The latest report from your
Fund's management team
ANNUAL REPORT
Global
Fund
OCTOBER 31, 1999
TRUSTEES
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
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
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive 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 & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02199-7603
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
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to fourth paragraph.]
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is
to welcome you to the New Millennium! I wish you all the best for a century
filled with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make
new resolutions, or re-commit to old ones. It seems fitting, therefore, that
this special New Year 2000 coincides with a very important, although
certainly less exotic, event.
Starting last October, personalized Social Security statements are being sent
to 125 million workers over age 25, showing estimates of the retirement,
disability and survivor benefits that they and their families are eligible to
receive now and in the future.
The statements, to be sent out annually, will provide people with a glimpse
of what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for
them at all. But many people also already know that government benefits will
only fulfill a small piece of their retirement needs.
The best thing about this massive mailing is that it can serve as a wake-up
call to encourage families to focus more on planning for their financial
future.
When you receive your statement, expected to be within three months of your
next birthday, we urge you to read it carefully for accuracy, making sure
your annual earnings history and amounts you have contributed over the years
are correct. Keep in mind that the estimated benefits are precisely that, and
that rules and regulations may change by the time you retire. Also remember
that they are not inflation adjusted, so it would be unrealistic to expect
them to have the same purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your
investment professional, or to select one if you are not working with
somebody. He or she can help you focus on establishing and maintaining a
sound plan to achieve a comfortable retirement. Together, you should make
sure to maximize your participation in tax-advantaged programs like IRAs and
401(k)s.
The stakes are too high to leave your retirement lifestyle to chance.
Congress' awareness-raising effort is commendable. The next step is yours.
Mark the beginning of the New Millennium by taking it.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY MIREN ETCHEVERRY AND JOHN L.F. WILLS, PORTFOLIO MANAGERS
John Hancock Global Fund
Japan and emerging markets top international performance
Recently, shareholders voted to approve a new subadvisory investment
management contract with Indocam International Investment Services, effective
January 1, 2000.
The last 12 months were productive for global investors, as financial markets
settled down after last year's global economic turmoil. Japan and the
emerging markets of Asia provided the largest returns. Lower interest rates
and a pickup in exports and growth produced especially strong results in
South Korea, Thailand and Malaysia. Japan benefited from a bank re-
capitalization plan and several major corporate restructurings that served as
signals for foreign investors to re-enter the Japanese market and caused the
yen to strengthen versus the dollar.
In Europe, a slowdown in economic growth for most of the period, the decline
of the new euro common currency and rising interest rates in the second half
of the fiscal year caused those markets to cool, yet the region still managed
to return 10% overall. Although still in recession in 1999, Latin America
also produced positive results due to the rise in commodity prices, which
helped these commodity-dependent markets. Several individual country concerns
held the Latin markets back as the year progressed. The U.S. market again
produced double-digit returns, but again it came primarily from a handful of
large-company growth stocks, with the technology sector ruling.
The second half of the fiscal period became more turbulent with concerns
about rising U.S. interest rates causing a Wall Street correction in the
third quarter, which filtered through foreign markets. But taken as a whole,
global markets produced very strong results, as evidenced by the 26.02%
return of our benchmark, Morgan Stanley Capital International (MSCI) All
Country World Free Index, for the year ended October 31, 1999.
"The last 12
months were
productive
for global
investors..."
Fund results
For the year ended October 31, 1999, John Hancock Global Fund's Class A and
Class B shares posted total returns of 20.90% and 20.12%, respectively, at
net asset value. That compared to the 25.53% return of the average global
fund, according to Lipper, Inc.1 Class C shares, which were launched on March
1, 1999, returned 11.02% from inception through October 31, 1999. 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.
[Pie chart at top left hand column with heading "Portfolio
Diversification." The chart is divided into eight sections (from top to
left): United Kingdom & Ireland 9%, Pacific Rim 22%, Continental Europe
24%, United States 33%, Latin America 1%, Canada 2% and Short-Term
Investments & Other 9%. A note below the chart reads "As a percentage of
net assets on October 31, 1999."]
Early focus on stability; U.S. stock picks
The Fund's return, while solid on an absolute basis, was somewhat lower than
its peers for several reasons. First, our focus on stability held us back in
the spring, as we were overweighted in Europe and underweighted in the
emerging markets and cyclical stocks as they rallied sharply. Furthermore,
our stake in U.S. stable growth companies hurt us when the robust
economy caused investors to look for better growth opportunities elsewhere,
especially in technology names.
"During the
year, Japan
grew from
6% to 17%
of the
Fund's net
assets..."
Shifting assets to Asia, emerging markets
Starting in the spring, as we grew more confident in the improved prospects
for recoveries in Japan and the emerging markets, we repositioned the
portfolio to up our stakes in those regions. In so doing, the Fund moved to a
more average weighting in continential Europe and the United Kingdom and
became more regionally balanced. After re-entering Hong Kong and Brazil in
the first half of the year, we re-established positions in South Korea,
Taiwan, Indonesia, China and Thailand in the second half. This, along
with an increase in Japan, caused our Asian exposure, including Australia,
to almost triple, from 8% a year ago to 22% at the end of October. We also
re-established a small foothold in Mexico.
[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 Sony followed by an up arrow with the phrase "Market reacts
favorably to restructuring plan." The second listing is Mannesmann
followed by an up arrow with the phrase "Strong subscriber growth boosts
Europe's largest telecom company." The third listing is Novartis
followed by a down arrow with the phrase "Pharmaceutical sector out of
favor; troubles with its agrochemical division." A note below the table
reads "See 'Schedule of Investments.' Investment holdings are subject to
change."]
Japan grows
During the year, Japan grew from 6% to 17% of the Fund's net assets through a
combination of additional names and strong performance, so that we ended the
year slightly overweighted versus our benchmark. Japan was also the biggest
contributor to the Fund's performance, including Sony, which announced a
major corporate restructuring, and Sakura Bank and Nomura Securities, both of
which rebounded after the proposed merger of three large banks further
bolstered confidence in the financial sector. The two fundamental themes
driving the Japanese markets are, most importantly, the potential for
corporate restructuring along with the prospects for economic recovery. Our
Japanese portfolio is composed of blue-chip companies benefiting from those
themes, as well as from the government's bank re-capitalization plan and the
re-emergence of the Japanese consumer.
Europe: cut but still important
We got to our reduced focus in Europe by cutting our overweight in France and
lowering our stakes in the U.K., Switzerland and Belgium. Nonetheless, we
plan to keep an important position in Europe because of the opportunities
that still abound around corporate restructurings and industry consolidation.
Europe still produced some of our biggest winners, like leading cellular-
phone manufacturer Nokia and Royal Philips Electronics. There were also
disappointments, however, including Allied Irish Banks, which we sold, and
DaimlerChrysler, which the market punished for not moving fast enough to
realize the synergies of its famous merger.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended October 31,
1999." The chart is scaled in increments of 5% with 0% at the bottom and
30% at the top. The first bar represents the 20.90% total return for
John Hancock Global Fund Class A. The second bar represents the 20.12% total
return for John Hancock Global Fund Class B. The third bar represents
the 11.02%* total return for John Hancock Global Fund Class C. The
fourth bar represents the 25.53% total return for Average global fund. A
note below the chart reads "Total returns for John Hancock Global Fund
are at net asset value with all distributions reinvested. The average
global fund is tracked by Lipper, Inc.1 See the following two pages for
historical performance information. * From inception March 1, 1999
through October 31, 1999."]
U.S. stake remains steady
We kept our U.S. stake fairly steady, ending at 33% of the Fund's net assets.
Our holdings in technology giants Microsoft and Cisco Systems and blue chip
General Electric served us well. However, normally steady growing food and
household products companies like Sara Lee, Colgate-Palmolive and Campbell
Soup, hurt us when they posted disappointing earnings. We eventually sold
them all. During the year we introduced more cyclical exposure to the
portfolio with the addition of oil and oil services companies. Early on, we
reduced our stakes in pharmaceuticals and financial stocks before they fell
further.
Cautious optimism ahead
We remain encouraged about the long-term prospects for global equities, while
being alert to the growing potential for uncertainties in the nearer term.
These include year 2000 computer concerns and the potential for further rises
in U.S. interest rates, which could slow down worldwide growth. That said, we
believe U.S. growth will indeed slow to a more desired level as the effect of
higher rates takes hold, and that bodes well for all markets.
"We remain
encouraged
about the
long-term
prospects
for global
equities..."
The fundamentals of Europe and Japan are strong, while stock valuations
remain more attractive than in the United States. So we expect to keep our
weightings there, with a more balanced approach than at the start of the
year, while keeping our U.S. stake steady.
Barring any untoward events like prolonged U.S. interest-rate hikes, we
believe the outlook for emerging markets is also positive. Latin
America is expected to recover from its 1999 recession and grow 3% next year.
Emerging Asian markets are expected to maintain a robust growth in excess of
5%, even assuming modest growth in Japan, the region's economic engine.
- --------------------------------------------------------------------------
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.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is
lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock Global 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%. Prior to August 1992, different sales charges were in effect
for Class A shares and are not reflected in the performance data. 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 September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/92)
------- ------- --------
Cumulative Total Returns 16.42% 49.29% 99.15%
Average Annual Total Returns 16.42% 8.34% 9.31%
CLASS B
For the period ended September 30, 1999
ONE FIVE TEN
YEAR YEARS YEARS
------- ------- --------
Cumulative Total Returns 16.81% 49.97% 108.02%
Average Annual Total Returns 16.81% 8.44% 7.60%
CLASS C
For the period ended September 30, 1999
SINCE
INCEPTION
(3/1/99)
---------
Cumulative Total Return 3.74%
Average Annual Total Return 3.74%(1)
Note to Performance
(1) Not annualized.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Global 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 Index - an unmanaged index used to measure
the performance of both developed and emerging non-U.S. stock markets.
The index represents stocks that are freely traded on equity exchanges
around the world. It is not possible to invest in an index. Past
performance is not indicative of future results.
Line chart with the heading John Hancock Global 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 Free Index and is equal to $27,048
as of October 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Global Fund on
January 3, 1992, before sales charge, and is equal to $22,241 as of
October 31, 1999. The third line represents the value of the same
hypothetical investment made in the John Hancock Global Fund, after
sales charge, and is equal to $21,120 as of October 31, 1999.
Line chart with the heading John Hancock Global Fund Class B*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the MSCI All Country World Free Index and is equal to $29,081
as of October 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Global Fund on
October 31, 1989, before sales charge, and is equal to $22,441 as of
October 31, 1999.
Line chart with the heading John Hancock Global 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 Free Index and is equal to $11,413
as of October 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Global Fund on
March 1, 1999, before sales charge, and is equal to $11,102 as of
October 31, 1999. The third line represents the value of the same
hypothetical investment made in the John Hancock Global Fund, after
sales charge, and is equal to $11,002 as of October 31, 1999.
* No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
<TABLE>
<CAPTION>
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 October 31,
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
October 31, 1999
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks, rights and warrants (cost - $141,130,920) $165,717,155
Preferred stock (cost - $506,019) 546,449
Short-term investments (cost - $17,766,234) - Note A 17,766,234
-------------
184,029,838
Cash 126
Foreign currency, at value (cost - $76,399) 76,399
Receivable for investments sold 15,209,376
Receivable for shares sold 27,059
Dividends receivable 146,487
Foreign tax receivable 100,450
Interest receivable 2,603
Other assets 9,168
-------------
Total Assets 199,601,506
- ------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 5,439,515
Payable for forward foreign currency exchange contracts purchased - Note A 102
Payable for forward foreign currency exchange contracts sold - Note A 3,806
Payable for shares repurchased 6,255
Payable upon return of securities on loan - Note A 11,793,234
Payable to John Hancock Advisers, Inc. and affiliates - Note B 198,049
Accounts payable and accrued expenses 92,905
-------------
Total Liabilities 17,533,866
- ------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 151,354,011
Accumulated net realized gain on investments and foreign currency transactions 6,879,418
Net unrealized appreciation of investments and foreign currency transactions 24,612,348
Accumulated net investment loss (778,137)
-------------
Net Assets $182,067,640
================================================================================================
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 - $128,081,341/8,405,769 $15.24
================================================================================================
Class B - $53,774,258/3,760,875 $14.30
================================================================================================
Class C* - $212,041/14,830 $14.30
================================================================================================
Maximum Offering Price Per Share**
Class A - ($15.24 x 105.26%) $16.04
================================================================================================
* Class C shares commenced operations on March 1, 1999.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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
Year ended October 31, 1999
- ------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $221,116) $2,493,113
Interest (including income on securities loaned of $48,009) 272,188
-------------
2,765,301
-------------
Expenses:
Investment management fee - Note B 1,526,776
Distribution and service fee - Note B
Class A 370,399
Class B 492,195
Class C 609
Transfer agent fee - Note B 617,719
Custodian fee 251,237
Registration and filing fees 73,397
Interest expense - Note A 50,097
Auditing fee 36,000
Printing 34,896
Accounting and legal services fee - Note B 29,462
Trustees' fees 9,028
Legal fees 4,410
-------------
Total Expenses 3,496,225
- ------------------------------------------------------------------------------------------------
Net Investment Loss (730,924)
- ------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 24,682,178
Net realized loss on foreign currency transactions (731,877)
Change in net unrealized appreciation/depreciation of investments 12,257,741
Change in net unrealized appreciation/depreciation
of foreign currency transactions (26,981)
-------------
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 36,181,061
- ------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $35,450,137
================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------
1998 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($924,241) ($730,924)
Net realized gain on investments
sold and foreign currency
transactions 35,860,865 23,950,301
Change in net unrealized
appreciation/depreciation of
investments and foreign currency transactions (17,528,493) 12,230,760
----------- -----------
Net Increase in Net Assets Resulting
from Operations 17,408,131 35,450,137
----------- -----------
Distributions to Shareholders:
Distributions from net realized gain on
investments sold and foreign currency transactions
Class A - ($0.9595 and $0.8634 per
share, respectively) (7,059,333) (7,257,489)
Class B - ($0.9595 and $0.8634 per
share, respectively) (2,130,122) (3,737,875)
----------- -----------
Total Distributions to Shareholders (9,189,455) (10,995,364)
----------- -----------
From Fund Share Transactions - Net:* 47,651,566 (18,391,630)
----------- -----------
Net Assets:
Beginning of period 120,134,255 176,004,497
----------- -----------
End of period (including
accumulated net investment loss of
$514,188 and $778,137, respectively) $176,004,497 $182,067,640
============ ============
<CAPTION>
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1998 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 15,576,589 $209,111,733 49,592,367 $704,807,728
Shares issued in reorganization - Note E 1,689,451 21,549,797 -- --
Shares issued to shareholders in
reinvestment of distributions 513,910 6,526,969 537,813 6,888,024
----------- ----------- ----------- -----------
17,779,950 237,188,499 50,130,180 711,695,752
Less shares repurchased (15,925,820) (215,196,184) (50,696,112) (722,561,306)
----------- ----------- ----------- -----------
Net increase (decrease) 1,854,130 $21,992,315 (565,932) ($10,865,554)
=========== =========== =========== ===========
CLASS B
Shares sold 2,030,542 $27,203,915 1,375,760 $18,393,897
Shares issued in reorganization - Note E 2,505,358 30,457,141 -- --
Shares issued to shareholders in
reinvestment of distributions 163,729 1,981,290 261,882 3,166,671
----------- ----------- ----------- -----------
4,699,629 59,642,346 1,637,642 21,560,568
Less shares repurchased (2,630,797) (33,983,095) (2,206,518) (29,287,957)
----------- ----------- ----------- -----------
Net increase (decrease) 2,068,832 $25,659,251 (568,876) ($7,727,389)
=========== =========== =========== ===========
CLASS C **
Shares sold -- -- 16,835 $228,716
Less shares repurchased -- -- (2,005) (27,403)
----------- ----------- ----------- -----------
Net increase -- -- 14,830 $201,313
=========== =========== =========== ===========
* Class C shares commenced operations on March 1, 1999.
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, if any, 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.
</TABLE>
<TABLE>
<CAPTION>
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:
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.16 $12.67 $12.97 $12.94 $13.46
-------- -------- -------- -------- --------
Net Investment Loss(1) (0.03) (0.02) (0.05) (0.05) (0.03)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.13) 1.20 1.21 1.53 2.67
-------- -------- -------- -------- --------
Total from Investment Operations (0.16) 1.18 1.16 1.48 2.64
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency Transactions (1.33) (0.88) (1.19) (0.96) (0.86)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $12.67 $12.97 $12.94 $13.46 $15.24
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) (0.37%) 9.87% 9.36% 11.88% 20.90%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $93,597 $94,746 $92,127 $120,775 $128,081
Ratio of Expenses to Average Net Assets 1.87% 1.88% 1.81%(3) 1.82%(3) 1.75%(3)
Ratio of Net Investment Loss to Average Net Assets (0.23%) (0.19%) (0.36%) (0.33%) (0.23%)
Portfolio Turnover Rate 60% 98% 81% 160% 176%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.93 $12.36 $12.54 $12.39 $12.76
-------- -------- -------- -------- --------
Net Investment Loss(1) (0.11) (0.10) (0.14) (0.13) (0.11)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.13) 1.16 1.18 1.46 2.51
-------- -------- -------- -------- --------
Total from Investment Operations (0.24) 1.06 1.04 1.33 2.40
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency Transactions (1.33) (0.88) (1.19) (0.96) (0.86)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $12.36 $12.54 $12.39 $12.76 $14.30
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) (1.01%) 9.10% 8.67% 11.15% 20.12%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $24,570 $27,599 $28,007 $55,229 $53,774
Ratio of Expenses to Average Net Assets 2.57% 2.54% 2.49%(3) 2.46%(3) 2.34%(3)
Ratio of Net Investment Loss to Average Net Assets (0.89%) (0.83%) (1.04%) (0.97%) (0.82%)
Portfolio Turnover Rate 60% 98% 81% 160% 176%
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------------
PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1999
----------------
<S> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $12.88
--------
Net Investment Loss(1) (0.10)
Net Realized and Unrealized Gain on
Investments and Foreign Currency Transactions 1.52
--------
Total from Investment Operations 1.42
--------
Net Asset Value, End of Period $14.30
========
Total Investment Return at Net Asset Value(2) 11.02%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $212
Ratio of Expenses to Average Net Assets 2.45%(3,5)
Ratio of Net Investment Loss to Average Net Assets (1.01%)(5)
Portfolio Turnover Rate 176%(4)
(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) Expense ratios do not include interest expense due to bank loans,
which amounted to less than 0.01% for the years ended October 31,
1997 and 1998 and amounted to 0.03% for the year ended October 31, 1999.
(4) Not annualized.
(5) Annualized.
The Financial Highlights summarizes the impact of the following factors on
a single share for each period indicated: net investment 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.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1999
- ------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Global Fund on October 31, 1999. It's divided into five main
categories: common stocks, rights, warrants, preferred stocks and
short-term investments. Common stocks, rights, warrants and preferred
stocks are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------------------------ ---------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Australia (1.81%)
Capral Aluminium Ltd. (Metal) 182,227 $223,813
Foster's Brewing Group Ltd.
(Beverages) 91,114 242,175
National Australia Bank Ltd.
(Banks - Foreign) 22,352 344,944
News Corp. Ltd. (The) (Media) 24,054 173,947
News Corp. Ltd. (The), American
Depositary Receipts (ADR) (Media) 28,614 847,690
Pasminco, Ltd. (Metal)* 480,000 459,144
Smorgon Steel Group Ltd. (Steel) 200,000 270,385
Telstra Corp. Ltd.
(Telecommunications) 81,214 413,130
WMC Ltd. (Metal) 74,354 319,106
--------------
3,294,334
--------------
Belgium (0.00%)
Fortis (B) (Insurance)* 8,190 86
--------------
Canada (2.43%)
Barrick Gold Corp. (Metal) 28,700 525,569
Bombardier, Inc.
(Diversified Operations) 102,689 1,810,435
Nortel Networks Corp.
(Telecommunications) 24,039 1,478,858
Petro-Canada (Oil & Gas) 42,300 604,943
--------------
4,419,805
--------------
China (0.35%)
Shandong International Power
Development Co. Ltd. (Utilities)* 1,600,000 255,390
Yanzhou Coal Mining Co. Ltd.
(Metal) 1,122,000 371,906
--------------
627,296
--------------
Finland (2.09%)
Nokia AB (Telecommunications) 33,316 3,813,076
--------------
France (6.07%)
Alcatel SA (Telecommunications) 4,209 657,445
Axa SA (Insurance) 4,440 626,276
Bouygues SA (Building) 2,170 755,512
Cap Gemini SA (Computers) 1,596 241,740
Carrefour SA (Retail) 5,322 985,238
France Telecom SA
(Telecommunications) 3,187 307,904
Legrand SA (Electronics) 1,104 264,183
L'Oreal SA (Cosmetics & Personal Care) 1,700 1,134,578
Pinault-Printemps-Redoute SA
(Retail) 4,848 924,515
PSA Peugeot Citroen SA
(Automobile/Trucks) 2,899 556,500
Schneider Electric SA (Machinery) 4,162 286,746
STMicroelectronics NV (Electronics) 6,000 526,977
Suez Lyonnaise des Eaux SA
(Diversified Operations) 6,526 1,053,681
Total Fina SA (Oil & Gas) 11,938 1,613,572
Vivendi SA (Diversified Operations) 14,775 1,119,735
--------------
11,054,602
--------------
Germany (4.17%)
Allianz AG (Insurance) 2,969 904,092
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign) 9,067 595,116
DaimlerChrysler AG
(Automobile/Trucks) 10,349 805,534
Degussa-Huels AG (Chemicals)* 11,000 420,004
Deutsche Telekom AG
(Telecommunications) 11,520 529,526
Fresenius AG (Medical) 2,584 364,209
Mannesmann AG (Machinery) 13,753 2,162,681
SAP AG (Computers) 1,350 501,543
Siemens AG (Diversified Operations) 10,040 901,345
Veba AG (Diversified Operations) 7,617 411,814
--------------
7,595,864
--------------
Hong Kong (1.13%)
Cheung Kong Holdings Ltd.
(Real Estate Operations) 75,000 683,047
First Pacific Co. Ltd. (Diversified
Operations) 200,000 115,852
Henderson Land Development Co. Ltd.
(Real Estate Operations) 61,000 277,183
HSBC Holdings Plc (Banks - Foreign) 48,030 578,079
New World Development Co. Ltd.
(Real Estate Operations) 85,627 162,028
Swire Pacific Ltd. (Diversified
Operations) 50,000 247,796
--------------
2,063,985
--------------
Indonesia (0.25%)
PT Bank Internasional Indonesia
(Banks - Foreign)* 11,891,000 260,197
PT Bank Negara Indonesia
(Banks - Foreign)* 3,800,000 194,019
--------------
454,216
--------------
Ireland (0.19%)
CRH Plc (Building) 18,295 345,422
--------------
Italy (1.83%)
Alleanza Assicurazioni SpA
(Insurance) 24,692 251,671
Assicurazioni Generali SpA
(Insurance) 17,300 555,009
Bipop-Carire SpA (Banks - Foreign) 12,239 518,162
Eni SpA (Oil & Gas) 67,000 391,835
Telecom Italia Mobile SpA
(Telecommunications) 183,385 1,145,787
Telecom Italia SpA
(Telecommunications) 40,058 345,928
UniCredito Italiano SpA (Banks - Foreign) 25,881 121,142
--------------
3,329,534
--------------
Japan (16.63%)
Aiful Corp. (Finance) 1,800 279,659
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) 171,000 2,833,873
Daiwa House Industry Co., Ltd.
(Building) 94,000 860,036
Denso Corp. (Automobile/Trucks) 36,000 769,924
Fuji Heavy Industries Ltd.
(Automobile/Trucks) 68,000 577,808
Fujitsu Ltd. (Computers) 40,000 1,204,565
Fujitsu Systems Construction Ltd.
(Engineering/R&D Services) 52,000 1,017,359
Ito-Yokado Co., Ltd. (Retail) 15,000 1,199,770
Marubeni Corp. (Diversified
Operations) 500,000 1,592,021
Nippon Telegraph & Telephone Corp.
(Telecommunications) 176 2,700,681
Nippon Thompson Co., Ltd.
(Machinery) 80,000 518,653
Nomura Securities Co., Ltd.
(Broker Services) 165,000 2,723,362
NTT Mobile Communication Network, Inc.
(Telecommunications) 65 1,726,767
Orix Corp. (Leasing Companies) 9,500 1,275,535
Ricoh Co., Ltd. (Office) 48,000 783,044
Sakura Bank, Ltd. (The) (Banks - Foreign) 210,000 1,804,546
Sekisui House, Ltd. (Building) 77,000 833,730
Sony Corp. (Electronics) 22,200 3,461,897
Takeda Chemical Industries, Ltd.
(Medical) 34,000 1,953,198
Takefuji Corp. (Finance) 12,100 1,566,606
Toyota Motor Corp.
(Automobile/Trucks) 17,000 588,568
--------------
30,271,602
--------------
Mexico (0.51%)
Grupo Televisa SA (ADR) (Media)* 5,976 253,980
Telefonos de Mexico SA (ADR)
(Telecommunications) 7,882 673,911
--------------
927,891
--------------
Netherlands (4.10%)
Aegon NV (Insurance) 10,055 928,075
Akzo Nobel NV (Chemicals) 16,648 716,908
Dordtsche Petroleum-Industrie
Maatschappij NV
(Diversified Operations) 26,746 1,361,626
Fortis NV (Insurance) 16,658 573,486
ING Groep NV (Banks - Foreign) 4,300 253,647
Koninklijke Numico NV (Food) 6,414 261,429
Randstad Holdings NV
(Business Services - Misc.) 5,474 277,527
Royal Philips Electronics NV
(Electronics) 9,636 988,223
TNT Post Group NV (Transport) 11,000 280,002
Unilever Plc (Food) 137,732 1,278,714
Wolters Kluwer NV (Media) 16,499 551,352
--------------
7,470,989
--------------
Norway (0.20%)
Tomra Systems ASA (Machinery) 9,538 364,579
--------------
Singapore (0.49%)
First Capital Corp. Ltd.
(Real Estate Operations) 246,000 292,840
Keppel TatLee Bank Ltd.
(Banks - Foreign) 183,000 369,675
Singapore Telecommunications, Ltd.
(Telecommunications) 119,000 226,081
--------------
888,596
--------------
South Korea (0.77%)
Housing & Commercial Bank
(Banks - Foreign)* 4,000 105,711
Kookmin Bank (Banks - Foreign) 17,370 270,795
Korea Line Co. (Transport)* 13,600 149,662
Samsung Electronics Co.
(Electronics) 3,570 595,248
Shinhan Bank (Banks - Foreign) 26,400 279,516
--------------
1,400,932
--------------
Spain (1.54%)
Banco Santander Central Hispano, SA
(Banks - Foreign) 84,356 875,764
Centros Comerciales Pryca, SA
(Retail) 13,400 251,874
Endesa SA (Utilities) 17,595 352,194
Telefonica SA (Telecommunications)* 80,673 1,327,146
--------------
2,806,978
--------------
Sweden (0.57%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 10,407 432,781
Skandia Forsakrings AB (Insurance) 26,827 596,953
--------------
1,029,734
--------------
Switzerland (3.52%)
Adecco SA (Business Services - Misc.) 2,032 1,231,758
Credit Suisse Group (Banks - Foreign) 1,809 347,725
Nestle SA (Food) 441 850,581
Novartis AG (Medical) 609 910,923
Roche Holding AG (Medical) 80 960,441
UBS AG (Banks - Foreign) 3,502 1,018,918
Zurich Allied AG (Insurance) 1,927 1,090,993
--------------
6,411,339
--------------
Taiwan (0.63%)
D-Link Corp. (Computers) 176,000 294,073
Taiwan Semiconductor Manufacturing Co.,
Ltd. (ADR) (Electronics)* 18,092 626,435
Vanguard International Semiconductor
Corp. (Electronics)* 213,316 232,011
--------------
1,152,519
--------------
Thailand (0.14%)
Golden Land Property Development Pcl
(Real Estate Operations)* 520,000 202,046
Land & Houses Pcl
(Real Estate Operations)* 65,000 60,614
--------------
262,660
--------------
United Kingdom (8.58%)
Bank of Scotland (Banks - Foreign)* 47,503 594,013
Barclays Plc (Banks - Foreign) 19,056 584,610
BP Amoco Plc (Oil & Gas) 211,579 2,054,708
British Aerospace Plc (Aerospace) 44,498 263,229
British Telecommunications Plc
(Telecommunications) 96,981 1,759,324
Cadbury Schweppes Plc (Food) 72,000 468,509
Carlton Communications Plc (Media) 76,816 555,385
Compass Group Plc (Food) 60,097 641,884
Dixons Group Plc (Retail) 16,026 283,879
Glaxo Wellcome Plc (Medical) 43,947 1,296,957
Kingfisher Plc (Retail) 41,769 457,108
Lloyds TSB Group Plc (Banks - Foreign) 115,011 1,591,262
Misys Plc (Computers) 28,618 238,417
Orange Plc (Telecommunications)* 21,702 539,190
Pearson Plc (Media) 44,113 993,064
SEMA Group Plc (Computers) 45,710 597,130
SmithKline Beecham Plc (Medical) 118,921 1,533,975
Smiths Industries Plc
(Manufacturing) 43,732 593,567
Vodafone Group Plc
(Telecommunications) 123,171 573,788
--------------
15,619,999
--------------
United States (33.00%)
Amazon.com, Inc. (Retail)* 17,650 1,246,531
American International Group, Inc.
(Insurance) 36,875 3,795,820
AT&T Corp. (Telecommunications) 39,300 1,837,275
Bank of America Corp.
(Banks - United States) 32,450 2,088,969
Bell Atlantic Corp.
(Telecommunications) 13,350 866,916
BMC Software, Inc. (Computers)* 21,550 1,383,241
Cisco Systems, Inc. (Computers)* 11,800 873,200
Citigroup, Inc. (Finance) 28,775 1,557,447
Dayton Hudson Corp. (Retail) 35,770 2,311,636
Duke Energy Corp. (Utilities) 15,950 901,175
EMC Corp. (Computers)* 14,550 1,062,150
Emerson Electric Co. (Electronics) 51,950 3,120,247
Fannie Mae (Mortgage Banking) 6,450 456,338
Fleet Boston Corp.
(Banks - United States) 42,850 1,869,331
Freddie Mac (Mortgage Banking) 16,700 902,844
General Electric Co. (Electronics) 21,050 2,853,591
Hewlett-Packard Co. (Computers) 10,400 770,250
Intel Corp. (Electronics) 37,050 2,869,059
International Business Machines Corp.
(Computers) 45,700 4,495,738
Johnson & Johnson (Medical) 20,065 2,101,809
Kimberly-Clark Corp.
(Paper & Paper Products) 22,950 1,448,719
Lowe's Cos., Inc. (Retail) 8,078 444,290
McDonald's Corp. (Retail) 66,150 2,728,688
Merck & Co., Inc. (Medical) 12,150 966,684
Microsoft Corp. (Computers)* 49,650 4,595,728
Morgan Stanley Dean Witter & Co.
(Finance) 7,528 830,433
PepsiCo, Inc. (Beverages) 14,950 518,578
Pfizer, Inc. (Medical) 22,968 907,236
Pitney Bowes, Inc. (Office) 34,150 1,555,959
Schering-Plough Corp. (Medical) 25,061 1,240,520
Schlumberger Ltd. (Oil & Gas) 7,600 460,275
Texaco, Inc. (Oil & Gas) 26,650 1,635,644
Time Warner, Inc. (Media) 24,850 1,731,734
Tyco International Ltd.
(Diversified Operations) 78,950 3,153,066
Wells Fargo Co.
(Banks - United States) 10,400 497,900
--------------
60,079,021
--------------
TOTAL COMMON STOCKS
(Cost $141,129,220) (91.00%) 165,685,059
------ --------------
RIGHTS
Norway (0.01%)
Orkla ASA (Diversified Operations)* 13,063 24,550
--------------
South Korea (0.00%)
Kookmin Bank (Banks - Foreign)* 1,744 0
--------------
Thailand (0.01%)
Land & Houses Pcl
(Real Estate Operations)* 26,000 5,927
--------------
TOTAL RIGHTS
(Cost $0) (0.02%) 30,477
------- --------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-
Gesellschaft AG (Insurance)* 38 1,619
--------------
TOTAL WARRANTS
(Cost $1,700) (0.00%) 1,619
------- --------------
TOTAL COMMON STOCKS,
RIGHTS AND WARRANTS
(Cost $141,130,920) (91.02%) 165,717,155
------- --------------
PREFERRED STOCKS
Brazil (0.30%)
Telecomunicacoes Brasileiras S.A.
(Preferred Shares) (ADR)
(Telecommunications) 7,017 546,449
--------------
TOTAL PREFERRED STOCKS
(Cost $506,019) (0.30%) 546,449
------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.28%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
10-29-99, due 11-01-99
(Secured by U.S. Treasury
Bonds, 8.125% thru 9.875%,
due 11-15-15 thru 08-15-21)
- -- Note A 5.23% $5,973 5,973,000
--------------
Cash Equivalents (6.48%)
Navigator Securities Lending
Prime Portfolio** 11,793 11,793,234
--------------
TOTAL SHORT-TERM INVESTMENTS (9.76%) 17,766,234
------- --------------
TOTAL INVESTMENTS (101.08%) 184,029,838
------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.08%) (1,962,198)
------- --------------
TOTAL NET ASSETS (100.00%) $182,067,640
======= ==============
* 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.
</TABLE>
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 October 31, 1999, assigned to the
various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- ---------------
Aerospace 0.14%
Automobile/Trucks 1.81
Banks - Foreign 7.44
Banks - United States 2.45
Beverages 0.42
Broker Services 1.50
Building 1.53
Business Services - Misc. 0.83
Chemicals 0.62
Computers 8.93
Cosmetics & Personal Care 0.62
Diversified Operations 6.48
Electronics 8.53
Engineering/R&D Services 0.56
Finance 2.33
Food 1.92
Insurance 5.12
Leasing Companies 0.70
Machinery 1.83
Manufacturing 0.33
Media 2.81
Medical 6.72
Metal 1.04
Mortgage Banking 0.75
Office 1.28
Oil & Gas 3.71
Paper & Paper Products 0.80
Real Estate Operations 0.92
Retail 5.95
Steel 0.15
Telecommunications 12.03
Transport 0.24
Utilities 0.83
Short-Term Investments 9.76
------
TOTAL INVESTMENTS 101.08%
======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
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 four series: John Hancock Global Fund (the "Fund"), John
Hancock Large Cap Growth Fund, John Hancock Mid Cap Growth Fund and John
Hancock International 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
three series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to achieve long-term growth of capital
primarily through investment in common stocks of companies domiciled in
foreign countries and the United States.
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 Trustees
authorized the issuance of Class C shares effective March 1, 1999. 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 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. 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, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the accrual
basis. Foreign income may be subject to foreign withholding taxes, which are
accrued as applicable.
The Fund records 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.
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.
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 maximum loan balance outstanding during the year
amounted to $10,192,000. The annualized interest rate charged during the year
ranged from 5.125% thru 6.125%. At October 31, 1999, there were no
outstanding loan balances.
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
October 31, 1999, the Fund loaned securities having a market value of
$11,506,741 collateralized by cash in the amount of $11,793,234, which 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 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 October 31, 1999, open forward foreign currency exchange contracts were as
follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE DEPRECIATION
- -------- ------------------- ---- ------------
BUYS
Euro Currency 50,050 NOV 99 $102
======
SELLS
Pound Sterling 695,280 NOV 99 $2,889
Swedish Krona 2,391,127 NOV 99 917
------
$3,806
======
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, currency exchange 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 contract may not
correlate with changes in the value of the underlying securities.
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 October 31, 1999, there were no open positions in financial futures
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) 0.90% of the first
$100,000,000 of the Fund's average daily net asset value, (b) 0.80% of the
next $200,000,000, (c) 0.75% of the next $200,000,000 and (d) 0.625% of the
Fund's average daily net asset value in excess of $500,000,000. The Adviser
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 Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1999, net sales charges received with regard to sales of Class A shares
amounted to $133,614. Of this amount, $6,389 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$62,742 was paid as sales commissions to unrelated broker-dealers and $64,483
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 year ended
October 31, 1999, contingent deferred sales charges paid to JH Funds amounted
to $199,456.
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 year ended
October 31, 1999, contingent deferred sales charges paid to JH Funds amounted
to $19.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution 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. A maximum of 0.25% of such payments may be service fees as
defined by the Conduct Rules of the National Association of Securities
Dealers. Under the Conduct Rules, curtailment of a portion of the Fund's 12b-
1 payments could occur under certain circumstances.
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,
accounting and legal 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. Maureen R. Ford, 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 through
December 31, 1999. 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.
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
year ended October 31, 1999, aggregated $302,726,894 and $338,229,767,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the year ended October 31, 1999.
The cost of investments owned at October 31, 1999 (including short-term
investments) for federal income tax purposes was $160,645,278. Gross
unrealized appreciation and depreciation of investments aggregated
$28,836,201 and $5,451,641, respectively, resulting in net unrealized
appreciation of $23,384,560.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect a decrease in net realized gain on investments of $16,545,627, a
decrease in accumulated net investment loss of $466,975 and an increase in
capital paid-in of $16,078,652. This represents the amount necessary to
report these balances on a tax basis, excluding certain temporary difference,
as of October 31, 1999. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to the treatment of net
operating losses, realized gain/loss on foreign currency transactions and
Passive Foreign Investment Companies in the computation of distributable
income and capital gains under federal tax rules versus generally accepted
accounting principles, and the Fund's use of the tax accounting practice
known as equalization. The calculation of net investment loss per share in
the financial highlights excludes these adjustments.
NOTE E -
REORGANIZATION
On November 12, 1997, the shareholders of John Hancock Global Marketplace
Fund ("Global Marketplace Fund") approved a plan of reorganization between
Global Marketplace Fund and the Fund providing for the transfer of
substantially all of the assets and liabilities of Global Marketplace Fund to
the Fund in exchange solely for Class A and Class B shares of the Fund. The
acquisition was accounted for as a tax-free exchange of 1,689,451 Class A
shares and 2,505,358 Class B shares of John Hancock Global Fund for the net
assets of Global Marketplace Fund, which amounted to $21,549,797 and
$30,457,141 for Class A and B shares, respectively, including $12,299,215 of
unrealized appreciation, after the close of business on December 5, 1997.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock Global Fund
and the Trustees of John Hancock Investment Trust III
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the highlights present fairly, in
all material respects, the financial position of John Hancock Global Fund
(the "Fund") (a series of John Hancock Investment Trust III), at October 31,
1999, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
October 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended October
31, 1999.
The Fund has designated distributions to shareholders of $18,127,228 as long-
term capital gain dividends.
Shareholders will be mailed a 1999 U.S. Treasury Department Form 1099-DIV in
January 2000. This will reflect the tax character of all
distributions for the calendar year 1999.
SHAREHOLDER MEETING (UNAUDITED)
On December 1, 1999, the shareholders of the Fund approved a new subadvisory
contract between the Adviser and Indocam International Investment Services
(6,924,019 FOR, 215,366 AGAINST and 622,906 ABSTAINING). At the same meeting
shareholders of the Fund also approved the following proposals:
* To amend and reclassify the Fund's investment restriction on margin
and short sales (5,631,542 FOR, 328,233 AGAINST and 634,738
ABSTAINING).
* To amend the Fund's investment restriction on borrowing money
(5,530,373 FOR, 421,183 AGAINST and 642,957 ABSTAINING).
* To amend the Fund's investment restriction on underwriting securities
(5,620,353 FOR, 309,002 AGAINST and 665,158 ABSTAINING).
* To amend the Fund's investment restriction on issuing senior
securities (5,640,166 FOR, 284,016 AGAINST and 670,331 ABSTAINING).
* To eliminate the Fund's investment restriction on warrants (5,574,246
FOR, 329,401 AGAINST and 690,866 ABSTAINING).
* To amend and reclassify the Fund's investment restriction on
diversification with respect to investments in any one issuer (5,662,511
FOR, 280,896 AGAINST and 651,106 ABSTAINING).
* To amend the Fund's investment restriction on purchasing real estate
(5,575,382 FOR, 388,412 AGAINST and 630,719 ABSTAINING).
* To amend the Fund's investment restriction on purchasing commodities
(5,578,974 FOR, 370,157 AGAINST and 645,382 ABSTAINING).
* To amend the Fund's investment restriction on making loans (5,509,150
FOR, 423,892 AGAINST and 661,471 ABSTAINING).
* To amend the Fund's investment restriction on concentration with
respect to investments in any one industry (5,618,201 FOR, 335,062
AGAINST and 641,250 ABSTAINING).
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Global Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."
0300A 10/99
12/99
The latest report from your
Fund's management team
ANNUAL REPORT
Mid Cap
Growth Fund
OCTOBER 31, 1999
TRUSTEES
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
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
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive 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
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to fourth paragraph.]
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is
to welcome you to the New Millennium! I wish you all the best for a century
filled with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make
new resolutions, or re-commit to old ones. It seems fitting, therefore, that
this special New Year 2000 coincides with a very important, although
certainly less exotic, event.
Starting last October, personalized Social Security statements are being sent
to 125 million workers over age 25, showing estimates of the retirement,
disability and survivor benefits that they and their families are eligible to
receive now and in the future.
The statements, to be sent out annually, will provide people with a glimpse
of what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for
them at all. But many people also already know that government benefits will
only fulfill a small piece of their retirement needs.
The best thing about this massive mailing is that it can serve as a wake-up
call to encourage families to focus more on planning for their financial
future.
When you receive your statement, expected to be within three months of your
next birthday, we urge you to read it carefully for accuracy, making sure
your annual earnings history and amounts you have contributed over the years
are correct. Keep in mind that the estimated benefits are precisely that, and
that rules and regulations may change by the time you retire. Also remember
that they are not inflation adjusted, so it would be unrealistic to expect
them to have the same purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your
investment professional, or to select one if you are not working with
somebody. He or she can help you focus on establishing and maintaining a
sound plan to achieve a comfortable retirement. Together, you should make
sure to maximize your participation in tax-advantaged programs like IRAs and
401(k)s.
The stakes are too high to leave your retirement lifestyle to chance.
Congress' awareness-raising effort is commendable. The next step is yours.
Mark the beginning of the New Millennium by taking it.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
John Hancock
Mid Cap Growth Fund
Mid-cap growth stocks rally; Fund posts strong returns
[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 "Mid Cap Growth Fund management
team members (l-r): Barbara Friedman, Lisa Welch and John Golden."]
The U.S. stock market took off in the fall of 1998, fueled by lower short-
term interest rates. Mid-cap stocks posted strong gains until February when
signs of slower economic growth caused investors to shift toward the safety
of large-company growth stocks. By early April, however, investors had
regained confidence in the economy's strength and were anticipating a hike in
interest rates. This combination ignited another rise in less expensive mid-
cap stocks, which climbed throughout the spring even as interest rates moved
higher. By mid-summer, however, inflation concerns, the possibility of
further interest rate increases and uncertainties related to Y2K had rattled
investors. The market gave back some ground and made little further headway
for the rest of the period. Nonetheless, the Russell Midcap Growth Index
finished the year ended October 31, 1999 with a 37.66% return, well ahead of
the 25.67% return for the Standard & Poor's 500 Index.
"A surge
of mid-cap
buy-outs
by both
foreign
corporations
and large
U.S.
companies..."
Fund outperforms
John Hancock Mid Cap Growth Fund's Class A, Class B and Class C shares
returned 41.05%, 40.14% and 40.02%, respectively, at net asset value, during
the same period. These returns exceeded by a wide margin the 33.45% return of
the average mid-cap fund, 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.
"The Fund
maintained
a disciplined
focus on
true mid-cap
stocks..."
[Table at top left hand column entitled "Top Five Stock Holdings." The
first listing is Omnipoint 1.9%, the second is AMFM 1.7%, the third
McLeodUSA 1.6%, the fourth i2 Technologies 1.5% and the fifth Global
Crossing 1.5%. A note below the table reads "As a percentage of net
assets on October 31, 1999."]
The Fund maintained a disciplined focus on true mid-cap stocks -- those with a
market capitalization between $1 billion and $10 billion. As investors began
to recognize how attractive the mid-cap sector was compared to high-priced,
large-company stocks, the Fund benefited. A surge of mid-cap buy-outs by both
foreign corporations and large U.S. companies also helped. The Fund owned
stakes in a number of companies where takeovers have either been announced or
taken place, including Ascend Communications, DST Systems, Frontier,
Omnipoint and Orange Plc in the technology sector; AMFM and Outdoor Systems
in the media area; and Select Appointments, a European temporary help agency.
[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
"Strong semiconductor sales to telecom companies." The second listing is
Global Crossing followed by an up arrow with the phrase "Leader in
building trans-Atlantic fiber-optic networks." The third listing is
Total Renal Care followed by a down arrow with the phrase "Internal
accounting and management problems." A note below the table reads "See
'Schedule of Investments.' Investment holdings are subject to change."]
Telecommunications leads
Our largest sector was technology, with a concentration in telecommunications
semiconductor and service stocks that served us particularly well. Among our
top performers were Global Crossing, which is involved in building fiber-
optic networks across the Atlantic; NEXTLINK Communications and McLeodUSA,
both of which are building networks in U.S. cities; Omnipoint, Nextel
Communications and VoiceStream Wireless, wireless phone companies; and
Conexant Systems, Ascend Communications and Comverse Technology, all of which
provide equipment to the telecommunications industry. Each of these stocks
returned over 100% during the period. Many of our other technology names also
did quite well. Lexmark International, which makes low-cost printers,
continued its strong run despite some volatility. Similarly, i2 Technologies,
a leading supply-chain vendor, saw its stock price climb with growing demand
for e-commerce solutions.
Media and energy pay off
The Fund also benefited from strong stock selection and a higher-than-average
stake in the media sector. We focused on media outlets that offer consumer
companies a more targeted and cost-effective way to advertise. Among the
names we owned were Outdoor Systems, a billboard company that was acquired by
Infinity Broadcasting; Univision Communications, a Spanish-language
television company; Hispanic Broadcasting, a Spanish-language radio company
and AMFM, a U.S. radio company that is being acquired by Clear Channel
Communications. All posted strong gains during the period.
Our stake in energy stocks, which we began building late last winter, also
boosted the Fund's returns. Oil service stocks like BJ Services and Cooper
Cameron did particularly well as oil prices rose from $11 to $24 per barrel.
Once oil prices reached higher levels, we began reducing our investment in
the sector.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended October 31,
1999." The chart is scaled in increments of 10% with 0% at the bottom
and 50% at the top. The first bar represents the 41.05% total return for
John Hancock Mid Cap Growth Fund Class A. The second bar represents the
40.14% total return for John Hancock Mid Cap Growth Fund Class B. The
third bar represents the 40.02% total return for John Hancock Mid Cap
Growth Fund Class C. The fourth bar represents the 33.45% 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.1 See the following two pages for historical performance
information."]
Health care and finance disappoint
Health-care stocks weakened as concerns grew that tightened Medicare
reimbursement policies would hurt profit margins. We pared back early in the
year, which helped during the second half of the period. Unfortunately, some
of the stocks we kept continued to bleed, including Cardinal Health, a drug
distribution company, and Total Renal Care, a kidney dialysis company facing
internal problems. We eventually sold those, too.
In the finance area, we cut back in the banking and insurance sectors, which
were hurt by rising interest rates. With passage of financial reform
legislation, however, we expect to see prospects improve as banks begin
acquiring insurance companies. Toward the end of the period, we began
rebuilding our finance stake, buying more shares of existing investments like
Ace, Ltd., a Bermuda-based property and casualty company, and adding new
names like ReliaStar Financial, a life insurer.
Opportunities ahead
We expect recent interest-rate increases, the labor shortage and higher
energy prices to contribute to somewhat slower economic growth in the United
States. In addition, some of the wholesale price increases that we've seen
lately may not get passed on to the consumer, but could instead erode
corporate profit margins. In this kind of environment, we believe strong
stock selection -- avoiding companies whose profit margins may deteriorate --
will become increasingly important.
"...stock
valuations
and earnings
prospects
remain
attractive
compared
to large-cap
names."
As we go forward, we also expect the economies of Europe and Asia to
accelerate. With this in mind, we've increased our investment in mid-cap
names with an international presence. Among the stocks we bought during the
third quarter were AFLAC, Inc., a company that sells insurance to the
Japanese; COLT Telecom Group, which is pan-Europe's largest competitive local
exchange carrier; STMicroelectronics, a European semiconductor company and
UnitedGlobalCom, a European cable company. Although the market may remain
volatile, we expect continued good performance from the mid-cap sector, where
stock valuations and earnings prospects remain attractive
compared to large-cap names.
- --------------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. Of course, the manager's views
are subject to change as market and other conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is
lower.
A LOOK AT PERFORMANCE
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 September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------ ------- ---------
Cumulative Total Returns 26.67% 95.10% 77.01%
Average Annual Total Returns 26.67% 14.30% 10.14%
CLASS B
For the period ended September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------ ------- ---------
Cumulative Total Returns 27.61% 96.50% 77.88%
Average Annual Total Returns 27.61% 14.46% 10.23%
CLASS C
For the period ended September 30, 1999
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ --------
Cumulative Total Returns 31.45% 9.91%
Average Annual Total Returns 31.45% 7.35%
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 Index and the Russell
Midcap Growth Index. The Standard & Poor's 500 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. It is not possible to invest in an
index. 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 Index and is equal to $32,993 as of
October 31, 1999. The second line represents the Russell Midcap Growth
Index and is equal to $24,405 as of October 31, 1999. 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 $20,754 as of October 31, 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
$19,710 as of October 31, 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 Index and is equal to $32,993 as of
October 31, 1999. The second line represents the Russell Midcap Growth
Index and is equal to $24,405 as of October 31, 1999. 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 $19,908 as of October 31, 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
$19,808 as of October 31, 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 three lines. The first line
represents the Standard & Poor's 500 Index and is equal to $12,735 as of
October 31, 1999. The second line represents the Russell Midcap Growth
Index and is equal to $12,661 as of October 31, 1999. 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 $12,222 as of October 31, 1999.
* No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Mid Cap Growth Fund
<TABLE>
<CAPTION>
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 October 31,
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
October 31, 1999
- ------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks and rights
(cost - $193,328,715) $254,719,486
Joint repurchase agreement
(cost - $4,800,000) 4,800,000
Corporate savings account 528
-----------
259,520,014
Receivable for investments sold 2,447,357
Receivable for shares sold 69,352
Dividends receivable 54,330
Interest receivable 2,112
Other assets 26,526
-----------
Total Assets 262,119,691
-----------
Liabilities:
Payable for investments purchased 3,544,991
Payable for shares repurchased 60,823
Payable to John Hancock Advisers,
Inc. and affiliates - Note B 281,389
Accounts payable and accrued expenses 58,146
-----------
Total Liabilities 3,945,349
-----------
Net Assets:
Capital paid-in 179,389,584
Accumulated net realized gain on
investments sold 17,410,317
Net unrealized appreciation of
investments 61,390,771
Accumulated net investment loss (16,330)
------------
Net Assets $258,174,342
============
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 - $112,082,397/8,725,743 $12.85
============================================================
Class B - $145,816,035/11,936,643 $12.22
============================================================
Class C - $275,910/22,603 $12.21
============================================================
Maximum Offering Price Per Share*
Class A - ($12.85 x 105.26%) $13.53
============================================================
* On single retail sales of less than $50,000. On sales of
$50,000 or more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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
Year ended October 31, 1999
- ------------------------------------------------------------
<S> <C>
Investment Income:
Dividends $891,567
Interest (including stock loan
income of $41,857) 219,726
-----------
1,111,293
-----------
Expenses:
Investment management fee - Note B 1,918,860
Distribution and service fee - Note B
Class A 310,971
Class B 1,263,457
Class C 1,812
Transfer agent fee - Note B 948,084
Custodian fee 73,050
Registration and filing fees 57,047
Accounting and legal services fee - Note B 39,688
Printing 32,091
Auditing fee 27,400
Trustees' fees 12,372
Miscellaneous 11,933
Legal fees 1,951
-----------
Total Expenses 4,698,716
-----------
Net Investment Loss (3,587,423)
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 30,387,309
Change in net unrealized
appreciation/depreciation
of investments 55,591,895
-----------
Net Realized and Unrealized Gain
on Investments 85,979,204
-----------
Net Increase in Net Assets
Resulting from Operations $82,391,781
===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------
1998 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($3,734,387) ($3,587,423)
Net realized gain on investments sold 11,463,586 30,387,309
Change in net unrealized
appreciation/depreciation of investments (32,557,064) 55,591,895
----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations (24,827,865) 82,391,781
----------- -----------
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) (59,644,150)
----------- -----------
Net Assets:
Beginning of period 346,809,745 235,426,711
----------- -----------
End of period (including
accumulated net investment loss of
$14,909 and $16,330, respectively) $235,426,711 $258,174,342
============ ============
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, if any, 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.
<CAPTION>
Statement of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
1998 1999
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 6,953,677 $70,620,558 4,311,988 $44,751,953
Shares issued to shareholders in
reinvestment of distributions 1,542,642 15,071,789 -- --
----------- ----------- ----------- -----------
8,496,319 85,692,347 4,311,988 44,751,953
Less shares repurchased (9,853,865) (100,927,104) (6,689,665) (69,584,697)
----------- ----------- ----------- -----------
Net decrease (1,357,546) ($15,234,757) (2,377,677) ($24,832,744)
=========== =========== =========== ===========
CLASS B
Shares sold 1,738,672 $17,297,307 1,928,686 $20,530,351
Shares issued to shareholders in
reinvestment of distributions 2,298,572 21,629,593 -- --
----------- ----------- ----------- -----------
4,037,244 38,926,900 1,928,686 20,530,351
Less shares repurchased (7,219,381) (70,681,852) (5,386,043) (55,460,249)
----------- ----------- ----------- -----------
Net decrease (3,182,137) ($31,754,952) (3,457,357) ($34,929,898)
=========== =========== =========== ===========
CLASS C**
Shares sold 11,518 $100,935 24,769 $256,801
Less shares repurchased -- -- (13,684) (138,309)
----------- ----------- ----------- -----------
Net increase 11,518 $100,935 11,085 $118,492
=========== =========== =========== ===========
** Class C shares commenced operations on June 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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:
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $7.93 $9.32 $10.92 $11.40 $9.11
-------- -------- -------- -------- --------
Net Investment Loss (1) (0.07) (0.11) (0.06) (0.09) (0.12)
Net Realized and Unrealized Gain (Loss)
on Investments 1.46 3.34 1.00 (0.89) 3.86
-------- -------- -------- -------- --------
Total from Investment Operations 1.39 3.23 0.94 (0.98) 3.74
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold -- (1.63) (0.46) (1.31) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.32 $10.92 $11.40 $9.11 $12.85
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (2) 17.53% 36.15% 8.79% (9.40%) 41.05%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $101,562 $156,578 $141,997 $101,138 $112,082
Ratio of Expenses to Average Net Assets 1.59% 1.59% 1.59% 1.59% 1.60%
Ratio of Net Investment Loss
to Average Net Assets (0.87%) (1.00%) (0.57%) (0.86%) (1.14%)
Portfolio Turnover Rate 155% 240% 317% 168% 153%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $7.87 $9.19 $10.67 $11.03 $8.72
-------- -------- -------- -------- --------
Net Investment Loss (1) (0.13) (0.18) (0.13) (0.15) (0.18)
Net Realized and Unrealized Gain (Loss)
on Investments 1.45 3.29 0.95 (0.85) 3.68
-------- -------- -------- -------- --------
Total from Investment Operations 1.32 3.11 0.82 (1.00) 3.50
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold -- (1.63) (0.46) (1.31) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.19 $10.67 $11.03 $8.72 $12.22
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (2) 16.77% 35.34% 7.84% (9.97%) 40.14%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $137,363 $238,901 $204,812 $134,188 $145,816
Ratio of Expenses to Average Net Assets 2.30% 2.29% 2.28% 2.27% 2.23%
Ratio of Net Investment Loss
to Average Net Assets (1.55%) (1.70%) (1.25%) (1.54%) (1.77%)
Portfolio Turnover Rate 155% 240% 317% 168% 153%
<CAPTION>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD FROM
JUNE 1, 1998
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1999
---------------- ----------------
<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) (0.19)
Net Realized and Unrealized Gain (Loss)
on Investments (1.21) 3.68
-------- --------
Total From Investment Operations (1.27) 3.49
-------- --------
Net Asset Value, End of Period $8.72 $12.21
======== ========
Total Investment Return at Net Asset Value (2) (12.71%)(4) 40.02%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $100 $276
Ratio of Expenses to Average Net Assets 2.29%(3) 2.30%
Ratio of Net Investment Loss
to Average Net Assets (1.66%)(3) (1.82%)
Portfolio Turnover Rate 168% 153%
(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) Annualized
(4) 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.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Mid Cap Growth Fund on October 31, 1999. It's divided into two main
categories: common stocks and rights, and short-term investments. The
common stocks and rights are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ---------- --------------
<S> <C> <C> <C>
COMMON STOCKS
Advertising (3.10%)
DoubleClick, Inc.* 10,400 $1,456,000
Interpublic Group of Cos., Inc. (The) 35,000 1,421,875
Omnicom Group, Inc. 24,400 2,147,200
Outdoor Systems, Inc.* 70,400 2,983,200
--------------
8,008,275
--------------
Banks - United States (2.35%)
Comerica, Inc. 21,200 1,260,075
First Tennessee National Corp. 39,500 1,343,000
Northern Trust Corp. 35,850 3,461,766
--------------
6,064,841
--------------
Broker Services (0.61%)
Merrill Lynch & Co., Inc. 19,900 1,562,150
--------------
Computers (19.44%)
Akamai Technologies, Inc.* 3,665 532,112
BMC Software, Inc.* 27,000 1,733,062
CMGI, Inc.* 26,050 2,850,847
Computer Sciences Corp.* 51,300 3,523,669
DST Systems, Inc.* 28,700 1,827,831
Electronics for Imaging, Inc.* 24,800 999,750
EMC Corp.* 18,850 1,376,050
Exodus Communications, Inc.* 21,000 1,806,000
Fiserv, Inc.* 81,850 2,619,200
Foundry Networks, Inc.* 4,800 909,600
Gateway, Inc.* 42,700 2,820,869
i2 Technologies, Inc.* 49,450 3,903,459
IMS Health, Inc. 77,150 2,237,350
Inktomi Corp.* 8,900 902,794
Lexmark International Group, Inc. (Class A)* 41,620 3,248,961
Media Metrix, Inc.* 33,650 1,577,344
Network Appliance, Inc.* 16,400 1,213,600
Novell, Inc.* 93,750 1,880,859
Parametric Technology Corp.* 43,250 824,453
RealNetworks, Inc.* 7,600 833,625
Security First Technologies Corp.* 46,400 1,864,700
SunGard Data Systems, Inc.* 89,000 2,174,938
Unisys Corp.* 70,250 1,703,563
VERITAS Software Corp.* 35,850 3,867,319
VerticalNet, Inc.* 26,150 1,464,400
Whittman-Hart, Inc.* 39,150 1,504,828
--------------
50,201,183
--------------
Cosmetics & Personal Care (1.51%)
Dial Corp. (The) 100,850 2,357,369
Estee Lauder Cos., Inc. (The) (Class A) 32,800 1,529,300
--------------
3,886,669
--------------
Electronics (15.91%)
Altera Corp.* 47,840 2,326,220
Analog Devices, Inc.* 26,250 1,394,531
Applied Materials, Inc.* 15,250 1,369,641
ASM Lithography Holding N.V.
(Netherlands)* 27,500 1,997,188
Atmel Corp.* 41,450 1,601,006
Broadcom Corp. (Class A)* 12,600 1,610,438
Conexant Systems, Inc.* 26,150 2,441,756
Flextronics International, Ltd.* 21,900 1,554,900
Jabil Circuit, Inc.* 43,140 2,254,065
KLA-Tencor Corp.* 27,060 2,142,814
Linear Technology Corp. 38,850 2,717,072
Maxim Intergrated Products, Inc.* 32,650 2,577,309
Novellus Systems, Inc.* 16,900 1,309,750
Sanmina Corp.* 20,100 1,810,256
Solectron Corp.* 19,300 1,452,325
STMicroelectronics N.V.
(Netherlands) 23,450 2,131,019
Teradyne, Inc.* 55,600 2,140,600
Vitesse Semiconductor Corp.* 52,400 2,403,850
Waters Corp.* 58,300 3,097,188
Xilinx, Inc.* 34,820 2,737,722
--------------
41,069,650
--------------
Finance (2.10%)
Capital One Financial Corp. 31,650 1,677,450
Concord EFS, Inc.* 89,200 2,413,975
Providian Financial Corp. 12,195 1,329,255
--------------
5,420,680
--------------
Insurance (4.84%)
Ace, Ltd. (Bermuda) 102,070 1,983,986
AFLAC, Inc. 32,800 1,676,900
Lincoln National Corp. 25,750 1,187,719
MBIA, Inc. 23,350 1,332,409
Protective Life Corp. 35,450 1,282,847
Reinsurance Group of America, Inc. 82,563 2,745,220
ReliaStar Financial Corp. 53,350 2,290,716
--------------
12,499,797
--------------
Leisure (0.72%)
Premier Parks, Inc.* 44,400 1,284,825
Royal Caribbean Cruises Ltd. 10,800 573,075
--------------
1,857,900
--------------
Linen Supply & Related (0.61%)
Cintas Corp. 26,250 1,581,562
--------------
Machinery (0.66%)
SPX Corp.* 20,000 1,695,000
--------------
Media (9.33%)
Adelphia Communications Corp. (Class A)* 28,650 1,565,006
AMFM, Inc.* 63,900 4,473,000
Cox Radio, Inc. (Class A)* 40,200 2,814,000
Cumulus Media, Inc. (Class A)* 36,300 1,302,262
Emmis Communications Corp. (Class A)* 14,120 1,018,405
Entercom Communications Corp.* 58,100 2,894,106
Harcourt General, Inc. 37,550 1,445,675
Hispanic Broadcasting Corp.* 24,700 2,000,700
Insight Communications Co., Inc.* 37,600 888,300
Spanish Broadcasting System, Inc. (Class A)* 62,250 1,657,406
UnitedGlobalCom, Inc. (Class A)* 26,500 2,305,500
Univision Communications, Inc. (Class A)* 20,400 1,735,275
--------------
24,099,635
--------------
Medical (3.32%)
Allergan, Inc. 14,700 1,578,412
Biogen, Inc.* 35,250 2,612,906
Express Scripts, Inc. (Class A)* 11,400 560,025
Forest Laboratories, Inc.* 32,600 1,495,525
Genzyme Corp.* 32,900 1,258,425
Immunex Corp.* 16,900 1,064,700
--------------
8,569,993
--------------
Office (0.63%)
Avery Dennison Corp. 25,900 1,618,750
--------------
Oil & Gas (3.07%)
Apache Corp. 30,500 1,189,500
BJ Services Co.* 36,300 1,245,544
Burlington Resources, Inc. 19,350 674,831
Cooper Cameron Corp.* 39,700 1,535,894
Diamond Offshore Drilling, Inc. 39,950 1,268,412
Noble Affiliates, Inc. 30,400 769,500
R&B Falcon Corp.* 99,650 1,239,397
--------------
7,923,078
--------------
Paper & Paper Products (1.98%)
Bowater, Inc. 47,450 2,491,125
Fort James Corp. 100,150 2,635,197
--------------
5,126,322
--------------
Retail (5.61%)
Best Buy Co., Inc.* 50,600 2,811,463
Circuit City Stores-Circuit City Group 50,000 2,134,375
Kohl's Corp.* 18,100 1,354,106
Kroger Co.* 38,300 797,119
Lowe's Cos., Inc. 21,500 1,182,500
Neiman Marcus Group, Inc. (The) (Class B)* 11,314 242,540
Staples, Inc.* 49,500 1,098,281
SYSCO Corp. 29,300 1,126,219
Tandy Corp. 47,300 2,976,944
TJX Cos., Inc. 28,000 759,500
--------------
14,483,047
--------------
Steel (0.77%)
Nucor Corp. 38,400 1,992,000
--------------
Telecommunications (21.66%)
Allegiance Telecom, Inc.* 40,650 2,804,850
American Tower Corp. (Class A)* 84,100 1,603,156
COLT Telecom Group Plc, American
Depositary Receipts (ADR)
(United Kingdom)* 22,170 2,627,145
Comverse Technology, Inc.* 32,650 3,705,775
Corning, Inc. 44,700 3,514,537
Crown Castle International Corp.* 92,030 1,771,577
Global Crossing Ltd. (Bermuda)* 111,827 3,872,010
Global TeleSystems Group, Inc.* 109,150 2,612,778
ICG Communications, Inc.* 59,200 969,400
Intermedia Communications, Inc.* 35,800 930,800
McLeodUSA, Inc. (Class A)* 93,090 4,154,141
Metromedia Fiber Network, Inc. (Class A)* 42,700 1,411,769
Nextel Communications, Inc. (Class A)* 39,200 3,378,550
NEXTLINK Communications, Inc. (Class A)* 55,000 3,289,687
Omnipoint Corp.* 60,350 4,986,419
Orange Plc (ADR) (United Kingdom)* 10,132 1,261,434
QUALCOMM, Inc.* 5,700 1,269,675
RCN Corp.* 31,200 1,493,700
Scientific-Atlanta, Inc. 23,250 1,331,062
Sycamore Networks, Inc.* 3,700 795,500
TALK.com, Inc.* 102,300 1,630,406
Teligent, Inc. (Class A)* 12,400 556,450
Time Warner Telecom, Inc. (Class A)* 21,800 549,088
Triton PCS Holdings, Inc. (Class A)* 2,050 72,263
VoiceStream Wireless Corp.* 34,850 3,441,438
Williams Communications Group, Inc.* 16,000 510,000
WinStar Communications, Inc.* 35,500 1,377,844
--------------
55,921,454
--------------
Utilities (0.44%)
Montana Power Co. 40,000 1,137,500
--------------
TOTAL COMMON STOCKS
(Cost $193,328,715) (98.66%) 254,719,486
------ --------------
RIGHTS
Telecommunications (0.00%)
TALK.com, Inc.* 5,115 --
--------------
TOTAL RIGHTS
(Cost $0) (0.00%) --
------ --------------
TOTAL COMMON STOCKS
AND RIGHTS
(Cost $193,328,715) (98.66%) 254,719,486
------ --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ------------ -------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.86%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
10-29-99, due 11-01-99
(Secured by U.S. Treasury
Bonds, 7.125% thru 13.375%,
due 08-15-01 thru 02-15-23)
- -- Note A 5.23% $4,800 $4,800,000
-------- ---------- --------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.30% 528
--------------
TOTAL SHORT-TERM INVESTMENTS (1.86%) 4,800,528
------ --------------
TOTAL INVESTMENTS (100.52%) 259,520,014
------ --------------
OTHER ASSETS AND LIABILITIES, NET (0.52%) (1,345,672)
------ --------------
TOTAL NET ASSETS (100.00%) $258,174,342
====== ==============
* 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.
</TABLE>
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
October 31, 1999 assigned to country categories.
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
Bermuda 2.27%
Netherlands 1.60
United Kingdom 1.50
United States 95.15
------
TOTAL INVESTMENTS 102.52%
======
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Mid Cap Growth Fund
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 four series: John Hancock Mid Cap Growth Fund (the "Fund"),
John Hancock Global 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 John Hancock Large Cap Growth Fund was known
as John Hancock Growth Fund. On October 22, 1999, John Hancock Short-Term
Strategic Income Fund merged into John Hancock Strategic Income Fund. The
other three 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 October 31, 1999, the Fund has
$6,126,325 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, 2000 -
$12,856, October 31, 2001 - $1,657,886 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 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 lines of credit and is allocated among the
participating funds. The Fund had no borrowing activity for the year ended
October 31, 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
October 31, 1999, the Fund loaned securities having a market value of
$33,605,393 collateralized by securities in the amount of $34,129,793.
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.
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 October 31, 1999, there were no open forward foreign currency 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 fluctuation 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 October 31, 1999, there were no open positions in financial futures
contracts.
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 year ended October
31, 1999, net sales charges received with regard to sales of Class A shares
amounted to $95,349. Out of this amount, $7,740 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$26,728 was paid as sales commissions to unrelated broker-dealers and $60,881
was paid as sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock 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 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 year ended
October 31, 1999, contingent deferred sales charges paid to JH Funds amounted
to $374,884.
Class C shares which are redeemed within one year of purchase will be subject
to 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
year ended October 31, 1999, contingent deferred sales charges paid to JH
Funds amounted to $1,182.
In addition, to reimburse JH Funds for the services it provides as
distributors 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. A maximum of 0.25% of such payments may be service fees as
defined by the Conduct Rules of the National Association of Securities
Dealers. Under the Conduct Rules, curtailment of a portion of the Fund's 12b-
1 payments could occur under certain circumstances.
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,
accounting and legal services for the Fund. The compensation for the year 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. Maureen R. Ford, 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 through
December 31, 1999. 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.
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
year ended October 31, 1999 aggregated $363,524,903 and $423,704,902,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the year ended October 31, 1999.
The cost of investments owned at October 31, 1999 (excluding the corporate
savings account) for federal income tax purposes was $199,005,765. Gross
unrealized appreciation and depreciation of investments aggregated
$69,816,261 and $9,302,540, respectively, resulting in net unrealized
appreciation of $60,513,721.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments sold of
$10,357,468, a decrease in accumulated net investment loss of $3,586,002 and
an increase in capital paid-in of $6,771,466. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 1999. Additional adjustments may be
needed in subsequent reporting periods. These reclassifications, which have
no impact on the net asset value of the Fund, are primarily attributable to
the treatment of net operating losses and utilized capital loss carryforwards
in the computation of distributable income and capital gains under federal
tax rules versus generally accepted accounting principles, and the Fund's
use of the tax accounting practice know as equalization. The calculation of
net investment loss per share in the financial highlights excludes these
adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Mid Cap Growth Fund
and the Trustees of John Hancock Investment Trust III
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of John Hancock Mid
Cap Growth Fund (formerly John Hancock Special Opportunities Fund, the
"Fund") (a series of John Hancock Investment Trust III) at October 31, 1999,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and the significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
October 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
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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.
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3900A 10/99
12/99
