The latest report from your
Fund's management team
ANNUAL REPORT
Global
Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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
SUB-INVESTMENT ADVISER
Indocam International Investment Services
90 Boulevard Pasteur
Paris, France 75015
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, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY MIREN ETCHEVERRY AND ROBERT UEK
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock Global Fund
World markets stumble in second half of the year
after a strong 1999
Stock markets around the world started the fiscal year on a high note
last November, with many markets buoyed by the strength of the "TMT"
sectors -- technology, media and telecommunications. But the tide turned
in March, when TMT stocks worldwide began a dramatic plunge as fears
grew that the group was far too expensive in the face of a potential
slowdown in earnings growth. In a major reversal of fortunes, the more
cyclical, old economy stocks began to make a comeback as the new-economy
darlings fell out of favor.
A number of factors continued to keep overseas markets volatile -- and
results constrained -- through the end of October. These included rising
oil prices, rising interest rates -- first in the U.S. and then in
Europe and elsewhere -- a slowdown in the U.S. economy, declines in many
of emerging Asia's currencies to 1998 levels and the continuing drop in
the value of the euro, which hurt U.S.-based investors. Furthermore, the
ongoing downturn in the tech-heavy NASDAQ Composite Index in the U.S.
generated similar volatility in Europe and Asia. Overall, overseas
markets, as measured by the Fund's benchmark, the MSCI All Country World
Free Index, stayed fairly flat, returning 0.08% for the year ended
October 31, 2000.
Fund performance
For the year ended October 31, 2000, John Hancock Global Fund's Class A,
Class B and Class C shares posted total returns of -6.90%, -7.60% and
-7.60% at net asset value, respectively. That compared with the 10.26%
return of the average global fund, according to Lipper, Inc.1 Keep in
mind that your net asset value return will be different from the Fund's
performance if you were not invested in the Fund for the entire period
and did not reinvest all distributions. Historical performance
information can be found on pages six and seven.
"A number of
factors
continued to
keep over-
seas markets
volatile..."
Our relative underperformance came mainly from our timing in the
volatile TMT sectors. Although overweight versus the MSCI index, we had
a lighter weighting than our peers when the tech group skyrocketed early
in the period. After boosting our TMT stake, we got hit by having an
overweighted position -- particularly in Japan and Europe -- as the
stocks came back down to earth in the tumultuous months of March and
April.
With such a dramatic about-face during the year, it's not surprising
that we had some of our best and worst performance from the tech and
telecom groups. Top contributors included Mannesmann, which was acquired
by Vodafone; Intel; EMC; Sony and Nokia, despite its stock's reversal
later in the period on a disappointing earnings announcement that
triggered another telecom sell off. Some on the downside were Vodafone,
Hikari Tsushin, Lucent Technologies and British Telecommunications.
[Pie chart at top left hand column with heading "Portfolio
Diversification." The chart is divided into seven sections (from top to
left): Latin America 1%, Canada 4%, Short-Term Investments & Other 5%,
United Kingdom & Ireland 10%, Pacific Rim 17%, Continental Europe 24%,
and United States 39%. A note below the chart reads "As a percentage of
net assets on October 31, 2000."]
"We are
taking a
more
defensive
approach to
Japan in the
near term..."
Shift to defense
Given the increasingly volatile conditions and the prospects for
economic slowdowns near term, we took some defensive steps. By the end
of October, our overall stakes in technology hardware, equipment and
telecom services companies were underweight versus the index. We pared
our emerging-market holdings, which are the most vulnerable to slowing
growth, and we cut the number of Fund holdings -- eliminating mostly
small positions. We also reduced some overweightings in sectors and
individual stocks. Regionally, our main focus areas are Canada,
developed Europe and developed Asia. Aside from these broader trends,
individual stock selection becomes more important than ever. We are
looking for companies with solid fundamentals and earnings visibility,
and the best prospects for growth in a variety of market conditions.
[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 American International Group followed by an up arrow with the phrase
"Steady earnings growth for large U.S. insurer." The second listing is
Samsung Electronics followed by a down arrow with phrase "Hit by
volatile semiconductor sector downturn." The third listing is British
Telecommunications followed by a down arrow with the phrase "Weak
management; disappointing earnings." A note below the table reads "See
'Schedule of Investments,' Investment holdings are subject to change."]
Japan: near-term caution
We are taking a more defensive approach to Japan in the near term,
since, for the moment, a rise in the number of bankruptcies and market
liquidity concerns are reminders that Japan's problems are not yet
solved. As a result, we reduced our stake there to a market-neutral 13%.
We did this primarily by paring tech and telecom names and moving into
sectors perceived as more defensive, including real estate, utility, and
food and beverage companies. We also shifted some assets from larger
companies to the mid-cap range, since they are less affected by the
ongoing unwinding of cross-ownership positions among Japan's large
companies. Looking further out, we still believe Japan's prospects will
improve, aided by the ongoing trend of corporate restructurings, and as
positive signs emerge of firmer private-sector demand.
Europe
European telecom services companies were hit this year not only by the
downturn in the NASDAQ, and numerous profit warnings, but also by
fallout from the higher-than-expected prices set at auction for licenses
for the next generation of wireless mobile technology. We reduced our
telecom stake, selling Deutsche Telecom and paring France Telecom. We
stayed with either the largest companies most able to absorb these
costs, like Vodafone, the largest telecommunications company in Europe,
or those that didn't participate, like Telefonica in Spain. Our European
exposure remains strongest in technology, media and software companies,
due to ongoing demand.
[Bar chart at top of left hand column with the heading "Fund
Performance." Under the heading is a note that reads "For the year ended
October 31, 2000." The chart is scaled in increments of 5% with -10% at
the bottom and 15% at the top. The first bar represents the -6.90% total
return for John Hancock Global Fund Class A. The second bar represents
the -7.60% total return for John Hancock Global Fund Class B. The third
bar represents the -7.60% total return for John Hancock Global Fund
Class C. The fourth bar represents the 10.26 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."]
U.S. underweighting
We continued to keep our stake in the United States about 35% on
average. This underweighting versus our index held us back, since the
stable growth companies that we focus on, such as General Electric,
started to do well in the move away from high-flying tech and telecom
names. We were helped, however, by being diversified and by
underweighting technology. Insurance giants American International Group
and AFLAC, and consumer staple names like Bestfoods and PepsiCo were
strong performers.
Canada grows
Our stake in Canada grew over the year to 4% of the Fund, in part due to
the performance of transport company Bombardier. We also added positions
in several other companies that we believe have solid growth prospects.
These include asset manager Sun Life Financial Services of Canada, media
company Thomson and outsourcing company Celestica. Another top holding,
Nortel Networks, was strong until October, when its stock was hit by the
surprise announcement of slower-than-expected revenue growth.
"Our outlook
for the world
economy is
positive."
Going forward
Our outlook for the world economy is positive. We do not expect oil
prices to derail global economic growth, since we expect them to drop by
the end of the winter season. In Europe, while the euro and high oil
prices could have a short-term impact on the economy, our medium-range
outlook is better. We believe the euro stands to recover through a
combination of central bank support and more parity between U.S. and
European growth. What's more, with valuations even more reasonable
today, investors will soon be ready to return to equities there, keeping
more of an eye on fundamentals. Until the horizon becomes clearer, we
will keep our posture defensive in Asia and the emerging markets. In
Japan, we expect the moderate pickup in the economy to continue, but be
partially weighed down by ongoing restructuring efforts, along with high
public debt. In this environment, with very rapid rotations among global
sectors, individual stock picking remains key, and we will keep our
sights set on only high-quality companies with the ability to grow their
earnings.
----------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's 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 an up-front 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 an up-front sales charge of
1% and a contingent deferred sales charge (maximum 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 October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/92)
------ ------ ---------
Cumulative Total Returns (11.55%) 43.70% 96.62%
Average Annual Total Returns (11.55%) 7.52% 7.96%
CLASS B
For the period ended October 31, 2000
ONE FIVE TEN
YEAR YEARS YEARS
------ ------ -------
Cumulative Total Returns (12.03%) 44.27% 131.09%
Average Annual Total Returns (12.03%) 7.61% 8.74%
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (3/1/99)
----- ---------
Cumulative Total Returns (9.37%) 1.57%
Average Annual Total Returns (9.37%) 0.94%
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 $27,264
as of October 31, 2000. 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 $20,705 as of
October 31, 2000. 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 $19,670 as of October 31, 2000.
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 $32,838
as of October 31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Global Fund on
October 31, 1990, before sales charge, and is equal to $23,109 as of
October 31, 2000.
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 $11,504
as of October 31, 2000. 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 $10,259 as of
October 31, 2000. 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 $10,157 as of October 31, 2000.
*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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks, units and warrants
(cost - $123,233,926) $139,576,773
Preferred stocks (cost - $348,446) 370,414
Short-term investments
(cost - $16,229,404) - Note A 16,229,404
-----------------
156,176,591
Cash 21,828
Foreign currency, at value
(cost - $108,945) 108,995
Receivable for investments sold 1,764,431
Receivable for shares sold 11,436
Dividends receivable 205,860
Interest receivable 1,038
Other assets 13,706
-----------------
Total Assets 158,303,885
--------------------------------------------------------------
Liabilities:
Payable for investments purchased 60,490
Payable for shares repurchased 101,863
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 174,859
Payable for securities on loan --
Note A 10,531,404
Accounts payable and accrued expenses 188,946
-----------------
Total Liabilities 11,057,562
--------------------------------------------------------------
Net Assets:
Capital paid-in 133,181,414
Accumulated net realized loss on
investments and foreign currency
transactions (1,947,252)
Net unrealized appreciation of
investments and foreign currency
transactions 16,353,309
Accumulated net investment loss (341,148)
-----------------
Net Assets $147,246,323
==============================================================
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 - $105,200,552/7,714,290 $13.64
==============================================================
Class B - $40,952,860/3,231,691 $12.67
==============================================================
Class C - $1,092,911/86,238 $12.67
==============================================================
Maximum Offering Price Per Share,
Class A* - ($13.64/95%) $14.36
==============================================================
Class C - ($12.67/99%) $12.80
==============================================================
* 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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $177,589) $1,789,632
Interest (including income on
securities loaned of $67,597) 625,797
-----------------
2,415,429
-----------------
Expenses:
Investment management fee - Note B 1,532,808
Distribution and service fee - Note B
Class A 381,128
Class B 509,807
Class C 10,776
Transfer agent fee - Note B 616,284
Custodian fee 405,064
Interest expense 59,016
Registration and filing fees 71,819
Auditing fee 38,087
Accounting and legal services fee --
Note B 34,007
Printing 34,701
Trustees' fees 11,422
Miscellaneous 9,692
Legal fees 4,370
-----------------
Total Expenses 3,718,981
--------------------------------------------------------------
Net Investment Loss (1,303,552)
--------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments, Futures
and Foreign Currency Transactions:
Net realized gain on investments sold 4,720,429
Net realized loss on financial futures
contracts (324,589)
Net realized loss on foreign currency
transactions (1,021,626)
Change in net unrealized appreciation
(depreciation) of investments (8,261,850)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions 2,811
-----------------
Net Realized and Unrealized Loss on
Investments, Futures and Foreign
Currency Transactions (4,884,825)
--------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations ($6,188,377)
==============================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
-------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($730,924) ($1,303,552)
Net realized gain on investments
sold, futures and foreign
currency transactions 23,950,301 3,374,214
Change in net unrealized
appreciation/depreciation of
investments and foreign currency
transactions 12,230,760 (8,259,039)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 35,450,137 (6,188,377)
----------------- -----------------
Distributions to Shareholders:
Distributions from net realized gain
on investments sold, futures and
foreign currency transactions
Class A - ($0.8634 and $0.6074
per share, respectively) (7,257,489) (5,012,505)
Class B - ($0.8634 and $0.6074
per share, respectively) (3,737,875) (2,320,803)
Class C - (none and $0.6074 per
share, respectively) -- (12,128)
----------------- -----------------
Total Distributions to
Shareholders (10,995,364) (7,345,436)
----------------- -----------------
From Fund Share Transactions - Net:* (18,391,630) (21,287,504)
----------------- -----------------
Net Assets:
Beginning of period 176,004,497 182,067,640
----------------- -----------------
End of period (including
accumulated net investment loss
of $778,137 and $341,148,
respectively) $182,067,640 $147,246,323
================= =================
<CAPTION>
Statement of Changes in Net Assets (continued)
---------------------------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C>> <C>> <C>
CLASS A
Shares sold 49,592,367 $704,807,728 73,248,920 $1,097,256,833
Shares issued to shareholders in
reinvestment of distributions 537,813 6,888,024 335,619 5,076,753
----------------- ----------------- ----------------- -----------------
50,130,180 711,695,752 73,584,539 1,102,333,586
Less shares repurchased (50,696,112) (722,561,306) (74,276,018) (1,117,219,697)
----------------- ----------------- ----------------- -----------------
Net decrease (565,932) ($10,865,554) (691,479) ($14,886,111)
================= ================= ================= =================
CLASS B
Shares sold 1,375,760 $18,393,897 1,780,224 $25,481,047
Shares issued to shareholders in
reinvestment of distributions 261,882 3,166,671 143,656 2,032,793
----------------- ----------------- ----------------- -----------------
1,637,642 21,560,568 1,923,880 27,513,840
Less shares repurchased (2,206,518) (29,287,957) (2,453,064) (34,900,938)
----------------- ----------------- ----------------- -----------------
Net decrease (568,876) ($7,727,389) (529,184) ($7,387,098)
================= ================= ================= =================
CLASS C**
Shares sold 16,835 $228,716 2,182,424 $30,034,664
Shares issued to shareholders in
reinvestment of distributions -- -- 891 12,636
----------------- ----------------- ----------------- -----------------
16,835 228,716 2,183,315 30,047,300
Less shares repurchased (2,005) (27,403) (2,111,907) (29,061,595)
----------------- ----------------- ----------------- -----------------
Net increase 14,830 $201,313 71,408 $985,705
================= ================= ================= =================
**Class C shares began 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, and any
increase or decrease in money shareholders invested in the Fund. The
footnote illustrates the number of Fund shares sold, reinvested and
redeemed 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,
-------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $12.67 $12.97 $12.94 $13.46 $15.24
------------- ------------- ------------- ------------- -------------
Net Investment Loss(1) (0.02) (0.05) (0.05) (0.03) (0.08)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions 1.20 1.21 1.53 2.67 (0.91)
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 1.18 1.16 1.48 2.64 (0.99)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold, Futures
and Foreign Currency
Transactions (0.88) (1.19) (0.96) (0.86) (0.61)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $12.97 $12.94 $13.46 $15.24 $13.64
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(2) 9.87% 9.36% 11.88% 20.90% (6.90%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $94,746 $92,127 $120,775 $128,081 $105,201
Ratio of Expenses to Average
Net Assets 1.88% 1.81% 1.82% 1.78% 1.87%
Ratio of Net Investment Loss
to Average Net Assets (0.19%) (0.36%) (0.33%) (0.23%) (0.52%)
Portfolio Turnover Rate 98% 81% 160% 176% 182%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $12.36 $12.54 $12.39 $12.76 $14.30
------------- ------------- ------------- ------------- -------------
Net Investment Loss(1) (0.10) (0.14) (0.13) (0.11) (0.18)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions 1.16 1.18 1.46 2.51 (0.84)
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 1.06 1.04 1.33 2.40 (1.02)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold, Futures
and Foreign Currency
Transactions (0.88) (1.19) (0.96) (0.86) (0.61)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $12.54 $12.39 $12.76 $14.30 $12.67
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(2) 9.10% 8.67% 11.15% 20.12% (7.60%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $27,599 $28,007 $55,229 $53,774 $40,952
Ratio of Expenses to Average
Net Assets 2.54% 2.49% 2.46% 2.37% 2.57%
Ratio of Net Investment Loss
to Average Net Assets (0.83%) (1.04%) (0.97%) (0.82%) (1.25%)
Portfolio Turnover Rate 98% 81% 160% 176% 182%
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------
PERIOD ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999(3) 2000
------------- -------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $12.88 $14.30
------------- -------------
Net Investment Loss(1) (0.10) (0.15)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions 1.52 (0.87)
------------- -------------
Total from Investment Operations 1.42 (1.02)
------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold, Futures
and Foreign Currency
Transactions -- (0.61)
------------- -------------
Net Asset Value, End of
Period $14.30 $12.67
============= =============
Total Investment Return at
Net Asset Value(2) 11.02%(4) (7.60%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $212 $1,093
Ratio of Expenses to Average
Net Assets 2.48%(5) 2.57%
Ratio of Net Investment Loss
to Average Net Assets (1.01%)(5) (1.06%)
Portfolio Turnover Rate 176% 182%
(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) Class C shares began operations on March 1, 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 each class. 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>
The Schedule of Investments is a complete list of all securities owned
by the Global Fund on October 31, 2000. It's divided into five main
categories: common stocks, units, warrants, preferred stocks and
short-term investments. Common stocks, units, warrants and preferred
stocks are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
Schedule of Investments
October 31, 2000
------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ---------- ------------
<S> <C> <C>
COMMON STOCKS
Argentina (0.03%)
Perez Companc SA (Finance) 27,000 $38,888
------------
Australia (1.21%)
AMP Ltd. (Insurance) 28 252
Broken Hill Proprietary Co., Ltd. (Diversified
Operations) 42,024 407,345
FH Faulding & Co., Ltd. (Medical) 8,219 43,455
Lend Lease Corp. Ltd. (Real Estate Operations) 11,463 134,197
National Australia Bank Ltd. (Banks - Foreign) 5,999 83,337
News Corp. Ltd. (The) (Media) 39,628 414,521
OneSteel Ltd.* (Steel) 10,506 5,010
Publishing & Broadcasting Ltd. (Media) 12,303 83,989
ResMed, Inc.* (Medical) 7,600 20,406
Securenet Ltd.* (Computers) 56,091 242,774
Telstra Corp. Ltd. (Telecommunications) 13,677 44,635
Westpac Banking Corp. Ltd. (Banks - Foreign) 5,772 39,416
Woodside Petroleum Ltd. (Oil & Gas) 36,461 266,484
------------
1,785,821
------------
Belgium (0.45%)
Fortis (B) (Insurance) 11,800 361,487
Fortis (B)* (Insurance) 8,190 69
UCB SA (Medical) 8,500 302,950
------------
664,506
------------
Brazil (0.55%)
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar, American Depositary Receipts (ADR)
(Retail) 6,500 231,563
Companhia Paranaense de Energia-Copel (ADR)
(Utilities) 21,000 190,313
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) 3,000 219,750
Uniao de Bancos Brasileiros SA, Global
Depositary Receipts (GDR) (Finance) 6,500 164,125
------------
805,751
------------
Canada (3.64%)
BCE, Inc. (Telecommunications) 7,975 214,059
Bombardier, Inc. (Diversified Operations) 119,125 1,867,786
Celestica, Inc.* (Electronics) 6,000 427,365
Nortel Networks Corp. (Telecommunications) 35,750 1,617,234
Sun Life Financial Services of Canada*
(Insurance) 30,609 631,217
Thomson Corp. (Computers) 10,231 411,919
Weston George Ltd. (Food) 3,899 193,738
------------
5,363,318
------------
Chile (0.07%)
Empresa Nacional de Electricidad SA* (ADR)
(Utilities) 9,500 99,750
------------
China (0.10%)
Shandong International Power Development Co.,
Ltd. (Utilities) 494,000 77,277
Shanghai Industrial Holdings Ltd.
(Manufacturing) 33,000 62,200
------------
139,477
------------
Denmark (0.29%)
Vestas Wind Systems AS (Utilities) 8,000 433,320
------------
Finland (0.62%)
Nokia Oyj (Telecommunications) 22,000 905,270
------------
France (6.87%)
Accor SA (Leisure) 6,900 279,300
Alcatel SA (Telecommunications) 17,140 1,045,786
Bouygues SA (Building) 7,240 368,632
Cap Gemini SA (Computers) 3,920 625,385
Carrefour SA (Retail) 12,000 805,491
Dassault Systemes SA (Computers) 3,000 228,740
Etablissements Economiques du Casino
Guichard-Perrachon SA (Retail) 3,800 331,820
France Telecom SA (Telecommunications) 2,900 303,188
Pinault-Printemps-Redoute SA (Retail) 4,900 874,457
PSA Peugeot Citroen SA (Automobile/Trucks) 1,321 243,257
Publicis Groupe SA (Advertising) 12,000 392,563
Renault SA (Automobile/Trucks) 8,000 397,824
Sagem SA (Electronics) 1,349 247,269
Schneider Electric SA (Machinery) 4,240 276,152
Societe Generale (Banks - Foreign) 5,135 291,521
Sodexho Alliance SA (Business Services - Misc.) 1,700 266,163
STMicroelectronics NV (Electronics) 13,038 657,758
Thomson Multimedia SA* (Electronics) 6,900 316,188
Total Fina Elf SA (Oil & Gas) 8,815 1,261,197
Vivendi SA (Diversified Operations) 10,650 765,484
Wanadoo SA* (Computers) 10,322 131,389
------------
10,109,564
------------
Germany (2.63%)
Allianz AG (Insurance) 3,225 1,093,463
BASF AG (Chemicals) 8,000 313,643
Deutsche Bank AG (Banks - Foreign) 5,400 442,114
Dresdner Bank AG (Banks - Foreign) 4,200 174,998
Metro AG (Retail) 7,100 286,190
SAP AG (Computers) 3,289 538,393
Siemens AG (Diversified Operations) 5,510 701,602
Volkswagen AG (Automobile/Trucks) 6,400 319,725
------------
3,870,128
------------
Greece (0.25%)
Alpha Bank SA (Banks - Foreign) 3,000 110,881
Hellenic Bottling Co. SA (Beverages) 8,100 110,723
Hellenic Telecommunications Organization SA
(ADR) (Telecommunications) 17,000 148,750
------------
370,354
------------
Hong Kong (1.00%)
ASM Pacific Technology Ltd. (Electronics) 20,000 39,749
Cathay Pacific Airways Ltd. (Transport) 15,000 27,215
Cheung Kong Holdings Ltd. (Real Estate
Operations) 21,000 232,241
China Everbright Ltd. (Finance) 106,000 94,461
China Resources Enterprise Ltd. (Real Estate
Operations) 50,000 56,738
China Unicom Ltd.* (Telecommunications) 64,000 128,427
Citic Pacific Ltd. (Diversified Operations) 24,000 96,320
Giordano International Ltd. (Retail) 32,000 18,772
Guoco Group Ltd. (Finance) 14,000 35,004
Hang Seng Bank Ltd. (Banks - Foreign) 10,000 117,964
Hongkong Electric Holdings Ltd. (Utilities) 6,000 19,810
HSBC Holdings Plc (Banks - Foreign) 15,266 212,381
Hutchison Whampoa Ltd. (Diversified Operations) 19,000 236,312
Sun Hung Kai Properties, Ltd. (Real Estate
Operations) 7,000 57,443
Swire Pacific Ltd. (Diversified Operations) 14,000 86,344
Tan Chong International Ltd. (Diversified
Operations) 117,000 14,552
------------
1,473,733
------------
Hungary (0.06%)
Magyar Tavkozlesi Rt (Telecommunications) 19,000 84,510
------------
India (0.25%)
ICICI Ltd. (ADR) (Finance) 10,000 94,375
Infosys Technologies Ltd. (ADR) (Computers) 600 82,500
Ranbaxy Laboratories Ltd. (GDR) (Medical) 6,500 110,500
Videsh Sanchar Nigam Ltd. (ADR)
(Telecommunications) 11,000 81,125
------------
368,500
------------
Indonesia (0.04%)
PT Telekomunikasi Indonesia (ADR)
(Telecommunications) 12,400 65,100
------------
Ireland (0.38%)
CRH Plc (Building) 36,500 560,628
------------
Israel (0.15%)
Bank Hapoalim Ltd. (Banks - Foreign) 59,000 149,246
Partner Communications Co. Ltd.* (ADR)
(Telecommunications) 11,000 66,000
------------
215,246
------------
Italy (2.59%)
Assicurazioni Generali SpA (Insurance) 28,500 937,173
Eni SpA (Oil & Gas) 77,810 421,269
Gruppo Editoriale L'Espresso SpA (Media) 18,928 207,043
Riunione Adriatica di Sicurta SpA (Insurance) 30,893 405,559
San Paolo-IMI SpA (Banks - Foreign) 22,000 356,582
Telecom Italia Mobile SpA (Telecommunications) 70,000 595,208
Telecom Italia SpA (Telecommunications) 41,650 482,448
UniCredito Italiano SpA (Banks - Foreign) 81,400 414,456
------------
3,819,738
------------
Japan (12.90%)
Aiful Corp. (Finance) 3,000 236,448
Amano Corp. (Manufacturing) 20,000 189,525
Asahi Glass Co., Ltd. (Glass Products) 30,000 307,932
Chubu Electric Power Co., Inc. (Utilities) 10,000 164,964
Daibiru Corp. (Real Estate Operations) 32,000 244,879
Daito Trust Construction Co., Ltd. (Real Estate
Operations) 23,000 387,848
Fuji Television Network, Inc. (Media) 31 340,925
Fujitsu Ltd. (Computers) 21,000 374,137
Inax Corp. (Building) 40,000 190,991
Katokichi Co., Ltd. (Food) 20,000 577,373
Kirin Brewery Co., Ltd. (Beverages) 61,000 636,191
Kurita Water Industries Ltd. (Pollution Control) 7,000 113,871
Kyocera Corp. (Electronics) 3,300 429,455
Maeda Corp. (Building) 163,000 603,510
Marui Co., Ltd. (Retail) 43,000 634,468
Matsushita Electric Industrial Co., Ltd.
(Electronics) 33,000 958,713
Max Co., Ltd. (Machinery) 30,000 299,959
Meiwa Estate Co., Ltd (Real Estate Operations) 12,000 247,445
Melco, Inc. (Computers) 6,700 187,279
Mitsui Fudosan Co., Ltd. (Real Estate
Operations) 65,000 787,518
Mizuno Corp. (Retail) 106,000 257,435
Murata Manufacturing Co., Ltd. (Electronics) 1,200 143,628
NEC Corp. (Electronics) 12,000 228,749
Nippon Meat Packers, Inc. (Food) 30,000 380,516
Nissan Motor Co., Ltd.* (Automobile/Trucks) 97,000 665,839
Nissin Food Products Co., Ltd. (Food) 14,000 367,594
Nitto Denko Corp. (Electronics) 10,000 338,175
Nomura Securities Co., Ltd. (Broker Services) 20,000 424,323
NTT DoCoMo, Inc. (Telecommunications) 10 246,529
Orix Corp. (Leasing Companies) 1,300 136,416
Q.P. Corp. (Food) 70,000 590,203
Rohm Co., Ltd. (Electronics) 1,800 453,815
Santen Pharmaceutical Co., Ltd. (Medical) 12,000 236,998
Sekisui House, Ltd. (Building) 53,000 560,528
Sharp Corp. (Electronics) 11,000 140,127
Shin-Etsu Chemical Co., Ltd. (Chemicals) 11,000 451,634
Shiseido Co., Ltd. (Cosmetics & Personal Care) 31,000 400,587
Sony Corp. (Electronics) 11,100 887,064
Stanley Electric Co., Ltd. (Electronics) 32,000 331,393
Sumitomo Bakelite Co., Ltd. (Chemicals) 23,000 257,371
Sumitomo Metal Mining Co., Ltd. (Metal) 60,000 309,582
Takefuji Corp. (Finance) 3,000 296,934
Terumo Corp. (Medical) 11,000 311,506
Toho Gas Co., Ltd. (Oil & Gas) 145,000 267,104
Tokyo Electric Power Co., Inc. (Utilities) 19,700 478,440
Tokyu Corp. (Transport) 64,000 330,807
Toshiba Corp. (Electronics) 33,000 235,898
Toyota Motor Corp. (Automobile/Trucks) 23,500 939,009
Yamanouchi Pharmaceutical Co., Ltd. (Medical) 9,000 407,460
------------
18,989,095
------------
Malaysia (0.22%)
AMMB Holdings Berhad (Banks - Foreign) 80,000 89,684
Petronas Gas Berhad (Oil & Gas) 50,000 90,789
Tenaga Nasional Berhad (Utilities) 25,000 80,921
United Engineers Berhad (Engineering / R&D
Services) 43,000 61,105
------------
322,499
------------
Mexico (0.18%)
Grupo Financiero BBVA Bancomer, SA de CV*
(Finance) 200,000 123,817
Telefonos de Mexico SA (ADR)
(Telecommunications) 2,700 145,631
------------
269,448
------------
Netherlands (4.24%)
Aegon NV (Insurance) 16,500 655,289
Akzo Nobel NV (Chemicals) 6,750 307,310
Fortis (NL) NV (Insurance) 14,500 442,969
ING Groep NV (Banks - Foreign) 11,200 769,090
Koninklijke (Royal) Philips Electronics NV
(Electronics) 9,500 373,337
Koninklijke Ahold NV (Retail) 23,354 678,377
Koninklijke Numico NV (Food) 8,000 374,063
Royal Dutch Petroleum Co. (Oil & Gas) 28,380 1,683,180
TNT Post Group NV (Transport) 11,000 232,992
VNU NV (Media) 9,968 469,466
Wolters Kluwer NV (Media) 11,700 263,307
------------
6,249,380
------------
New Zealand (0.05%)
Auckand International Airport Ltd. (Transport) 31,400 35,492
Telecom Corp of New Zealand Ltd.
(Telecommunications) 14,000 30,982
------------
66,474
------------
Norway (0.50%)
Tomra Systems ASA (Machinery) 18,300 735,629
------------
Poland (0.02%)
Polski Koncern Naftowy Orlen SA (Oil & Gas) 9,000 34,478
------------
Portugal (0.13%)
Portugal Telecom SA (Telecommunications) 18,500 164,841
PT Multimedia.com Servicos de Acesso a Internet
SGPS SA* (Computers) 6,000 30,550
------------
195,391
------------
Singapore (0.37%)
DBS Group Holdings Ltd. (Banks - Foreign) 10,000 117,861
DBS Land Ltd. (Real Estate Operations) 20,000 30,405
Flextech Holdings Ltd. (Electronics) 42,000 26,544
Keppel TatLee Bank Ltd. (Banks - Foreign) 16,000 27,330
Neptune Orient Lines Ltd.* (Transport) 35,000 29,693
Overseas Union Bank Ltd. (Banks - Foreign) 11,000 53,237
Pacific Century Regional Developments Ltd.*
(Real Estate Operations) 50,000 38,433
Singapore Technologies Engineering Ltd.
(Engineering / R&D Services) 75,000 120,851
United Overseas Bank Ltd. (Banks - Foreign) 12,000 88,823
Wing Tai Holdings Ltd. (Real Estate Operations) 23,000 17,810
------------
550,987
------------
South Africa (0.41%)
ABSA Group Ltd. (Banks - Foreign) 56,000 190,328
Anglo American Platinum Corp. Ltd. (Metal) 3,400 132,642
DataTec Ltd.* (Computers) 19,000 119,603
Sasol Ltd. (Oil & Gas) 21,000 160,797
------------
603,370
------------
South Korea (0.39%)
Korea Telecom Corp. (Telecommunications) 1,550 91,297
LG Chemical Ltd. (Chemicals) 10,000 98,462
Samsung Electronics Co. (Electronics) 1,150 144,066
Shinhan Bank (Banks - Foreign) 11,850 118,760
SK Telecom Co., Ltd. (Telecommunications) 590 125,780
------------
578,365
------------
Spain (1.92%)
Amadeus Global Travel Distribution SA*
(Transport) 15,950 130,344
Banco Bilbao Vizcaya Argentaria SA (Banks --
Foreign) 47,032 626,609
Banco Santander Central Hispano SA (Banks --
Foreign) 66,850 647,844
Endesa SA (Utilities) 23,068 375,850
Telefonica Publicidad e Informacion, SA
(Advertising) 23,966 162,700
Telefonica SA* (Telecommunications) 44,000 838,994
Terra Lycos, SA (Computers) 2,000 47,861
------------
2,830,202
------------
Sweden (1.16%)
Ericsson (LM) Telefonaktiebolaget AB
(Telecommunications) 62,000 825,235
Nordic Baltic Holding AB (Banks - Foreign) 60,000 453,153
Skandia Forsakrings AB (Insurance) 25,000 424,077
------------
1,702,465
------------
Switzerland (1.82%)
Adecco SA (Business Services - Misc.) 640 442,546
Credit Suisse Group (Banks - Foreign) 2,750 515,549
Novartis AG (Medical) 730 1,107,427
Roche Holding AG (Medical) 67 612,005
------------
2,677,527
------------
Taiwan (0.65%)
Advanced Semiconductor Engineering, Inc.*
(Electronics) 76,000 87,294
Advanced Semiconductor Engineering, Inc.* (GDR)
(Electronics) (R) 1,386 7,945
Cathay Life Insurance Co., Ltd. (Insurance) 59,000 105,944
Compal Electronics, Inc. (Computers) 72,000 109,895
Compeq Manufacturing Co., Ltd.* (Electronics) 25,000 94,427
Hon Hai Precision Industry Co., Ltd.
(Electronics) 23,400 122,433
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 59,000 179,009
United Microelectronics Corp.* (Electronics) 91,000 160,588
Winbond Electronics Corp.* (Electronics) 86,000 83,337
------------
950,872
------------
Thailand (0.07%)
PTT Exploration and Production Pcl (Oil & Gas) 14,000 33,402
Shin Satellite Pcl* (Telecommunications) 50,000 31,527
Siam Makro Pcl (Retail) 27,000 31,288
------------
96,217
------------
Turkey (0.15%)
Dogan Yayin Holding AS* (Diversified Operations) 4,551,000 59,348
Koc Holding AS (Diversified Operations) 900,000 57,364
Vestel Elektronik Sanayi ve Ticaret AS*
(Household) 280,000 57,437
Yapi ve Kredi Bankasi AS* (Banks - Foreign) 5,685,000 49,146
------------
223,295
------------
United Kingdom (9.32%)
Barclays Plc (Banks - Foreign) 10,450 299,003
BP Amoco Plc (Oil & Gas) 195,057 1,654,239
British Telecommunications Plc
(Telecommunications) 45,000 527,565
Cable & Wireless Plc (Telecommunications) 16,400 232,007
Carlton Communications Plc (Media) 29,900 240,778
Centrica Plc (Utilities) 228,194 784,702
CGNU Plc (Insurance) 20,385 272,705
CMG Plc (Computers) 8,835 147,324
COLT Telecom Group Plc* (Telecommunications) 8,448 269,668
Energis Plc* (Telecommunications) 29,790 254,804
Glaxo Wellcome Plc (Medical) 40,000 1,151,473
HSBC Holdings Plc (Banks - Foreign) 94,429 1,345,455
Lloyds TSB Group Plc (Banks - Foreign) 52,800 537,803
Logica Plc (Computers) 6,571 194,402
Marconi Plc (Telecommunications) 59,259 748,042
Pearson Plc (Media) 32,990 885,057
Sage Group Plc (Computers) 36,060 263,176
SEMA Group Plc (Computers) 26,052 328,861
SmithKline Beecham Plc (Medical) 58,567 756,302
Telewest Communications Plc* (Media) 102,630 169,758
Vodafone AirTouch Plc (Telecommunications) 641,000 2,666,943
------------
13,730,067
------------
United States (39.03%)
AFLAC, Inc. (Insurance) 16,100 1,176,306
Alcoa, Inc. (Metal) 19,000 545,062
ALLTEL Corp. (Telecommunications) 14,100 908,569
American Express Co. (Finance) 14,850 891,000
American General Corp. (Insurance) 11,000 885,500
American Home Products Corp. (Medical) 15,200 965,200
American International Group, Inc. (Insurance) 17,062 1,672,076
Amgen, Inc.* (Medical) 10,800 625,725
Anheuser-Busch Cos., Inc. (Beverages) 20,000 915,000
Baxter International, Inc. (Medical) 15,800 1,298,562
Chase Manhattan Corp. (The) (Banks - United
States) 12,300 559,650
Chevron Corp. (Oil & Gas) 11,800 969,075
Cisco Systems, Inc.* (Computers) 32,600 1,756,325
Citigroup, Inc. (Finance) 27,166 1,429,611
Coca-Cola Co. (The) (Beverages) 17,700 1,068,638
Compaq Computer Corp. (Computers) 20,000 608,200
Costco Wholesale Corp.* (Retail) 6,500 238,063
CVS Corp. (Retail) 19,800 1,048,163
Disney (Walt) Co. (The) (Leisure) 17,800 637,462
Dover Corp. (Machinery) 15,800 670,512
Duke Energy Corp. (Utilities) 17,050 1,473,759
EMC Corp.* (Computers) 13,800 1,229,062
Emerson Electric Co. (Electronics) 16,100 1,182,344
Enron Corp. (Oil & Gas) 5,400 443,138
Exxon Mobil Corp. (Oil & Gas) 20,400 1,819,425
Fannie Mae (Mortgage Banking) 16,150 1,243,550
First Data Corp. (Computers) 10,600 531,325
Freddie Mac (Mortgage Banking) 19,250 1,155,000
General Electric Co. (Electronics) 48,900 2,680,331
Halliburton Co. (Oil & Gas) 15,400 570,763
Home Depot, Inc. (The) (Retail) 7,200 309,600
Intel Corp. (Electronics) 30,400 1,368,000
International Business Machines Corp.
(Computers) 6,250 615,625
International Paper Co. (Paper & Paper Products) 13,800 505,425
Interpublic Group of Cos., Inc. (The)
(Advertising) 6,800 291,975
JDS Uniphase Corp.* (Fiber Optics) 9,000 732,937
Johnson & Johnson (Medical) 14,915 1,374,044
Kimberly-Clark Corp. (Paper & Paper Products) 20,350 1,343,100
Level 3 Communications, Inc.*
(Telecommunications) 6,100 290,894
Lowe's Cos., Inc. (Retail) 12,100 552,819
McGraw-Hill Cos., Inc. (The) (Media) 16,550 1,062,303
Medtronic, Inc. (Medical) 20,850 1,132,416
Merck & Co., Inc. (Medical) 13,350 1,200,666
Microsoft Corp.* (Computers) 23,450 1,615,119
Minnesota Mining & Manufacturing Co.
(Diversified Operations) 7,000 676,375
Motorola, Inc. (Electronics) 8,400 209,475
Omnicom Group, Inc. (Advertising) 3,500 322,875
Oracle Corp.* (Computers) 15,200 501,600
PepsiCo, Inc. (Beverages) 19,600 949,375
Philip Morris Cos., Inc. (Tobacco) 25,000 915,625
Safeway, Inc.* (Retail) 18,700 1,022,656
SBC Communications, Inc. (Telecommunications) 8,350 481,691
Schlumberger Ltd. (Oil & Gas) 10,600 806,925
State Street Corp. (Banks - United States) 6,700 835,758
Sun Microsystems, Inc.* (Computers) 13,200 1,463,550
Target Corp. (Retail) 19,840 548,080
Tyco International Ltd. (Diversified Operations) 23,150 1,312,316
United Technologies Corp. (Aerospace) 6,100 425,856
Verizon Communications (Telecommunications) 11,350 656,172
Wal-Mart Stores, Inc. (Retail) 22,400 1,016,400
Wells Fargo & Co. (Banks - United States) 25,400 1,176,338
WorldCom, Inc.* (Telecommunications) 23,525 558,719
------------
57,472,105
------------
TOTAL COMMON STOCKS
(Cost $123,130,933) (94.71%) 139,451,468
------- ------------
UNITS
Mexico (0.08%)
Controladora Comercial Mexicana SA de CV
(Retail) 110,000 121,935
------------
TOTAL UNITS
(Cost $101,293) (0.08%) 121,935
------- ------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs- Gesellschaft AG*
(Insurance) 38 3,370
------------
TOTAL WARRANTS
(Cost $1,700) (0.00%) 3,370
------- ------------
TOTAL COMMON STOCKS,
UNITS AND WARRANTS
(Cost $123,233,926) (94.79%) 139,576,773
------- ------------
PREFERRED STOCKS
Germany (0.25%)
Fresenius AG (Medical) 1,500 370,414
------------
TOTAL PREFERRED STOCKS
(Cost $348,446) (0.25%) 370,414
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.87%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 6.000% and 9.125%, due
05-15-18 and 02-15-26) - Note A 6.56% $5,698 $5,698,000
------- ------------
NUMBER OF SHARES
----------------
Cash Equivalents (7.15%)
Navigator Securities Lending Prime
Portfolio** 10,531,404 10,531,404
------- ------------
TOTAL SHORT-TERM INVESTMENTS (11.02%) 16,229,404
------- ------------
TOTAL INVESTMENTS (106.06%) 156,176,591
------- ------------
OTHER ASSETS AND LIABILITIES, NET (6.06%) (8,930,268)
------- ------------
TOTAL NET ASSETS (100.00%) $147,246,323
======= ============
* Non-income producing security.
** Represents investment of security lending collateral -- Note A.
(R) This security is exempt from registration under rule 144A of the
Securities and Exchange Act of 1933. Such security may be resold,
normally to qualified institutional buyers, in transactions exempt from
registration. Rule 144A security amounted to $7,945 as of October 31,
2000.
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>
<TABLE>
<CAPTION>
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,
2000, assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
--------------------- -------------
<S> <C>
Advertising 0.79%
Aerospace 0.29
Automobile/Trucks 1.74
Banks -- Foreign 5.65
Banks -- United States 1.75
Beverages 2.50
Broker Services 0.29
Building 1.55
Business Services -- Misc. 0.48
Chemicals 0.97
Computers 8.41
Cosmetics & Personal Care 0.27
Diversified Operations 4.27
Electronics 8.53
Engineering/R&D Services 0.12
Fiber Optics 0.50
Finance 2.31
Food 1.69
Glass Products 0.21
Household 0.04
Insurance 6.16
Leasing Companies 0.09
Leisure 0.62
Machinery 1.35
Manufacturing 0.17
Media 2.81
Medical 8.17
Metal 0.67
Mortgage Banking 1.63
Oil & Gas 7.12
Paper & Paper Products 1.25
Pollution Control 0.08
Real Estate Operations 1.52
Retail 6.12
Steel 0.00
Telecommunications 10.93
Tobacco 0.62
Transport 0.53
Utilities 2.84
Short-Term Investments 11.02
-------
TOTAL INVESTMENTS 106.06%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Global Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Global Fund (the "Fund") is a diversified series of John
Hancock Investment Trust III, an open-end management investment company,
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term growth of capital
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
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 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
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.
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. In addition, the Fund accrues
foreign repatriation taxes on unrealized gains, as applicable.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net 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 are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative size of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The average daily loan balance during the
period for which loans were outstanding amounted to $4,690,290. The
weighted average interest rate was 6.52%. Interest expense includes
$57,704 paid under the line of credit. There was no outstanding
borrowing under the line of credit on October 31, 2000.
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, 2000, the Fund loaned securities having a
market value of $10,186,476 collateralized by cash in the amount of
$10,531,404. The cash collateral was invested in a short-term
instrument.
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.
The fund had no open forward foreign currency exchange contracts at
October 31, 2000.
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
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.
The Fund had no open financial futures contracts at October 31, 2000.
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 dividends and 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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with accounting principles generally accepted in the United
States of America incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.90% of the first $100,000,000 of the Fund's average daily net asset
value, (b) 0.80% of the next $200,000,000, (c) 0.75% of the next
$200,000,000 and (d) 0.625% of the Fund's average daily net asset value
in excess of $500,000,000. The Adviser is solely responsible for
advising the Fund with respect to investments in the United States and
Canada.
The Adviser has a subadvisory contract with Indocam International
Investment Services ("IIIS"), effective January 1, 2000, under which
IIIS 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 this contract IIIS acted
as co-subadviser with the Fund's original subadviser, John Hancock
Advisers International Limited ("JHAI"), a wholly owned subsidiary of
the Adviser. As of March 1, 2000, the Adviser terminated its contract
with JHAI so that currently IIIS is the Fund's sole subadviser. The Fund
is not responsible for payment of the subadvisers' fees.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. 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 makes payments to JH Funds 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $161,392 with regard to sales of Class A shares. Of
this amount, $23,146 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $86,384 was paid as
sales commissions to unrelated broker-dealers and $51,862 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $3,313 with regard to sales of Class C shares. Of this
amount, $3,153 was paid as sales commissions to unrelated broker-dealers
and $160 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 CDSCs are paid to
JH Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection with
the sale of Class B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $124,511 for Class B shares
and $1,185 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
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, 2000, aggregated $306,037,086 and
$328,556,809, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $142,074,225. Gross
unrealized appreciation and depreciation of investments aggregated
$22,319,670 and $8,217,304, respectively, resulting in net unrealized
appreciation of $14,102,366.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized gain on investments of
$4,855,448, a decrease in accumulated net investment loss of $1,740,541
and an increase in capital paid-in of $3,114,507. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of October 31, 2000. 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 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 income (loss)
per share in the financial highlights excludes these adjustments.
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, 2000, 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 accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and 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, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund paid during its taxable
year ended October 31, 2000.
The Fund has designated distributions to shareholders of $11,977,748 as
long-term capital gain dividends.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January 2001. This will reflect the tax character of all
distributions for the calendar year 2000.
SHAREHOLDER MEETING (UNAUDITED)
On December 1, 1999, the shareholders of John Hancock Global Fund
approved a sub-advisory contract between the Adviser and Indocam
International Investment Services (6,924,019 FOR; 215,366 AGAINST; and
622,906 ABSTAINING).
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
Global Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
0300A 10/00
12/00
The latest report from your
Fund's management team
ANNUAL REPORT
Large Cap
Growth Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-5072
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY WILLIAM L. BRAMAN AND ROBERT J. UEK, CFA,
FOR THE PORTFOLIO MANAGEMENT TEAM
[A 2" x 3" photo bottom middle of page of John Hancock Large Cap Growth
Fund. Caption below reads "William Braman, portfolio management team
leader."]
John Hancock
Large Cap Growth Fund
Abrupt shifts in investor sentiment over last 12 months
On July 1, Will Braman assumed the role of portfolio management team
leader for John Hancock Large Cap Growth Fund. Prior to joining John
Hancock Funds, Mr. Braman was at Baring Asset Management, and he brings
with him 23 years of investment management experience.
The past 12 months may well be remembered as one of the most
unpredictable and volatile periods in the recent history of stock
investing. Over the course of John Hancock Large Cap Growth Fund's
fiscal year, we've witnessed dramatic stock price swings and sector
rotation as investors rushed to anticipate the Federal Reserve Board's
next move and the effect its actions would have on the economy and
corporate profits. The direction of technology stock prices had no small
influence on either market performance or the Fund. With a sizeable
amount of the Fund's net assets invested in technology companies, the
Fund's performance was impacted by that sector.
Performance results
For the year ended October 31, 2000, John Hancock Large Cap Growth Fund
posted total returns of -8.15%, -8.79% and -8.80% at net asset value
for Class A, Class B and Class C shares, respectively. For the same
period, the S&P 500 Index returned 6.08%, the Russell Top 200 Growth
Index returned 4.08% and the average large-cap growth fund returned
15.25%, according to Lipper, Inc.1
"...technology
stock prices
had no small
influence..."
Keep in mind that your net asset value return will be different from the
Fund's stated performance if you were not invested in the Fund for the
entire period and did not reinvest all distributions. Longer-term
performance information can be found on pages six and seven.
Market leadership changes
As you may recall, we began fiscal 2000 last November on the heels of a
year in which the Fund produced substantial gains. Early on, the rally
in large-company tech stocks broadened significantly to include small-
and mid-size companies, at which time the Fund's performance began to
lag. In early March, the abrupt halt in the tech rally -- and steep
price declines -- placed further pressure on Fund performance. From that
point through period's end, the broad market and the Fund had a
tumultuous ride as various stock groupings and industry sectors rotated
in and out of favor, with the final months of the period particularly
volatile for tech stocks. As was the case at midyear, the Fund's
relative underperformance was due, by and large, to its overweight in
the technology arena relative to its peer group, although a number of
individual holdings, not only in technology but other sectors, detracted
from performance as well. Some of the more disappointing names over the
year included: NBC Internet, Sycamore Networks, Microsoft, American
General, Procter & Gamble and Wal-Mart.
[Table at top left-hand column entitled "Top Five Stock Holdings." The
first listing is General Electric 5.1%, the second is Pfizer 4.7%, the
third Cisco Systems 4.5%, the fourth EMC Corp. 3.9% and the fifth Sun
Microsystems 3.7%. A note below the table reads "As a percentage of net
assets on October 31, 2000."]
"...we
increased the
Fund's stake
in health
care and
financial
stocks..."
[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 Nortel Networks followed by a sideways arrow with the phrase
"Perceived disappointments about future growth of optical space." The
second listing is Sun Microsystems followed by an up arrow with phrase
"Unquestioned leadership in servers." The third listing is Clear Channel
followed by a down arrow with the phrase "Concerns of advertising
slowdown." A note below the table reads "See 'Schedule of Investments,'
Investment holdings are subject to change."]
Tech exposure increased on dips
In the second half of the fiscal year, we chose to further bolster the
Fund's stake in technology issues, buying when valuations on some former
high flyers became quite compelling. We did so believing that the highly
attractive long-term growth prospects of technology companies far
outweigh the short-term bouts of volatility that tech stocks are likely
to experience over the course of an economic cycle. Thus, the Fund's
tech-related positions stood at 50% of net assets by period's end. We
also reconfigured the tech exposure so that the Fund's tech holdings
were in two main camps: networking, communications infrastructure and
components; and Internet infrastructure and services -- servers, storage
and software.
We emphasized companies that we believe dominate their niches and that
are highly focused on producing rapid earnings growth for the
foreseeable future. Several new holdings include Nortel Networks,
Juniper Networks, CIENA Corp., Broadcom Corp., PMC-Sierra and SDL. We
believe these companies stand to benefit from the strong future demand
for bandwith. In the area of Internet infrastructure and services,
notable holdings include Sun Microsystems, VERITAS Software and Siebel
Systems.
Shifts in portfolio composition
As the period progressed, we increased the Fund's stake in health-care
and financial stocks -- two sectors whose standing among investors
improved significantly in recent months. We also substantially decreased
the portfolio's exposure to retail, media and utility services
(wireless), selling what we believed were the more marginal companies
that would likely have a difficult time in a more competitive
environment in which consumer spending was slowing.
The biotech companies that we added have been licensed research and
development facilities for the more well-known pharmaceutical
corporations for quite some time, and are just now developing product
for their own distribution and sales. New holdings include Genentech and
Millennium Pharmaceuticals, as well as Waters Corp. and PE Corp.-PE
Biosystems Group, which provide the measurement and lab equipment to
many biotech firms. We also boosted or initiated positions in the larger
drug companies, such as Pfizer, Pharmacia and Merck. Together, the rapid
earnings growth offered by biotechnology firms combined with the visible
earnings growth of the pharmaceuticals bring to the portfolio an element
of solid defensive earnings growth.
[Bar chart at top of left hand column with the heading "Fund
Performance." Under the heading is a note that reads "For the year ended
October 31, 2000." The chart is scaled in increments of 5% with -10% at
the bottom and 20% at the top. The first bar represents the -8.15% total
return for John Hancock Large Cap Growth Fund Class A. The second bar
represents the -8.79% total return for John Hancock Large Cap Growth
Fund Class B. The third bar represents the -8.80% total return for John
Hancock Large Cap Growth Fund Class C. The fourth bar represents the
15.25% total return for Average large-cap growth fund. A note below the
chart reads "Total returns for John Hancock Large Cap Growth Fund are at
net asset value with all distributions reinvested. The average growth
fund is tracked by Lipper, Inc.1 See the following two pages for
historical performance information."]
Inexpensively priced in a relative sense and perceived as safe havens,
the financial stocks that garnered our increased attention included MBNA
Corp., Citigroup and State Street Corp. Though these companies are a bit
more defensive compared with technology and biotech stocks, they are by
no means slow growers and may well produce growth rates between 15% and
20%.
In the retail, media and utility services arenas, we sold Lowe's and
CVS, while paring Best Buy and Kroger. We also moved out of Comcast and
Liberty Media because of the declining advertising environment and lack
of earnings visibility. Tough price competition has pushed the breakeven
point for many wireless companies further out on the horizon, prompting
us to sell VoiceStream and Dobson Communications and to significantly
pare Sprint PCS.
"With all eyes
on earnings,
individual
stock selec-
tion becomes
more impor-
tant than
ever."
Outlook
Our outlook for the first half of fiscal 2001 is a mix of caution and
optimism. We believe investors might be surprised to find that the
"soft-landing" scenario may not be so soft and that many corporations
may find it more difficult to achieve earnings projections. With current
GDP growth at roughly 3%, the next interest-rate action from the Fed may
well be a pullback to a neutral if not an easing stance. Given the more
constrained growth, we anticipate that stock investors and analysts will
continue to discriminate between the stocks of the consistent
earnings-growth achievers from those that disappoint. We believe
companies that can continue to execute their business plans and express
confident outlooks are likely to be rewarded with stock price
appreciation, while those that stumble even slightly will suffer. With
all eyes on earnings, individual stock selection becomes more important
than ever.
-------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team'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 Large Cap Growth Fund.
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
For Class A shares, total return figures include an up-front 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 an up-front sales charge of 1%
and 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 October 31, 2000
ONE FIVE TEN
YEAR YEARS YEARS
----- ----- -----
Cumulative Total Returns (12.75%) 67.92% 274.27%
Average Annual Total Returns (12.75%) 10.92% 14.11%
CLASS B
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
----- ----- ---------
Cumulative Total Returns (12.88%) 68.88% 102.96%
Average Annual Total Returns (12.88%) 11.05% 10.93%
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ ---------
Cumulative Total Returns (10.52%) 14.08%
Average Annual Total Returns (10.52%) 5.60%
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Large Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. In addition, the Fund
is compared to the Russell Top 200 Growth Index, which measures the
performance of the Russell Top 200 companies with higher price-to-book
ratios and higher forecasted growth values. For future reports the
Adviser has chosen to remove the Standard & Poor's 500 Index, but will
continue to compare the Fund's performance to the broad-based Russell
Top 200 Growth Index, which more closely represents the investment
strategy of the Fund. It is not possible to invest in an index. Past
performance is not indicative of future results.
Line chart with the heading John Hancock Large Cap Growth Fund Class A,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are four lines. The first line
represents the Russell Top 200 Growth Index and is equal to $66,248 as
of October 31, 2000. The second line represents the Standard & Poor's
500 Index and is equal to $58,993 as of October 31, 2000. The third line
represents the value of the hypothetical $10,000 investment made in the
John Hancock Large Cap Growth Fund on October 31, 1990, before sales
charge, and is equal to $39,396 as of October 31, 2000. The fourth line
represents the value of the same hypothetical investment made in the
John Hancock Large Cap Growth Fund, after sales charge, and is equal to
$37,427 as of October 31, 2000.
Line chart with the heading John Hancock Large Cap Growth Fund Class B*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the Russell Top 200 Growth Index and is equal to $41,973 as
of October 31, 2000. The second line represents the Standard & Poor's
500 Index and is equal to $34,913 as of October 31, 2000. The third line
represents the value of the hypothetical $10,000 investment made in the
John Hancock Large Cap Growth Fund on January 3, 1994, before sales
charge, and is equal to $20,296 as of October 31, 2000.
Line chart with the heading John Hancock Large Cap Growth Fund Class C*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are four lines. The first line
represents the Russell Top 200 Growth Index and is equal to $14,955 as
of October 31, 2000. The second line represents the Standard & Poor's
500 Index and is equal to $13,509 as of October 31, 2000. The third line
represents the value of the hypothetical $10,000 investment made in the
John Hancock Large Cap Growth Fund on June 1, 1998, before sales charge,
and is equal to $11,525 as of October 31, 2000. The fourth line
represents the value of the same hypothetical investment made in the
John Hancock Large Cap Growth Fund, after sales charge, and is equal to
$11,410 as of October 31, 2000.
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds -- Large 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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $568,713,659) $660,419,841
Joint repurchase agreement
(cost - $4,155,000) 4,155,000
Corporate savings account 233
-----------------
664,575,074
Receivable for shares sold 153,691
Dividends receivable 26,331
Interest receivable 760
Other assets 56,919
-----------------
Total Assets 664,812,775
-----------------
Liabilities:
Payable for shares repurchased 254,993
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 643,446
Accounts payable and accrued expenses 137,679
-----------------
Total Liabilities 1,036,118
-----------------
Net Assets:
Capital paid-in 546,852,402
Accumulated net realized gain on
investments 25,244,661
Net unrealized appreciation of
investments 91,706,182
Accumulated net investment loss (26,588)
-----------------
Net Assets $663,776,657
=================
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 - $421,455,042/20,328,818 $20.73
==============================================================
Class B - $238,996,169/12,317,092 $19.40
==============================================================
Class C - $3,325,446/171,486 $19.39
==============================================================
Maximum Offering Price Per Share
Class A * - ($20.73/0.95) $21.82
==============================================================
Class C - ($19.39/0.99) $19.59
==============================================================
* 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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $14,920) $2,551,775
Securities lending income - Note A 99,006
Interest 423,272
-----------------
3,074,053
-----------------
Expenses:
Investment management fee - Note B 5,882,773
Distribution and service fee - Note B
Class A 1,455,749
Class B 2,970,018
Class C 23,935
Transfer agent fee - Note B 1,907,495
Custodian fee 160,548
Accounting and legal services fee --
Note B 149,540
Trustees' fees 50,294
Miscellaneous 46,539
Printing 44,598
Auditing fee 38,500
Registration and filing fees 17,249
Interest expense 13,799
Legal fees 6,417
-----------------
Total Expenses 12,767,454
-----------------
Net Investment Loss (9,693,401)
-----------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 39,807,898
Change in net unrealized appreciation
(depreciation) of investments (88,157,503)
-----------------
Net Realized and Unrealized Loss on
Investments (48,349,605)
-----------------
Net Decrease in Net Assets Resulting
from Operations ($58,043,006)
=================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($7,146,985) ($9,693,401)
Net realized gain on investments
sold 110,762,438 39,807,898
Change in net unrealized
appreciation (depreciation) of
investments 59,045,415 (88,157,503)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 162,660,868 (58,043,006)
----------------- -----------------
Distributions to Shareholders:
Distributions from net realized
gain on investments sold
Class A - ($2.7100 and $2.5980
per share, respectively) (45,972,496) (50,047,115)
Class B - ($2.7100 and $2.5980
per share, respectively) (27,759,800) (34,402,171)
Class C - ($2.7100 and $2.5980
per share, respectively) (27,033) (155,747)
----------------- -----------------
Total Distributions to
Shareholders (73,759,329) (84,605,033)
----------------- -----------------
From Fund Share Transactions - Net:* 109,605,788 8,726,562
----------------- -----------------
Net Assets:
Beginning of period 599,190,807 797,698,134
----------------- -----------------
End of period (including
accumulated net investment loss
of $23,130 and $26,588,
respectively) $797,698,134 $663,776,657
================= =================
The Statement of Changes in Net Assets shows how the value of the Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment gains and
losses, distributions paid to shareholders, and any increase or decrease
in money shareholders invested in the Fund. The footnote illustrates the
number of Fund shares sold, reinvested and repurchased during the last
two periods, along with the corresponding dollar value.
See notes to financial statements.
<CAPTION>
Statement of Changes in Net Assets (continued)
---------------------------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 9,568,899 $230,610,734 5,654,099 $134,661,975
Shares issued to shareholders in
reinvestment of distributions 2,130,741 42,891,827 1,962,883 46,599,078
----------------- ----------------- ----------------- -----------------
11,699,640 273,502,561 7,616,982 181,261,053
Less shares repurchased (9,499,232) (229,248,085) (6,624,254) (157,146,910)
----------------- ----------------- ----------------- -----------------
Net increase 2,200,408 $44,254,476 992,728 $24,114,143
================= ================= ================= =================
CLASS B
Shares sold 6,594,456 $150,932,220 4,126,439 $92,609,687
Shares issued to shareholders in
reinvestment of distributions 1,263,938 24,280,197 1,292,439 28,912,218
----------------- ----------------- ----------------- -----------------
7,858,394 175,212,417 5,418,878 121,521,905
Less shares repurchased (4,888,308) (111,107,205) (6,244,702) (139,338,666)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,970,086 $64,105,212 (825,824) ($17,816,761)
================= ================= ================= =================
CLASS C
Shares sold 60,561 $1,390,286 219,079 $4,892,316
Shares issued to shareholders in
reinvestment of distributions 1,368 26,263 5,950 133,107
----------------- ----------------- ----------------- -----------------
61,929 1,416,549 225,029 5,025,423
Less shares repurchased (7,655) (170,449) (114,939) (2,596,243)
----------------- ----------------- ----------------- -----------------
Net increase 54,274 $1,246,100 110,090 $2,429,180
================= ================= ================= =================
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 PERIOD ENDED YEAR ENDED OCTOBER 31,
DECEMBER 31, OCTOBER 31, -------------------------------------------------------
1995 1996(1) 1997 1998 1999 2000
------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.89 $19.51 $23.28 $24.37 $22.27 $25.04
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Loss(2) (0.09) (0.13) (0.12) (0.11) (0.17) (0.23)
Net Realized and Unrealized
Gain (Loss) on Investments 4.40 3.90 3.49 2.17 5.65 (1.48)
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment Operations 4.31 3.77 3.37 2.06 5.48 (1.71)
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold (0.69) -- (2.28) (4.16) (2.71) (2.60)
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $19.51 $23.28 $24.37 $22.27 $25.04 $20.73
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 27.17% 19.32%(4) 16.05% 9.80% 27.58% (8.15%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $241,700 $279,425 $303,067 $381,591 $484,196 $421,455
Ratio of Expenses to Average
Net Assets 1.48% 1.48%(5) 1.44% 1.40% 1.35% 1.36%
Ratio of Net Investment Loss
to Average Net Assets (0.46%) (0.73%)(5) (0.51%) (0.50%) (0.70%) (0.97%)
Portfolio Turnover Rate 68%(6) 59% 133% 153%(6) 183% 162%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.83 $19.25 $22.83 $23.70 $21.38 $23.74
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Loss(2) (0.26) (0.26) (0.27) (0.25) (0.31) (0.37)
Net Realized and Unrealized
Gain (Loss) on Investments 4.37 3.84 3.42 2.09 5.38 (1.37)
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment Operations 4.11 3.58 3.15 1.84 5.07 (1.74)
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold (0.69) -- (2.28) (4.16) (2.71) (2.60)
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $19.25 $22.83 $23.70 $21.38 $23.74 $19.40
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 26.01% 18.60%(4) 15.33% 9.04% 26.70% (8.79%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $15,913 $25,474 $36,430 $217,448 $312,046 $238,996
Ratio of Expenses to Average
Net Assets 2.31% 2.18%(5) 2.13% 2.08% 2.02% 2.05%
Ratio of Net Investment Loss
to Average Net Assets (1.39%) (1.42%)(5) (1.20%) (1.16%) (1.37%) (1.66%)
Portfolio Turnover Rate 68%(6) 59% 133% 153%(6) 183% 162%
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income,
gains (losses), distributions and total investment return of each class.
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.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -------------------------
1998(7) 1999 2000
------------- ---------- ----------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $21.43 $21.37 $23.73
------------- ---------- ----------
Net Investment Loss(2) (0.10) (0.31) (0.37)
Net Realized and Unrealized
Gain (Loss) on Investments 0.04 5.38 (1.37)
------------- ---------- ----------
Total from Investment Operations (0.06) 5.07 (1.74)
------------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain
on Investments Sold -- (2.71) (2.60)
------------- ---------- ----------
Net Asset Value, End of
Period $21.37 $23.73 $19.39
============= ========== ==========
Total Investment Return at
Net Asset Value(3) (0.28%)(4) 26.72% (8.80%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $152 $1,457 $3,325
Ratio of Expenses to Average
Net Assets 2.10%(5) 2.05% 2.06%
Ratio of Net Investment Loss
to Average Net Assets (1.14%)(5) (1.36%) (1.71%)
Portfolio Turnover Rate 153%(6) 183% 162%
(1) Effective October 31, 1996, the fiscal period end changed from
December 31 to October 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of
sales charges.
(4) Not annualized.
(5) Annualized.
(6) Portfolio turnover rate excludes merger activity.
(7) Class C shares began operations on June 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Large Cap Growth Fund on October 31, 2000. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ---------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Banks - United States (1.74%)
State Street Corp. 47,165 $5,883,362
Wells Fargo & Co. 122,731 5,683,979
------------
11,567,341
------------
Broker Services (0.81%)
Schwab (Charles) Corp. (The) 153,030 5,375,179
------------
Business Services - Misc. (0.46%)
Paychex, Inc. 53,650 3,041,284
------------
Computer - Software (9.37%)
Adobe Systems, Inc. 74,200 5,643,837
BEA Systems, Inc.* 100,650 7,221,637
i2 Technologies, Inc.* 30,350 5,159,500
Oracle Corp.* 598,000 19,734,000
Siebel Systems, Inc.* 65,300 6,852,419
VeriSign, Inc.* 37,250 4,917,000
VERITAS Software Corp.* 89,600 12,634,998
------------
62,163,391
------------
Computers (19.64%)
Brocade Communications Systems, Inc.* 26,450 6,014,069
Cisco Systems, Inc.* 554,650 29,881,769
Compaq Computer Corp. 302,260 9,191,727
EMC Corp.* 289,586 25,791,253
Gateway, Inc.* 114,236 5,895,720
Hewlett-Packard Co. 155,716 7,231,062
Juniper Networks, Inc.* 33,200 6,474,000
Network Appliance, Inc.* 54,850 6,527,150
Palm, Inc.* 85,900 4,601,019
Redback Networks, Inc.* 37,700 4,012,694
Sun Microsystems, Inc.* 223,450 24,775,019
------------
130,395,482
------------
Diversified Operations (8.18%)
General Electric Co. 615,000 33,709,688
Tyco International Ltd. (Bermuda) 363,750 20,620,078
------------
54,329,766
------------
Electronics (7.77%)
Altera Corp.* 132,500 5,424,219
Analog Devices, Inc.* 70,698 4,595,370
Applied Materials, Inc.* 145,600 7,735,000
Broadcom Corp. (Class A)* 47,100 10,473,862
Flextronics International Ltd. (Singapore)* 147,600 5,608,800
KLA-Tencor Corp.* 61,800 2,089,612
Micron Technology, Inc.* 147,950 5,141,262
PMC-Sierra, Inc.* 28,800 4,881,600
Xilinx, Inc.* 77,550 5,617,528
------------
51,567,253
------------
Fiber Optics (4.60%)
CIENA Corp.* 61,000 6,412,625
JDS Uniphase Corp.* 125,200 10,195,975
SDL, Inc.* 21,500 5,573,875
Sycamore Networks, Inc.* 75,800 4,794,350
TyCom, Ltd. (Bermuda)* 105,897 3,547,549
------------
30,524,374
------------
Finance (3.14%)
Citigroup, Inc. 299,073 15,738,717
MBNA Corp. 136,535 5,128,596
------------
20,867,313
------------
Instruments - Scientific (1.50%)
PE Corp.-PE Biosystems Group 42,783 5,005,611
Waters Corp.* 67,870 4,924,817
------------
9,930,428
------------
Insurance (2.14%)
AFLAC, Inc. 70,668 5,163,181
American International Group, Inc. 92,649 9,079,602
------------
14,242,783
------------
Media (4.44%)
Clear Channel Communications, Inc.* 123,459 7,415,256
Time Warner, Inc. 222,834 16,915,329
Yahoo! Inc.* 88,000 5,159,000
------------
29,489,585
------------
Medical (17.57%)
Amgen, Inc.* 156,850 9,087,497
Cardinal Health, Inc. 170,000 16,107,500
Genentech, Inc.* 104,100 8,588,250
Johnson & Johnson 94,188 8,677,069
Medtronic, Inc. 277,776 15,086,709
Merck & Co., Inc. 146,344 13,161,813
Millennium Pharmaceuticals, Inc.* 69,200 5,021,325
Pfizer, Inc. 729,731 31,515,258
Pharmacia Corp. 170,534 9,379,370
------------
116,624,791
------------
Retail (6.54%)
Bed Bath & Beyond, Inc.* 180,150 4,650,122
Best Buy Co., Inc.* 55,179 2,769,296
Home Depot, Inc. (The) 333,559 14,343,037
Kroger Co.* 285,915 6,450,957
Wal-Mart Stores, Inc. 334,564 15,180,842
------------
43,394,254
------------
Telecommunications (10.82%)
American Tower Corp. (Class A)* 122,446 5,012,633
Comverse Technology, Inc.* 56,850 6,352,987
Corning, Inc. 210,000 16,065,000
Level 3 Communications, Inc.* 91,950 4,384,866
McLeodUSA, Inc. (Class A)* 216,400 4,165,700
Nokia Corp., American Depositary Receipt
(Finland) 326,864 13,973,436
Nortel Networks Corp. 272,058 12,378,639
Scientific-Atlanta, Inc. 48,781 3,338,450
Sprint PCS* 160,694 6,126,459
------------
71,798,170
------------
Utilities (0.77%)
AES Corp. (The)* 90,415 5,108,447
------------
TOTAL COMMON STOCKS
(Cost $568,713,659) (99.49%) 660,419,841
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.63%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 7.125% thru 13.250%, due
05-15-14 thru 02-15-23) - Note A 6.56% $4,155 $4,155,000
------------
Corporate Savings Account (0.00%)
Investor's Bank & Trust Daily Interest
Savings Account Current Rate 5.20% 233
------------
TOTAL SHORT-TERM INVESTMENTS (0.63%) 4,155, 233
--------- ------------
TOTAL INVESTMENTS (100.12%) 664,575,074
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.12%) (798,417)
--------- ------------
TOTAL NET ASSETS (100.00%) $663,776,657
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Large Cap Growth Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Large Cap Growth Fund (the "Fund") is a diversified series
of John Hancock Investment Trust III, an open-end management investment
company, registered under the Investment Company Act of 1940. The
investment objective of the Fund is to seek long-term capital
appreciation.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net 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 are directly identifiable to an
individual fund. Expenses that are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative size of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The average daily loan balance during the
period for which loans were outstanding amounted to $1,921,136. The
weighted average interest rate was 6.27%. Interest expense includes
$3,626 paid under the line of credit program. At October 31, 2000, there
were no outstanding borrowings under the line of credit.
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, 2000, the Fund loaned securities having a
market value of $12,647,900 collateralized by securities in the amount
of $12,648,878.
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 dividends and 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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with accounting principles generally accepted in the United
States of America incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.75% of the first $750,000,000 of the Fund's average daily net asset
value, and (b) 0.70% of the Fund's average daily net asset value in
excess of $750,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. 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 makes payments to JH Funds at an annual rate
not to exceed 0.30% of Class A average daily net assets and 1.00% of
Class B and Class C average daily net assets, to reimburse JH Funds for
its distribution and service costs. Up to a maximum of 0.25% of such
payments may be service fees as defined by the 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $581,112 with regard to sales of Class A shares. Of
this amount, $84,340 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $229,312 was paid as
sales commissions to unrelated broker-dealers and $267,460 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $16,204 with regard to sales of Class C shares. Of this
amount, $13,486 was paid as sales commissions to unrelated
broker-dealers and $2,718 was paid as sales commissions to sales
personnel of Signator Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $741,821 for Class B shares
and $84,484 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
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, 2000, aggregated $1,259,165,461 and
$1,346,237,043, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (excluding corporate
savings account) for federal income tax purposes was $573,667,603. Gross
unrealized appreciation and depreciation of investments aggregated
$150,808,254 and $59,901,016, respectively, resulting in net unrealized
appreciation of $90,907,238.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized gain on investments of
$9,484,126, a decrease in accumulated net investment loss of $9,689,943
and a decrease in capital paid-in of $205,817. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of October 31, 2000. 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 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 income (loss) per share in the
financial highlights excludes these adjustments.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of John Hancock Investment
Trust III -- John Hancock Large Cap Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the John Hancock Large Cap
Growth Fund (the "Fund"), a series of John Hancock Investment Trust III,
as of October 31, 2000, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of October 31, 2000, by correspondence with the custodian and brokers,
or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the John Hancock Large Cap Growth Fund, a series
of John Hancock Investment Trust III, at October 31, 2000, the results
of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United
States of America.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund during its fiscal year
ended October 31, 2000.
The Fund has designated distributions to shareholders of $84,605,033 as
capital gain dividends.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January 2001. This will reflect the tax character of all
distributions for the calendar year 2000.
NOTES
John Hancock Funds -- Large Cap Growth Fund
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
Large Cap Growth Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
2000A 10/00
12/00
The latest report from your
Fund's management team
ANNUAL REPORT
Mid Cap
Growth Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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 02110CEO CORNER
DEAR FELLOW SHAREHOLDERS:
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
[A 2" x 3" photo bottom middle of page of John Hancock Mid Cap Growth
Fund. Caption below reads "Barbara Friedman."]
John Hancock
Mid Cap Growth Fund
Mid-cap stocks remain in sweet spot of growth
Mid-cap growth stocks turned in strong results for the year ended
October 31, 2000, with the Russell Midcap Growth Index returning 38.67%
compared with 6.08% for the larger-cap Standard & Poor's 500 Index.
Mid-size companies benefited from being able to grow their businesses
organically -- either by selling more existing products or developing
new ones. Many also focused on particular niches -- such as fiber-optics
systems -- that are growing faster than the overall economy. Most of the
sector's gains, however, came early in the period as technology stocks
drove the market to new heights. This run ended in mid-March, as
investors sold technology and telecommunications shares and moved into
less expensive and more defensive sectors like health care. Despite a
broader market and stable interest rates over the summer, the market
remained volatile. Rising energy prices and slower profit growth put
added pressure on mid-cap stocks in the fall.
Performance review
John Hancock Mid Cap Growth Fund's Class A, Class B and Class C shares
returned 33.26%, 32.30% and 32.32%, respectively, at net asset value,
for the year ended October 31, 2000. By comparison, the average
multi-cap growth fund returned 34.42% during the same period, according
to Lipper, Inc.1 Keep in mind that your net asset value return will
differ from these performance numbers 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 long-term performance information.
"Most of the
sector's
gains, how-
ever, came
early in the
period..."
The Fund benefited from its disciplined focus on mid-cap companies --
those with market capitalizations between $1 billion and $12 billion --
and its heavy stake in technology stocks early in the year. The Fund's
lower-than-average investment in health care last spring and a
higher-than-average stake in telecommunications during the second half
of the period kept us from further gains.
[Table at top left-hand column entitled "Top Five Stock Holdings." The
first listing is Palm 2.5%, the second is PE Corp.-PE Biosystems Group
2.0%, the third McLeodUSA 2.0%, the fourth Waters 1.9% and the fifth
Brocade Communications Systems 1.9%. A note below the table reads "As a
percentage of net assets on October 31, 2000."]
"Many of the
health-care
names we
bought last
spring helped
perfor-
mance."
Technology bright spots
Most of the Fund's performance came from technology names, especially in
the computer and electronics industries. Among the top performers were
i2 Technologies, a leader in inventory and production management
software, as well as VERITAS Software and Network Appliance, companies
that provide storage capabilities. Thanks to increased demand for their
products, each of these stocks returned over 200% for the year. Many
electronics companies benefited from the cable upgrade that is in full
swing. In particular, the Fund did well owning Oak Industries, a
supplier of components for the cable, TV, wireless and fiber-optics
markets. It was bought out by Corning, the leading maker of fiber for
fiber-optics networks. We took profits in both Corning and Broadcom, a
company that manufactures integrated circuits for fiber-optics networks,
because they had outgrown the mid-cap category. In Broadcom's place, we
bought Applied Micro Circuits, a similar type of company that also
boosted performance. Finally, contract manufacturers like Jabil Circuit,
Sanmina and Flextronics International did well as customers like Nortel
Networks experienced strong demand and continued to outsource
production.
[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 Network Appliance followed by an up arrow with the phrase "Exploding
demand for storage systems." The second listing is Waters followed by
an up arrow with phrase "Push to map human genome and study proteins." The
third listing is Radio One followed by a down arrow with the phrase
"Anticipated slowdown in ad spending." A note below the table reads "See
'Schedule of Investments,' Investment holdings are subject to change."]
Health-care and energy winners
Many of the health-care names we bought last spring helped performance.
Biotechnology companies in particular benefited from the recent push to
map the human genome and study human proteins. Top performers were
Waters Corp. and PE Corp.-PE Biosystems Group, companies that design and
produce high-precision, analytic equipment for biotech companies. In the
energy sector, we owned stocks like R&B Falcon, a contract driller, as
well as equipment and oil service stocks like BJ Services and Baker
Hughes, all of which appreciated as exploration and production spending
increased.
Communications stocks disappoint
Throughout the year, we maintained a higher-than-average stake in
communications services companies, especially competitive local exchange
carriers (or CLECs) that are going up against the established telephone
service providers. By the fall, these stocks had fallen more than 50%
from their earlier highs due to investors' concerns that the companies
would be denied the needed capital to build out their systems. In fact,
the stronger companies remain fully funded for their current growth
plans. Plus, revenues, access lines, gross margins and other measures
were stronger than ever. We took the opportunity to increase our
investments in companies like McLeodUSA and XO Communications (formerly
NEXTLINK). We also boosted our stake in Aeroflex, a company that
provides the test equipment used in building out fiber-optics networks.
At the same time, we sold secondary names -- like NorthPoint
Communications -- which will most likely take longer to come back.
[Bar chart at top of left hand column with the heading "Fund
Performance." Under the heading is a note that reads "For the year ended
October 31, 2000." The chart is scaled in increments of 10% with 0% at
the bottom and 40% at the top. The first bar represents the 33.26% total
return for John Hancock Mid Cap Growth Fund Class A. The second bar
represents the 32.30% total return for John Hancock Mid Cap Growth Fund
Class B. The third bar represents the 32.32% total return for John
Hancock Mid Cap Growth Fund Class C. The fourth bar represents the
34.42% total return for Average multi-cap growth 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 multi-cap
growth fund is tracked by Lipper, Inc.1 See the following two pages for
historical performance information."]
Guarded optimism
Both U.S. economic growth and profit growth rates are showing signs of
deceleration from unsustainably high levels to historically more normal
levels. While this has caused stock prices to tumble in recent months,
we believe it has also created a great buying opportunity. Our
expectation is that many sectors will participate in the market's gains
going forward. But within each sector there will also be more distinct
winners and losers. With this in mind, we recently repositioned the Fund
to focus on the strongest mid-cap companies in each sector. We also
readjusted our sector weightings to prepare for slower growth in the
economy. In particular, we lightened up on technology, where we expect
spending to decelerate. Among the names we sold were semiconductor
equipment companies like Teradyne and Lam Research, which could see a
slowdown in demand. We kept a sizable stake in the technology sector,
however, because we expect technology spending to still outpace the
growth rate of the overall economy. We focused our investments on
businesses with strong forecast demand, including Palm, a leader in the
personal digital assistant market, and Brocade Communications Systems, a
manufacturer of switches for the fast-growing storage area.
"Growth
prospects
remain
strong in
the mid-cap
market..."
In the energy area, we began trimming positions like BJ Services and
Baker Hughes as oil service stocks neared what we believe are full
valuations. We also boosted our stake in financial stocks like Intuit
and USA Education, which we expect will benefit from flat or lower
interest rates. Growth prospects remain strong in the mid-cap market,
and that bodes well for the Fund.
------------------------------------------------------------------------
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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 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 October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------ ------- ---------
Cumulative Total Returns 26.56% 139.64% 162.66%
Average Annual Total Returns 26.56% 19.10% 14.80%
CLASS B
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (11/1/93)
------ ------- ---------
Cumulative Total Returns 27.30% 141.60% 163.38%
Average Annual Total Returns 27.30% 19.29% 14.84%
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ ---------
Cumulative Total Returns 30.04% 60.12%
Average Annual Total Returns 30.04% 21.51%
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 result 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 Russell Midcap Growth Index and is equal to $36,616 as of
October 31, 2000. The second line represents the Standard & Poor's 500
Index and is equal to $34,999 as of October 31, 2000. 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 $27,657 as of October 31, 2000. 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
$26,274 as of October 31, 2000.
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 three lines. The first line
represents the Russell Midcap Growth Index and is equal to $36,616 as of
October 31, 2000. The second line represents the Standard & Poor's 500
Index and is equal to $34,999 as of October 31, 2000. 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 $26,338 as of October 31, 2000.
Line chart with the heading John Hancock Mid Cap Growth Fund Class C*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are four lines. The first line
represents the Russell Midcap Growth Index and is equal to $17,557 as of
October 31, 2000. The second 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 $16,172 as of
October 31, 2000. The third 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 $16,010 as of October 31, 2000. The
fourth line represents the Standard & Poor's 500 Index and is equal to
$13,509 as of October 31, 2000.
*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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $307,923,533) $415,730,855
Joint repurchase agreement (cost -
$7,487,000) 7,487,000
Corporate savings account 823
-----------------
423,218,678
Receivable for investments sold 8,520,428
Receivable for shares sold 85,339
Dividends receivable 33,112
Interest receivable 1,370
Other assets 34,604
-----------------
Total Assets 431,893,531
-----------------
Liabilities:
Payable for investments purchased 8,846,495
Payable for shares repurchased 140,421
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 424,893
Accounts payable and accrued expenses 157,975
-----------------
Total Liabilities 9,569,784
-----------------
Net Assets:
Capital paid-in 294,125,343
Accumulated net realized gain on
investments sold 20,408,696
Net unrealized appreciation of
investments 107,807,322
Accumulated net investment loss (17,614)
-----------------
Net Assets $422,323,747
=================
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 - $176,352,413/11,002,619 $16.03
==============================================================
Class B - $240,762,887/15,962,576 $15.08
==============================================================
Class C - $5,208,447/345,559 $15.07
==============================================================
Maximum Offering Price Per Share
Class A* - (16.03/95%) $16.87
==============================================================
Class C - (15.07/99%) $15.22
==============================================================
* 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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign witholding
tax of $3,683) $541,621
Interest 544,171
Income on securities loaned 380,539
-----------------
1,466,331
-----------------
Expenses:
Investment management fee - Note B 3,143,893
Distribution and service fee - Note B
Class A 491,297
Class B 2,268,789
Class C 23,421
Transfer agent fee - Note B 1,040,030
Custodian fee 89,749
Registration and filing fees 88,628
Accounting and legal services fee - Note B 74,428
Printing 33,823
Auditing fee 28,200
Trustees' fees 19,616
Miscellaneous 19,453
Legal fees 3,482
Interest expense 1,192
-----------------
Total Expenses 7,326,001
-----------------
Net Investment Loss (5,859,670)
-----------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 38,277,590
Change in net unrealized appreciation
of investments 46,416,551
-----------------
Net Realized and Unrealized Gain on
Investments 84,694,141
-----------------
Net Increase in Net Assets Resulting
from Operations $78,834,471
=================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
-------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
<S> <C> <C>
From Operations:
Net investment loss ($3,587,423) ($5,859,670)
Net realized gain on investments
sold 30,387,309 38,277,590
Change in net unrealized
appreciation (depreciation) of
investments 55,591,895 46,416,551
----------------- -----------------
Net Increase in Net Assets
Resulting from Operations 82,391,781 78,834,471
----------------- -----------------
Distributions to Shareholders:
Distributions from net realized gain
on investments sold
Class A - (none and $0.8819 per
share, respectively) -- (7,725,298)
Class B - (none and $0.8819 per
share, respectively) -- (10,531,936)
Class C - (none and $0.8819 per
share, respectively) -- (30,130)
----------------- -----------------
Total Distributions to
Shareholders -- (18,287,364)
----------------- -----------------
From Fund Share Transactions - Net: * (59,644,150) 103,602,298
----------------- -----------------
Net Assets:
Beginning of period 235,426,711 258,174,342
----------------- -----------------
End of period (including
accumulated net investment loss
of $16,330 and $17,614,
respectively) $258,174,342 $422,323,747
================= =================
The Statement of Changes in Net Assets shows how the value of the Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, and any
increase or decrease in money shareholders invested in the Fund. The
footnote illustrates the number of Fund shares sold, reinvested and
redeemed 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,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
CLASS A
Shares sold 4,311,988 $44,751,953 7,007,167 $113,792,310
Shares reinvested -- -- 559,925 7,234,539
----------------- ----------------- ----------------- -----------------
4,311,988 44,751,953 7,567,092 121,026,849
Less shares repurchased (6,689,665) (69,584,697) (5,290,216) (84,452,496)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (2,377,677) ($24,832,744) 2,276,876 $36,574,353
================= ================= ================= =================
CLASS B
Shares sold 1,928,686 $20,530,351 6,140,752 $96,363,708
Shares reinvested -- -- 792,521 9,700,479
----------------- ----------------- ----------------- -----------------
1,928,686 20,530,351 6,933,273 106,064,187
Less shares repurchased (5,386,043) (55,460,249) (2,907,340) (44,027,463)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (3,457,357) ($34,929,898) 4,025,933 $62,036,724
================= ================= ================= =================
CLASS C
Shares sold 24,769 $256,801 345,301 $5,336,113
Shares reinvested -- -- 1,965 24,049
----------------- ----------------- ----------------- -----------------
24,769 256,801 347,266 5,360,162
Less shares repurchased (13,684) (138,309) (24,310) (368,941)
----------------- ----------------- ----------------- -----------------
Net increase 11,085 $118,492 322,956 $4,991,221
================= ================= ================= =================
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,
-------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $9.32 $10.92 $11.40 $9.11 $12.85
------------- ------------- ------------- ------------- -------------
Net Investment Loss (1) (0.11) (0.06) (0.09) (0.12) (0.17)
Net Realized and Unrealized
Gain (Loss) on Investments 3.34 1.00 (0.89) 3.86 4.23
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 3.23 0.94 (0.98) 3.74 4.06
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold (1.63) (0.46) (1.31) -- (0.88)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.92 $11.40 $9.11 $12.85 $16.03
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (2) 36.15% 8.79% (9.40%) 41.05% 33.26%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $156,578 $141,997 $101,138 $112,082 $176,352
Ratio of Expenses to Average
Net Assets 1.59% 1.59% 1.59% 1.60% 1.46%
Ratio of Net Investment Loss
to Average Net Assets (1.00%) (0.57%) (0.86%) (1.14%) (1.08%)
Portfolio Turnover Rate 240% 317% 168% 153% 146%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $9.19 $10.67 $11.03 $8.72 $12.22
------------- ------------- ------------- ------------- -------------
Net Investment Loss (1) (0.18) (0.13) (0.15) (0.18) (0.27)
Net Realized and Unrealized
Gain (Loss) on Investments 3.29 0.95 (0.85) 3.68 4.01
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 3.11 0.82 (1.00) 3.50 3.74
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold (1.63) (0.46) (1.31) -- (0.88)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.67 $11.03 $8.72 $12.22 $15.08
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (2) 35.34% 7.84% (9.97%) 40.14% 32.30%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $238,901 $204,812 $134,188 $145,816 $240,763
Ratio of Expenses to Average
Net Assets 2.29% 2.28% 2.27% 2.23% 2.16%
Ratio of Net Investment Loss
to Average Net Assets (1.70%) (1.25%) (1.54%) (1.77%) (1.78%)
Portfolio Turnover Rate 240% 317% 168% 153% 146%
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income,
gains (losses), distributions and total investment return of each class.
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.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -------------------------
1998(7) 1999 2000
------------- ---------- ----------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $9.99 $8.72 $12.21
------------- ---------- ----------
Net Investment Loss(1) (0.06) (0.19) (0.27)
Net Realized and Unrealized
Gain (Loss) on Investments (1.21) 3.68 4.01
------------- ---------- ----------
Total From Investment
Operations (1.27) 3.49 3.74
------------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold -- -- (0.88)
------------- ---------- ----------
Net Asset Value, End of
Period $8.72 $12.21 $15.07
============= ========== ==========
Total Investment Return at
Net Asset Value(2) (12.71%)(4) 40.02% 32.32%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $100 $276 $5,208
Ratio of Expenses to Average
Net Assets 2.29%(5) 2.30% 2.16%
Ratio of Net Investment Loss
to Average Net Assets (1.66%)(5) (1.82%) (1.80%)
Portfolio Turnover Rate 168% 153% 146%
(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) Class C shares began operations on June 1, 1998.
(4) Not annualized.
(5) Annualized.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Mid Cap Growth Fund on October 31, 2000. It's divided into two
main categories: common stocks and short-term investments. The common
stocks are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ---------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Banks - United States (3.01%)
Fifth Third Bancorp 47,350 $2,432,606
Mellon Financial Corp. 103,542 4,995,901
Northern Trust Corp. 61,750 5,271,906
------------
12,700,413
------------
Broker Services (0.88%)
Bear Stearns Cos., Inc. 24,596 1,491,132
Lehman Brothers Holdings, Inc. 34,614 2,232,603
------------
3,723,735
------------
Business Services (0.70%)
Commerce One, Inc. 46,150 2,962,253
------------
Computers (21.92%)
America Online Latin America, Inc. (Class A)* 180,050 1,198,467
Ariba, Inc.* 53,250 6,729,469
Art Technology Group, Inc.* 53,100 3,332,025
Brocade Communications Systems, Inc.* 34,600 7,867,175
CacheFlow, Inc.* 27,150 2,932,200
DST Systems, Inc.* 49,400 3,044,275
EMC Corp.* 26,331 2,345,105
Exodus Communications, Inc.* 52,600 1,765,387
Fiserv, Inc.* 44,900 2,354,444
i2 Technologies, Inc.* 39,100 6,647,000
Interwoven, Inc.* 20,350 2,050,263
Intuit, Inc.* 74,650 4,586,309
McDATA Corp. (Class B)* 1,290 107,534
Mercury Interactive Corp.* 37,100 4,118,100
Network Appliance, Inc.* 48,800 5,807,200
Palm, Inc.* 197,300 10,567,881
Phone.com, Inc.* 25,300 2,341,831
Rational Software Corp.* 106,200 6,338,813
Redback Networks, Inc.* 28,000 2,980,250
Siebel Systems, Inc.* 39,600 4,155,525
StorageNetworks, Inc.* 1,130 71,684
SunGard Data Systems Inc.* 113,210 5,787,861
TIBCO Software, Inc.* 21,050 1,326,150
VERITAS Software Corp.* 29,387 4,144,025
------------
92,598,973
------------
Electronics (19.09%)
Aeroflex, Inc.* 126,912 7,551,264
Alpha Industries, Inc.* 33,850 1,349,769
Amphenol Corp. (Class A)* 103,043 6,620,513
Analog Devices, Inc.* 45,400 2,951,000
Applied Micro Circuits Corp.* 60,540 4,627,526
ASM Lithography Holding N.V.* (Netherlands) 45,300 1,259,906
Flextronics International Ltd.* (Singapore) 149,600 5,684,800
Inrange Technologies Corp. (Class B)* 11,600 424,850
Jabil Circuit, Inc.* 106,893 6,099,582
Linear Technology Corp. 39,500 2,550,219
Molex, Inc. 36,950 1,995,300
Novellus Systems, Inc.* 60,750 2,486,953
PE Corp.-PE Biosystems Group 73,450 8,593,650
QLogic Corp.* 42,450 4,107,038
Sanmina Corp.* 40,350 4,612,509
Tektronix, Inc. 71,400 5,087,250
Vitesse Semiconductor Corp.* 40,750 2,849,953
Waters Corp.* 112,900 8,192,306
Xilinx, Inc.* 49,540 3,588,554
------------
80,632,942
------------
Energy (1.13%)
Calpine Corp.* 60,515 4,776,903
------------
Fiber Optics (2.01%)
SDL, Inc.* 18,150 4,705,388
Sycamore Networks, Inc.* 59,700 3,776,025
------------
8,481,413
------------
Finance (3.36%)
Concord EFS, Inc.* 126,250 5,215,703
Golden West Financial Corp. 57,735 3,236,768
USA Education, Inc. 102,432 5,723,388
------------
14,175,859
------------
Insurance (2.86%)
AFLAC, Inc. 86,922 6,350,739
Ambac Financial Group, Inc. 71,597 5,714,336
------------
12,065,075
------------
Media (4.36%)
Clear Channel Communications, Inc.* 104,868 6,298,634
Hispanic Broadcasting Corp.* 97,170 3,036,563
Reader's Digest Association, Inc. (Class A) 109,173 4,005,284
Scripps (E.W.) Co. (The) (Class A) 46,420 2,712,669
Univision Communications, Inc. (Class A)* 61,907 2,367,943
------------
18,421,093
------------
Medical (14.31%)
Alkermes, Inc.* 50,500 1,871,656
Allergan, Inc. 57,050 4,795,766
Alpharma, Inc. (Class A) 84,533 3,280,937
ALZA Corp.* 56,770 4,594,822
Cardinal Health, Inc. 47,517 4,502,236
Community Health Systems, Inc.* 124,625 3,512,867
Forest Laboratories, Inc.* 21,350 2,828,875
Health Management Associates, Inc. (Class A)* 120,185 2,381,165
Human Genome Sciences, Inc.* 29,600 2,616,362
Immunex Corp.* 78,850 3,356,053
McKesson HBOC, Inc. 152,240 4,272,235
MedImmune, Inc.* 61,050 3,991,144
Millennium Pharmaceuticals, Inc.* 89,700 6,508,856
Oxford Health Plans, Inc.* 147,400 4,974,750
QLT, Inc.* (Canada) 65,550 3,260,090
Stryker Corp. 78,375 3,693,422
------------
60,441,236
------------
Oil & Gas (5.20%)
Baker Hughes, Inc. 111,937 3,847,834
BJ Services Co.* 77,638 4,071,143
Cooper Cameron Corp.* 48,200 2,626,900
El Paso Energy Corp. 78,697 4,933,318
R&B Falcon Corp.* 150,396 3,759,900
Weatherford International, Inc.* 74,350 2,713,775
------------
21,952,870
------------
Retail (2.74%)
Bed Bath & Beyond, Inc.* 116,800 3,014,900
Intimate Brands, Inc. 116,309 2,776,877
RadioShack Corp. 53,726 3,203,413
Staples, Inc.* 180,700 2,574,975
------------
11,570,165
------------
Telecommunications (16.32%)
Allegiance Telecom, Inc.* 173,425 5,452,048
American Tower Corp. (Class A)* 133,236 5,454,349
COLT Telecom Group Plc, American Depositary
Receipts, (United Kingdom)* 11,645 1,521,128
Comverse Technology, Inc.* 67,900 7,587,825
Crown Castle International Corp.* 122,970 3,727,528
Dobson Communications Corp. (Class A)* 336,970 4,380,610
Global Crossing Ltd.* (Bermuda) 185,427 4,380,713
McLeodUSA, Inc. (Class A)* 434,620 8,366,435
Research in Motion Ltd.* (Canada) 31,270 3,127,000
Scientific-Atlanta, Inc. 96,463 6,601,687
Time Warner Telecom, Inc. (Class A)* 30,520 1,819,755
UnitedGlobalCom, Inc. (Class A)* 67,850 2,158,478
VoiceStream Wireless Corp.* 13,362 1,757,103
Western Wireless Corp. (Class A)* 113,250 5,379,375
XO Communications, Inc. (Class A)* 213,600 7,205,668
------------
68,919,702
------------
Utilities (0.55%)
Dynegy, Inc. (Class A) 32,753 1,516,873
TNPC, Inc.* 47,600 791,350
------------
2,308,223
------------
TOTAL COMMON STOCKS
(Cost $307,923,533) (98.44%) 415,730,855
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.77%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 7.125% thru 13.250%, due
05-15-14 thru 02-15-23) - Note A 6.56% $7,487 $7,487,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 823
------------
TOTAL SHORT-TERM INVESTMENTS (1.77%) 7,487,823
--------- ------------
TOTAL INVESTMENTS (100.21%) 423,218,678
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.21%) (894,931)
--------- ------------
TOTAL NET ASSETS (100.00%) $422,323,747
========= ============
* 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>
<TABLE>
<CAPTION>
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, 2000 assigned to country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
----------------------- ------------------
<S> <C>
Bermuda 1.04%
Canada 1.51
Netherlands 0.30
Singapore 1.34
United Kingdom 0.36
United States 95.66
-------
TOTAL INVESTMENTS 100.21%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Mid Cap Growth Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Mid Cap Growth Fund (the "Fund") is a diversified series of
John Hancock Investment Trust III (the "Trust"), an open-end management
investment company, registered under the Investment Company Act of 1940.
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.
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 large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 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
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determineed at the fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution and service fees, if any, are
calculated daily at the class level based on the appropriate net assets
of each class and the specific expense rate(s) applicable to each class.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative sizes of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The average daily loan balance during the
period for which loans were outstanding amounted to $1,392,000. The
weighted average interest rate was 7.00%. Interest expense includes $799
paid under the line of credit. There was no outstanding borrowing under
the line of credit on October 31, 2000.
SECURITIES LENDING The Fund may lend its securities to certain
quali-fied 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, 2000, the Fund loaned
securities having a market value of $22,988,097 collateralized by the
securities in the amount of $23,447,859.
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, 2000 the fund has $4,132,330 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 distribution will be made. The Fund's carryforwards expire
as follows: October 31, 2001 - $149,103; October 31, 2002 - $3,983,227.
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 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 dividends and 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.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.80% of the first $500,000,000 of the Fund's average daily net asset
value, (b) 0.75% of the next $500,000,000 and (c) 0.70% of the Fund's
average daily net asset value in excess of $1,000,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. 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 shares pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Accordingly, the Fund makes payments to JH Funds 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $345,001 with regard to sales of Class A shares. Of
this amount, $53,040 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $148,829 was paid as
sales commissions to unrelated broker-dealers and $143,132 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $25,374 with regard to sales of Class C shares. Of this
amount, $20,966 was paid as sales commissions to unrelated
broker-dealers and $4,408 was paid as sales commissions to sales
personnel of Signator Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 CDSCs are paid to
JH Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection with
the sale of Class B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $226,320 for Class B sales
and $1,608 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
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, 2000, aggregated $632,375,331 and
$556,018,452, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $315,987,838. Gross
unrealized appreciation and depreciation of investments aggregated
$124,445,653 and $17,215,636, respectively, resulting in net unrealized
appreciation of $107,230,017.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized gain on investments of
$16,991,847, a decrease in accumulated net investment loss of $5,858,386
and an increase in capital paid-in of $11,133,461. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary difference, as of October 31, 2000. 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 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 known as equalization. The calculation of net
investment income (loss) per share in the financial highlights excludes
these adjustments.
REPORT OF INDEPENDENT AUDITORS
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 (a series of John Hancock Investment Trust
III) at October 31, 2000, the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities owned at October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund paid during its taxable
year ended October 31, 2000.
The Fund has designated distributions to shareholders of $19,940,395 as
capital gain dividends.
With respect to the Fund's ordinary taxable income for the fiscal year
ended October 31, 2000, 4.47% of the distributions qualify for the
dividends-received deduction available to corporations.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January 2001. This will reflect the tax character of all
distributions for the calendar year 2000.
NOTES
John Hancock Funds -- Mid Cap Growth Fund
NOTES
John Hancock Funds -- Mid Cap Growth Fund
NOTES
John Hancock Funds -- Mid Cap Growth Fund
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
Mid Cap Growth Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
3900A 10/00
12/00
The latest report from your
Fund's management team
ANNUAL REPORT
International
Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISER
Indocam International Investment
90 Boulevard Pasteur
Paris, France 75015
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, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY MIREN ETCHEVERRY FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
International Fund
Overseas markets stumble in second half of the year
after a strong 1999
Overseas markets started the fiscal year on a high note last November,
with many stock markets buoyed by the strength of the "TMT" sectors --
technology, media and telecommunications. But the tide turned in March,
when TMT stocks worldwide began a dramatic plunge as fears grew that the
group was far too expensive in the face of a potential slowdown in
earnings growth. In a major reversal of fortunes, the more cyclical, old
economy stocks began to make a comeback as the new economy darlings fell
out of favor.
A number of factors continued to keep overseas markets volatile -- and
their results contained -- through the end of October. These included
rising oil prices, rising interest rates -- first in the U.S. and then
in Europe and elsewhere -- a slowdown in the U.S. economy, declines in
many of emerging Asia's currencies to 1998 levels and the continuing
drop in the value of the euro, which hurt U.S.-based investors.
Furthermore, the ongoing downturn in the tech-heavy NASDAQ Composite
Index in the U.S. generated similar volatility in Europe and Asia.
Overall, overseas markets, as measured by the Fund's benchmark, the MSCI
All Country World Free Ex-U.S. Index, lost ground, returning -2.07% for
the year ended October 31, 2000.
"A number of
factors
continued to
keep overseas
markets
volatile..."
Fund performance
For the year ended October 31, 2000, John Hancock International Fund's
Class A, Class B and Class C shares posted total returns of -10.15%,
-10.65% and -10.72% at net asset value, respectively. That compared
with the 2.69% return of the average international fund, according to
Lipper, Inc.1 Keep in mind that your net asset value return will be
different from the Fund's performance if you were not invested in the
Fund for the entire period and did not reinvest all distributions.
Historical performance information can be found on pages six and seven.
Our relative underperformance came mainly from our timing in the
volatile TMT sectors. Although overweight versus the MSCI index, we had
a lighter weighting than our peers when the tech group skyrocketed early
in the period. After boosting our TMT stake, we got hit by having an
overweighted position -- particularly in Japan and Europe -- as the
stocks came back down to earth in the tumultuous months of March and
April.
With such a dramatic about-face during the year, it's not surprising
that we had some of our best and worst performance from the tech and
telecom groups. Top contributors included Mannesman, which was acquired
by Vodafone; Sony and Nokia, whose stock came back to earth later in the
period on a disappointing earnings announcement that triggered another
telecom sell-off. Some on the downside were Vodafone, Hikari Tsushin and
British Telecommunications.
[Pie chart at top left hand column with heading "Portfolio
Diversification." The chart is divided into seven sections (from top to
left): Latin America 2%, Short-Term Investments & Other 4%, Canada 6%,
Pacific Rim ex-Japan 7%, United Kingdom & Ireland 17%, Japan 22% and
Continental Europe 42%. A note below the chart reads "As a percentage of
net assets on October 31, 2000."]
"We are tak-
ing a more
defensive
approach to
Japan in the
near term..."
Shift to defense
Given the increasingly volatile conditions and the potential for
economic slowdowns near term, we took some defensive steps. By the end
of October, our overall stakes in technology hardware, equipment and
telecom services companies were underweight versus the index. We pared
our basket of emerging-market countries, which are the most vulnerable
to slowing growth, and we cut the number of Fund holdings -- eliminating
mostly small positions. We also reduced some overweightings in sectors
and individual stocks. Regionally, we will keep our main focuses on
Canada, developed Europe and developed Asia. Aside from these broader
trends, individual stock selection becomes more important than ever. We
are looking for companies with solid fundamentals and earnings
visibility, and the best prospects for growth in a variety of market
conditions.
[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 Bombardier followed by an up arrow with the phrase "Strong earnings
results boost Canadian transport manufacturer." The second listing is
Samsung Electronics followed by a down arrow with phrase "Hit by
volatile semiconductor sector downturn." The third listing is British
Telecommunications followed by a down arrow with the phrase "Weak
management; disappointing earnings." A note below the table reads "See
'Schedule of Investments,' Investment holdings are subject to change."]
Japan: near-term caution
We are taking a more defensive approach to Japan in the near term,
since, for the moment, a rise in the number of bankruptcies and market
liquidity concerns are reminders that Japan's problems are not yet
solved. As a result, we reduced our position there to a market-neutral
22%. We did this primarily by paring tech and telecom names and moving
into sectors perceived as more defensive, including real estate, utility
and food and beverage companies. We also shifted some assets from larger
companies to the mid-cap range, since they are less affected by the
ongoing unwinding of cross-ownership positions among Japan's large
companies. Looking farther out, we still believe Japan's prospects will
improve, aided by the ongoing trend of corporate restructurings and as
positive signs emerge of firmer private-sector demand.
Europe
European telecom services companies were hit this year not only by the
downturn in NASDAQ, and numerous profit warnings, but also by fallout
from the higher-than-expected prices set at auction for licenses for the
next generation of wireless mobile technology. We reduced our telecom
stake, selling Deutsche Telecom and paring France Telecom. We stayed
with either the largest companies most able to absorb these costs, like
Vodafone, the largest telecommunications company in Europe, or those
that didn't participate in the auction, like Telefonica in Spain. Our
European exposure remains strongest in technology, media and software
companies, due to ongoing demand.
[Bar chart at top of left hand column with the heading "Fund
Performance." Under the heading is a note that reads "For the year ended
October 31, 2000." The chart is scaled in increments of 5% with -15% at
the bottom and 5% at the top. The first bar represents the -10.15% total
return for John Hancock International Fund Class A. The second bar
represents the -10.65% total return for John Hancock International Fund
Class B. The third bar represents the -10.72% total return for John
Hancock International Fund Class C. The fourth bar represents the 2.69
total return for Average International fund. A note below the chart
reads "Total returns for John Hancock International Fund are at net
asset value with all distributions reinvested. The average international
fund is tracked by Lipper, Inc. 1 See the following two pages for
historical performance information."]
Canada grows
Our stake in Canada grew over the year to 6% of the Fund, in part due to
the performance of transport company Bombardier. We also added positions
in several other companies that we believe have solid growth prospects.
These include asset manager Sun Life Financial Services of Canada, media
company Thomson Corp. and outsourcing company Celestica. Another top
holding, Nortel Networks, was strong until October, when its stock was
hit by the surprise announcement of slower-than-expected revenue growth.
"Our outlook
for the world
economy is
positive."
Going forward
Our outlook for the world economy is positive. We do not believe oil
prices will derail global economic growth, since we expect them to drop
by the end of the winter season. In Europe, while the euro and high oil
prices could have a short-term impact on the economy, our medium-range
outlook is better. We believe the euro stands to recover through a
combination of central bank support and more parity between U.S. and
European growth. What's more, with valuations even more reasonable
today, investors will soon be ready to return to equities there, keeping
more of an eye on fundamentals. Until the horizon becomes clearer in the
emerging markets, we will keep our posture defensive. In Japan, we
expect the moderate pickup in the economy to continue, but be partially
weighed down by ongoing restructuring efforts, along with high public
debt. In this environment, with very rapid rotations among global
sectors, individual stock picking remains key, and we will keep our
sights set on only high-quality companies with the ability to grow their
earnings.
-------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's 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 International Fund.
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
For Class A shares, total return figures include an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 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 October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEAR (1/3/94)
------ ------ ---------
Cumulative Total Returns (14.67%) 15.87% 12.05%
Average Annual Total Returns(1) (14.67%) 2.99% 1.68%
CLASS B
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEAR (1/3/94)
------ ------ ---------
Cumulative Total Returns (14.94%) 16.07% 12.55%
Average Annual Total Returns(1) (14.94%) 3.03% 1.75%
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ ---------
Cumulative Total Returns (12.49%) (0.14%)
Average Annual Total Returns(1) (12.49%) (0.06%)
Note to Performance
(1) Effective January 3, 1994, the Adviser has temporarily voluntarily
undertaken to limit the Fund's expenses, including the management fee
(but not including the transfer agent fee and 12b-1 fee) to 0.90%
of the Fund's daily net asset value. Without the limitations
of expenses, the average annual total returns for the one-year
period, five-year period and since inception would have been
(16.22%), 1.37% and (0.25%), respectively, for Class A shares and
(16.49%), 1.41% and (0.18%), respectively, for Class B shares. The
average annual total return for the one-year period and since inception
would have been (14.04%) and (1.79%), respectively, for Class C shares.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock International Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index, which measures the
performance of a broad range of developed and emerging stock markets
around the world. The index represents "free" securities that are traded
freely on equity exchanges around the world. It is not possible to
invest in an index. Past performance is not indicative of future
results.
Line chart with the heading John Hancock International Fund Class A,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$16,438 as of October 31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock International
Fund on January 3, 1994, before sales charge, and is equal to $11,799 as
of October 31, 2000. The third line represents the value of the same
hypothetical investment made in the John Hancock International Fund,
after sales charge, and is equal to $11,205 as of October 31, 2000.
Line chart with the heading John Hancock International Fund Class B*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$16,438 as of October 31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock International
Fund on January 3, 1994, before sales charge, and is equal to $11,255 as
of October 31, 2000.
Line chart with the heading John Hancock International Fund Class C*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$11,460 as of October 31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock International
Fund on June 1, 1998, before sales charge, and is equal to $10,082 as of
October 31, 2000. The third line represents the value of the same
hypothetical investment made in the John Hancock International Fund,
after sales charge, and is equal to $9,981 as of October 31, 2000.
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds -- 500 Index 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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks, units and
warrants (cost - $27,191,144) $27,575,669
Short-term investments
(cost - $3,087,649) - Note A 3,087,649
-----------------
30,663,318
Foreign currency, at value
(cost - $44,468) 43,047
Receivable for investments sold 301,180
Receivable for forward foreign currency
exchange contracts sold - Note A 3
Receivable for shares sold 211,035
Dividends receivable 31,362
Interest receivable 103
Other assets 12,951
-----------------
Total Assets 31,262,999
-----------------
Liabilities:
Payable for investments purchased 8,506
Payable for shares repurchased 2,940
Payable for securities on loan - Note A 2,523,649
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 1,018
Accounts payable and accrued expenses 115,502
-----------------
Total Liabilities 2,651,615
-----------------
Net Assets:
Capital paid-in 29,746,449
Accumulated net realized loss on
investments and foreign currency
transactions (1,426,481)
Net unrealized appreciation of
investments and foreign currency
transactions 382,304
Accumulated net investment loss (90,888)
-----------------
Net Assets $28,611,384
=================
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 - $15,495,268/1,639,009 $9.45
==============================================================
Class B - $11,909,843/1,318,068 $9.04
==============================================================
Class C - $1,206,273/133,350 $9.05
==============================================================
Maximum Offering Price Per Share
Class A* - ($9.45/95%) $9.95
==============================================================
Class C - ($9.05/99%) $9.14
==============================================================
* 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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $42,173) $260,952
Interest 86,313
Income on securities loaned 19,030
-----------------
366,295
-----------------
Expenses:
Investment management fee - Note B 252,090
Distribution and service fee - Note B
Class A 34,688
Class B 129,141
Class C 5,909
Custodian fee 258,182
Transfer agent fee - Note B 172,699
Registration and filing fees 40,811
Auditing fee 39,014
Printing 17,029
Accounting and legal services fee --
Note B 4,779
Legal fees 3,396
Miscellaneous 1,986
Trustees' fees 1,269
Interest expense 913
-----------------
Total Expenses 961,906
-----------------
Less Expense Reductions - Note B (392,491)
-----------------
Net Expenses 569,415
-----------------
Net Investment Loss (203,120)
-----------------
Realized and Unrealized Gain (Loss) on
Investments, Futures and
Foreign Currency Transactions:
Net realized loss on investments sold (1,241,956)
Net realized gain on financial futures
contracts 16,905
Net realized loss on foreign currency
transactions (114,890)
Change in net unrealized appreciation
(depreciation) of investments (2,413,731)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (1,398)
-----------------
Net Realized and Unrealized Loss on
Investments, Futures and
Foreign Currency Transactions (3,755,070)
-----------------
Net Decrease in Net Assets Resulting
from Operations ($3,958,190)
=================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($98,658) ($203,120)
Net realized gain (loss) on
investments sold, futures and
foreign currency transactions 1,232,968 (1,339,941)
Change in net unrealized
appreciation (depreciation) of
investments, futures and foreign
currency transactions 2,432,425 (2,415,129)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 3,566,735 (3,958,190)
----------------- -----------------
Distributions to Shareholders:
Distributions from net realized gain on
investments sold, futures and
foreign currency transactions
Class A - (none and $0.4521 per
share, respectively) -- (295,164)
Class B - (none and $0.4521 per
share, respectively) -- (409,639)
Class C - (none and $0.4521 per
share, respectively) -- (7,456)
----------------- -----------------
Total Distributions to
Shareholders -- (712,259)
----------------- -----------------
From Fund Share Transactions - Net: * (2,414,954) 16,270,661
----------------- -----------------
Net Assets:
Beginning of period 15,859,391 17,011,172
----------------- -----------------
End of period (including
accumulated net investment loss
of $139,640 and $90,888
respectively) $17,011,172 $28,611,384
================= =================
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 futures and
foreign currency gains and losses, distributions paid to shareholders,
and any increase or decrease in money shareholders invested in the Fund.
The footnote illustrates the number of Fund shares sold, reinvested and
redeemed during the last two periods, along with the corresponding
dollar value.
<CAPTION>
Statement of Changes in Net Assets (continued)
---------------------------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,992,880 $19,868,374 5,688,563 $61,833,499
Shares issued to shareholders in
reinvestment of distributions -- -- 24,777 272,550
----------------- ----------------- ----------------- -----------------
1,992,880 19,868,374 5,713,340 62,106,049
Less shares repurchased (2,012,650) (20,158,135) (4,748,871) (51,907,424)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (19,770) ($289,761) 964,469 $10,198,625
================= ================= ================= =================
CLASS B
Shares sold 679,532 $6,557,542 963,130 $10,656,322
Shares issued to shareholders in
reinvestment of distributions -- -- 30,269 320,249
----------------- ----------------- ----------------- -----------------
679,532 6,557,542 993,399 10,976,571
Less shares repurchased (922,491) (8,828,604) (569,523) (6,051,775)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (242,959) ($2,271,062) 423,876 $4,924,796
================= ================= ================= =================
CLASS C
Shares sold 16,886 $164,040 784,403 $7,784,613
Shares issued to shareholders in
reinvestment of distributions -- -- 704 7,456
----------------- ----------------- ----------------- -----------------
16,886 164,040 785,107 7,792,069
Less shares repurchased (1,879) (18,171) (669,480) (6,644,829)
----------------- ----------------- ----------------- -----------------
Net increase 15,007 $145,869 115,627 $1,147,240
================= ================= ================= =================
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,
-------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.14 $8.70 $8.41 $8.81 $10.95
------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)(1) 0.06 (0.02) --(2) (0.02) (0.04)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions 0.50 (0.26) 0.47 2.16 (1.01)
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.56 (0.28) 0.47 2.14 (1.05)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income -- (0.01) -- -- --
Distributions from Net
Realized Gain on
Investments Sold, Futures
and Foreign Currency
Transactions -- -- (0.07) -- (0.45)
------------- ------------- ------------- ------------- -------------
Total Distributions -- (0.01) (0.07) -- (0.45)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $8.70 $8.41 $8.81 $10.95 $9.45
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 6.88% (3.22%) 5.61% 24.29% (10.15%)
Total Adjusted Investment
Return at Net Asset
Value(3,4) 5.33% (4.52%) 3.75% 22.44% (10.71%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $5,098 $4,965 $6,116 $7,388 $15,495
Ratio of Expenses to Average
Net Assets 1.75% 1.73% 1.79% 1.96% 1.88%
Ratio of Adjusted Expenses
to Average Net Assets(5) 3.30% 3.03% 3.65% 3.81% 3.44%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.68% (0.16%) 0.04% (0.20%) (0.43%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(5) (0.87%) (1.46%) (1.82%) (2.05%) (1.99%)
Portfolio Turnover Rate 83% 169% 129% 113% 163%
Fee Reduction Per Share(1) $0.14 $0.12 $0.17 $0.18 $0.16
The Financial Highlights summarizes the impact of the following factors
on a single share for the period indi cated: net investment income,
gains (losses), dividends and total investment return of each class. It
shows how the Fund's net asset value for a share has changed since the
end of the previous period. Additionally, important rela tionships
between some items presented in the financial statements are expressed
in ratio form.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.05 $8.55 $8.22 $8.55 $10.55
------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)(1) --(2) (0.08) (0.06) (0.09) (0.12)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions 0.50 (0.25) 0.46 2.09 (0.94)
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.50 (0.33) 0.40 2.00 (1.06)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold, Futures
and Foreign Currency
Transactions -- -- (0.07) -- (0.45)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $8.55 $8.22 $8.55 $10.55 $9.04
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 6.21% (3.86%) 4.88% 23.39% (10.65%)
Total Adjusted Investment
Return at Net Asset
Value(3,4) 4.66% (5.16%) 3.02% 21.54% (12.21%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $8,175 $8,713 $9,720 $9,436 $11,910
Ratio of Expenses to Average
Net Assets 2.45% 2.43% 2.49% 2.63% 2.57%
Ratio of Adjusted Expenses
to Average Net Assets(5) 4.00% 3.73% 4.35% 4.48% 4.13%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.02% (0.88%) (0.66%) (0.91%) (1.13%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(5) (1.53%) (2.18%) (2.52%) (2.76%) (2.69%)
Portfolio Turnover Rate 83% 169% 129% 113% 163%
Fee Reduction Per Share(1) $0.14 $0.12 $0.17 $0.18 $0.16
<CAPTION>
Financial Highlights (continued)
-------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
PERIOD ENDED -------------------------------
OCTOBER 31, 1998(6) 1999 2000
---------------- ------------- -------------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $9.36 $8.55 $10.57
------------- ------------- -------------
Net Investment Loss(1) (0.03) (0.10) (0.11)
Net Realized and Unrealized
Gain (Loss) on Investments,
Futures and Foreign
Currency Transactions (0.78) 2.12 (0.96)
------------- ------------- -------------
Total from Investment Operations (0.81) 2.02 (1.07)
------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on Investments
Sold, Futures and Foreign
Currency Transactions -- -- (0.45)
------------- ------------- -------------
Net Asset Value, End of
Period $8.55 $10.57 $9.05
============= ============= =============
Total Investment Return at
Net Asset Value(3) (8.65%)(7) 23.63% (10.72%)
Total Adjusted Investment
Return at Net Asset
Value(3,4) (9.43%)(7) 21.78% (12.28%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $23 $187 $1,206
Ratio of Expenses to Average
Net Assets 2.29%(8) 2.66% 2.57%
Ratio of Adjusted Expenses
to Average Net Assets(5) 4.15%(8) 4.51% 4.13%
Ratio of Net Investment Loss
to Average Net Assets (1.27%)(8) (1.04%) (1.07%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(5) (3.13%)(8) (2.89%) (2.63%)
Portfolio Turnover Rate 129% 113% 163%
Fee Reduction Per Share(1) $0.07 $0.18 $0.16
(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Assumes dividend reinvestment and does not reflect the effect of
sales charges.
(4) An estimated total return calculation that does not take into
consideration management fee reductions and other expense subsidies by
the Adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Class C shares began operations on June 1, 1998.
(7) Not annualized.
(8) Annualized.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
-----------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the International Fund on October 31, 2000. It's divided into five
main categories: common stocks, preferred stocks, units, warrants and
short-term investments. Common and preferred stocks, warrants and units
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
Argentina (0.05%)
Perez Companc SA (Finance) 8,300 $11,954
------------
Australia (1.97%)
AMP Ltd. (Insurance) 21 189
Broken Hill Proprietary Co., Ltd. (Diversified
Operations) 13,068 126,670
FH Faulding & Co., Ltd. (Medical) 3,111 16,448
Lend Lease Corp., Ltd. (Real Estate Operations) 3,802 44,510
National Australia Bank Ltd. (Banks - Foreign) 1,886 26,200
News Corp., Ltd. (The) (Media) 12,324 128,913
OneSteel Ltd.* (Steel) 3,267 1,558
Publishing & Broadcasting Ltd. (Media) 4,081 27,860
ResMed, Inc.* (Medical) 3,700 9,935
Securenet Ltd.* (Computers) 17,603 76,190
Telstra Corp., Ltd. (Telecommunications) 5,594 18,256
Westpac Banking Corp., Ltd. (Banks - Foreign) 459 3,134
Woodside Petroleum Ltd. (Oil & Gas) 11,338 82,866
------------
562,729
------------
Belgium (0.77%)
Fortis (B) (Insurance) 4,000 122,538
Fortis (B)* (Insurance) 1,134 10
UCB SA (Medical) 2,700 96,231
------------
218,779
------------
Brazil (0.93%)
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar, American Depository Receipts (ADR)
(Retail) 2,000 71,250
Companhia Paranaense de Energia-Copel (ADR)
(Utilities) 6,500 58,906
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) 1,160 84,970
Uniao de Bancos Brasileiros SA, Global
Depository Receipts (GDR) (Finance) 2,000 50,500
------------
265,626
------------
Canada (5.92%)
BCE, Inc. (Telecommunications) 2,421 64,983
Bombardier, Inc. (Diversified Operations) 35,551 557,412
Celestica, Inc.* (Electronics) 2,000 142,455
Nortel Networks Corp. (Telecommunications) 11,941 540,179
Sun Life Financial Services of Canada
(Insurance) 9,701 200,053
Thomson Corp. (Computers) 3,242 130,529
Weston (George) Ltd. (Food) 1,184 58,832
------------
1,694,443
------------
Chile (0.11%)
Empresa Nacional de Electricidad SA* (ADR)
(Utilities) 3,000 31,500
------------
China (0.16%)
Shandong International Power Development Co.,
Ltd. (Utilities) 158,000 24,716
Shanghai Industrial Holdings Ltd. (Diversified
Operations) 11,000 20,733
------------
45,449
------------
Denmark (0.51%)
Vestas Wind Systems AS (Utilities) 2,700 146,246
------------
Finland (1.11%)
Nokia Oyj (Telecommunications) 7,700 316,844
------------
France (11.91%)
Accor SA (Leisure) 2,300 93,100
Alcatel SA (Telecommunications) 6,000 366,086
Bouygues SA (Building) 2,300 117,107
Cap Gemini SA (Computers) 1,300 207,398
Carrefour SA (Retail) 4,050 271,853
Dassault Systemes SA (Computers) 1,000 76,247
Etablissements Economiques du Casino
Guichard-Perrachon SA (Retail) 1,300 113,517
France Telecom SA (Telecommunications) 950 99,320
Pinault-Printemps-Redoute SA (Retail) 1,683 300,349
PSA Peugeot Citroen SA (Automobile/Trucks) 408 75,132
Publicis Groupe SA (Advertising) 4,000 130,854
Renault SA (Automobile/Trucks) 2,700 134,265
Sagem SA (Electronics) 520 95,315
Schneider Electric SA (Machinery) 1,420 92,485
Societe Generale (Banks - Foreign) 1,700 96,511
Sodexho Alliance SA (Business Services - Misc.) 650 101,768
STMicroelectronics NV (Electronics) 4,200 211,887
Thomson Multimedia SA* (Electronics) 2,150 98,523
Total Fina Elf SA (Oil & Gas) 3,000 429,222
Vivendi SA (Diversified Operations) 3,589 257,965
Wanadoo SA* (Computers) 3,000 38,187
------------
3,407,091
------------
Germany (4.33%)
Allianz AG (Insurance) 1,075 364,488
BASF AG (Chemicals) 2,350 92,133
Bayerische Motoren Werke AG (Automobile/Trucks) 2 66
Deutsche Bank AG (Banks - Foreign) 2,020 165,383
Dresdner Bank AG (Banks - Foreign) 1,400 58,333
Metro AG (Retail) 900 36,278
SAP AG (Computers) 1,100 180,065
Siemens AG (Diversified Operations) 1,850 235,565
Volkswagen AG (Automobile/Trucks) 2,125 106,159
------------
1,238,470
------------
Greece (0.41%)
Alpha Credit Bank SA (Banks - Foreign) 900 33,264
Hellenic Bottling Co. SA (Beverages) 2,600 35,541
Hellenic Telecommunications Organization SA
(ADR) (Telecommunications) 5,400 47,250
------------
116,055
------------
Hong Kong (1.86%)
Aeon Credit Service Co., Ltd. (Finance) 67,200 22,403
ASM Pacific Technology Ltd. (Electronics) 8,500 16,893
Cathay Pacific Airways Ltd. (Transport) 7,000 12,700
Cheung Kong Holdings Ltd. (Real Estate
Operations) 7,000 77,414
China Everbright Ltd. (Finance) 32,000 28,516
China Resources Enterprise Ltd. (Diversified
Operations) 18,000 20,426
China Unicom Ltd.* (Telecommunications) 18,000 36,120
Citic Pacific Ltd. (Diversified Operations) 8,000 32,107
Giordano International Ltd. (Retail) 8,000 4,693
Guoco Group Ltd. (Finance) 10,000 25,003
Hang Seng Bank Ltd. (Banks - Foreign) 2,600 30,671
Hongkong Electric Holdings Ltd. (Utilities) 3,500 11,556
HSBC Holdings Plc (Banks - Foreign) 5,199 72,329
Hutchison Whampoa Ltd. (Diversified Operations) 7,000 87,062
Sun Hung Kai Properties, Ltd. (Real Estate
Operations) 2,000 16,412
Swire Pacific Ltd. (Diversified Operations) 5,000 30,837
Tan Chong International Ltd. (Diversified
Operations) 45,000 5,597
------------
530,739
------------
Hungary (0.09%)
Magyar Tavkozlesi Rt (Telecommunications) 6,000 26,687
------------
India (0.40%)
ICICI Ltd. (ADR) (Finance) 3,200 30,200
Infosys Technologies Ltd. (ADR) (Computers) 190 26,125
Ranbaxy Laboratories Ltd. (ADR) (Medical) 2,000 34,000
Videsh Sanchar Nigam Ltd. (ADR)
(Telecommunications) 3,300 24,338
------------
114,663
------------
Indonesia (0.07%)
PT Telekomunikasi Indonesia (ADR)
(Telecommunications) 4,000 21,000
------------
Ireland (0.65%)
CRH Plc (Building) 12,150 186,620
------------
Israel (0.24%)
Bank Hapoalim Ltd. (Banks - Foreign) 19,000 48,062
Partner Communications Co., Ltd.* (ADR)
(Telecommunications) 3,300 19,800
------------
67,862
------------
Italy (4.60%)
Assicurazioni Generali SpA (Insurance) 10,000 328,833
ENI SpA (Oil & Gas) 25,400 137,517
Gruppo Editoriale L'Espresso SpA (Media) 7,450 81,492
Riunione Adriatica di Sicurta SpA (Insurance) 10,578 138,866
San Paolo-IMI SpA (Banks - Foreign) 7,900 128,045
Telecom Italia Mobile SpA (Telecommunications) 24,000 204,071
Telecom Italia SpA (Telecommunications) 13,900 161,009
UniCredito Italiano SpA (Banks - Foreign) 26,830 136,608
------------
1,316,441
------------
Japan (22.34%)
Aiful Corp. (Finance) 1,000 78,816
Amano Corp. (Manufacturing) 6,000 56,857
Asahi Glass Co., Ltd. (Glass Products) 10,000 102,644
Chubu Electric Power Co., Inc. (Utilities) 3,000 49,489
Daibiru Corp. (Real Estate Operations) 11,000 84,177
Daito Trust Construction Co., Ltd. (Real Estate
Operations) 8,000 134,904
Fuji Television Network, Inc. (Media) 10 109,976
Fujitsu Ltd. (Computers) 7,000 124,712
Inax Corp. (Building) 13,000 62,072
Katokichi Co., Ltd. (Food) 7,000 202,080
Kirin Brewery Co., Ltd. (Beverages) 21,000 219,017
Kurita Water Industries Ltd. (Pollution Control) 2,000 32,534
Kyocera Corp. (Electronics) 1,000 130,138
Maeda Corp. (Building) 54,000 199,936
Marui Co., Ltd. (Retail) 14,000 206,571
Matsushita Electric Industrial Co., Ltd.
(Electronics) 11,000 319,571
Max Co., Ltd. (Machinery) 11,000 109,985
Meiwa Estate Co., Ltd (Real Estate Operations) 4,300 88,668
Melco, Inc. (Computers) 2,400 67,085
Mitsui Fudosan Co., Ltd. (Real Estate
Operations) 22,000 266,544
Mizuno Corp. (Retail) 32,000 77,716
Murata Manufacturing Co., Ltd. (Electronics) 400 47,876
NEC Corp. (Electronics) 3,000 57,187
Nippon Meat Packers, Inc. (Food) 11,000 139,523
Nissan Motor Co., Ltd. (Automobile/Trucks) 31,000 212,794
Nissin Food Products Co., Ltd. (Food) 4,500 118,155
Nitto Denko Corp. (Electronics) 4,000 135,270
Nomura Securities Co., Ltd. (Broker Services) 6,000 127,297
NTT DoCoMo, Inc. (Telecommunications) 3 73,959
Orix Corp. (Leasing Companies) 400 41,974
Q.P. Corp. (Food) 34,000 286,670
Rohm Co., Ltd. (Electronics) 600 151,272
Santen Pharmaceutical Co., Ltd. (Medical) 4,000 78,999
Sekisui House, Ltd. (Building) 18,000 190,368
Sharp Corp. (Electronics) 3,000 38,217
Shin-Etsu Chemical Co., Ltd. (Chemicals) 3,000 123,173
Shiseido Co., Ltd. (Cosmetics & Personal Care) 10,000 129,221
Sony Corp. (Electronics) 3,700 295,688
Stanley Electric Co., Ltd. (Electronics) 10,000 103,560
Sumitomo Bakelite Co., Ltd. (Chemicals) 7,000 78,330
Sumitomo Metal Mining Co., Ltd. (Metal) 18,000 92,874
Takefuji Corp. (Finance) 1,000 98,978
Terumo Corp. (Medical) 6,000 169,912
Toho Gas Co., Ltd. (Oil & Gas) 51,000 93,947
Tokyo Electric Power Co., Inc. (Utilities) 6,200 150,575
Tokyu Corp. (Transport) 19,000 98,208
Toshiba Corp. (Electronics) 11,000 78,633
Toyota Motor Corp. (Automobile/Trucks) 8,000 319,663
Yamanouchi Pharmaceutical Co., Ltd. (Medical) 3,000 135,820
------------
6,391,635
------------
Malaysia (0.36%)
AMMB Holdings Berhad (Banks - Foreign) 25,000 28,026
Petronas Gas Berhad (Oil & Gas) 15,000 27,237
Tenaga Nasional Berhad (Utilities) 9,000 29,132
United Engineers Berhad (Engineering/R&D
Services) 13,000 18,474
------------
102,869
------------
Mexico (0.32%)
Grupo Financiero BBVA Bancomer SA de CV
(Finance) 68,000 42,098
Telefonos de Mexico SA (ADR)
(Telecommunications) 930 50,162
------------
92,260
------------
Netherlands (7.37%)
Aegon NV (Insurance) 5,500 218,430
Akzo Nobel NV (Chemicals) 2,260 102,892
Fortis (NL) NV (Insurance) 4,710 143,889
ING Groep NV (Banks - Foreign) 3,800 260,941
Koninklijke Ahold NV (Retail) 8,074 234,530
Koninklijke Numico NV (Food) 2,860 133,728
Koninklijke (Royal) Philips Electronics NV
(Electronics) 3,300 129,686
Royal Dutch Petroleum Co. (Oil & Gas) 9,800 581,225
TNT Post Group NV (Transport) 3,300 69,898
VNU NV (Media) 3,100 146,002
Wolters Kluwer NV (Media) 3,900 87,769
------------
2,108,990
------------
New Zealand (0.09%)
Auckand International Airport Ltd. (Transport) 9,800 11,077
Telecom Corp of New Zealand Ltd.
(Telecommunications) 7,000 15,491
------------
26,568
------------
Norway (0.88%)
Tomra Systems ASA (Machinery) 6,250 251,239
------------
Poland (0.04%)
Polski Koncern Naftowy Orlen SA (Oil & Gas) 3,000 11,493
------------
Portugal (0.21%)
Portugal Telecom SA (Telecommunications) 6,100 54,353
PT - Multimedia.com - Servicos de Acesso a
Internet SGPS SA* (Computers) 1,200 6,110
------------
60,463
------------
Singapore (0.77%)
DBS Group Holdings Ltd. (Banks - Foreign) 4,000 47,145
DBS Land Ltd. (Real Estate Operations) 7,000 10,642
Flextech Holdings Ltd. (Electronics) 17,000 10,744
Keppel TatLee Bank Ltd. (Banks - Foreign) 6,000 10,249
Neptune Orient Lines Ltd.* (Transport) 15,000 12,726
Overseas Union Bank Ltd. (Banks - Foreign) 4,000 19,359
Pacific Century Regional Developments Ltd.*
(Real Estate Operations) 30,000 23,060
Singapore Technologies Engineering Ltd.
(Engineering/R&D Services) 27,000 43,506
United Overseas Bank Ltd. (Banks - Foreign) 5,000 37,010
Wing Tai Holdings Ltd. (Real Estate Operations) 9,000 6,969
------------
221,410
------------
South Africa (0.67%)
ABSA Group Ltd. (Banks - Foreign) 18,000 61,177
Anglo American Platinum Corp. Ltd. (Metal) 1,100 42,914
DataTec Ltd.* (Computers) 6,000 37,769
Sasol Ltd. (Oil & Gas) 6,500 49,771
------------
191,631
------------
South Korea (0.63%)
Korea Telecom Corp. (Telecommunications) 470 27,684
LG Chemical Ltd. (Chemicals) 3,200 31,508
Samsung Electronics Co. (Electronics) 360 45,099
Shinhan Bank (Banks - Foreign) 3,600 36,079
SK Telecom Co., Ltd. (Telecommunications) 190 40,505
------------
180,875
------------
Spain (3.15%)
Banco Bilbao Vizcaya Argentaria SA
(Banks - Foreign) 16,020 213,435
Banco Santander Central Hispano SA
(Banks - Foreign) 22,350 216,594
Endesa SA (Utilities) 7,708 125,587
Telefonica Publicidad e Informacion, SA
(Advertising) 6,303 42,790
Telefonica SA* (Telecommunications) 15,000 286,021
Terra Lycos, SA* (Computers) 685 16,392
------------
900,819
------------
Sweden (2.00%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 21,250 282,843
Nordic Baltic Holding AB (Banks - Foreign) 17,520 132,321
Skandia Forsakrings AB (Insurance) 9,300 157,756
------------
572,920
------------
Switzerland (3.23%)
Adecco SA (Business Services - Misc.) 235 162,497
Credit Suisse Group (Banks - Foreign) 910 170,600
Novartis AG (Medical) 245 371,670
Roche Holding AG (Medical) 24 219,226
------------
923,993
------------
Taiwan (1.07%)
Advanced Semiconductor Engineering, Inc.*
(Electronics) 25,000 28,715
Advanced Semiconductor Engineering, Inc.* (GDR)
(Electronics) (R) 536 3,072
Cathay Life Insurance Co., Ltd. (Insurance) 18,000 32,322
China Steel Corp. (GDR) (Steel) 80 904
Compal Electronics, Inc. (Computers) 23,000 35,105
Compeq Manufacturing Co., Ltd.* (Electronics) 8,000 30,217
Hon Hai Precision Industry Co., Ltd.
(Electronics) 6,900 36,102
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 18,000 54,613
United Microelectronics Corp.* (Electronics) 32,000 56,471
Winbond Electronics Corp.* (Electronics) 30,000 29,071
------------
306,592
------------
Thailand (0.10%)
PTT Exploration & Production Pcl (Oil & Gas) 4,000 9,543
Shin Satellite Pcl* (Telecommunications) 15,500 9,773
Siam Makro Pcl (Retail) 8,600 9,966
------------
29,282
------------
Turkey (0.24%)
Dogan Yayin Holding AS* (Diversified Operations) 1,349,800 17,602
Koc Holding AS (Diversified Operations) 300,000 19,121
Vestel Elektronik Sanayi ve Ticaret AS*
(Household) 77,000 15,795
Yapi ve Kredi Bankasi AS (Banks - Foreign) 1,898,500 16,412
------------
68,930
------------
United Kingdom (16.26%)
Barclays Plc (Banks - Foreign) 3,500 100,145
BP Amoco Plc (Oil & Gas) 67,312 570,859
British Telecommunications Plc
(Telecommunications) 14,719 172,561
Cable & Wireless Plc (Telecommunications) 5,500 77,807
Carlton Communications Plc (Media) 10,000 80,528
Centrica Plc (Utilities) 75,500 259,626
CGNU Plc (Insurance) 6,300 84,280
CMG Plc (Computers) 2,950 49,191
COLT Telecom Group Plc* (Telecommunications) 2,562 81,781
Energis Plc* (Telecommunications) 9,800 83,823
Glaxo Wellcome Plc (Medical) 13,400 385,743
HSBC Holdings Plc (Banks - Foreign) 33,000 470,195
Lloyds TSB Group Plc (Banks - Foreign) 18,100 184,360
Logica Plc (Computers) 1,778 52,602
Marconi Plc (Telecommunications) 20,500 258,777
Pearson Plc (Media) 11,500 308,523
Sage Group Plc (Computers) 11,850 86,485
SEMA Group Plc (Computers) 9,220 116,386
SmithKline Beecham Plc (Medical) 20,189 260,710
Telewest Communications Plc* (Media) 37,059 61,299
Vodafone AirTouch Plc (Telecommunications) 218,050 907,218
------------
4,652,899
------------
TOTAL COMMON STOCKS
(Cost $27,052,857) (95.82%) 27,414,066
--------- ------------
UNITS
Mexico (0.13%)
Controladora Comercial Mexicana SA de CV
(Retail) 34,000 37,689
------------
TOTAL UNITS
(Cost $35,619) (0.13%) 37,689
--------- ------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-Gesellschaft AG*
(Insurance) 5 443
------------
TOTAL WARRANTS
(Cost $224) (0.00%) 443
--------- ------------
PREFERRED STOCKS
Germany (0.43%)
Fresenius AG (Medical) 500 123,471
------------
TOTAL PREFERRED STOCKS
(Cost $102,444) (0.43%) 123,471
--------- ------------
TOTAL COMMON STOCKS, UNITS,
WARRANTS AND PREFERRED STOCKS
(Cost $27,191,144) (96.38%) 27,575,669
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.97%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 9.125% and 6.000%, due
05-15-18 and 02-15-26) - Note A 6.56% $564 564,000
------------
Non-Cash Security Lending Collateral (0.07%)
U.S. Treasury Bonds 6.125% thru
10.375%, due 11-15-12 thru 08-15-29
and U.S. Treasury Note 3.625%, due
01-15-08** 19 19,345
------------
NUMBER OF SHARES
----------------
Cash Equivalents (8.75%)
Navigator Securities Lending Prime
Portfolio** 2,504,304 2,504,304
------------
TOTAL SHORT-TERM INVESTMENTS (10.79%) 3,087,649
--------- ------------
TOTAL INVESTMENTS (107.17%) 30,663,318
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (7.17%) (2,051,934)
--------- ------------
TOTAL NET ASSETS (100.00%) $28,611,384
========= ============
NOTES TO THE SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Represents investment of security lending collateral -- Note A.
(R) This security is exempt from registration under rule 144A of the
Securities and Exchange Act of 1933. Such security may be resold,
normally to qualified institutional buyers, in transactions exempt from
registration. Rule 144A security amounted to $3,072 or 0.01% of net
assets as of October 31, 2000.
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>
<TABLE>
<CAPTION>
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,
2000 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
------------------- -------------
<S> <C>
Advertising 0.61%
Automobile/Trucks 2.96
Banks --Foreign 9.79
Beverages 0.89
Broker Services 0.44
Building 2.64
Business Services - Misc. 0.92
Chemicals 1.50
Computers 4.64
Cosmetics & Personal Care 0.45
Diversified Operations 4.93
Electronics 8.20
Engineering/R&D Services 0.22
Finance 1.36
Food 3.28
Glass Products 0.36
Household 0.06
Insurance 6.26
Leasing Companies 0.15
Leisure 0.33
Machinery 1.59
Manufacturing 0.20
Media 3.61
Medical 6.65
Metal 0.47
Oil & Gas 6.97
Pollution Control 0.11
Real Estate 2.63
Retail 4.77
Steel 0.01
Telecommunications 15.57
Transport 0.71
Utilities 3.10
Short-Term Investments 10.79
-------
TOTAL INVESTMENTS 107.17%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- International Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock International Fund (the "Fund") is a diversified series of
John Hancock Investment Trust III, an open-end management investment
company, registered under the Investment Company Act of 1940. The
investment objective of the Fund is long-term growth of capital through
investment primarily in stocks of foreign companies.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 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
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.
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. In addition, the Fund accrues for
foreign repatriation taxes on unrealized gains, as applicable.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net 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 are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative size of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The average daily loan balance during the
period for which loans were outstanding amounted to $816,000. The
weighted average interest rate was 6.72%. Interest expense paid under
the line of credit amounted to $913. There was no outstanding borrowing
under the line of credit on October 31, 2000.
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, 2000, the Fund loaned securities having a
market value of $2,430,415 collateralized by cash and securities in the
amount of $2,523,649. The cash collateral was invested in a short-term
instrument.
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 the
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.
The Fund had the following open forward foreign currency exchange
contracts at October 31, 2000:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION
CURRENCY COVERED BY CONTRACT DATE (DEPRECIATION)
-------- ------------------- ---------- ------------
SELLS
Australian Dollars $294 NOV 00 $4
Pound Sterling 697 NOV 00 (1)
------------
$3
============
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
contracts 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. The Fund had no open financial futures contracts at October
31, 2000.
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, the
Fund has $1,044,142 of capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized capital
gains. To the extent such carryforwards are used by the Fund, no capital
gain distributions will be made. The carryforwards expire as follows:
October 31, 2008 -- $1,044,142.
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 dividends and 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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with accounting principles generally accepted in the United
States of America incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
1.00% of the first $250,000,000 of the Fund's average daily net asset
value, (b) 0.80% of the next $250,000,000, (c) 0.75% of the next
$250,000,000 and (d) 0.625% of the Fund's average daily net asset value
in excess of $750,000,000.
Effective January 1, 2000, the Adviser entered into a subadvisory
agreement with Indocam International Investment Services ("IIIS"), under
which IIIS provides the Fund with investment services and advice. Under
this contract IIIS acted as co-subadviser with the Fund's original
subadviser, John Hancock Advisers International Limited ("JHAI"), a
wholly owned subsidiary of the Adviser. As of March 1, 2000, the Adviser
terminated its contract with JHAI so that currently IIIS is the Fund's
sole subadviser. The Fund is not responsible for the payment of the
subadvisers' fees.
The Adviser has agreed to limit Fund expenses, including the management
fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets, at least until February
28, 2001. Accordingly, the reduction in the Fund's expenses amounted to
$392,491 for the year ended October 31, 2000. The Adviser reserves the
right to terminate this limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. 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 makes payments to JH Funds at an annual rate
not to exceed 0.30% of Class A average daily net assets and 1.00% of
Class B and Class C average daily net assets, to reimburse JH Funds for
its distribution and service costs. Up to a maximum of 0.25% of such
payments may be service fees as defined by the 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $122,328 with regard to sales of Class A shares. Of
this amount, $11,580 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $84,284 was paid as
sales commissions to unrelated broker-dealers and $26,464 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $9,118 with regard to sales of Class C shares. Of this
amount, $8,051 was paid as sales commissions to unrelated broker-dealers
and $1,067 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares which are redeemed within one year of purchase
are subject to a CDSC at a rate of 1.00% of the lesser of the current
market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds
and are used in whole or in part to defray its expenses for providing
distribution related services to the Fund in connection with the sale of
Class B and Class C shares. For the year ended October 31, 2000, CDSCs
received by JH Funds amounted to $21,715 for Class B shares and $42 for
Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
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, 2000, aggregated $53,302,520 and
$38,511,877, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $30,743,110. Gross
unrealized appreciation and depreciation of investments aggregated
$2,394,538 and $2,474,330, respectively, resulting in net unrealized
depreciation of $79,792.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect an increase in net realized loss on investments,
futures and foreign currency transactions of $57,209, a decrease in
accumulated net investment loss of $251,872 and a decrease in capital
paid-in of $194,663. This represents the amount necessary to report
these balances on a tax basis, excluding certain temporary difference,
as of October 31, 2000. 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, passive foreign investment
companies and net realized gain/loss on foreign currency transactions in
the computation of distributable income and capital gains under federal
tax rules versus generally accepted accounting principles. The
calculation of net investment income per share in the financial
highlights excludes these adjustments.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock International 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 International Fund (the "Fund") (a series of John Hancock
Investment Trust III) at October 31, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and 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, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
Deccember 8, 2000
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, 2000.
The Fund has designated distributions to shareholders of $712,259 as
capital gain dividends.
With respect to the distributions paid by the Fund for the fiscal year
ended October 31, 2000, none of the distributions qualify for the
corporate dividends-received deduction.
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
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Permit No. 75
This report is for the information of the shareholders of the John Hancock
International Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
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Recycled Paper."]
4000A 10/00
12/00
