The latest report from your
Fund's management team
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Large Cap
Growth Fund
(formerly Growth Fund)
APRIL 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
--------------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Douglas M. Costle
Leland O. Erdahl
Richard A. Farrell
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
Richard S. Scipione
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-5072
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
---------------------------------------------
==============================CHAIRMAN'S MESSAGE================================
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements are nearly done, and the tests of all our
systems are on schedule for completion by the end of July. The rest of 1999 will
be spent testing with our business partners and continuing to participate in
industry testing. We have also established additional contingency plans beyond
our regular ones to prepare for any challenges that the Year 2000 might present.
In the end, John Hancock will spend approximately $90-$95 million to ensure we
make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's. Sincerely,
/s/Edward J. Boudreau, Jr.
- -------------------------------------------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By David L. Eisenberg, CFA, and Geoffrey R. Plume, CFA,
Portfolio Managers
John Hancock
Large Cap Growth Fund
Fund posts double-digit gains
-----------------------------
Effective June 1, 1999, John Hancock Growth Fund was renamed John Hancock Large
Cap Growth Fund to better describe how the Fund invests.
Recently, David Eisenberg, senior vice president and chief equity strategist for
John Hancock Funds, assumed leadership of the Fund's management team on an
interim basis, joining fund management team members Geoffrey Plume and John
Golden.
The turmoil in the global financial markets during the late summer and early
fall of 1998 began to dissipate as the John Hancock Large Cap Growth Fund began
fiscal 1999 in November. By the time the Federal Reserve Board enacted its third
consecutive interest-rate cut on November 17, investors were beginning to have a
more positive outlook for U.S. economic growth and corporate profitability. When
the economic statistics for the fourth quarter of 1998 were tallied early in the
new year -- GDP rose a stellar 6%, unemployment hit a 29-year low and inflation
remained historically low -- the results were enough to power the market upward
to record heights during the first four months of 1999.
The Dow Jones Industrial Average surged across the 10,000 point mark on
March 29 and rushed headlong toward the 11,000 point mark by the close of the
Fund's semiannual period. The S&P 500 Index also hit record levels in recent
months. In all the euphoria, it was easy to lose sight of the fact that until
April, the market's advance was largely due to the performance of a narrow band
of stocks -- the mega-capitalization stocks, such as Microsoft and America
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Large Cap
Growth Fund. Caption below reads "Fund management team members (l-r): "John
Golden, David Eisenberg and Geoffrey Plume."]
- --------------------------------------------------------------------------------
"...economic statistics... were enough to power the market upward to record
heights..."
3
<PAGE>
================================================================================
John Hancock Funds - Large Cap Growth Fund
"...we shifted our focus to companies demonstrating accelerating earnings
growth."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is American Express 4.4%, the second is Citigroup 4.3%, the third United
Technologies 4.2%, the fourth Tyco International 4.2% and the fifth Microsoft
3.7%. A note below the table reads "As a percentage of net assets on April 30,
1999."]
- --------------------------------------------------------------------------------
Online. An astonishing fact: the 100 largest stocks in the S&P 500 provided 93%
of the Index's return in the first calendar quarter of 1999.
For the six months ended April 30, 1999, John Hancock Large Cap Growth
Fund posted total returns of 24.37%, 23.93% and 23.89% for Class A, Class B and
Class C shares, respectively, at net asset value. This return compares with the
23.07% return of the average growth fund, according to Lipper, Inc.1 Keep in
mind that your net asset value return will be different from the Fund's stated
performance if you were not invested in the Fund for the entire period and did
not reinvest all distributions. Longer-term performance information can be found
on pages six and seven.
Shift toward accelerated earnings growth
In our last report, we discussed how we had targeted companies exhibiting
resilient earnings growth. That proved to be a profitable strategy
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is EMC Corp.
followed by an up arrow with the phrase "World's leading supplier of data
storage and retrieval." The second listing is Providian Financial followed by an
up arrow with the phrase "Strong growth due to favorable economic backdrop." The
third listing is Albertson's followed by a sideways arrow with the phrase
"Concerns about integration of a large acquisition." A note below the table
reads "See `Schedule of Investments.' Investment holdings are subject to
change."]
- --------------------------------------------------------------------------------
last summer, given the uncertainty about a global recession and extreme
volatility at that time.
Early in fiscal 1999, as recession fears dissipated and markets settled
down, we shifted our focus to companies demonstrating accelerating earnings
growth. We did so believing that the dramatic change in investor psychology,
combined with the strong fundamentals of the U.S. economy -- high productivity
and low interest rates, inflation and unemployment -- bode well for companies in
certain industries that have the ability to grow their earnings more rapidly
than traditional stable-growth players. Our prime targets were companies that
have always exhibited consistent earnings growth, but where we believed there
was some catalyst, such as increased product demand, a new market or the
selling-off of marginal business operations, that would accelerate their
earnings growth potential.
Financial and telecom exposure increased
Three industry sectors that have accelerated earnings growth potential are
technology, telecommunications and finance, and the Fund benefited from our
increased emphasis on stocks in these sectors. Within the first few months of
fiscal 1999, we decreased the Fund's exposure to health-care stocks and switched
our concentration within the retail arena as selected stable-growth holdings
reached our near-term price objectives. We sold many issues at considerable
profit, including such noteworthy names as Warner-Lambert, Abbott Laboratories,
Colgate-Palmolive, Walgreen and Kroger. We moved money instead into such
retailers as Wal-Mart Stores, Costco, Lowe's and Home Depot, which stand to
benefit from a robust employment market, subdued inflation, the current
4
<PAGE>
================================================================================
John Hancock Funds - Large Cap Growth Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended April 30, 1999." The
chart is scaled in increments of 5% with 0% at the bottom and 25% at the top.
The first bar represents the 24.37% total return for John Hancock Large Cap
Growth Fund Class A. The second bar represents the 23.93% total return for John
Hancock Large Cap Growth Fund Class B. The third bar represents the 23.89% total
return for John Hancock Large Cap Growth Fund Class C, and the fourth bar
represents the 23.07% total return for Average growth fund. A note below the
chart reads "Total returns for John Hancock Large Cap Growth Fund are at net
asset value with all distributions reinvested. The average growth fund is
tracked by Lipper, Inc. (1) See the following two pages for historical
performance information."]
- --------------------------------------------------------------------------------
import/export picture and a strong housing market.
In keeping with our accelerated earnings focus, we redirected our
attention within the technology arena from software to hardware firms,
increasing the Fund's position in companies such as EMC Corp. and adding
companies like Sun Microsystems. With telecommunications, we either added to, or
initiated positions in, such names as MCI WorldCom, Lucent Technologies, Tellabs
and Sprint.
Financial stocks garnered our attention after being beaten down in
price during last year's global turmoil. Favorable demographics and market
trends give the sector strong rebound potential with the prospect of higher
earnings-per-share growth. We increased the Fund's weighting in financial
intermediaries, adding stakes in American Express, Citigroup, Bank of America,
Merrill Lynch and Providian Financial. Brisk merger and acquisition activity
across the industry should also give an upward bias to stock prices.
Select Industrials
In response to a broadening of the market late in the period, we purchased
several large growth conglomerates that are positioned to capitalize on the
resiliency of the U.S. economy and rebounding world economies. New holdings
include Textron, AlliedSignal and United Technologies -- all of which look
extremely attractive on a risk/reward basis given their proven ability to adapt
to changing market environments.
Outlook
We approach the final months of 1999 with a positive view, although we are not
without caution, given the market's recent preference for more economically
sensitive value stocks over certain of the growth stocks that have led the
market in the recent past. While we make no guarantees, our research suggests
that the U.S. economy should continue to post strong growth with no inflationary
forces on the near-term horizon. This should allow corporate earnings to remain
positive, particularly as the economies of Asia have begun to stabilize and
recover. While this may result in a more favorable environment than the past two
years for economically sensitive value stocks, it is also a great environment to
continue investing in growth stocks, especially those with international
customers and operations.
"...a positive view, although we are not without caution..."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
1Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
================================================================================
John Hancock Funds - Large Cap Growth Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Large Cap Growth Fund. Total return measures
the change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
ONE FIVE TEN
YEAR YEARS YEARS
-------- -------- --------
Cumulative Total Returns 15.51% 132.55% 304.86%
Average Annual Total Returns 15.51% 18.39% 15.01%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
-------- -------- ----------
Cumulative Total Returns 15.81% 134.47% 120.31%
Average Annual Total Returns 15.81% 18.58% 16.27%
- --------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
INCEPTION
(6/1/98)
----------
Cumulative Total Return 24.62%
Average Annual Total Return 24.62%(1)
Notes to Performance
(1) Not annualized.
6
<PAGE>
================================================================================
John Hancock Funds - Large Cap Growth Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Large Cap Growth Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in the Standard & Poor's 500 Stock Index. The Standard & Poor's 500
Stock Index is an unmanaged index that includes 500 widely traded common stocks
and is used as a measure of stock market performance. Past performance is not
indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Large Cap Growth Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $63,281. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Large Cap Growth Fund on October 31, 1988, before sales charge, and is
equal to $45,363 as of April 30, 1999. The third line represents the value of
the same hypothetical investment made in the John Hancock Large Cap Growth Fund,
after sales charge, and is equal to $43,108 as of April 30, 1999.
Line chart with the heading John Hancock Large Cap Growth Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $32,035. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Large Cap Growth Fund on January 3, 1994, before sales charge, and is
equal to $21,765 as of April 30, 1999. The third line represents the value of
the same hypothetical investment made in the John Hancock Large Cap Growth Fund,
after sales charge, and is equal to $21,665 as of April 30, 1999.
Line chart with the heading John Hancock Large Cap Growth Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $12,396. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Large Cap Growth Fund on June 1, 1998, before sales charge, and is equal
to $12,354 as of April 30, 1999. The third line represents the value of the same
hypothetical investment made in the John Hancock Large Cap Growth Fund, after
sales charge, and is equal to $12,254 as of April 30, 1999.
- --------------------------------------------------------------------------------
7
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Large Cap Growth Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $555,776,877)....................... $735,189,382
Receivable for investments sold ........................... 80,419,297
Receivable for shares sold ................................ 423,494
Dividends receivable ...................................... 365,805
Interest receivable ....................................... 23
Other assets .............................................. 36,367
-------------
Total Assets ........................ 816,434,368
------------------------------------------------------
Liabilities:
Due to custodian .......................................... 4,321,182
Payable for shares repurchased ............................ 161,852
Payable for investments purchased ......................... 24,202,872
Bank borrowings outstanding - Note A ...................... 6,271,000
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................. 484,815
Accounts payable and accrued expenses ..................... 83,400
-------------
Total Liabilities ................... 35,525,121
------------------------------------------------------
Net Assets:
Capital paid-in ........................................... 516,746,041
Accumulated net realized gain on investments .............. 88,447,583
Net unrealized appreciation of investments ................ 179,415,287
Accumulated net investment loss (3,699,664)
-------------
Net Assets .......................... $780,909,247
======================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $468,095,190/19,179,512.......................... $24.41
============================================================================
Class B - $312,039,473/13,438,215 ......................... $23.22
============================================================================
Class C - $774,584/33,380 ................................. $23.20
============================================================================
Maximum Offering Price Per Share*
Class A - ($24.41 x 105.26%) .............................. $25.69
============================================================================
* 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.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains for the period
stated.
Statement of Operations
Six months ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends.................................................. $1,754,972
Interest................................................... 167,559
-----------
1,922,531
-----------
Expenses:
Investment management fee - Note B ....................... 2,641,080
Distribution and service fee - Note B
Class A ................................................. 657,711
Class B ................................................. 1,264,609
Class C ................................................. 1,834
Transfer agent fee - Note B .............................. 761,522
Custodian fee ............................................ 79,841
Registration and filing fees ............................. 72,466
Financial services fee - Note B .......................... 50,801
Auditing fee ............................................. 22,094
Printing ................................................. 20,953
Trustees' fees ........................................... 15,206
Miscellaneous ............................................ 7,342
Interest expense - Note A ................................ 5,831
Legal fees ............................................... 1,575
-----------
Total Expenses ..................... 5,602,865
-----------------------------------------------------
Net Investment Loss ................ (3,680,334)
-----------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold...................... 88,556,646
Change in net unrealized appreciation/depreciation
of investments............................................ 58,597,017
-----------
Net Realized and Unrealized
Gain on Investments................. 147,153,663
-----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations........... $143,473,329
=====================================================
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Large Cap Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss................................................. ($4,311,745) ($3,680,334)
Net realized gain on investments sold .............................. 91,144,971 88,556,646
Change in net unrealized appreciation/depreciation of investments... (38,147,156) 58,597,017
------------- -------------
Net Increase in Net Assets Resulting from Operations............... 48,686,070 143,473,329
------------- -------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A - ($4.1588 and $2.7100 per share, respectively)............ (52,605,912) (45,972,496)
Class B - ($4.1588 and $2.7100 per share, respectively)............ (6,547,479) (27,759,800)
Class C ** - (none and $2.7100 per share, respectively)............ -- (27,033)
------------- -------------
Total Distributions to Shareholders................................ (59,153,391) (73,759,329)
------------- -------------
From Fund Share Transactions - Net: * ............................... 270,160,343 112,004,440
------------- -------------
Net Assets:
Beginning of period................................................. 339,497,785 599,190,807
------------- -------------
End of period (including accumulated net investment loss
of $19,330 and $3,699,664, respectively) .......................... $599,190,807 $780,909,247
============= =============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders and any increase or decrease in money shareholders invested in the
Fund. The footnote illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding dollar
value.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
================================FINANCIAL STATEMENTS============================
John Hancock Funds - Large Cap rowth Fund
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .......................................... 6,396,870 $142,420,669 6,728,827 $161,594,108
Shares issued in reorganization - Note D ............. 3,892,361 81,397,839 -- --
Shares reinvested .................................... 2,338,784 48,248,711 2,130,770 42,892,404
----------- ------------- ----------- ------------
12,628,015 272,067,219 8,859,597 204,486,512
Less shares repurchased .............................. (7,925,886) (175,825,692) (6,815,767) (163,762,610)
----------- ------------- ----------- ------------
Net increase ......................................... 4,702,129 $96,241,527 2,043,830 $40,723,902
=========== ============= =========== ============
CLASS B
Shares sold .......................................... 2,092,555 $44,843,569 4,087,847 $92,820,531
Shares issued in reorganization - Note D ............. 9,479,759 191,455,100 -- --
Shares reinvested .................................... 307,784 6,131,792 1,263,836 24,278,017
----------- ------------- ----------- ------------
11,880,098 242,430,461 5,351,683 117,098,548
Less shares repurchased .............................. (3,244,695) (68,713,094) (2,086,298) (46,417,484)
----------- ------------- ----------- ------------
Net increase ......................................... 8,635,403 $173,717,367 3,265,385 $70,681,064
=========== ============= =========== ============
CLASS C **
Shares sold .......................................... 20,303 $456,292 28,300 $646,605
Shares reinvested .................................... -- -- 1,368 26,263
----------- ------------- ----------- ------------
20,303 456,292 29,668 672,868
Less shares repurchased .............................. (13,181) (254,843) (3,410) (73,394)
----------- ------------- ----------- ------------
Net increase ......................................... 7,122 $201,449 26,258 $599,474
=========== ============= =========== ============
** Class C shares commenced operations on June 1, 1998.
</TABLE>
SEE NOTES TO FINANCIAL STAATEMENTS
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Large Cap Growth Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
---------------------------- JANUARY 1, 1996 TO ------------------------ APRIL 30, 1999
1993 1994 1995 October 31, 1996(7) 1997 1998 (UNAUDITED)
------ -------- ------ ------------------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of
Period......................... $17.32 $17.40 $15.89 $19.51 $23.28 $24.37 $22.27
-------- -------- ------- ------- -------- -------- --------
Net Investment Loss............ (0.11) (0.10) (0.09)(1) (0.13)(1) (0.12)(1) (0.11)(1) (0.09)(1)
Net Realized and Unrealized Gain
(Loss) on Investments ........ 2.33 (1.21) 4.40 3.90 3.49 2.17 4.94
-------- --------- ------- ------- -------- -------- --------
Total from Investment
Operations.................. 2.22 (1.31) 4.31 3.77 3.37 2.06 4.85
--------- --------- ------- ------- -------- -------- --------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold.......... (2.14) (0.20) (0.69) -- (2.28) (4.16) (2.71)
--------- -------- ------- ------- -------- -------- --------
Net Asset Value, End of Period $17.40 $15.89 $19.51 $23.28 $24.37 $22.27 $24.41
========= ======== ======= ======= ======== ======== ========
Total Investment Return at
Net Asset Value(2)........... 13.03% (7.50%) 27.17% 19.32%(5) 16.05% 9.80% 24.37%(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)............... $162,937 $146,466 $241,700 $279,425 $303,067 $381,591 $468,095
Ratio of Expenses to Average
Net Assets .................. 1.56% 1.65% 1.48% 1.48%(6) 1.44% 1.40% 1.34%(6)
Ratio of Net Investment Loss to
Average Net Assets........... (0.67%) (0.64%) (0.46%) (0.73%)(6) (0.51%) (0.50%) (0.80%)(6)
Portfolio Turnover Rate ...... 68% 52% 68%(3) 59% 133% 153%(3) 109%
YEAR ENDED DECEMBER 31, PERIOD FROM YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
-------------------------- JANUARY 1, 1996 TO ------------------------ APRIL 30, 1999
1994(4) 1995 October 31, 1996(7) 1997 1998 (UNAUDITED)
--------- --------- ------------------ -------- --------- -----------------
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period... $17.16 $15.83 $19.25 $22.83 $23.70 $21.38
-------- -------- -------- -------- -------- --------
Net Investment Loss(1)................. (0.20) (0.26) (0.26) (0.27) (0.25) (0.16)
Net Realized and Unrealized Gain
(Loss) on Investments.................. (0.93) 4.37 3.84 3.42 2.09 4.71
-------- -------- -------- -------- -------- --------
Total from Investment Operations...... (1.13) 4.11 3.58 3.15 1.84 4.55
-------- -------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold ................. (0.20) (0.69) -- (2.28) (4.16) (2.71)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ........ $15.83 $19.25 $22.83 $23.70 $21.38 $23.22
======== ======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(2).................... (6.56%)(5) 26.01% 18.60%(5) 15.33% 9.04% 23.93%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $3,807 $15,913 $25,474 $36,430 $217,448 $312,039
Ratio of Expenses to Average Net Assets 2.38%(6) 2.31% 2.18%(6) 2.13% 2.08% 1.99%(6)
Ratio of Net Investment Loss to
Average Net Assets..................... (1.25%)(6) (1.39%) (1.42%)(6) (1.20%) (1.16%) (1.45%)(6)
Portfolio Turnover Rate................. 52% 68%(3) 59% 133% 153%(3) 109%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Large Cap Growth Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 1, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO APRIL 30, 1999
October 31, 1998 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period......................... $21.43 $21.37
------- -------
Net Investment Loss(1) ...................................... (0.10) (0.16)
Net Realized and Unrealized Gain on Investments ............. 0.04 4.70
------- -------
Total from Investment Operations ........................... (0.06) 4.54
------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold ... -- (2.71)
------- -------
Net Asset Value, End of Period .............................. $21.37 $23.20
======= =======
Total Investment Return at Net Asset Value(2) ............... (0.28%)(5) 23.89%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .................... $152 $775
Ratio of Expenses to Average Net Assets ..................... 2.10%(6) 2.04%(6)
Ratio of Net Investment Loss to Average Net Assets .......... (1.14%)(6) (1.50%)(6)
Portfolio Turnover Rate ..................................... 153%(3) 109%
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Portfolio turnover rate excludes merger activity.
(4) Class B shares commenced operations on January 3, 1994.
(5) Not annualized.
(6) Annualized.
(7) Effective October 31, 1996, the fiscal period end changed from December 31
to October 31.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Large Cap Growth Fund
Schedule of Investments
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Large Cap Growth Fund on April 30, 1999. It consists of common stocks which are
broken down by industry group.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Aerospace (4.17%)
United Technologies Corp. ............ 225,000 $32,596,875
------------
Banks - United States (9.70%)
Bank of America Corp. ................ 390,000 28,080,000
Citigroup, Inc. ...................... 450,000 33,862,500
Wells Fargo Co. ...................... 320,000 13,820,000
------------
75,762,500
------------
Broker Services (3.31%)
Donaldson, Lufkin & Jenrette, Inc. ... 100,000 6,993,750
Merrill Lynch & Co., Inc. ............ 225,000 18,885,937
------------
25,879,687
------------
Computers (17.15%)
America Online, Inc.* ................ 130,000 18,557,500
Cisco Systems, Inc.* ................. 200,000 22,812,500
Dell Computer Corp.* ................. 275,000 11,326,562
EMC Corp.* ........................... 175,000 19,064,062
International Business Machines Corp. 75,000 15,689,063
Microsoft Corp.* ..................... 355,000 28,865,937
Novell, Inc.* ........................ 275,000 6,118,750
Sun Microsystems, Inc.* .............. 100,000 5,981,250
Unisys Corp.* ........................ 175,000 5,501,562
------------
133,917,186
------------
Diversified Operations (9.07%)
AlliedSignal, Inc. ................... 425,000 24,968,750
Textron, Inc. ........................ 145,000 13,358,125
Tyco International Ltd. .............. 400,000 32,500,000
------------
70,826,875
------------
Electronics (4.03%)
General Electric Co. ................. 150,000 15,825,000
Intel Corp. .......................... 255,000 15,602,812
------------
31,427,812
------------
Finance (13.59%)
American Express Co. ................. 265,000 34,632,188
Associates First Capital Corp. (Class A) 375,000 16,617,188
Capital One Financial Corp. .......... 80,000 13,895,000
Finance (continued)
Morgan Stanley Dean Witter & Co. ..... 185,000 $18,349,688
Providian Financial Corp. ............ 175,000 22,585,938
------------
106,080,002
------------
Media (2.82%)
Time Warner, Inc. .................... 315,000 22,050,000
------------
Medical (2.55%)
Johnson & Johnson .................... 150,000 14,625,000
Merck & Co., Inc. .................... 75,000 5,268,750
------------
19,893,750
------------
Oil & Gas (3.57%)
Halliburton Co. ...................... 200,000 8,525,000
Phillips Petroleum Co. ............... 180,000 9,112,500
Schlumberger Ltd. .................... 160,000 10,220,000
------------
27,857,500
------------
Retail (11.18%)
Amazon.com, Inc.* .................... 55,000 9,463,438
Costco Cos., Inc.* ................... 200,000 16,187,500
Home Depot, Inc. (The) ............... 400,000 23,975,000
Lowe's Cos., Inc. .................... 100,000 5,275,000
McDonald's Corp. ..................... 100,000 4,237,500
Office Depot, Inc.* .................. 100,000 2,200,000
Wal-Mart Stores, Inc. ................ 565,000 25,990,000
------------
87,328,438
------------
Telecommunications (13.01%)
AT&T Corp. ........................... 200,000 10,100,000
Lucent Technologies, Inc. ............ 480,000 28,860,000
MCI WorldCom, Inc.* .................. 325,000 26,710,938
Sprint Corp. ......................... 190,000 19,486,875
Tellabs, Inc.* ....................... 150,000 16,410,945
------------
101,568,758
------------
TOTAL COMMON STOCKS
(Cost $555,776,877) (94.15%) 735,189,382
-------- ------------
TOTAL INVESTMENTS (94.15%) 735,189,382
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (5.85%) 45,719,865
-------- ------------
TOTAL NET ASSETS (100.00%) $780,909,247
======== ============
* Non-income producing security.
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
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Large Cap Growth Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust III (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of five series: John Hancock Large Cap Growth Fund (the "Fund"),
John Hancock Global Fund, John Hancock Short-Term Strategic Income Fund, John
Hancock Mid Cap Growth Fund and John Hancock International Fund. Prior to June
1, 1999, the Fund was known as John Hancock Growth Fund and the John Hancock Mid
Cap Growth Fund was known as John Hancock Special Opportunities Fund. The other
four series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to seek long-term capital appreciation.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights 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 which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
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,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more 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 for both financial
reporting and federal income tax purposes.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date. 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
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 relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Large Cap Growth Fund
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks,
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Advisor in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund based on its borrowings. In
addition, a commitment fee is charged based on the average daily unused portion
of the line of credit and is allocated among the participating funds. The
maximum loan balance outstanding during the period amounted to $6,579,000. The
annualized interest rate charged during the period ranged from 5.375% thru
5.625%. At April 30, 1999, the borrowings outstanding amounted to $6,271,000.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of: (a) 0.75% of the first $750,000,000 of the
Fund's average daily net asset value and (b) 0.70% of the Fund's average daily
net asset value in excess of $750,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the period ended
April 30, 1999, net sales charges received with regard to sales of Class A
shares amounted to $305,858. Out of this amount, $39,847 was retained and used
for printing prospectuses, advertising, sales literature and other purposes,
$152,131 was paid as sales commissions to unrelated broker-dealers and $113,880
was paid as sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer, formerly known as John Hancock
Distributors, Inc. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% 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 CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended April 30, 1999,
contingent deferred sales charges amounted to $277,134.
Class C shares which are redeemed within one year of purchase will be
subject to a contingent deferred sales charge ("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 CDSC are paid to
JH Funds and are used in whole or in part to defray its expenses related to
providing distribution related services to the Fund in connection with the sale
of Class C shares. For the period ended April 30, 1999, there were no contingent
deferred sales charges.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, 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. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not to exceed
0.30% of Class A average daily
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Large Cap Growth Fund
net assets and 1.00% of Class B and Class C average daily net assets to
reimburse JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon
and Mr. Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect
to defer, for tax purposes, their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability for the
deferred compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The deferred
compensation liability and the related other asset are always equal and are
marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. At April 30, 1999, the
Fund's investments to cover the deferred compensation liability had unrealized
appreciation of $2,782.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term obligations, during the period
ended April 30, 1999, aggregated $765,383,107 and $760,494,076, respectively.
The cost of investments owned at April 30, 1999 for federal income tax
purposes was $555,885,940. Gross unrealized appreciation and depreciation of
investments aggregated $186,033,952 and $6,730,510, respectively, resulting in
net unrealized appreciation of $179,303,442.
NOTE D -
REORGANIZATION
On November 12, 1997, the shareholders of John Hancock Disciplined Growth Fund
(JHDGF) and John Hancock Discover Fund (JHDF) approved a plan of reorganization
between JHDGF and the Fund and JHDF and the Fund, providing for the transfer of
substantially all of the assets and liabilities of JHDGF and JHDF to the Fund in
exchange solely for Class A and Class B shares of the Fund. The acquisition of
JHDGF was accounted for as a tax free exchange of 1,825,089 Class A shares and
5,012,295 Class B shares of the Fund (valued at $38,166,628 and $101,229,305,
respectively) for the 2,318,348 Class A shares and 6,305,496 Class B shares of
JHDGF, including $42,164,993 of unrealized appreciation, after the close of
business at December 5, 1997. The acquisition of JHDF was accounted for as a tax
free exchange of 2,067,272 Class A shares and 4,467,464 Class B shares of the
Fund (valued at $43,231,211 and $90,225,795, respectively) for the 2,567,733
Class A shares and 5,636,912 Class B shares of JHDF, including $31,282,553 of
unrealized appreciation, after the close of business at December 5, 1997. The
aggregate net assets of JHDGF, JHDF and the Fund were $139,395,933, $133,457,006
and $350,721,840, respectively, immediately before the acquisition.
16
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Large Cap Growth Fund
17
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Large Cap Growth Fund
18
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Large Cap Growth Fund
19
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS ----------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713 (TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Large Cap Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[LOGO] Printed on Recycled Paper 200SA 4/99
6/99
<PAGE>
The latest report from
your Fund's management team
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
International
Fund
APRIL 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Douglas M. Costle
Leland O. Erdahl
Richard A. Farrell
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
Richard S. Scipione
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
-----------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements are nearly done, and the tests of all our
systems are on schedule for completion by the end of July. The rest of 1999 will
be spent testing with our business partners and continuing to participate in
industry testing. We have also established additional contingency plans beyond
our regular ones to prepare for any challenges that the Year 2000 might present.
In the end, John Hancock will spend approximately $90-$95 million to ensure we
make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/s/Edward J. Boudreau, Jr.
- -------------------------------------------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Miren Etcheverry, John L.F. Wills and Gerardo J. Espinoza,
Portfolio Managers
John Hancock
International Fund
Foreign stock markets advance as global turmoil subsides
--------------------------------------------------------
Overseas markets gained ground over the last six months, as last summer's global
economic turmoil began to subside. The move up was volatile, however, while
investors sorted through the economic developments and market leadership changed
hands. Perhaps the biggest story during the period was the resurgence in March
and April of Japan and the recession ravaged emerging Asian and Latin American
stock markets. In Japan, foreign investors long underweighted in the second
largest market began pouring money back in after a bank rescue program was
implemented and several large corporate restructurings were announced.
Brazil's ability to control the effects of its currency's devaluation
in January was the spark for renewed investor confidence that emerging markets
worldwide were coming out of last summer's woods. A strong U.S. economy and
stock market, and rising commodity prices also helped the commodity-dependent
emerging markets of Latin America stage their dramatic rebound. The rally was
still not enough, however, to bring them back to their levels of a year ago.
Europe, which had dominated overseas markets last year, took a breather in the
last several months because of a slowdown in economic growth and the unexpected
decline in value of the new euro common currency since its January 1 debut.
Stability: A mixed blessing
For the six months ended April 30, 1999, John Hancock International Fund's Class
A, Class B and Class C shares posted total returns of
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock
International Fund. Caption below reads "Fund management team members (l-r):
"John Wills, Gerardo Esponoza, Jean-Marc Berteaux and Miren Etcheverry."]
- --------------------------------------------------------------------------------
"Overseas markets gained ground over the last six months..."
3
<PAGE>
================================================================================
John Hancock Funds - International Fund
"...we increased our stake in Japan gradually over the period..."
- --------------------------------------------------------------------------------
[Pie chart at top left hand column with heading "Portfolio Diversification." The
chart is divided into nine sections (from top to left): Continental Europe 49%,
Hong Kong 1%, Latin America 1%, Canada 1%, Singapore 1%, Short-Term Investments
and Other 2%, Australia 3%, Japan 20% and U.K. & Ireland 22%. A note below the
chart reads "As a percentage of net assets on April 30, 1999."]
- --------------------------------------------------------------------------------
13.62%, 13.22% and 13.22%, respectively, at net asset value. By comparison, the
Morgan Stanley Capital International (MSCI) All Country World Free Ex-U.S. Index
returned 17.17% and the average international fund returned 15.11%, according to
Lipper, Inc.1 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. Historical performance
information can be found on pages six and seven.
Given the fluctuating world markets over the last year, we sought to
maintain a portfolio that represented stability in a volatile world. As a
result, we kept an overweighting in Europe and in the blue-chip names. While
this helped the Fund in the first half of the period, it detracted from our
performance in 1999, when Europe's economic growth slowed and the value of the
euro fell by 12% versus the dollar. At the sector
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Nokia
followed by an up arrow with the phrase "Growing cell-phone demand." The second
listing is Royal Philips Electronics followed by an up arrow with the phrase
"Market reacts positively to company restructuring." The third listing is Nestle
followed by a down arrow with the phrase "Hurt by slowing emerging-market
economies." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
level, our overweighting in European utility, food and household product
companies such as Danone and Nestle held us back. Food companies were hurt by
their exposure to slowing emerging markets, and utility companies lagged when
good economic news sent investors into less defensive sectors.
Europe stays overweighted
Nevertheless, we are maintaining an overweighting in Europe, because we still
believe in the long-term opportunities stemming from corporate restructuring.
Indeed our European companies involved in restructurings or mergers continued to
be our top performers. These included Royal Philips Electronics, Mannesmann and
Vodafone. Our top holding, Nokia, was also our top performer, given its dominant
position in the fast-growing cellular phone market. We pared our European
holdings slightly to take advantage of opportunities in Japan and to move out of
weaker markets. While we still like France, we slightly reduced our
overweighting there, and moved out of Belgium's more defensive utility
companies. We also cut our stake in Germany, given its heavy emphasis on
manufacturing and exports, which could be stung by the Continent's slowdown.
That said, we have increased our stake in the U.K. because of signs of a growing
economy and the enhanced prospects of its joining the European commission, which
bodes well for lower interest rates.
Make room for Japan, Hong Kong
Following our cautious approach, we increased our stake in Japan gradually over
the period, yet we still moved from an 8% position last November to 20% of the
Fund's net assets by the end of April, through a combination of additional
purchases and good performance. Announcements
4
<PAGE>
================================================================================
John Hancock Funds - International Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended April 30, 1999." The
chart is scaled in increments of 5% with 0% at the bottom and 20% at the top.
The first bar represents the 13.62% total return for John Hancock International
Fund Class A. The second bar represents the 13.22% total return for John Hancock
International Fund Class B. The third bar represents the 13.22% total return for
John Hancock International Fund Class C and the fourth bar represents the 15.11%
total return for Average international fund. A note below the chart reads "Total
returns for John Hancock International Fund are at net asset value with all
distributions reinvested. The average international fund is tracked by Lipper,
Inc. See the following two pages for historical performance information."]
- --------------------------------------------------------------------------------
of several important corporate restructurings, including Fund holdings Sony and
NTT Data Corp., suggest that Japan is finally moving in the right direction by
placing more emphasis on shareholder value. We increased our stake in these and
other companies proactively pursuing restructurings. We also upped our holdings
in financial stocks, introducing a position in Sakura Bank and adding to our
positions in Bank of Tokyo-Mitsubishi and Nomura Securities, given the positive
implications of the bank recapitalization program. Another sector we targeted
was housing and construction, including Daiwa House Industry and Sekisui House,
since they are benefiting from government efforts to stimulate the economy.
During the period, we re-established an underweighted 1% position in
Hong Kong, with the purchase of several blue-chip real estate and conglomerate
companies that are representative of the market. We are returning slowly to the
emerging markets, only after careful analysis and deliberation. This period, we
re-entered Brazil with our purchase of its high-quality Telecomunicacoes
Brasileiras communications company.
Positive outlook
Our optimism is growing about the prospects for international equities.
Better-than-expected world economic growth and the re-emergence of Asia and the
emerging markets are bolstering our enthusiasm. We will maintain a strong
presence in Europe, where we see the recent pullback as simply a normal market
correction following a period of sustained strength. Our belief in this region
has been reinforced by the European Central Bank's recent interest-rate cuts and
by current economic forecasts of stronger growth later this year. Now that we
have risen to a more average weighting in Japan, we will keep it fairly steady,
with a diverse portfolio that emphasizes companies that are restructuring or
will benefit from any domestic economic recovery. In Latin America, it appears
the economic slowdown will be less pronounced than expected. This, plus the
speed of reforms taking place there and in Asia, leaves us more favorably
inclined toward these markets.
"Our optimism is growing about the prospects for international equities."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change 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.
1Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
================================================================================
John Hancock Funds - International Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock International Fund. Total return measures the
change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting, before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
------- ------- --------
Cumulative Total Returns (0.70%) 20.08% 12.30%
Average Annual Total Returns(1) (0.70%) 3.73% 2.24%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
------- ------- --------
Cumulative Total Returns (1.19%) 19.79% 12.91%
Average Annual Total Returns(1) (1.19%) 3.68% 2.34%
- --------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
INCEPTION
(6/1/98)
--------
Cumulative Total Return 0.92%
Average Annual Total Return(1) 0.92%(2)
Notes to Performance
(1) Effective January 3, 1994, the Adviser has temporarily voluntarily
undertaken to limit the Fund's expenses, including the management fee
(but not including the transfer agent fee and 12b-1 fee) to 0.90% of
the Fund's daily net asset value. Without the limitations of expenses,
the average annual total return for the one-year period, five-year
period and since inception would have been (2.54%), 1.74% and 0.23% for
Class A shares and (3.03%), 1.69% and 0.33% for Class B shares. The
cumulative total return since inception would have been (0.72%) for
Class C shares.
(2) Not annualized.
6
<PAGE>
================================================================================
John Hancock Funds - International Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
International Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in the Morgan Stanley Capital International (msCi) All Country World
Free Ex-U.S. Index, which measures the performance of a broad range of developed
and emerging stock markets around the world. The index represents "free"
securities that are traded freely on equity exchanges around the world. Past
performance is not indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock International Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
All Country World-Ex U.S. Free Index and is equal to $21,602. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock International Fund on January 3, 1994, before sales charge, and is equal
to $12,004 as of April 30, 1999. 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 $11,401.
Line chart with the heading John Hancock International Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
All Country World-Ex U.S. Free Index and is equal to $21,602. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock International Fund on January 3, 1994, before sales charge, and is equal
to $11,558 as of April 30, 1999. 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 $11,458.
Line chart with the heading John Hancock International Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
All Country World-Ex U.S. Free Index and is equal to $11,732. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock International Fund on June 1, 1998, before sales charge, and is equal to
$10,342 as of April 30, 1999. 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 $10,242.
- --------------------------------------------------------------------------------
7
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks, rights and warrants
(cost - $13,661,282) .................................. $15,455,913
Short-term investments (cost - $3,077,718) - Note A .... 3,077,718
--------------
18,533,631
Cash ..................................................... 667
Foreign currency, at value (cost - $2,241) .............. 2,237
Receivable for investments sold ......................... 204,982
Receivable for shares sold .............................. 2,729
Dividends receivable .................................... 38,764
Foreign tax receivable .................................. 12,773
Interest receivable ..................................... 23
Receivable from John Hancock Advisers, Inc.
and affiliates - Note B ................................ 7,637
Other assets ............................................ 562
--------------
Total Assets ..................... 18,804,005
-----------------------------------------------------
Liabilities:
Payable for investments purchased ....................... 148,570
Payable upon return of securities on loan - Note A ...... 2,918,718
Accounts payable and accrued expenses ................... 54,342
--------------
Total Liabilities ................ 3,121,630
-----------------------------------------------------
Net Assets:
Capital paid-in ......................................... 13,378,661
Accumulated net realized gain on investments
and foreign currency transactions ...................... 659,869
Net unrealized appreciation of investments
and foreign currency transactions ...................... 1,793,579
Accumulated net investment loss ......................... (149,734)
--------------
Net Assets ....................... $15,682,375
=====================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with no par value)
Class A - $6,473,888/646,967 ............................ $10.01
============================================================================
Class B - $9,171,148/947,727 ............................ $9.68
============================================================================
Class C - $37,339/3,859 ................................. $9.68
============================================================================
Maximum Offering Price Per Share*
Class A - ($10.01 x 105.26%) ............................ $10.54
============================================================================
* 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.
The 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.
Statement of Operations
Six months ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (net of foreign withholding taxes of $10,161) . $88,605
Interest (including income on securities loaned..........
of $3,047) 9,813
--------------
98,418
--------------
Expenses:
Investment management fee - Note B ...................... 78,399
Distribution and service fee - Note B
Class A ................................................ 9,541
Class B ................................................ 45,665
Class C ................................................ 143
Custodian fee ........................................... 62,929
Transfer agent fee - Note B ............................. 52,893
Registration and filing fees ............................ 40,039
Auditing fee ............................................ 18,341
Printing ................................................ 5,361
Organization expense - Note A ........................... 4,039
Financial services fee - Note B ......................... 1,130
Trustees' fees .......................................... 388
Miscellaneous ........................................... 279
Legal fees .............................................. 261
--------------
Total Expenses ................... 319,408
-----------------------------------------------------
Less Expense Reductions
- Note B ......................... (154,298)
-----------------------------------------------------
Net Expenses ..................... 165,110
-----------------------------------------------------
Net Investment Loss .............. (66,692)
-----------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold ................... 625,551
Net realized gain on foreign currency transactions....... 35,260
Change in net unrealized appreciation/depreciation
of investments.......................................... 1,431,801
Change in net unrealized appreciation/depreciation
of foreign currency transactions........................ (3,230)
--------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions .... 2,089,382
-----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations......... $2,022,690
=====================================================
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ............................................................... ($61,776) ($66,692)
Net realized gain (loss) on investments sold and foreign currency transactions..... (20,135) 660,811
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions..................................................... 522,994 1,428,571
----------- -------------
Net Increase in Net Assets Resulting from Operations.............................. 441,083 2,022,690
----------- -------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and
foreign currency transactions
Class A - ($0.0676 and none per share, respectively) ............................. (42,230) --
Class B - ($0.0676 and none per share, respectively) ............................. (68,630) --
----------- -------------
Total Distributions to Shareholders............................................... (110,860) --
----------- -------------
From Fund Share Transactions - Net:* ............................................... 1,850,363 (2,199,706)
----------- -------------
Net Assets:
Beginning of period .............................................................. 13,678,805 15,859,391
----------- -------------
End of period (including accumulated net investment loss of $83,042 and
$149,734, respectively)........................................................... $15,859,391 $15,682,375
=========== =============
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------
CLASS A
Shares sold.................................................... 1,291,951 $11,453,795 948,008 $9,282,617
Shares issued to shareholders in reinvestment of distributions. 5,131 43,600 -- --
----------- ----------- --------- -----------
1,297,082 11,497,395 948,008 9,282,617
Less shares repurchased ....................................... (1,193,043) (10,519,106) (995,351) (9,775,976)
----------- ----------- --------- -----------
Net increase (decrease) ....................................... 104,039 $978,289 (47,343) ($493,359)
=========== =========== ========= ===========
CLASS B
Shares sold ................................................... 1,001,789 $8,906,797 277,578 $2,632,991
Shares issued to shareholders in reinvestment of distributions 6,391 52,132 -- --
----------- ----------- ---------- -----------
1,008,180 8,958,929 277,578 2,632,991
Less shares repurchased ....................................... (930,993) (8,113,241) (467,002) (4,350,451)
----------- ----------- ---------- -----------
Net increase (decrease) ....................................... 77,187 $845,688 (189,424) ($1,717,460)
=========== =========== ========== ===========
Shares sold ................................................... 4,321 $40,254 1,639 $15,857
Less shares repurchased ....................................... (1,605) (13,868) (496) (4,744)
----------- ----------- ---------- -----------
Net increase .................................................. 2,716 $26,386 1,143 $11,113
=========== =========== ========== ===========
</TABLE>
** Class C shares commenced operations on June 1, 1998.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and repurchased during the last two periods, along with
the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1994
(COMMENCEMENT YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
OF OPERATIONS) TO _________________________________________ APRIL 30, 1999
OCTOBER 31, 1994 1995 1996 1997 1998 (UNAUDITED)
---------------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ................. $8.50 $8.65 $8.14 $8.70 $8.41 $8.81
------- ------- ------- ------- ------- -------
Net Investment Income (Loss) ......................... 0.07(1) 0.04 0.06(1) (0.02)(1) 0.00(1,7) (0.02)(1)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions ....... 0.08 (0.47) 0.50 (0.26) 0.47 1.22
------- ------- ------- ------- ------- -------
Total from Investment Operations ..................... 0.15 (0.43) 0.56 (0.28) 0.47 1.20
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ................. -- (0.03) -- (0.01) -- --
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency Transactions .. -- (0.05) -- -- (0.07) --
------- ------- ------- ------- ------- -------
Total Distributions .................................. -- (0.08) -- (0.01) (0.07) --
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ....................... $8.65 $8.14 $8.70 $8.41 $8.81 $10.01
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) ....... 1.77%(3) (4.96%) 6.88% (3.22%) 5.61% 13.62%(3)
Total Adjusted Investment Return at
Net Asset Value (2,4) .............................. (0.52%)(3) (8.12%) 5.33% (4.52%) 3.75% 12.62%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .......... $4,426 $4,215 $5,098 $4,965 $6,116 $6,474
Ratio of Expenses to Average Net Assets ............. 1.50%(5) 1.64% 1.75% 1.73%(8) 1.79%(8) 1.70%(5)
Ratio of Adjusted Expenses to Average Net Assets (6) 3.79%(5) 4.80% 3.30% 3.03%(8) 3.65%(8) 3.72%(5)
Ratio of Net Investment Income (Loss) to
Average Net Assets ................................. 1.02%(5) 0.56% 0.68% (0.16%) 0.04% (0.41%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) ............................. (1.27%)(5) (2.60%) (0.87%) (1.46%) (1.82%) (2.43%)(5)
Portfolio Turnover Rate 50% 69% 83% 169% 129%8%
Fee Reduction Per Share (1) ......................... $0.16 $0.25 $0.14 $0.12 $0.17 $0.09
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: the net investment income, gains
(losses), distributions of the Fund and total investment return of the Fund. It
shows how the Fund's net asset value for a share has changed since the
commencement of operations. Additionally, important relationships between some
items presented in the financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1994
(COMMENCEMENT YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
OF OPERATIONS) TO _________________________________________ APRIL 30, 1999
OCTOBER 31, 1994 1995 1996 1997 1998 (UNAUDITED)
---------------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ............... $8.50 $8.61 $8.05 $8.55 $8.22 $8.55
------- ------- ------- ------- ------- -------
Net Investment Income (Loss) ....................... 0.02(1) (0.03) 0.00(1,7) (0.08)(1) (0.06)(1) (0.05)(1)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions .... 0.09 (0.48) 0.50 (0.25) 0.46 1.18
------- ------- ------- ------- ------- -------
Total from Investment Operations .................. 0.11 (0.51) 0.50 (0.33) 0.40 1.13
------- ------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency Transactions -- (0.05) -- -- (0.07) --
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ..................... $8.61 $8.05 $8.55 $8.22 $8.55 $9.68
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) ..... 1.29%(3) (5.89%) 6.21% (3.86%) 4.88% 13.22%(3)
Total Adjusted Investment Return at Net Asset Value (2,4) (1.00%)(3) (9.05%) 4.66% (5.16%) 3.02% 12.22%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .......... $3,948 $3,990 $8,175 $8,713 $9,720 $9,171
Ratio of Expenses to Average Net Assets ............ 2.22%(5) 2.52% 2.45% 2.43%(8) 2.49%(8) 2.39%(5)
Ratio of Adjusted Expenses to Average Net Assets (6) 4.51%(5) 5.68% 4.00% 3.73%(8) 4.35%(8) 4.41%(5)
Ratio of Net Investment Income (Loss) to
Average Net Assets ............................... 0.31%(5) (0.37%) 0.02% (0.88%) (0.66%) (1.15%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) .......................... (1.98%)(5) (3.53%) (1.53%) (2.18%) (2.52%) (3.17%)(5)
Portfolio Turnover Rate ............................ 50% 69% 83% 169% 129% 8%
Fee Reduction Per Share (1) ........................ $0.16 $0.25 $0.14 $0.12 $0.17 $0.09
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
---------------- ---------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period .......................................... $9.36 $8.55
------- -------
Net Investment Loss (1) ....................................................... (0.03) (0.05)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions ................................................ (0.78) 1.18
------- -------
Total from Investment Operations ............................................. (0.81) 1.13
------- -------
Net Asset Value, End of Period ................................................ $8.55 $9.68
======= =======
Total Investment Return at Net Asset Value (2) ................................ (8.65%)(3) 13.22%(3)
Total Adjusted Investment Return at Net Asset Value (2,4) ..................... (9.43%)(3) 12.22%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ...................................... $23 $37
Ratio of Expenses to Average Net Assets ....................................... 2.29%(5,8) 2.41%(5)
Ratio of Adjusted Expenses to Average Net Assets (6) .......................... 4.15%(5,8) 4.43%(5)
Ratio of Net Investment Loss to Average Net Assets ............................ (1.27%)(5) (1.06%)(5)
Ratio of Adjusted Net Investment Loss to Average Net Assets (6) ............... (3.13%)(5) (3.08%)(5)
Portfolio Turnover Rate ....................................................... 129% 8%
Fee Reduction Per Share (1) ................................................... $0.07 $0.09
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Not annualized.
(4) An estimated total return calculation that does not take into consideration
management fee reductions and other expense subsidies by the Adviser during
the periods shown.
(5) Annualized.
(6) Unreimbursed, without fee reduction.
(7) Less than $0.01 per share.
(8) Expense ratios do not include interest expense due to bank loans, which
amounted to less than $0.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Schedule of Investments
April 30, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
International Fund on April 30, 1999. It's divided into two main categories:
common stocks, rights and warrants, and short-term investments. Common stocks,
rights and warrants are further broken down by country. Short-term investments,
which represent the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Australia (2.94%)
Australia & New Zealand Banking Group
Ltd., American Depositary Receipt
(ADR) (Banks - Foreign)....................... 2 $79
National Australia Bank, Ltd.
(Banks - Foreign) ............................ 2,922 56,888
News Corp., Ltd. (The) (Media) ................ 6,000 50,282
News Corp., Ltd. (The) (ADR) (Media) .......... 2,940 95,918
Normandy Mining Ltd. (Metal) .................. 52,528 45,536
Telstra Corp., Ltd. (Telecommunications) ...... 30,594 166,014
Westpac Banking Corp., Ltd.
(Banks - Foreign) ............................ 6,000 45,804
----------
460,521
----------
Belgium (1.20%)
Fortis AG (Insurance) ......................... 3,582 120,143
Fortis AG (Certificate De Valeur Garantie)
(Insurance)* ................................. 1,134 12
Fortis AG (New shares) (Insurance)* ........... 126 647
Tractebel SA (Utilities) ...................... 492 67,619
----------
188,421
----------
Brazil (0.90%)
Telecomunicacoes Brasileiras SA
(Telecommunications) ......................... 1,542 140,611
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) ......................... 1,542 120
----------
140,731
----------
Canada (1.36%)
BCE, Inc. (Telecommunications) ................ 930 42,415
Bombardier, Inc. (Diversified Operations) ..... 11,035 171,038
Royal Bank of Canada (Banks - Foreign) ........ 1 49
----------
213,502
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Denmark (0.90%)
Novo Nordisk A/S (Medical) .................... 579 $56,787
Tele Danmark A/S (Telecommunications) ......... 825 85,019
----------
141,806
----------
Finland (2.08%)
Nokia AB (Telecommunications) ................. 4,240 326,753
----------
France (14.97%)
Accor SA (Leisure) ............................ 303 79,862
Axa SA (Insurance) ............................ 1,140 147,165
Banque Nationale de Paris
(Banks - Foreign) ............................ 2,583 214,065
Cap Gemini SA (Computers) ..................... 792 121,066
Carrefour SA (Retail) ......................... 54 42,784
Castorama Dubois (Retail) .................... 382 91,403
Danone SA (Food) .............................. 993 265,398
Elf Aquitaine SA (Oil & Gas) .................. 754 117,089
Etablissements Economiques du Casino
Guichard-Perrachon SA (Retail) ............... 815 80,242
France Telecom SA (Telecommunications) ........ 2,320 187,367
L'Oreal SA (Cosmetics & Personal Care) ........ 319 204,217
Legrand SA (Electronics) ...................... 316 75,444
Pinault-Printemps-Redoute SA (Retail) ......... 834 138,323
Promodes (Retail) ............................. 61 38,664
Schneider SA (Machinery) ...................... 500 32,616
Suez Lyonnaise des Eaux SA
(Diversified Operations) ..................... 1,125 191,340
Synthelabo SA (Medical) ....................... 180 36,794
Total SA (Oil & Gas) .......................... 759 103,914
Vivendi SA (Diversified Operations) ........... 770 179,849
----------
2,347,602
----------
Germany (4.74%)
Allianz AG (Insurance) ........................ 447 142,372
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign) ............................ 1,439 93,794
DaimlerChrysler AG (Automobile/Trucks) ........ 914 90,231
Deutsche Telekom AG
(Telecommunications) ......................... 730 28,765
Fresenius AG (Medical) ........................ 103 15,669
Mannesmann AG (Machinery) ..................... 1,462 192,439
Metro AG (Retail) ............................. 289 20,883
VEBA AG (Diversified Operations) .............. 1,397 76,594
Viag AG (Diversified Operations) .............. 164 83,333
----------
744,080
----------
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Hong Kong (1.19%)
Cheung Kong Holdings Ltd.
(Real Estate Operations) ..................... 4,000 $36,382
HSBC Holdings Plc (Banks - Foreign) ........... 1,220 45,331
Hutchison Whampoa Ltd.
(Diversified Operations) ..................... 4,000 35,866
New World Development Company Ltd.
(Real Estate Operations) ..................... 13,225 32,760
Swire Pacific Ltd. (Diversified Operations) ... 6,500 36,479
----------
186,818
----------
Ireland (1.36%)
Allied Irish Banks Plc (ADR)
(Banks - Foreign) ............................ 30,847 91,307
CRH Plc (Building) ............................ 4,267 83,745
Irish Life Plc (Insurance) .................... 4,197 38,485
----------
213,537
----------
Italy (4.21%)
Alleanza Assicurazioni (Insurance) ............ 3,210 38,488
Assicurazioni Generali SpA (Insurance) ........ 1,300 50,607
Banca Popolare di Brescia SpA
(Banks - Foreign) ............................ 4,000 137,543
Credito Italiano SpA (Banks - Foreign) ........ 13,336 35,220
Istituto Nazionale delle Assicurazioni SpA
(Insurance) .................................. 17,024 101,431
Telecom Italia Mobile SpA
(Telecommunications) ......................... 19,122 203,419
Telecom Italia SpA (Telecommunications) ....... 14,227 72,141
Unione Immobiliare SpA
(Real Estate Operations)* .................... 36,708 21,018
----------
659,867
----------
Japan (20.09%)
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) ............................ 13,000 191,810
Credit Saison Co., Ltd. (Finance) ............. 1,400 28,605
Daiwa House Industry Co., Ltd. (Building) ..... 6,000 71,596
Denso Corp. (Automobile/Trucks) ............... 5,000 101,532
Fuji Photo Film Co., Ltd. (Leisure) ........... 3,000 113,298
Fujitsu Ltd. (Computers) ...................... 8,000 136,995
Honda Motor Co., Ltd.
(Automobile/Trucks) .......................... 4,000 176,185
Ito-Yokado Co., Ltd. (Retail) ................. 1,000 61,380
Kansai Electric Power Co., Inc. (Utilities) ... 6,000 118,322
Marui Co., Ltd. (Retail) ...................... 7,000 116,120
Matsushita Electric Industrial Co., Ltd.
(Electronics) ................................ 10,000 190,085
NIDEC Corp. (Machinery) ....................... 400 51,918
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Japan (continued)
Nippon Telegraph & Telephone Corp.
(Telecommunications) ......................... 27 $293,921
Nomura Securities Co., Ltd. (Finance) ......... 18,000 194,138
NTT Data Corp. (Telecommunications) ........... 33 261,137
NTT Mobile Communication Network, Inc.
(Telecommunications) ......................... 4 234,467
Orix Corp. (Leasing Companies) ................ 1,600 128,756
Sakura Bank, Ltd. (Banks - Foreign) ........... 17,000 65,626
Sankyo Co., Ltd. (Medical) .................... 3,000 62,929
Secom Co., Ltd.
(Protection - Safety Equip. & Svc.) .......... 1,000 97,639
Sekisui House, Ltd. (Building) ................ 3,000 33,587
Sony Corp. (Electronics) ...................... 2,100 196,073
Sumitomo Trust & Banking Co., Ltd.
(Banks - Foreign) ............................ 19,000 93,234
Takeda Chemical Industries, Ltd. (Medical) .... 3,000 130,380
----------
3,149,733
----------
Netherlands (3.16%)
ABN AMRO Holding NV (ADR)
(Banks - Foreign) ............................ 9 211
AEGON NV (Insurance) .......................... 2,135 204,679
KPN NV (Telecommunications) ................... 1,500 62,592
Royal Philips Electronics NV (Electronics) .... 2,175 187,260
TNT Post Group NV (Transport)* ................ 1,500 40,407
----------
495,149
----------
Norway (0.75%)
Orkla ASA (Diversified Operations) ............ 6,996 117,339
----------
Portugal (1.49%)
Electricidade de Portugal SA (Utilities) ...... 3,263 61,357
Portugal Telecom SA
(Telecommunications) ......................... 4,120 171,701
----------
233,058
----------
Singapore (0.81%)
Overseas-Chinese Banking Corp., Ltd.
(Banks - Foreign) ............................ 10,574 99,114
Singapore Telecommunications, Ltd.
(Telecommunications) ......................... 15,000 27,766
----------
126,880
----------
Spain (6.22%)
Argentaria SA (Banks - Foreign) ............... 8,532 200,634
Banco Bilbao Vizcaya SA
(Banks - Foreign) ............................ 4,078 61,001
Banco Santander SA (Banks - Foreign) .......... 97 2,107
Endesa SA (Utilities) ......................... 6,774 150,563
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Spain (continued)
Iberdrola SA (Utilities) ...................... 6,698 $93,754
Repsol SA (Oil & Gas) ......................... 4,938 80,334
Telefonica SA (Telecommunications)* .......... 5,599 262,321
TelePizza SA (Retail)* ........................ 19,700 124,867
----------
975,581
----------
Sweden (1.89%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) ......................... 3,154 82,803
Investor AB (Diversified Operations) .......... 1,701 77,217
Nordbanken Holding AB (Banks - Foreign) ....... 20,515 128,872
Saab AB (Aerospace)* .......................... 926 7,518
----------
296,410
----------
Switzerland (7.70%)
Adecco SA (Business Services - Misc.) ......... 315 158,770
Barry Callebaut AG (Food)* .................... 211 34,159
Credit Suisse Group (Banks - Foreign) ......... 253 50,162
Nestle SA (Food) .............................. 141 260,892
Novartis AG (Medical) ......................... 77 112,696
Roche Holding AG (Medical) .................... 20 235,171
UBS AG (Banks - Foreign)* ..................... 282 95,744
Zurich Allied AG (Insurance)* ................. 404 260,295
----------
1,207,889
----------
United Kingdom (20.56%)
Allied Zurich Plc (Insurance)* ................ 8,937 118,466
Anglian Water Plc (B shares) (Utilities)* ..... 5,000 3,700
BP Amoco Plc (Oil & Gas) ...................... 8,306 157,670
British Aerospace Plc (Aerospace) ............. 19,988 149,519
British American Tobacco Plc (Tobacco) ........ 2,974 25,070
British Telecommunications Plc
(Telecommunications) ......................... 11,698 195,337
Diageo Plc (Beverages) ........................ 9,552 110,023
Glaxo Wellcome Plc (Medical) .................. 8,552 253,415
Granada Group Plc
(Diversified Operations) ..................... 96 2,048
Hanson Plc (Building) ......................... 7,851 78,053
Kingfisher Plc (Retail) ....................... 10,000 149,287
Lloyds TSB Group Plc (Banks - Foreign) ........ 20,174 325,188
Misys Plc (Computers) ......................... 4,244 39,462
Pearson Plc (Media) ........................... 3,515 74,640
Pennon Group Plc (Utilities) .................. 4,000 60,745
Prudential Corp. Plc (Insurance) .............. 2,896 41,184
Royal & Sun Alliance Insurance Group Plc
(Insurance) .................................. 17,107 147,920
Royal Bank of Scotland Group Plc
(Banks - Foreign) ............................ 1,879 44,374
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
United Kingdom (continued)
Scottish & Southen Energy Plc (Utilities) ..... 8,000 $75,158
SEMA Group Plc (Computers) .................... 14,474 139,939
SmithKline Beecham Plc (Medical) .............. 16,361 216,350
Tesco Plc (Retail) ............................ 29,081 86,431
Thames Water Plc (Utilities) .................. 2,350 32,455
Unilever Plc (Consumer Products Misc.) ........ 29,582 262,927
Vodafone Group Plc
(Telecommunications) ......................... 16,574 305,287
WPP Group Plc (Advertising) ................... 14,690 130,211
----------
3,224,859
----------
TOTAL COMMON STOCKS
(Cost $13,661,058) (98.52%) 15,450,536
------- ----------
RIGHTS
Spain (0.03%)
Telefonica SA (Telecommunications)*............ 5,599 5,205
----------
TOTAL RIGHTS
(Cost $0) (0.03%) 5,205
------- ----------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-
Gesellschaft AG (Insurance)*.................. 5 172
----------
TOTAL WARRANTS
(Cost $224) (0.00%) 172
------- ----------
TOTAL COMMON STOCKS,
RIGHTS AND WARRANTS
(Cost $13,661,282) (98.55%) 15,455,913
------- ----------
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.02%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
04-30-99, due 05-03-99
(Secured by U.S. Treasury Bonds,
6.875% thru 13.875% due
05-15-11 thru 08-15-25)
- Note A ........................... 4.89% $159 $159,000
------------
Non-Cash Security Lending Collateral (0.58%)
U.S. Treasury Bill 4.49% due
06-24-99, U.S. Treasury Note
3.375% due 01-15-07, U.S.
Treasury Note (Strip Principal)
7.50% due 05-15-02 and U.S.
Treasury Bonds 7.125% thru
9.875%, due 11-15-15 thru
02-15-23** ......................... 91 90,527
------------
Cash Equivalents (18.03%)
Navigator Securities Lending
Prime Portfolio**................... 2,828 2,828,191
------------
TOTAL SHORT-TERM INVESTMENTS (19.63%) 3,077,718
-------- ------------
TOTAL INVESTMENTS (118.18%) 18,533,631
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (18.18%) (2,851,256)
-------- ------------
TOTAL NET ASSETS (100.00%) $15,682,375
======== ============
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
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
16
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - International Fund
Portfolio Concentration (Unaudited)
- --------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries in which it invests. The concentration of investments by country
for individual securities held by the Fund is shown in the schedule of
investments. In addition, the concentration of investments can be aggregated by
various industry groups. The table below shows the percentages of the Fund's
investments at April 30, 1999 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
OF FUND'S
INVESTMENT CATEGORIES NET ASSETS
- --------------------- ---------------
Advertising ................................................. 0.83%
Aerospace ................................................... 1.00
Automobile/Trucks ........................................... 2.35
Banks - Foreign ............................................. 13.49
Beverages ................................................... 0.70
Building .................................................... 1.70
Broker Services ............................................. 1.24
Business Services - Misc. ................................... 1.01
Computers ................................................... 2.79
Consumer Products Misc. ..................................... 1.68
Cosmetics & Personal Care ................................... 1.30
Diversified Operations ...................................... 6.19
Electronics ................................................. 4.14
Finance ..................................................... 0.18
Food ........................................................ 3.57
Insurance ................................................... 8.58
Leasing Companies ........................................... 0.82
Leisure ..................................................... 1.23
Machinery ................................................... 1.77
Media ....................................................... 1.41
Medical ..................................................... 7.14
Metal ....................................................... 0.29
Oil & Gas ................................................... 2.93
Protection - Safety Equip. & Svc. ........................... 0.62
Real Estate Operations ...................................... 0.57
Retail ...................................................... 6.06
Telecommunications .......................................... 20.31
Tobacco ..................................................... 0.16
Transport ................................................... 0.26
Utilities ................................................... 4.23
Short-Term Investments ...................................... 19.63
--------
TOTAL INVESTMENTS 118.18%
========
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - International Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust III (the "Trust") is a diversified open-end
management investment company, registered under the Investment Company Act of
1940. The Trust consists of five series: John Hancock International Fund (the
"Fund"), John Hancock Global Fund, John Hancock Large Cap Growth Fund, John
Hancock Mid Cap Growth Fund and John Hancock Short-Term Strategic Income Fund.
Prior to June 1, 1999, John Hancock Large Cap Growth Fund was known as John
Hancock Growth Fund and John Hancock Mid Cap Growth Fund was known as John
Hancock Special Opportunities Fund. The other four series of the Trust are
reported in separate financial statements. The investment objective of the Fund
is 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 and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights 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 which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value. 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,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement. Aggregate cash balances
are invested in one or more 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.
Capital gains realized on some foreign securities are subject to
foreign taxes and are accrued, as applicable.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses, and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily
18
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - International Fund
to each class of shares based on the appropriate net assets of the respective
classes. Distribution and service fees if any, are calculated daily at the class
level based on the appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which 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.
ORGANIZATION EXPENSES Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that commenced with the investment operations of
the Fund.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks,
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in unsecured
lines of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund based on its borrowings. In
addition, a commitment fee is charged 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 for the period ended April 30, 1999.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. 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, 1999, the Fund
loaned securities having a market value of $2,800,984 collateralized by cash and
securities in the amount of $2,918,718. The cash portion of the collateral was
invested in a short-term instrument.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 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 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 exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
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 assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of
19
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - International Fund
counterparties to meet the terms of the contract 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 transaction.
At April 30, 1999, the Fund had no open forward foreign currency
exchange contracts.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also have
a sub-investment management contract with John Hancock Advisers International
Limited (the "Sub-Adviser"), a wholly owned subsidiary of the Adviser, under
which the Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment management
services and advice with respect to the portion of the Fund's assets invested in
countries other than the United States and Canada.
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 1.00% of the first
$250,000,000 of the Fund's average daily net asset value, (b) 0.80% of the next
$250,000,000, (c) 0.75% of the next $250,000,000 and (d) 0.625% of the Fund's
average daily net asset value in excess of $750,000,000. The Adviser pays the
Sub-Adviser a fee equivalent, on an annual basis, to the sum of (a) 0.70% of the
first $200,000,000 of the Fund's average daily net asset value and (b) 0.6375%
of the Fund's average daily net asset value in excess of $200,000,000. The Fund
is not responsible for the payment of the Sub-Adviser's fee.
The Adviser has agreed to limit Fund expenses, including the management
fee (but not including transfer agent and 12b-1 expenses), to 0.90% of the
Fund's average daily net assets. Accordingly, the reduction in the Adviser's fee
amounted to $154,298 for the period ended April 30, 1999. The Adviser reserves
the right to terminate this limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the period ended
April 30, 1999, net sales charges received with regard to sales of Class A
shares amounted to $10,025. Out of this amount, $1,218 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $6,462
was paid as sales commissions to unrelated broker-dealers and $2,345 was paid as
sales commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer, formerly known as John Hancock
Distributors, Inc. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares which are redeemed within six years of purchase will be
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. Proceeds
from the CDSC 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 shares. For the period ended April 30, 1999,
contingent deferred sales charges paid to JH Funds amounted to $54,899.
Class C shares which are redeemed within one year of purchase will be
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 CDSC 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 C shares. For the period ended
April 30, 1999, contingent deferred sales charges paid to JH Funds amounted to
$480.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution
20
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - International Fund
Plan with respect to Class A, Class B and Class C pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Accordingly, the Fund will make payments to
JH Funds for distribution and service expenses, at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets, to reimburse JH Funds for its distribution and service
costs. Up to a maximum of 0.25% of such payments may be service fees as defined
by the amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon
and Mr. Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect
to defer for tax purposes their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability for the
deferred compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The deferred
compensation liability and the related other asset are always equal and are
marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. At April 30, 1999, the
Fund's investments to cover the deferred compensation liability had unrealized
appreciation of $50.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended April 30, 1999, aggregated $5,669,471 and $1,220,818, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended April 30, 1999.
The cost of investments owned at April 30, 1999 (including short-term
investments) for federal income tax purposes was $16,794,639. Gross unrealized
appreciation and depreciation of investments aggregated $2,279,246 and $540,254,
respectively, resulting in net unrealized appreciation of $1,738,992.
21
<PAGE>
======================================NOTES=====================================
John Hancock Funds - International Fund
22
<PAGE>
======================================NOTES=====================================
John Hancock Funds - International Fund
23
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS -----------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713 (TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
-----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
International Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[LOGO] Printed on Recycled Paper 400SA 4/99
6/99
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Mid Cap
Growth Fund
(formerly Special Opportunities Fund)
APRIL 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Douglas M. Costle
Leland O. Erdahl
Richard A. Farrell
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
Richard S. Scipione
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
-----------------------------------
==============================CHAIRMAN'S MESSAGE================================
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements are nearly done, and the tests of all our
systems are on schedule for completion by the end of July. The rest of 1999 will
be spent testing with our business partners and continuing to participate in
industry testing. We have also established additional contingency plans beyond
our regular ones to prepare for any challenges that the Year 2000 might present.
In the end, John Hancock will spend approximately $90-$95 million to ensure we
make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/s/Edward J. Boudreau, Jr.
- -------------------------------------------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Barbara C. Friedman, CFA, Portfolio Manager
John Hancock
Mid Cap Growth Fund
Healthy economy drives U.S. stocks to strong finish
---------------------------------------------------
Effective June 1, 1999, John Hancock Special Opportunities Fund was renamed John
Hancock Mid Cap Growth Fund to better describe how the Fund invests.
U.S. stocks began to rebound last fall, following the Federal Reserve's decision
to cut short-term interest rates. Strong economic growth, continued low
inflation levels and stable interest rates kept stocks climbing into the new
year. Signs that the economy might be weakening caused the market to stumble in
February. But the market regained its momentum in March and April as economic
growth remained steady and most corporations reported high first-quarter
profits. Reassured investors began expanding their investment horizons beyond
the select group of large-company stocks that had led the market's uphill
charge. This helped the Russell Midcap Growth Index return 27.38% between
October 31, 1998 and April 30, 1999.
Performance and strategy review
John Hancock Mid Cap Growth Fund's Class A, Class B and Class C shares returned
23.71%, 23.28% and 23.17%, respectively, at net asset value, for the six months
ended April 30, 1999. For the same period, the average mid-cap fund gained
23.15%, according to Lipper, Inc.1 Keep in mind that your net asset value return
will differ from the Fund's performance if you were not invested in the Fund for
the entire period and did not reinvest all distributions. Please see pages six
and seven for longer-term performance information.
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Mid Cap
Growth Fund. Caption below reads "Portfolio manager Barbara Friedman (l) and
equity research analysts Lisa Welch (center) and John Golden."]
- --------------------------------------------------------------------------------
"...investors began expanding their investment horizons beyond the select group
of large- company stocks..."
3
<PAGE>
================================================================================
John Hancock Funds - Mid Cap Growth Fund
"Some of the Fund's best performers were technology stocks..."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Ascend Communications 1.8%, the second is Guidant Corp. 1.6%, the
third Charles Schwab Corp. 1.5%, the fourth Qwest Communications International
1.5% and the fifth EMC Corp. 1.4%. A note below the table reads "As a percentage
of net assets on April 30, 1999."]
- --------------------------------------------------------------------------------
Strong stock selection helped us keep pace with other mid-cap funds,
many of which invested a portion of their assets in top-performing large-company
stocks. By contrast, the Fund maintained its strategy of focusing on true
mid-cap stocks - although during the period we did shift some of our investments
toward the larger end of the mid-cap market.
Technology winners
Some of the Fund's best performers were technology stocks, which represented 44%
of net assets. In particular, we invested heavily in telecommunications
equipment and service companies - many of which are involved in building
fiber-optic networks for Internet as well as data transmission services.
NEXTLINK Communications, a company that is building networks in major
metropolitan areas and offers better service than the local Bell operating
companies, saw its stock gain 186% during the
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Conexant
Systems followed by an up arrow with the phrase "Rising semiconductor sales."
The second listing is NEXTLINK Communications followed by an up arrow with the
phrase "Better service, lower cost advantage." The third listing is Omnicare
followed by a down arrow with the phrase "Tightened Medicare reimbursement
policies." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
period. Similarly, the stock of Global Crossing, a company positioned to offer
contiguous service from New England across the Atlantic and into Europe, rose
nearly 300% between October 31, 1998, and the time we sold it in March. In its
place, we bought Frontier Corp., a U.S. telecommunications firm that Global is
buying. Frontier's stock, which is tied to Global's through the acquisition, was
available at a discount. Other top performers included Ascend Communications, a
leading telecommunications equipment manufacturer that Lucent Technologies is
buying, and Qwest Communications International, a company that is laying a
fiber-optic network across the United States.
Another area that boosted performance was Internet stocks. We started
building our stake in December, adding to it in February. By mid-April, our
Internet investments accounted for over 10% of net assets, including
well-recognized names like Yahoo! and Amazon.com. Prices on Internet stocks
climbed so high that we decided to lock in gains and trimmed our stake to about
4% by period end. Although we expect the Internet to be a vibrant force in the
economy, there will most likely be better buying opportunities ahead. Our
semiconductor stocks also appreciated nicely. The stock of Conexant Systems, a
leading supplier of semiconductors to the high-growth communications industry,
climbed 152% from the time we bought it in January through the end of April.
During the period, we also bought shares in Best Buy and Circuit City Stores,
retailers that sell technology products like PCs and digital VCRs. These stocks
did well amidst strong consumer spending. Finally, core holdings like Lexmark
International Group, which makes low-cost printers, and EMC Corp., a
manufacturer of data storage
4
<PAGE>
================================================================================
John Hancock Funds - Mid Cap Growth Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended April 30, 1999." The
chart is scaled in increments of 5% with 0% at the bottom and 25% at the top.
The first bar represents the 23.71% total return for John Hancock Mid Cap Growth
Fund Class A. The second bar represents the 23.28% total return for John Hancock
Mid Cap Growth Fund Class B. The third bar represents the 23.17% total return
for John Hancock Mid Cap Growth Fund Class C, and the fourth bar represents the
23.15% total return for Average mid-cap fund. A note below the chart reads
"Total returns for John Hancock Mid Cap Growth Fund are at net asset value with
all distributions reinvested. The average mid-cap fund is tracked by Lipper,
Inc. See the following two pages for historical performance information."]
- --------------------------------------------------------------------------------
devices, delivered returns in excess of 75% for the period.
Finance and health-care cuts
We trimmed our finance stake to about 15% of net assets, paring our investments
in the banking and insurance sectors while adding to financial services. Our
biggest new investments were in brokerage stocks, which have benefited from the
rising market as well as increased on-line trading. Among the names we added
were market leaders like Charles Schwab, as well as Donaldson, Lufkin & Jenrette
and E*TRADE Group. We also cut back on our investment in health-care stocks,
especially service providers, because of concerns that tightened Medicare
reimbursement policies would hurt profit margins. By late April, however, these
stocks had declined to such low levels that we started adding selectively to
names like Omnicare, a company that supplies drugs to nursing homes whose
prospects remained strong. We also added to Guidant, a medical device
manufacturer that has developed a superior stent with the potential to cut down
on open-heart surgery by making it easier to open up blocked arteries.
Looking ahead
We remain cautiously optimistic about the stock market's prospects for several
reasons. Even if the market takes a breather or economic growth slows, the U.S.
economy will most likely remain healthy, inflation low and interest rates around
current levels. Year-end 1998 and first-quarter 1999 earnings were on target or
better than expected at most companies, reaffirming the strength of corporate
America. Economies in Brazil and Asia have begun to stabilize, while growth in
Europe appears to be accelerating modestly. All of this bodes well for stock
investors, especially those with a long-term investment horizon who are willing
to ride out near-term volatility. We're particularly optimistic about the
mid-cap sector of the market, which continues to offer strong earnings growth
prospects and attractive valuations relative to larger-cap names.
"We remain cautiously optimistic about the stock market's prospects..."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
Sector investing is subject to greater risks than the market as a whole.
1Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
================================================================================
John Hancock Funds - Mid Cap Growth Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Mid Cap Growth Fund. Total return measures
the change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------- ------- ---------
Cumulative Total Returns (9.10%) 73.88% 63.97%
Average Annual Total Returns (9.10%) 11.70% 9.57%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------- ------- ---------
Cumulative Total Returns (9.60%) 74.73% 65.34%
Average Annual Total Returns (9.60%) 11.81% 9.74%
- --------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------
For the period ended March 31, 1999
SINCE
INCEPTION
(6/1/98)
---------
Cumulative Total Return 1.10%
Average Annual Total Return 1.10%(1)
Notes to Performance
(1) Not annualized.
6
<PAGE>
================================================================================
John Hancock Funds - Mid Cap Growth Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Mid Cap Growth Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in both the Standard & Poor's 500 Stock Index and the Russell Midcap
Growth Index. The Standard & Poor's 500 Stock Index is an unmanaged index that
includes 500 widely traded common stocks and is a commonly used measure of stock
market performance. The Russell Midcap Growth Index is an unmanaged index that
contains those securities from the Russell Midcap Index with a
greater-than-average growth orientation. Past performance is not indicative of
future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Mid Cap Growth Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are four lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $32,114. The second line
represents the Russell Midcap Growth Index and is equal to $24,432. The third
line represents the value of the hypothetical $10,000 investment made in the
John Hancock Mid Cap Growth Fund on November 1, 1993, before sales charge, and
is equal to $18,202 as of April 30, 1999. 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 $17,287 as of April 30, 1999.
Line chart with the heading John Hancock Mid Cap Growth Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are four lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $32,114. The second line
represents the Russell Midcap Growth Index and is equal to $24,432. The third
line represents the value of the hypothetical $10,000 investment made in the
John Hancock Mid Cap Growth Fund on November 1, 1993, before sales charge, and
is equal to $17,513 as of April 30, 1999. 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 $17,413 as of April 30, 1999.
Line chart with the heading John Hancock Mid Cap Growth Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are four lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $12,396. The second line
represents the Russell Midcap Growth Index and is equal to $11,715. The third
line represents the value of the hypothetical $10,000 investment made in the
John Hancock Mid Cap Growth Fund on June 1, 1998, before sales charge, and is
equal to $10,751 as of April 30, 1999. 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 $10,651 as of April 30, 1999.
- --------------------------------------------------------------------------------
7
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Mid Cap Growth Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $206,445,127)........................ $236,083,819
Joint repurchase agreement (cost - $5,395,000) ............ 5,395,000
Corporate savings account ................................. 37
--------------
241,478,856
Receivable for investments sold ............................ 5,463,668
Receivable for shares sold ................................. 25,494
Dividends receivable ....................................... 43,427
Interest receivable ........................................ 735
Other assets ............................................... 23,133
--------------
Total Assets ..................... 247,035,313
---------------------------------------------------
Liabilities:
Payable for investments purchased .......................... 7,313,895
Payable for shares repurchased ............................. 124,293
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................... 279,883
Accounts payable and accrued expenses ...................... 66,072
--------------
Total Liabilities ................ 7,784,143
---------------------------------------------------
Net Assets:
Capital paid-in ............................................ 185,112,356
Accumulated net realized gain on investments sold .......... 26,428,876
Net unrealized appreciation of investments ................. 29,640,304
Accumulated net investment loss ............................ (1,930,366)
--------------
Net Assets ....................... $239,251,170
===================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $104,190,038/9,248,890 .......................... $11.27
============================================================================
Class B - $134,889,960/12,549,344.......................... $10.75
============================================================================
Class C - $171,172/15,932.................................. $10.74
============================================================================
Maximum Offering Price Per Share*
Class A - ( $11.27 x 105.26%).............................. $11.86
============================================================================
* 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.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains for the period
stated.
Statement of Operations
Six months ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends .................................................. $395,789
Interest.................................................... 88,113
--------------
483,902
--------------
Expenses:
Investment management fee - Note B ........................ 963,878
Distribution and service fee - Note B
Class A .................................................. 155,008
Class B .................................................. 618,684
Class C .................................................. 727
Transfer agent fee - Note B ............................... 524,286
Custodian fee ............................................. 41,413
Registration and filing fees .............................. 34,113
Financial services fee - Note B ........................... 17,362
Printing .................................................. 15,678
Auditing fee .............................................. 13,506
Miscellaneous ............................................. 7,563
Trustees' fees ............................................ 6,017
Legal fees ................................................ 1,124
---------------
Total Expenses ................... 2,399,359
---------------------------------------------------
Net Investment Loss .............. (1,915,457)
---------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold....................... 29,048,400
Change in net unrealized appreciation/depreciation
of investments ............................................ 23,841,428
---------------
Net Realized and Unrealized
Gain on Investments............... 52,889,828
---------------------------------------------------
Net Increase in Net Assets
Resulting from Operations......... $50,974,371
===================================================
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Mid Cap Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
---------------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss.................................................................. ($3,734,387) ($1,915,457)
Net realized gain on investments sold ............................................... 11,463,586 29,048,400
Change in net unrealized appreciation/depreciation of investments ................... (32,557,064) 23,841,428
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations .................... (24,827,865) 50,974,371
-------------- --------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A - ($1.3062 and none per share, respectively) ............................... (15,933,609) --
Class B - ($1.3062 and none per share, respectively) ............................... (23,732,786) --
-------------- --------------
Total Distributions to Shareholders ................................................ (39,666,395) --
-------------- --------------
From Fund Share Transactions - Net:* ................................................. (46,888,774) (47,149,912)
-------------- --------------
Net Assets:
Beginning of period ................................................................. 346,809,745 235,426,711
-------------- --------------
End of period (including accumulated net investment loss
of $14,909 and $1,930,366, respectively) ........................................... $235,426,711 $239,251,170
============== ==============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders and any increase or decrease in money shareholders invested in the
Fund. The footnote illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding dollar
value.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Mid Cap Growth Fund
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .............................. 6,953,677 $70,620,558 3,171,119 $31,388,844
Shares reinvested ........................ 1,542,642 15,071,789 95 954
------------- -------------- ------------ -------------
8,496,319 85,692,347 3,171,214 31,389,798
Less shares repurchased .................. (9,853,865) (100,927,104) (5,025,744) (50,293,756)
------------- -------------- ------------ -------------
Net decrease ............................. (1,357,546) ($15,234,757) (1,854,530) ($18,903,958)
============= ============== ============ =============
CLASS B
Shares sold .............................. 1,738,672 $17,297,307 687,719 $6,689,793
Shares reinvested ........................ 2,298,572 21,629,593 -- --
------------- -------------- ------------ -------------
4,037,244 38,926,900 687,719 6,689,793
Less shares repurchased .................. (7,219,381) (70,681,852) (3,532,375) (34,979,123)
------------- -------------- ------------ -------------
Net decrease ............................. (3,182,137) ($31,754,952) (2,844,656) ($28,289,330)
============= ============== ============ =============
CLASS C**
Shares sold .............................. 11,518 $100,935 16,564 $165,249
------------- -------------- ------------ -------------
Less shares repurchased .................. -- -- (12,150) (121,873)
------------- -------------- ------------ -------------
Net increase (decrease) .................. 11,518 $100,935 4,414 $43,376
============= ============== ============ =============
** Class C shares commenced operations on June 1, 1998.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Mid Cap Growth Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
--------------------------------------------------- APRIL 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ................. $8.50 $7.93 $9.32 $10.92 $11.40 $9.11
-------- --------- -------- -------- -------- --------
Net Investment Loss(1) ............................... (0.03) (0.07) (0.11) (0.06) (0.09) (0.06)
Net Realized and Unrealized Gain (Loss) on Investments (0.54) 1.46 3.34 1.00 (0.89) 2.22
-------- --------- -------- -------- -------- --------
Total from Investment Operations .................... (0.57) 1.39 3.23 0.94 (0.98) 2.16
-------- --------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold -- -- (1.63) (0.46) (1.31) --
-------- --------- -------- -------- -------- --------
Net Asset Value, End of Period ....................... $7.93 $9.32 $10.92 $11.40 $9.11 $11.27
======== ========= ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) ........ (6.71%) 17.53% 36.15% 8.79% (9.40%) 23.71%(6)
Total Adjusted Investment Return at Net Asset Value(2,3) (6.83%) -- -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............. $92,325 $101,562 $156,578 $141,997 $101,138 $104,190
Ratio of Expenses to Average Net Assets .............. 1.50% 1.59% 1.59% 1.59% 1.59% 1.65%(5)
Ratio of Adjusted Expenses to Average Net Assets(4) .. 1.62% -- -- -- -- --
Ratio of Net Investment Loss to Average Net Assets ... (0.41%) (0.87%) (1.00%) (0.57%) (0.86%) (1.25%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets(4) ............................... (0.53%) -- -- -- -- --
Portfolio Turnover Rate .............................. 57% 155% 240% 317% 168% 87%
Expense Reimbursement Per Share ...................... $0.01(1) -- -- -- -- --
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ................. $8.50 $7.87 $9.19 $10.67 $11.03 $8.72
-------- -------- -------- -------- -------- --------
Net Investment Loss(1) ............................... (0.09) (0.13) (0.18) (0.13) (0.15) (0.09)
Net Realized and Unrealized Gain (Loss) on Investments (0.54) 1.45 3.29 0.95 (0.85) 2.12
-------- -------- -------- -------- -------- --------
Total from Investment Operations .................... (0.63) 1.32 3.11 0.82 (1.00) 2.03
-------- -------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold -- -- (1.63) (0.46) (1.31) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ....................... $7.87 $9.19 $10.67 $11.03 $8.72 $10.75
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) ........ (7.41%) 16.77% 35.34% 7.84% (9.97%) 23.28%(6)
Total Adjusted Investment Return at Net Asset Value(2,3) (7.53%) -- -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............. $131,983 $137,363 $238,901 $204,812 $134,188 $134,890
Ratio of Expenses to Average Net Assets .............. 2.22% 2.30% 2.29% 2.28% 2.27% 2.25%(5)
Ratio of Adjusted Expenses to Average Net Assets(4) .. 2.34% -- -- -- -- --
Ratio of Net Investment Loss to Average Net Assets ... (1.13%) (1.55%) (1.70%) (1.25%) (1.54%) (1.85%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets(4) ............................... (1.25%) -- -- -- -- --
Portfolio Turnover Rate .............................. 57% 155% 240% 317% 168% 87%
Expense Reimbursement Per Share ...................... $0.01(1) -- -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Mid Cap Growth Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 1, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO APRIL 30, 1999
October 31, 1998 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $9.99 $8.72
------- -------
Net Investment Loss(1) ..................................... (0.06) (0.09)
Net Realized and Unrealized Gain (Loss) on Investments ..... (1.21) 2.11
------- -------
Total From Investment Operations .......................... (1.27) 2.02
------- -------
Net Asset Value, End of Period ............................. $8.72 $10.74
======= =======
Total Investment Return at Net Asset Value(2) .............. (12.71%)(6) 23.17%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................... $100 $171
Ratio of Expenses to Average Net Assets .................... 2.29%(5) 2.35%(5)
Ratio of Net Investment Loss to Average Net Assets ......... (1.66%)(5) (1.95%)(5)
Portfolio Turnover Rate .................................... 168% 87%
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation which does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Annualized.
(6) Not annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: the net investment income (loss), gains
(losses), distributions and total investment return of the Fund. It shows how
the Fund's net asset value for a share has changed since the end of the previous
period. Additionally, important relationships between some items presented in
the financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Mid Cap Growth Fund
Schedule of Investments
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Mid Cap Growth Fund on April 30, 1999. It's divided into two main categories:
common stocks and short-term investments. The common stocks are further broken
down by industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Advertising (1.98%)
DoubleClick, Inc.* ........................... 6,500 $908,781
Lamar Advertising Co.* ....................... 4,100 137,862
Omnicom Group, Inc. .......................... 21,700 1,573,250
Outdoor Systems, Inc.* ....................... 84,350 2,124,566
----------
4,744,459
----------
Banks - Foreign (0.30%)
Toronto-Dominion Bank (Canada)................ 13,400 716,062
----------
Banks - United States (4.40%)
Comerica, Inc. ............................... 18,500 1,203,656
First Tennessee National Corp. ............... 50,900 2,195,062
Firstar Corp. ................................ 21,750 653,859
FirstMerit Corp. ............................. 56,700 1,576,969
Northern Trust Corp. ......................... 29,700 2,765,812
Wilmington Trust Corp. ....................... 34,700 2,131,881
----------
10,527,239
----------
Broker Services (3.92%)
Donaldson, Lufkin & Jenrette, Inc. ........... 26,500 1,853,344
E*TRADE Group, Inc.* ......................... 24,300 2,806,650
Merrill Lynch & Co., Inc. .................... 13,400 1,124,762
Schwab (Charles) Corp. ....................... 32,700 3,588,825
----------
9,373,581
----------
Building (0.49%)
USG Corp. ................................... 20,200 1,179,175
----------
Business Services - Misc. (0.72%)
Metzler Group, Inc. (The)* .................. 13,500 376,313
Snyder Communications, Inc.* ................ 45,700 1,342,437
----------
1,718,750
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Computers (18.51%)
Ascend Communications, Inc.* ................ 45,100 $4,357,788
BMC Software, Inc.* ......................... 27,000 1,162,687
Ceridian Corp.* ............................. 28,600 1,047,475
Citrix Systems, Inc.* ....................... 63,400 2,694,500
Computer Sciences Corp.* .................... 39,900 2,376,544
Compuware Corp.* ............................ 81,000 1,974,375
DST Systems, Inc.* .......................... 28,700 1,671,775
EMC Corp.* .................................. 30,925 3,368,892
Fiserv, Inc.* ............................... 46,600 2,729,012
i2 Technologies, Inc.* ...................... 77,500 2,625,312
Inktomi Corp* ............................... 8,900 1,065,775
Intuit, Inc.* ............................... 10,300 887,087
Lexmark International Group, Inc.
(Class A)* ................................. 24,810 3,064,035
Lycos, Inc. * ............................... 10,900 1,086,594
MindSpring Enterprises, Inc.* ............... 8,900 862,744
Network Appliance, Inc.* .................... 16,400 825,125
Novell, Inc.* ............................... 77,900 1,733,275
Quantum Corp.* .............................. 11,900 212,712
RealNetworks, Inc.* ......................... 3,800 841,700
Sapient Corp.* .............................. 8,200 514,550
SportsLine USA, Inc.* ....................... 20,700 828,000
SunGard Data Systems, Inc.* ................. 68,150 2,176,541
Synopsys, Inc.* ............................. 13,500 636,188
Unisys Corp.* ............................... 45,400 1,427,263
Wang Laboratories, Inc.* .................... 69,500 1,741,844
Yahoo!, Inc.* ............................... 13,600 2,375,750
----------
44,287,543
----------
Containers (0.49%)
Sealed Air Corp. * .......................... 19,100 1,161,519
----------
Electronics (10.27%)
Altera Corp.* ............................... 24,070 1,739,057
Analog Devices, Inc.* ....................... 13,400 470,675
Applied Materials, Inc.* .................... 32,900 1,764,262
ASM Lithography Holding N.V.
(Netherlands)* ............................. 27,500 1,072,500
Conexant Systems, Inc.* ..................... 75,300 3,068,475
Flextronics International, Ltd.* ............ 15,500 723,656
Jabil Circuit, Inc.* ........................ 50,440 2,348,612
KLA-Tencor Corp.* ........................... 29,060 1,442,102
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Mid Cap Growth Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Electronics (continued)
Linear Technology Corp. ..................... 20,000 $1,137,500
Maxim Intergrated Products, Inc.* ........... 11,200 627,200
Novellus Systems, Inc.* ..................... 30,500 1,441,125
Sanmina Corp.* .............................. 20,100 1,334,137
Solectron Corp. * ........................... 19,300 936,050
Teradyne, Inc.* ............................. 27,800 1,311,812
Vitesse Semiconductor Corp.* ................ 16,600 768,788
Waters Corp.* ............................... 28,400 2,985,550
Xilinx, Inc.* ............................... 30,520 1,392,475
----------
24,563,976
----------
Finance (2.37%)
Charter One Financial, Inc. ................. 67,905 2,122,031
Concord EFS, Inc.* .......................... 50,500 1,685,438
FINOVA Group, Inc. (The) .................... 38,600 1,864,863
----------
5,672,332
----------
Funeral Services & Related (0.12%)
Loewen Group, Inc. (Canada) ................. 236,600 280,962
----------
Furniture (0.70%)
Leggett & Platt, Inc. ....................... 73,100 1,685,869
----------
Household (1.12%)
WestPoint Stevens, Inc.* .................... 78,500 2,688,625
----------
Insurance (3.58%)
Ace, Ltd. (Bermuda) ......................... 67,500 2,041,875
Horace Mann Educators Corp. ................. 20,100 457,275
Mutual Risk Management, Ltd. ................ 29,700 1,154,587
Progressive Corp. (The) ..................... 8,550 1,226,925
Provident Cos., Inc. ........................ 32,100 1,263,937
Reinsurance Group of America, Inc. .......... 66,000 1,996,500
UNUM Corp. .................................. 7,700 420,612
----------
8,561,711
----------
Media (3.52%)
Chancellor Media Corp.* ..................... 55,500 3,045,562
Clear Channel Communications, Inc.* ......... 12,050 837,475
Heftel Broadcasting Corp. (Class A)* ........ 21,250 1,155,469
Infinity Broadcasting Corp. (Class A)* ...... 26,400 730,950
TCA Cable TV, Inc. .......................... 29,700 1,479,431
Univision Communications, Inc. (Class A)* ... 20,400 1,180,650
----------
8,429,537
----------
Medical (10.72%)
AmeriSource Health Corp. (Class A)* ......... 25,300 700,494
Becton, Dickinson & Co. ..................... 30,550 1,136,078
Biogen, Inc.* ............................... 17,100 1,625,569
Cardinal Health, Inc. ....................... 40,468 2,420,492
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Medical (continued)
Forest Laboratories, Inc.* .................. 33,300 $1,481,850
Genzyme Corp.* .............................. 32,900 1,241,975
Genzyme Molecular Oncology* ................. 11,507 36,320
Guidant Corp. ............................... 72,800 3,908,450
HCR Manor Care, Inc.* ....................... 71,100 1,973,025
Health Management Associates, Inc.
(Class A)* ................................. 60,250 941,406
HEALTHSOUTH Corp.* .......................... 217,900 2,928,031
Mylan Laboratories, Inc. .................... 114,710 2,602,483
Omnicare, Inc. .............................. 92,275 2,220,367
Total Renal Care Holdings, Inc. * ........... 120,400 1,670,550
Watson Pharmaceutical, Inc.* ................ 18,600 753,300
----------
25,640,390
----------
Metal (1.16%)
Reynolds Metals Co. ......................... 44,400 2,769,450
----------
Office (0.74%)
Avery Dennison Corp. ........................ 25,900 1,767,675
----------
Oil & Gas (5.91%)
Anadarko Petroleum Corp. .................... 32,800 1,244,350
Apache Corp. ................................ 60,600 1,859,663
Baker Hughes, Inc. .......................... 49,000 1,463,875
BJ Services Co.* ............................ 82,800 2,214,900
Burlington Resources, Inc. .................. 31,000 1,427,937
Cooper Cameron Corp.* ....................... 39,700 1,533,413
Diamond Offshore Drilling, Inc. ............. 29,900 988,569
Halliburton Co. ............................. 33,700 1,436,463
Noble Affiliates, Inc. ...................... 30,400 974,700
Santa Fe International Corp. ................ 46,000 989,000
----------
14,132,870
----------
Paper & Paper Products (0.48%)
Bowater, Inc. ............................... 21,500 1,152,938
----------
Printing - Commercial (0.43%)
Valassis Communications, Inc. * ............. 18,200 1,019,200
----------
Retail (6.89%)
Amazon.com, Inc.* ........................... 2,800 481,775
Best Buy Co., Inc.* ......................... 18,300 873,825
Circuit City Stores-Circuit City Group ...... 21,800 1,340,700
Ethan Allen Interiors, Inc. ................. 22,600 1,145,538
Kohl's Corp.* ............................... 31,900 2,119,356
Lowe's Cos., Inc. ........................... 25,500 1,345,125
Meyer (Fred), Inc. * ........................ 28,800 1,558,800
Office Depot, Inc.* ......................... 36,300 798,600
Saks, Inc.* ................................. 65,400 1,851,638
Staples, Inc.* .............................. 63,950 1,918,500
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Mid Cap Growth Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Retail (continued)
SYSCO Corp. ................................. 29,300 $869,844
TJX Cos., Inc. .............................. 65,800 2,191,963
----------
16,495,664
----------
Soap & Cleaning Preparations (1.78%)
Clorox Co. (The) ............................ 15,100 1,742,163
Dial Corp. (The) ............................ 74,300 2,526,200
----------
4,268,363
----------
Telecommunications (13.47%)
Allegiance Telecom, Inc.* ................... 34,700 1,596,200
American Tower Corp. (Class A)* ............. 84,100 1,781,869
Comverse Technology, Inc.* .................. 49,050 3,145,331
Corning, Inc. ............................... 50,400 2,885,400
Crown Castle International Corp.* ........... 37,300 713,363
Frontier Corp. .............................. 45,500 2,511,031
Global TeleSystems Group, Inc.* ............. 16,700 1,104,288
ICG Communications, Inc.* ................... 77,600 1,712,050
Intermedia Communications, Inc.* ............ 72,600 2,336,813
McLeodUSA, Inc. (Class A)* .................. 46,545 2,609,429
Nextel Communications, Inc. (Class A)* ...... 46,600 1,907,688
NEXTLINK Communications, Inc. (Class A)* .... 27,500 2,014,375
QUALCOMM, Inc.* ............................. 5,200 1,040,000
Qwest Communications International, Inc.* ... 41,200 3,520,025
Tel-Save Holdings, Inc.* .................... 102,300 1,227,600
Teligent, Inc. (Class A)* ................... 12,400 674,250
Uniphase Corp.* ............................. 6,100 740,388
WinStar Communications, Inc.* ............... 14,300 695,338
----------
32,215,438
----------
Textile (0.85%)
Jones Apparel Group, Inc.* .................. 61,500 2,029,500
----------
Transport (0.41%)
Expeditors International of
Washington, Inc. ............................ 16,000 970,000
----------
Utilities (1.47%)
ALLTEL Corp. ................................ 19,650 1,325,147
Montana Power Co. ........................... 20,000 1,491,250
Potomac Electric Power Co. .................. 24,200 707,850
----------
3,524,247
----------
Waste Disposal Service & Equip. (1.88%)
Republic Services, Inc. (Class A)* .......... 126,300 2,597,044
Waste Management, Inc. ...................... 33,800 1,909,700
----------
4,506,744
----------
TOTAL COMMON STOCKS
(Cost $206,445,127) (98.68%) 236,083,819
-------- -----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.25%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
04-30-99, due 05-03-99
(Secured by U.S. Treasury Bonds,
6.625% thru 9.250%, due 02-15-16
thru 02-15-27 and U.S. Treasury
Note, 5.625% due 04-30-00)
- Note A ............................ 4.89% $5,395 $5,395,000
-------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00%............................ 37
-------------
TOTAL SHORT-TERM INVESTMENTS (2.25%) 5,395,037
------- -------------
TOTAL INVESTMENTS (100.93%) 241,478,856
------- -------------
OTHER ASSETS AND LIABILITIES, NET (0.93%) (2,227,686)
------- -------------
TOTAL NET ASSETS (100.00%) $239,251,170
======= =============
* Non-income producing security.
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
15
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - Mid Cap Growth Fund
Portfolio Concentration (Unaudited)
- --------------------------------------------------------------------------------
The Mid Cap Growth Fund invests primarily in common stocks of U.S. and foreign
issuers. The performance of the Fund is closely tied to the economic and
financial conditions within the countries in which it invests. The concentration
of investments by industry category for individual securities held by the Fund
is shown in the schedule of investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's investments at
April 30, 1999 assigned to country categories.
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- -----------------
Bermuda...................................................... 0.85%
Canada ...................................................... 0.42
Netherlands ................................................. 0.45
United States ............................................... 99.21
-------
TOTAL INVESTMENTS 100.93%
=======
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Mid Cap Growth Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust III is an open-end management investment company,
registered under the Investment Company Act of 1940. The Trust consists of five
series: John Hancock Mid Cap Growth Fund (the "Fund"), John Hancock Global Fund,
John Hancock Short-Term Strategic Income Fund, John Hancock Large Cap Growth
Fund and John Hancock International Fund. Prior to June 1, 1999, the Fund was
known as John Hancock Special Opportunities Fund and the John Hancock Large Cap
Growth Fund was known as John Hancock Growth Fund. The other four series of the
Trust are reported in separate financial statements. The investment objective of
the Fund is long-term capital appreciation.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights 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 which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation."
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,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more 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 for both financial
reporting and federal income tax purposes. Capital gains realized on some
foreign securities are subject to foreign taxes and are accrued, as applicable.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, at April 30, 1999, the fund has $8,860,270 of
capital loss carryforwards available, to the extent provided by regulations, to
offset future net realized capital gains. If such carryforwards are used by the
Fund, no capital gain distributions will be made. The Fund's carryforwards
expire as follows: October 31, 1999 - $1,297,087, October 31, 2000 - $12,856,
October 31, 2001 - $3,094,744 and October 31, 2002 - $4,455,583. Availability of
a certain amount of loss carryforwards which were acquired on September 6, 1996
and December 16, 1994 in mergers, 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 is made aware of 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Mid Cap Growth Fund
distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles. Dividends paid by the
Fund with respect to each class of shares will be calculated in the same manner,
at the same time and will be in the same amount, except for the effect of
expenses that may be applied differently to each class.
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 relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowings. In
addition, a commitment fee is charged 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 for the period ended April 30, 1999.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 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 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 exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
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 assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
18
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Mid Cap Growth Fund
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 transaction.
At April 30, 1999, there were no open forward foreign currency exchange
contracts.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates and other market conditions. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling futures
tends to decrease the Fund's exposure to the underlying instrument or hedge
other Fund instruments. At the time the Fund enters into a financial futures
contract, it is required to deposit with its custodian a specified amount of
cash or U.S. government securities, known as "initial margin," equal to a
certain percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange on which it trades. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract fluctuates.
Daily variation margin adjustments, arising from this "mark to market," are
recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1999, there were no open positions in financial futures
contracts.
SHORT SALE POSITIONS The Fund, in "selling short," sells borrowed securities
which must at some date be repurchased and returned to the lender. The risk
associated with this practice is that, if the market value of securities sold
short increases, the Fund may realize losses upon repurchase at prices which may
exceed the prices used in determining the liability on the Statement of Assets
and Liabilities. Further, in unusual circumstances, the Fund may be unable to
repurchase securities to close its short positions except at prices above those
previously quoted in the market.
At April 30, 1999, there were no open positions in short sales.
NOTE B -
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program 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 a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the period ended
April 30, 1999, net sales charges received with regard to sales of Class A
shares amounted to $39,917. Out of this amount, $6,296 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $628
was paid as sales commissions to unrelated broker-dealers and $32,993 was paid
as sales commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer, formerly known as John Hancock
Distributors, Inc. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares which are redeemed within six years of purchase will be
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
19
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Mid Cap Growth Fund
time of redemption or the original purchase cost of the shares being redeemed.
Proceeds from the CDSC are paid to JH Funds and are used in whole or in part to
defray its expenses related to providing distribution related services to the
Fund in connection with the sale of Class B shares. For the period ended April
30, 1999, contingent deferred sales charges paid to JH Funds amounted to
$245,869.
Class C shares which are redeemed within one year of purchase will be
subject to a contingent deferred sales charge ("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 CDSC are paid to
JH Funds and are used in whole or in part to defray its expenses related to
providing distribution related services to the Fund in connection with the sale
of Class C shares. For the period ended April 30, 1999, contingent deferred
sales charges paid to JH Funds amounted to $1,148.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, 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. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets, to reimburse JH Funds for its distribution and service
costs. Up to a maximum of 0.25% of such payments may be service fees as defined
by the amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon
and Mr. Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect
to defer, for tax purposes, their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability for the
deferred compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The deferred
compensation liability and the related other asset are always equal and are
marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. At April 30, 1999, the
Fund's investments to cover the deferred compensation liability had unrealized
appreciation of $1,612.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended April 30, 1999, aggregated $208,293,624 and $254,023,106, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended April 30, 1999.
The cost of investments owned at April 30, 1999 (excluding the
corporate savings account) for federal income tax purposes was $213,651,081.
Gross unrealized appreciation and depreciation of investments aggregated
$42,288,320 and $14,460,582, respectively, resulting in net unrealized
appreciation of $27,827,738.
20
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Mid Cap Growth Fund
21
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Mid Cap Growth Fund
22
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Mid Cap Growth Fund
23
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS ---------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713 (TDD) Randolph, MA
INTERNET: ww.jhancock.com/funds Permit No. 75
---------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Mid Cap Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[LOGO] Printed on Recycled Paper 390SA 4/99
6/99
