The latest report from your
Fund's management team
SEMIANNUAL REPORT
Core
Equity Fund
JUNE 30, 2000
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*
Richard S. Scipione
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial 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
SUB-INVESTMENT ADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
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
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 four years of spectacular returns, the stock market succumbed in
the first six months of 2000 largely to the pressures of rising interest
rates, as the Federal Reserve kept up its campaign to fight inflation.
The red-hot economy has begun to show signs of slowing, and investors
are no longer blind to the real possibility that rising rates could slow
corporate profits. The result was flat-to-negative results for the three
main stock-market indexes through June. Bonds also suffered during this
period, since their prices generally move in the opposite direction of
rates.
But there was good news, too. The Treasury market, where shrinking
supply bolstered prices thanks to the government's efforts to retire
some of its debt, performed well. And the Fed appears closer to the end
of its tightening cycle, which will be a strong positive if it can slow
the economy to a level that supports corporate earnings growth but keeps
inflation at bay. The picture on the global economy is brighter and
technology continues to dominate as the driver of ever-improving
corporate productivity.
No matter what happens next in the financial markets, these past several
months only served to reinforce some of the important lessons for
investors: Diversify, invest in line with your tolerance for risk and
maintain a long-term perspective.
Since not all parts of your portfolio will perform equally well all the
time, it is important to allocate your assets among different types of
investments and funds that target a variety of stock- and bond-market
segments. This strategy, executed under the guidance of a seasoned
investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing
conditions.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY PAUL MCMANUS FOR THE PORTFOLIO MANAGEMENT TEAM
[A 2" x 3" photo at bottom right side of page of John Hancock
Core Equity Fund. Caption below reads "Fund management team
members (l-r): Stephen Lanzendorf, John Montgomery and Paul
McManus."]
John Hancock
Core Equity Fund
Higher rates prompt deflation of technology values
The first two months of the period saw a continuation of several trends
in place at the end of 1999. Technology stocks led the market higher,
but most other sectors struggled. Investors bought technology issues
virtually without regard to valuations, and many stocks with little more
than an intriguing business concept were bid to stratospheric levels.
The narrow market advance and rich valuations were both challenging for
the Fund, which emphasizes broad diversification and stocks with
improving fundamentals that are reasonably priced.
Strong economic growth, combined with a frothy stock market, prompted
the Federal Reserve Board to continue its effort to keep inflation in
check by raising interest rates. Rising rates, which typically have the
greatest impact on stocks with the highest valuations, finally took
their toll on the market in March, April and May. From peak to trough,
the NASDAQ Composite Index fell almost 40%, while on April 14 the Dow
Jones Industrial Average and the S&P 500 Index both experienced one-day
drops exceeding 5%.
"Rising rates
...finally
took their
toll on the
market in
March, April
and May."
Stocks stabilized and even rebounded somewhat near the end of the
period, as investors attempted to weigh a number of factors. On the one
hand, there was a sense that the Fed was close to the end of its series
of tightening moves. Another positive for the market was the prospect of
generally favorable second-quarter earnings announcements in July. On
the negative side, some investors anticipated one more rate increase in
August. Furthermore, there was concern about the effect of a slower
economy on earnings growth in the second half of the year.
[Table at top left hand column entitled "Top Five
Stock Holdings." The first listing is Pfizer 4.6%, the second
is Intel 3.9%, the third Cisco Systems 3.9%, the fourth
General Electric 3.8% and the fifth Microsoft 3.3%. A note
below the table reads "As a percentage of net assets on June
30, 2000."]
Technology
helps...
and hurts.
Fund results
While the Fund's disciplined investment strategy was not favored by the
speculative conditions that prevailed earlier in the period, it
performed better in the more sober climate after the correction. With
investors paying more attention to valuations, the Fund was able to make
up a substantial amount of ground on its benchmarks. For the six months
ended June 30, 2000, John Hancock Core Equity Fund's Class A, Class B
and Class C shares had returns of -0.24%, -0.58% and -0.58%,
respectively, at net asset value. 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. In comparison, the S&P 500 Index returned -0.43%. The
Fund's returns slightly trailed the average large-cap core fund, which
finished the period with a return of 1.27%, according to Lipper, Inc.1
(Lipper has introduced new competitive categories that more accurately
reflect the average portfolio holdings of the funds they track.)
Although we cannot be certain of the reasons for this, the likely
explanation is that many of our peers maintained a higher technology
weighting and risk profile than we did. Longer-term performance
information can be found on pages six and seven.
[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 Intel followed by
an up arrow with the phrase "Tight supply, strong demand for
semiconductors." The second listing is Warner-Lambert
followed by an up arrow with the phrase "Takeover target."
The third listing is Microsoft followed by a down arrow with
the phrase "Unfavorable decision in antitrust case." A note
below the table reads "See 'Schedule of Investments.'
Investment holdings are subject to change."]
Technology helps...
Although technology stocks with meager earnings were hit hard during the
spring correction, higher-quality issues weathered the storm fairly
well. For example, semiconductor stalwart Intel was one of the most
positive contributors to the Fund's performance, benefiting from tight
supplies and strong demand. Another semiconductor manufacturer, Texas
Instruments, also helped the Fund. Whereas Intel dominates the market
for personal computer semiconductors, Texas Instruments is a leading
manufacturer of the semiconductors used in wireless telephones, another
high-growth area during the period. Another technology holding that
helped the Fund's performance was Cisco Systems. The company has a
dominant market share of the routers used in Internet communications and
should benefit from ongoing rapid growth in Internet use. In the
health-care sector, Warner-Lambert, a pharmaceutical holding, was helped
by the company's acquisition by competitor Pfizer during the period.
...and hurts
Some technology and telecommunications leaders faltered during the
period, however. A prime example was Microsoft, which lost the antitrust
case filed against the company by the U.S. Justice Department and, if
unsuccessful in the appeals process, faces being split into two smaller
companies. While Microsoft's competitive abilities have been eroded to
some extent, the company looks to remain a dominant player in its
markets. Accordingly, we reduced the Fund's position in the stock but
maintained a weighting comparable to that of the S&P 500.
[Bar chart at top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
six months ended June 30, 2000." The chart is scaled in
increments of 1% with -1% at the bottom and 3% at the top.
The first bar represents the -0.24% total return for John
Hancock Core Equity Fund Class A. The second bar represents
the -0.58% total return for John Hancock Core Equity Fund
Class B. The third bar represents the -0.58% total return for
John Hancock Core Equity Fund Class C. The fourth bar
represents the 1.27% total return for Average large-cap core
fund. A note below the chart reads "Total returns for John
Hancock Core Equity Fund are at net asset value with all
distributions reinvested. The average large-cap core fund is
tracked by Lipper, Inc.1 See the following two pages for
historical performance information"]
America Online faltered when its growth prospects were downgraded as a
result of AOL's bid to acquire Time Warner. Long-distance telephone
giant WorldCom also ran into problems when it attempted to buy Sprint.
Investors judged that WorldCom offered too much for Sprint, causing the
former's stock to sag. When the deal appeared to be souring, WorldCom
stock recovered somewhat. In the consumer cyclical group, Home Depot was
hurt by the perception that higher interest rates would slow the housing
market and reduce demand for the home-related products in which the
company specializes.
Looking ahead
Going forward, we look for a continuation of the sort of environment
we've seen since March--much less speculative than before, with
investors paying more attention to valuations. The main question on the
near-term horizon has to do with interest rates. Investors will be
trying to decide how much the recent increases in rates will slow the
economy and whether further rate hikes will be necessary. It's
reasonable to think we are close to the end of the cycle of higher rates
at this point, but confirmation of that judgment awaits more concrete
evidence of slower economic growth. If the Fed can engineer a smooth
transition to slower growth, the environment for stocks should be
favorable.
"We caution
the Fund's
investors to
keep their
eyes firmly
on the long
term..."
We caution the Fund's investors to keep their eyes firmly on the long
term and try to avoid being seduced by the easy money that can be
made--temporarily--during a speculative bubble such as we saw recently.
The dramatic rise and fall of many "dot-com" stocks with no earnings is
a testament to the futility of using short-term yardsticks such as
stock-price momentum as the main criterion for investment decisions. In
contrast, we remain convinced that buying undervalued stocks of
companies with improving fundamentals offers a way to achieve
competitive returns over the long run.
------------------------------------------------------------------------
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 Core Equity 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% and 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 June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (6/10/91)
----- ----- -----
Cumulative Total Returns (3.27%) 148.01% 296.70%
Average Annual Total Returns(1) (3.27%) 19.92% 16.44%
CLASS B
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (9/7/95)
----- ----------
Cumulative Total Returns (3.84%) 135.04%
Average Annual Total Returns(1) (3.84%) 19.43%
CLASS C
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (5/1/98)
----- ----------
Cumulative Total Returns (0.87%) 20.23%
Average Annual Total Returns (0.87%) 8.88%
Note to Performance
(1) From September 1, 1995 through February 28, 1997, the Adviser
limited the Fund's expenses to 1.30% and 2.00% for Class A and Class B
shares, respectively, of the Fund's average daily net asset value. Prior
to September 1, 1995, and the creation of Class B shares, the limitation
of expenses was 0.70% of the Fund's average daily net asset value.
Without the limitation of expenses, the average annualized returns for
the five-year period and since inception for Class A would have been
19.76% and 15.85%, respectively. Without the limitation of expenses, the
average annualized return since inception for Class B would have been
19.19%.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Core Equity 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
often used as a measure of stock market performance. It is not possible
to invest in an index. Past performance is not indicative of future
results.
Line chart with the heading John Hancock Core Equity Fund
Class A, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines. The first line represents the Standard & Poor's
500 Index and is equal to $45,676 as of June 30, 2000. The
second line represents the value of the hypothetical $10,000
investment made in the John Hancock Core Equity Fund on June
10, 1991, before sales charge, and is equal to $41,776 as of
June 30, 2000. The third line represents the value of the
same hypothetical investment made in the John Hancock Core
Equity Fund, after sales charge, and is equal to $39,687 as
of June 30, 2000.
Line chart with the heading John Hancock Core Equity Fund
Class B, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines. The first line represents the Standard & Poor's
500 Index and is equal to $28,074 as of June 30, 2000. The
second line represents the value of the hypothetical $10,000
investment made in the John Hancock Core Equity Fund on
September 7, 1995, before sales charge, and is equal to
$23,704 as of June 30, 2000. The third line represents the
value of the same hypothetical investment made in the John
Hancock Core Equity Fund, after sales charge, and is equal to
$23,504 as of June 30, 2000.
Line chart with the heading John Hancock Core Equity Fund
Class C*, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines. The first line represents the Standard & Poor's
500 Index and is equal to $13,464 as of June 30, 2000. The
second line represents the value of the hypothetical $10,000
investment made in the John Hancock Core Equity Fund on May
1, 1998, before sales charge, and is equal to $12,144 as of
June 30, 2000. The third line represents the value of the
same hypothetical investment made in the John Hancock Core
Equity Fund, after sales charge, and is equal to $12,022 as
of June 30, 2000.
* No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Core Equity Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Common stocks (cost -- $810,042,868) $977,896,007
Joint repurchase agreement
(cost -- $11,561,000) 11,561,000
Corporate savings account 990
-----------------
989,457,997
Receivable for investments sold 10,513,597
Receivable for shares sold 512,991
Dividends and interest receivable 852,450
Other assets 7,414
-----------------
Total Assets 1,001,344,449
--------------------------------------------------------------
Liabilities:
Payable for investments purchased 13,589,150
Payable for shares repurchased 781,969
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 815,537
Accounts payable and accrued expenses 16,738
-----------------
Total Liabilities 15,203,394
--------------------------------------------------------------
Net Assets:
Capital paid-in 809,524,869
Accumulated net realized gain on
investments 11,768,597
Net unrealized appreciation of
investments 167,853,139
Accumulated net investment loss (3,005,550)
-----------------
Net Assets $986,141,055
==============================================================
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 -- $382,678,898/11,550,499 $33.13
==============================================================
Class B -- $571,642,785/17,668,924 $32.35
==============================================================
Class C -- $31,819,372/983,545 $32.35
==============================================================
Maximum Offering Price Per Share
Class A* -- ($33.13/0.95) $34.87
==============================================================
Class C -- ($32.35/0.99) $32.68
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on June 30,
2000. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $28,070) $5,787,500
Interest (including income on
securities loaned of $16,196) 260,079
-----------------
6,047,579
-----------------
Expenses:
Investment management fee -- Note B 3,646,223
Distribution and service fee -- Note B
Class A 560,016
Class B 2,905,965
Class C 146,048
Transfer agent fee -- Note B 1,407,284
Registration and filing fees 107,668
Custodian fee 93,042
Accounting and legal services fee -- Note B 89,064
Trustees' fees 27,731
Miscellaneous 25,535
Printing 21,151
Auditing fee 9,628
Interest expense -- Note A 5,452
Legal fees 3,660
-----------------
Total Expenses 9,048,467
--------------------------------------------------------------
Net Investment Loss (3,000,888)
--------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 8,033,743
Change in net unrealized
appreciation/depreciation of
investments (15,316,349)
-----------------
Net Realized and Unrealized Loss on
Investments (7,282,606)
--------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations ($10,283,494)
==============================================================
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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($4,655,124) ($3,000,888)
Net realized gain on investments sold 35,836,416 8,033,743
Change in net unrealized
appreciation/depreciation of
investments 70,719,126 (15,316,349)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 101,900,418 (10,283,494)
----------------- -----------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A -- ($0.6338 and none per share, respectively) (7,493,385) --
Class B -- ($0.6338 and none per share, respectively) (12,945,566) --
Class C -- ($0.6338 and none per share, respectively) (560,223) --
----------------- -----------------
Total Distributions to Shareholders (20,999,174) --
----------------- -----------------
From Fund Share Transactions -- Net: * 451,946,345 (91,330,833)
----------------- -----------------
Net Assets:
Beginning of period 554,907,793 1,087,755,382
----------------- -----------------
End of period (including
accumulated net investment loss
of $4,662 and $3,005,550,
respectively) $1,087,755,382 $986,141,055
================= =================
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 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:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 11,089,403 $349,612,898 3,892,524 $125,423,957
Shares issued to shareholders in
reinvestment of distributions 219,924 7,018,772 396 12,521
----------------- ----------------- ----------------- -----------------
11,309,327 356,631,670 3,892,920 125,436,478
Less shares repurchased (6,119,968) (194,552,349) (4,199,392) (134,390,712)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,189,359 $162,079,321 (306,472) ($8,954,234)
================= ================= ================= =================
CLASS B
Shares sold 14,318,400 $442,530,048 2,391,416 $75,578,555
Shares issued to shareholders in
reinvestment of distributions 329,313 10,303,723 1,281 40,338
----------------- ----------------- ----------------- -----------------
14,647,713 452,833,771 2,392,697 75,618,893
Less shares repurchased (5,905,354) (184,187,259) (5,130,138) (160,165,688)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,742,359 $268,646,512 (2,737,441) ($84,546,795)
================= ================= ================= =================
CLASS C
Shares sold 834,300 $25,819,138 270,955 $8,562,792
Shares issued to shareholders in
reinvestment of distributions 13,139 411,030 47 1,490
----------------- ----------------- ----------------- -----------------
847,439 26,230,168 271,002 8,564,282
Less shares repurchased (161,886) (5,009,656) (204,943) (6,394,086)
----------------- ----------------- ----------------- -----------------
Net increase 685,553 $21,220,512 66,059 $2,170,196
================= ================= ================= =================
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:
--------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED MAY 31, JUNE 1, 1996 TO YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------- DECEMBER 31, ------------------------------------ JUNE 30, 2000
1995 1996 1996(1) 1997 1998 1999 (UNAUDITED)
--------- -------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $12.68 $14.41 $17.98 $19.42 $23.93 $30.14 $33.21
--------- -------- --------- --------- --------- --------- -----------
Net Investment Income
(Loss)(2) 0.32 0.20 0.13 0.10 0.05 (0.02) (0.03)
Net Realized and Unrealized
Gain (Loss) on Investments 1.77 3.88 1.72 5.55 6.81 3.72 (0.05)
--------- -------- --------- --------- --------- --------- -----------
Total from Investment Operations 2.09 4.08 1.85 5.65 6.86 3.70 (0.08)
--------- -------- --------- --------- --------- --------- -----------
Less Distributions:
Dividends from Net
Investment Income (0.28) (0.22) (0.14) (0.04) -- -- --
Distributions from Net
Realized Gain on
Investments Sold (0.08) (0.29) (0.27) (1.10) (0.65) (0.63) --
--------- -------- --------- --------- --------- --------- -----------
Total Distributions (0.36) (0.51) (0.41) (1.14) (0.65) (0.63) --
--------- -------- --------- --------- --------- --------- -----------
Net Asset Value, End of
Period $14.41 $17.98 $19.42 $23.93 $30.14 $33.21 $33.13
========= ======== ========= ========= ========= ========= ===========
Total Investment Return at
Net Asset Value(3) 16.98% 29.12% 10.33%(4) 29.19% 28.84% 12.37% (0.24%)(4)
Total Adjusted Investment
Return at Net Asset
Value(3,5) 16.94% 28.47% 10.08%(4) 29.17% -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $101,418 $14,878 $31,013 $92,204 $200,962 $393,792 $382,679
Ratio of Expenses to Average
Net Assets 0.70% 0.94% 1.30%(6) 1.42% 1.39% 1.37%(7) 1.40%(6)
Ratio of Adjusted Expenses
to Average Net Assets(8) 0.74% 1.59% 1.73%(6) 1.44% -- -- --
Ratio of Net Investment
Income (Loss) to Average
Net Assets 2.43% 1.55% 1.16%(6) 0.45% 0.17% (0.06%) (0.17%)(6)
Ratio of Adjusted Net
Investment Income to
Average Net Assets(8) 2.39% 0.90% 0.73%(6) 0.43% -- -- --
Portfolio Turnover Rate 71% 157% 35% 62% 50% 98% 43%
Fee Reduction Per Share $0.005(2) $0.08(2) $0.05(2) --(2,9) -- -- --
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 the Fund.
It shows how the Fund's net asset value for a share has changed since
the end of the previous period. Additionally, important relationships
between some items presented in the financial statements are expressed
in ratio form.
<CAPTION>
Financial Highlights (continued)
--------------------------------------------------------------------------------------------------------------------
PERIOD PERIOD FROM
ENDED JUNE 1, 1996 TO YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
MAY 31, DECEMBER 31, ------------------------------------ JUNE 30, 2000
1996(10) 1996(1) 1997 1998 1999 (UNAUDITED)
--------- -------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.25 $17.96 $19.41 $23.80 $29.75 $32.54
--------- -------- --------- --------- --------- ---------
Net Investment Income
(Loss)(2) 0.09 0.05 (0.06) (0.14) (0.24) (0.14)
Net Realized and Unrealized
Gain (Loss) on Investments 2.71 1.72 5.56 6.74 3.66 (0.05)
--------- -------- --------- --------- --------- ---------
Total from Investment Operations 2.80 1.77 5.50 6.60 3.42 (0.19)
--------- -------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net
Investment Income (0.09) (0.05) (0.01) -- -- --
Distributions from Net
Realized Gain on
Investments Sold -- (0.27) (1.10) (0.65) (0.63) --
--------- -------- --------- --------- --------- ---------
Total Distributions (0.09) (0.32) (1.11) (0.65) (0.63) --
--------- -------- --------- --------- --------- ---------
Net Asset Value, End of
Period $17.96 $19.41 $23.80 $29.75 $32.54 $32.35
========= ======== ========= ========= ========= =========
Total Investment Return at
Net Asset Value(3) 18.46%(4) 9.83%(4) 28.39% 27.90% 11.59% (0.58%)(4)
Total Adjusted Investment
Return at Net Asset
Value(3,5) 17.59%(4) 9.58%(4) 28.37% -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $15,125 $42,461 $134,939 $347,045 $664,104 $571,643
Ratio of Expenses to Average
Net Assets 2.00%(6) 2.00%(6) 2.12% 2.09% 2.07%(7) 2.09%(6)
Ratio of Adjusted Expenses
to Average Net Assets(8) 3.21%(6) 2.43%(6) 2.14% -- -- --
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.78%(6) 0.45%(6) (0.25%) (0.53%) (0.77%) (0.87%)(6)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(8) (0.43%)(6) 0.02%(6) (0.27%) -- -- --
Portfolio Turnover Rate 157% 35% 62% 50% 98% 43%
Fee Reduction Per Share(2) $0.13 $0.05 --(9) -- -- --
<CAPTION>
Financial Highlights (continued)
--------------------------------------------------------------------------------------------------------------------
PERIOD
ENDED SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30, 2000
1998(10) DECEMBER 31 1999 (UNAUDITED)
------------- ---------------- -------------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $27.81 $29.75 $32.54
------------- ------------- -------------
Net Investment Loss(2) (0.09) (0.25) (0.14)
Net Realized and Unrealized
Gain (Loss) on Investments 2.68 3.67 (0.05)
------------- ------------- -------------
Total from Investment Operations 2.59 3.42 (0.19)
------------- ------------- -------------
Less Distributions:
Distributions from
Net Realized Gain
on Investments Sold (0.65) (0.63) --
------------- ------------- -------------
Net Asset Value, End of
Period $29.75 $32.54 $32.35
============= ============= =============
Total Investment Return at
Net Asset Value(3) 9.46%(4) 11.59% (0.58%)(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $6,901 $29,859 31,819
Ratio of Expenses to Average
Net Assets 2.12%(6) 2.08%(7) 2.10%(6)
Ratio of Net Investment Loss
to Average Net Assets (0.53%)(6) (0.80%) (0.87%)(6)
Portfolio Turnover Rate 50% 98% 43%
(1) Effective December 31, 1996, the fiscal year end changed from May 31
to December 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) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Expense ratios do not include interest expense due to bank loans,
which amounted to less than 0.01%.
(8) Unreimbursed, without fee reduction.
(9) Less than $0.01 per share.
(10) Class B shares commenced operations on September 7, 1995. Class C
shares commenced operations on May 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Core Equity Fund on June 30, 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 MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- ------------- --------------
<S> <C> <C>
COMMON STOCKS
Advertising (1.59%)
Interpublic Group of Cos., Inc. (The) 167,200 $7,189,600
Omnicom Group, Inc. 95,700 8,523,281
------------
15,712,881
------------
Aerospace (1.36%)
General Dynamics Corp. 85,900 4,488,275
United Technologies Corp. 152,200 8,960,775
------------
13,449,050
------------
Automobile/Trucks (1.03%)
Borg-Warner Automotive, Inc. 75,200 2,641,400
Ford Motor Co. 110,200 4,738,600
Lear Corp.* 130,800 2,616,000
Visteon Corp.* 14,428 174,939
------------
10,170,939
------------
Banks -- United States (3.66%)
Bank of America Corp. 55,500 2,386,500
Comerica, Inc. 71,300 3,199,587
FleetBoston Financial Corp. 443,700 15,085,800
Mellon Financial Corp. 200,000 7,287,500
Morgan (J.P.) & Co., Inc. 31,900 3,512,987
State Street Corp. 29,400 3,118,237
SunTrust Banks, Inc. 33,100 1,512,256
------------
36,102,867
------------
Beverages (1.29%)
Anheuser-Busch Cos., Inc. 84,100 6,281,219
PepsiCo, Inc. 60,000 2,666,250
Seagram Co. Ltd. (The) (Canada) 64,500 3,741,000
------------
12,688,469
------------
Building (1.30%)
Black & Decker Corp. (The) 193,400 7,603,038
Danaher Corp. 42,800 2,115,925
Willamette Industries, Inc. 112,700 3,071,075
------------
12,790,038
------------
Chemicals (1.09%)
Air Products & Chemicals, Inc. 78,400 2,415,700
Dow Chemical Co. 128,700 3,885,131
Eastman Chemical Co. 56,100 2,678,775
Praxair, Inc. 48,200 1,804,487
------------
10,784,093
------------
Computers (19.31%)
America Online, Inc.* 194,600 10,265,150
Cisco Systems, Inc.* 600,800 38,188,350
Compaq Computer Corp. 159,800 4,084,888
Dell Computer Corp.* 217,200 10,710,675
Electronic Data Systems Corp. 71,900 2,965,875
EMC Corp.* 148,400 11,417,525
First Data Corp. 121,900 6,049,288
Hewlett-Packard Co. 80,600 10,064,925
International Business Machines Corp. 147,000 16,105,688
Microsoft Corp.* 411,300 32,904,000
Network Appliance, Inc.* 32,300 2,600,150
Oracle Corp.* 266,800 22,427,875
Sun Microsystems, Inc.* 119,300 10,848,844
VERITAS Software Corp.* 50,000 5,650,780
Yahoo! Inc.* 49,600 6,144,200
------------
190,428,213
------------
Diversified Operations (2.20%)
Honeywell International, Inc. 125,200 4,217,675
Minnesota Mining & Manufacturing Co. 50,800 4,191,000
Textron, Inc. 72,800 3,953,950
Tyco International Ltd. 196,600 9,313,925
------------
21,676,550
------------
Electronics (13.33%)
Agilent Technologies, Inc.* 30,740 2,267,075
Analog Devices, Inc.* 50,700 3,853,200
Applied Materials, Inc.* 77,800 7,050,625
General Electric Co. 708,600 37,555,800
Intel Corp. 288,900 38,622,319
Linear Technology Corp. 53,400 3,414,262
Maxim Integrated Products, Inc.* 63,800 4,334,413
Motorola, Inc. 172,500 5,013,281
Novellus Systems, Inc.* 50,300 2,845,094
PE Corp.-PE Biosystems Group 36,000 2,371,500
SCI Systems, Inc.* 46,000 1,802,625
Solectron Corp.* 68,800 2,881,000
Teradyne, Inc.* 26,700 1,962,450
Texas Instruments, Inc. 155,300 10,667,169
Waters Corp.* 23,700 2,958,056
Xilinx, Inc.* 46,100 3,806,131
------------
131,405,000
------------
Finance (4.39%)
American Express Co. 99,200 5,170,800
Associates First Capital Corp. (Class A) 181,000 4,038,562
Citigroup, Inc. 506,000 30,486,500
MBNA Corp. 131,700 3,572,362
------------
43,268,224
------------
Food (0.56%)
Kellogg Co. 61,500 1,829,625
Quaker Oats Co. 49,000 3,681,125
------------
5,510,750
------------
Insurance (5.18%)
American General Corp. 109,600 6,685,600
Aon Corp. 127,400 3,957,362
AXA Financial, Inc. 396,500 13,481,000
CIGNA Corp. 31,200 2,917,200
Hartford Financial Services Group, Inc. (The) 33,600 1,879,500
Lincoln National Corp. 125,600 4,537,300
Marsh & McLennan Cos., Inc. 63,600 6,642,225
St. Paul Cos., Inc. (The) 110,400 3,767,400
Torchmark Corp. 96,800 2,389,750
XL Capital Ltd. (Class A) 89,200 4,827,950
------------
51,085,287
------------
Machinery (0.47%)
Ingersoll-Rand Co. 116,000 4,669,000
------------
Media (3.22%)
AT&T Corp. -- Liberty Media Group* 155,200 3,763,600
Clear Channel Communications, Inc.* 74,000 5,550,000
Time Warner, Inc. 108,900 8,276,400
Viacom, Inc. (Class B)* 207,800 14,169,363
------------
31,759,363
------------
Medical (13.79%)
Abbott Laboratories 91,000 4,055,188
Allergan, Inc. 103,200 7,688,400
American Home Products Corp. 76,400 4,488,500
Bausch & Lomb, Inc. 41,500 3,211,062
Baxter International, Inc. 59,300 4,169,531
Bristol-Myers Squibb Co. 233,000 13,572,250
Johnson & Johnson 99,900 10,177,313
Lilly (Eli) & Co. 109,100 10,896,363
Merck & Co., Inc. 207,700 15,915,013
Pfizer, Inc. 955,000 45,840,000
Pharmacia Corp. 139,500 7,210,406
Schering-Plough Corp. 174,000 8,787,000
------------
136,011,026
------------
Metal (0.23%)
Illinois Tool Works, Inc. 40,600 2,314,200
------------
Mortgage Banking (1.15%)
Fannie Mae 217,400 11,345,563
------------
Office (0.29%)
Avery Dennison Corp. 43,300 2,906,512
------------
Oil & Gas (5.64%)
Anadarko Petroleum Corp. 54,200 2,672,737
BP Amoco Plc, American Depositary Receipts (ADR)
(United Kingdom) 56,900 3,218,406
Chevron Corp. 82,000 6,954,625
El Paso Energy Corp. 102,400 5,216,000
Exxon Mobil Corp. 300,000 23,550,000
Royal Dutch Petroleum Co. (ADR) (Netherlands) 168,200 10,354,813
USX -- Marathon Group 146,000 3,659,125
------------
55,625,706
------------
Paper & Paper Products (0.69%)
International Paper Co. 104,000 3,100,500
Kimberly-Clark Corp. 64,400 3,694,950
------------
6,795,450
------------
Retail (5.74%)
Federated Department Stores, Inc.* 108,600 3,665,250
Gap, Inc. (The) 206,600 6,456,250
Home Depot, Inc. (The) 214,000 10,686,625
Limited, Inc. (The) 111,400 2,409,025
Lowe's Cos., Inc. 106,100 4,356,731
Target Corp. 93,600 5,428,800
TJX Cos., Inc. 242,600 4,548,750
Wal-Mart Stores, Inc. 330,600 19,050,825
------------
56,602,256
------------
Soap & Cleaning Preparations (0.56%)
Procter & Gamble Co. (The) 95,500 5,467,375
------------
Telecommunications (6.50%)
AT&T Wireless Group* 90,000 2,508,750
Bell Atlantic Corp. 90,600 4,603,613
Corning, Inc. 25,600 6,908,800
Lucent Technologies, Inc. 130,000 7,702,500
Nortel Networks Corp. (Canada) 248,000 16,926,000
Sprint Corp. 120,800 6,160,800
Sprint PCS* 109,400 6,509,300
WorldCom, Inc.* 278,600 12,780,775
------------
64,100,538
------------
Tobacco (0.62%)
Philip Morris Cos., Inc. 228,700 6,074,844
------------
Utilities (3.97%)
Ameren Corp. 99,800 3,368,250
BellSouth Corp. 67,300 2,868,662
Dominion Resources, Inc. 146,100 6,264,038
Duke Energy Corp. 122,100 6,883,388
GTE Corp. 53,900 3,355,275
Reliant Energy, Inc. 170,400 5,037,450
SBC Communications, Inc. 263,000 11,374,750
------------
39,151,813
------------
TOTAL COMMON STOCKS
(Cost $810,042,868) (99.16%) 977,896,007
------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
----------------------------------- --------- -------------- --------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.17%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 06-30-00, due
07-03-00 (Secured by U.S. Treasury
Bonds 6.250% thru 7.500% due 08-15-22
thru 08-15-27) -- Note A 6.55% $11,561 $11,561,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate 5.20% 990
------------
TOTAL SHORT-TERM INVESTMENTS (1.17%) 11,561,990
--------- ------------
TOTAL INVESTMENTS (100.33%) 989,457,997
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.33%) 3,316,942
--------- ------------
TOTAL NET ASSETS (100.00%) $986,141,055
========= ============
* Non-income producing security.
The percentage shown for each investment category is the total of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Core Equity Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Core Equity Fund (the "Fund") is a diversified series of
John Hancock Capital Series, an open-end management investment company,
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to seek above-average total return, consisting
of capital appreciation plus current income.
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 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
instruments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more repurchase agreements, whose underlying securities are obligations
of the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund is made aware
of the dividend. Interest income on investment securities is recorded on
the accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles. Dividends paid by
the Fund with respect to each class of shares will be calculated in the
same manner, at the same time and will be in the same amount, except for
the effect of expenses that may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the Fund level and allocated daily to
each class of shares based on the relative net assets of the respective
classes. Distribution and service fees are calculated daily at the class
level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Fund. Actual results
could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has 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
maximum loan balance during the period amounted to $4,052,000. The
annualized interest rate charged during the period ranged from 5.94%
through 6.44%. At June 30, 2000, there were no outstanding borrowings.
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 securitites 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 June 30, 2000, the Fund had loaned securities
having a market value of $9,059,613 collateralized by securities in the
amount of $9,240,805.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund pays a monthly management fee to the Adviser, for a continuous
investment program equivalent, on an annual basis, to the sum of (a)
0.75% of the first $750,000,000 of the Fund's average daily net asset
value and (b) 0.70% of the Fund's average daily net asset value in
excess of $750,000,000.
The Fund and the Adviser have a sub-investment management contract with
Independence Investment Associates, Inc. (the "Sub-Adviser"), a wholly
owned indirect subsidiary of John Hancock Life Insurance Company
("JHLICo"), under which the Sub-Adviser provides the Fund with
investment research and portfolio management services. The Adviser pays
the Sub-Adviser a quarterly fee at an annual rate of 55% of the
investment management fee paid by the Fund to the Adviser for the
preceding three months. The Fund is not responsible for payment of the
Sub-Adviser's fee.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
June 30, 2000, JH Funds received net sales charges of $936,561 with
regard to sales of Class A shares. Out of this amount, $130,231 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $572,741 was paid as sales commissions to
unrelated broker-dealers and $233,589 was paid as sales commissions to
sales personnel of Signator Investors, Inc. ("Signator Investors"), a
related broker-dealer. The Adviser's indirect parent, JHLICo, is the
indirect sole shareholder 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. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses for providing distribution
related services to the Fund in connection with the sale of Class B
shares. For the period ended June 30, 2000, the CDSCs received by JH
Funds amounted to $1,500,242.
Effective May 1, 2000, all Class C retail purchases are assessed a 1.00%
up-front sales charge. For the year ended May 31, 2000, up-front sales
charges received with regard to sales of Class C shares amounted to
$68,714. Out of this amount $56,876 was paid as sales commissions to
unrelated broker-dealers and $11,838 was paid as sales commissions to
sales personnel of Signator Investors. 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 related to providing distribution related services to the
Fund in connection with the sale of Class C shares. For the period ended
June 30, 2000, the CDSCs received by JH Funds amounted to $14,740.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund
will make payments to JH Funds for distribution and service expenses, at
an annual rate not to exceed 0.30% of Class A average daily net assets
and 1.00% of Class B and Class C average daily net assets, to reimburse
JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the Conduct
Rules of the National Association of Securities Dealers. Under the
Conduct Rules, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L Brown, Ms. Maureen R. Ford and Mr. Richard S.
Scipione are directors and/or officers of the Adviser, and 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 investment 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 period ended June 30, 2000, aggregated $432,020,910 and
$529,638,143, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended June 30, 2000.
The cost of investments owned at June 30, 2000 (excluding the corporate
savings account) for federal income tax purposes was $821,836,705. Gross
unrealized appreciation and depreciation of investments aggregated
$227,096,038 and $59,475,736, respectively, resulting in net unrealized
appreciation of $167,620,302.
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