<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SPECIAL
EQUITIES
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Bayard Henry*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Michael P.DiCarlo
Senior Vice President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
James K. Ho
Senior Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ EDWARD J. BOUDREAU, JR
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY MICHAEL P. DICARLO,
CHIEF EQUITY OFFICER AND PORTFOLIO MANAGER
JOHN HANCOCK
SPECIAL EQUITIES FUND
Falling interest rates spur stocks to new highs;
growth stocks deliver earnings, appear to gain momentum
Market conditions have changed dramatically since the last time we reported
to shareholders. Interest rates, after having risen sharply for the better part
of a year, peaked around the beginning of the period in November and started
heading back down. Stocks rallied in response, although small-company growth
stocks -- the focus of the Fund's investment strategy -- tended to lag the
larger-capitalization stocks that make up the Dow Jones Industrial Average. All
this took place against a backdrop of much slower economic growth. Initial
estimates for first-quarter growth in the gross domestic product were less than
3% at an annualized rate, compared to more than 5% in the fourth quarter of
1994.
John Hancock Special Equities Fund finished the period with a positive
return, well ahead of last year's pace when performance was basically flat. For
the six months ended April 30, 1995, the Fund's total return at net asset value
was 5.71% for Class A shares, 5.32% for Class B shares and 6.05% for Class C
shares. Those returns compared favorably with the total return of 5.32% for the
average small-company growth fund tracked by Lipper Analytical Services.(1)
[PHOTO] MICHAEL P. DICARLO, PORTFOLIO MANAGER
[Caption]
"MARKET CONDITIONS HAVE CHANGED DRAMATICALLY..."
3
<PAGE> 4
John Hancock Funds -- Special Equities Fund
"HEALTH-CARE STOCKS KEPT THEIR PLACE IN THE FUND AT ABOUT 15%..."
- --------------------------------------------------------------------------------
TOP FIVE COMMON
STOCK HOLDINGS
1. AMERICA ONLINE 5.0%
2. CYPRESS SEMICONDUCTOR 3.5%
3. ADAPTEC, INC. 3.2%
4. INFINITY BROADCASTING 3.0%
5. ATMEL CORP. 2.9%
As a percentage of net assets on April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCORECARD
INVESTMENTS RECENT PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS
<S> <C> <C>
America Online [GRAPHIC] Growing subscriber base
Lincare Holdings [GRAPHIC] Beneficiary of consolidation in health care
Cobra Golf [GRAPHIC] Market ignores strong earnings growth
</TABLE>
See "Schedule of Investments." Investment holdings are subject to change.
TECHNOLOGY DOMINATES
We use a bottom-up investment strategy with John Hancock Special Equities. By
that we mean, we look for well-run companies with impressive earnings growth. We
don't worry about what sector they're in. Still, it happens that certain sectors
dominate during certain stages in the growth and development of the economy. And
that has certainly been the case lately with technology. About 35% of the Fund's
assets were invested in technology stocks at the beginning of November. By the
end of April, that percentage had risen to about 45%, even higher if we include
telecommunications under the wide umbrella of technology.
Happily, the technology stock that was the Fund's largest investment --
America Online -- was also among the Fund's best performing stocks. It was up
more than 160% during the period. America Online, a familiar name to
shareholders who have been in the Fund for a while, is the largest and fastest
growing on-line computer information service. Adaptec was another big winner for
the Fund. The company makes devices that manage the flow of information between
computers and peripheral devices, such as modems or printers. Also, we got good
results from a number of semiconductor stocks -- including Altera which was up
more than 100% for the period. Semiconductors are the guts of every new piece of
productivity-enhancing technology that comes along. And they've helped fuel
what's shaping up as the next industrial revolution.
It's impossible to talk about telecommunications these days without talking
about technology. One company that has capitalized on technological advances to
help create a fast-growing market where none existed before is Colonial Data, a
maker of devices that display the phone numbers of incoming callers. Colonial
Data was yet another technology-related stock that more than doubled during the
period.
FOCUS ON SPECIALTY RETAILERS
Many retail stocks suffered during the past six months as a brisk holiday buying
season gave way to a quiet spring. That hurt stocks such as AnnTaylor Stores. We
had better luck, however, with non-apparel specialty retailers -- the so-called
"category killers" that stayed on a fast-growth track despite lackluster trends
in consumer spending. Among the stocks that made up the Funds 18% retail stake
was PetSmart, a pet supplies supermarket; Office Depot, a discount office-supply
chain; Sunglass Hut, which sells sunglasses and nothing else; and Dollar Tree
Stores, a concept store where nearly every item costs a dollar.
4
<PAGE> 5
John Hancock Funds - Special Equities Fund
- --------------------------------------------------------------------------------
FUND PERFORMANCE
For the six months ended April 30, 1995
<TABLE>
<S> <C>
John Hancock Special Equities Fund; Class A 5.71%
John Hancock Special Equities Fund; Class B 5.32%
John Hancock Special Equities Fund; Class C 6.05%
Average small company growth fund 5.32%
</TABLE>
Total returns for John Hancock Special Equities Fund are at net asset value with
all distributions reinvested. The average small-company growth fund is tracked
by Lipper Analytical Services.(1) See following page for historical performance
information.
- --------------------------------------------------------------------------------
The Fund's most disappointing performer during the period was Cobra Golf, a
consumer products company that makes oversized golf clubs. While the company
continued to generate strong earnings growth, its stock suffered from guilt by
association with a major competitor whose performance was not as impressive. As
that misperception in the market clears up, Cobra Golf is likely to recover.
TREND TOWARD COST SAVINGS DRIVES
HEALTH-CARE STOCKS
Health-care stocks kept their place in the Fund at about 15% of total assets.
The stocks that have done well lately have been those best able to prosper in a
climate of reform. With the collapse of the Clinton Administration's
far-reaching initiative, it looks now as if reform will be accomplished in the
private sector rather than with government mandates. That creates opportunities
for managed-care providers like HMOs and home-care specialists whose focus is
cost containment. Examples include Abbey Healthcare Group, Coventry and Lincare
Holdings. Two of these have already become takeover targets as the industry
continues to move toward consolidation.
OUTLOOK
As the economy slows and large blue-chip companies, especially the more
economically-sensitive ones, have a harder time sustaining earnings growth, we
think small-company growth stocks may be in a position to outperform the broader
market in the months ahead. Currently, market sentiment toward these stocks is
largely negative. In the perverse logic of the market, negative sentiment can be
a positive factor since it suggests there may be lots of money on the sidelines,
waiting to jump in at the first hint of good news. Meanwhile, we'll keep our
focus on companies that can consistently generate above-average earnings,
knowing that if there's one thing long-term investors have been able to count on
over the years, it's this: Stock prices follow earnings. That bodes well for
companies that can deliver strong earnings growth in good economic times and
bad.
[CAPTION]
"...WE THINK SMALL-COMPANY GROWTH STOCKS MAY BE IN A POSITION TO OUTPERFORM..."
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE> 6
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Special Equities Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year, 5-year and 10-year periods were
10.68%, 22.77%, and 14.72%, respectively, and reflect payment of the maximum
sales charge of 5.0%. The average annualized total returns for Class B shares
for the 1-year period and since inception on March 1, 1993, were 10.90% and
15.23%, respectively, and reflect applicable contingent deferred sales charge
(maximum contingent deferred sales charge of 5% and declines to 0% over 6
years). The average annualized total returns for Class C shares for the 1-year
period and since inception on September 1, 1993, were 17.35% and 9.71%,
respectively. All performance data shown represent past performance and should
not be considered indicative of future performance. Returns and principal values
of Fund investments will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. For Class A shares,
different sales charge schedules were in effect prior to January 1992 and are
not reflected in the above performance information. Consult your prospectus
for more information on the risks associated with emerging growth stock
investments.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
(OR MOST RECENT TEN YEARS)
SPECIAL EQUITIES FUND: CLASS A
[CHART]
Special Equities Fund: Class B
[CHART]
Special Equities Fund: Class C
* The Standard & Poor's 500 Stock Index is an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $387,058,532)................ $532,806,188
Short-term notes (cost - $30,933,068).............. 30,933,068
Joint repurchase agreement (cost - $25,927,000).... 25,927,000
Corporate savings account.......................... 39,580
------------
589,705,836
Receivable for shares sold........................... 4,676,447
Receivable for investments sold...................... 7,035,889
Interest receivable.................................. 4,709
Dividends receivable................................. 9,250
Prepaid expenses..................................... 45,201
------------
Total Assets...................... 601,477,332
----------------------------------------------------
LIABILITIES:
Payable for shares repurchased....................... 815,495
Payable for investments purchased.................... 2,030,624
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................ 706,160
------------
Total Liabilities................. 3,552,279
----------------------------------------------------
NET ASSETS:
Capital paid-in...................................... 473,617,824
Accumulated net realized loss on investments ........ (17,678,904)
Net unrealized appreciation of investments .......... 145,747,656
Accumulated net investment loss...................... (3,761,523)
------------
Total Net Assets.................. $597,925,053
====================================================
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 - $341,682,082/20,068,952........ $ 17.03
=======================================================================
Class B - $247,065,239/14,688,858........ $ 16.82
=======================================================================
Class C - $9,177,732/534,305............. $ 17.18
=======================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($17.03 x 105.26%)............. $ 17.93
=======================================================================
</TABLE>
* 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 APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<S> <C>
Investment Income:
Interest................................. $ 992,575
Dividends ............................... 18,500
-----------
1,011,075
-----------
Expenses:
Investment management fee - Note B..... 2,113,994
Distribution/service fee - Note B
Class A............................... 460,153
Class B............................... 994,255
Transfer agent fee - Note B
Class A............................... 603,148
Class B............................... 445,023
Class C............................... 3,787
Registration and filing fees........... 44,227
Custodian fee.......................... 35,572
Printing............................... 24,848
Trustees' fees......................... 23,234
Auditing fee........................... 11,637
Legal fees............................. 6,750
Miscellaneous.......................... 5,970
-----------
Total Expenses........ 4,772,598
-----------------------------------------------------
Net Investment Loss... (3,761,523)
-----------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold.... 8,341,236
Change in net unrealized appreciation/depreciation
of investments......................... 24,616,718
-----------
Net Realized and Unrealized
Gain on Investments... 32,957,954
-----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $29,196,431
=====================================================
</TABLE>
See notes to financial statements.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss................................................................... $ (3,761,523) $ (7,073,460)
Net realized gain (loss) on investments sold.......................................... 8,341,236 (20,708,728)
Change in net unrealized appreciation/depreciation of investments..................... 24,616,718 29,140,783
------------ ------------
Net Increase in Net Assets Resulting from Operations................................ 29,196,431 1,358,595
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*................................................... 59,001,740 50,457,201
------------ ------------
NET ASSETS:
Beginning of period................................................................... 509,726,882 457,911,086
------------ ------------
End of period (including accumulated net investment loss of $3,761,523
and none, respectively) $597,925,053 $509,726,882
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
---------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold.................................................. 8,068,392 $131,950,619 15,399,407 $233,394,230
Less shares repurchased...................................... (7,286,758) (119,057,046) (14,507,334) (219,847,278)
---------- ------------ ------------ ------------
Net increase................................................. 781,634 $ 12,893,573 892,073 $ 13,546,952
========== ============ ============ ============
CLASS B
Shares sold.................................................. 3,814,807 $ 63,022,736 4,220,733 $ 63,417,649
Less shares repurchased...................................... (1,147,567) (18,482,766) (2,043,273) (30,587,828)
---------- ------------ ----------- ------------
Net increase................................................. 2,667,240 $ 44,539,970 2,177,460 $ 32,829,821
========== ============ =========== ============
CLASS C
Shares sold.................................................. 137,035 $ 2,251,048 318,075 $ 4,881,336
Less shares repurchased...................................... (42,331) (682,851) (54,405) (800,908)
---------- ------------ ----------- ------------
Net increase................................................. 94,704 $ 1,568,197 263,670 $ 4,080,428
========== ============ =========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS YEAR. 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.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
--------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 16.11 $ 16.13 $ 10.99 $ 9.71 $ 4.97 $ 6.38
------- ------- -------- -------- -------- --------
Net Investment Loss (a) ........................ (0.09)(b) (0.21)(b) (0.20)(b) (0.19)(b) (0.10) (0.12)
Net Realized and Unrealized Gain (Loss)
on Investments ............................... 1.01 0.19 5.43 2.14 4.84 (1.27)
------- ------- -------- -------- -------- --------
Total from Investment Operations .............. 0.92 (0.02) 5.23 1.95 4.74 (1.39)
------- ------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ........... -- -- -- -- -- (0.02)
Distributions from Net Realized Gain on
Investments Sold ............................. -- -- (0.09) (0.67) -- --
------- ------- -------- -------- -------- --------
Total Distributions ........................... -- -- 0.09) (0.67) -- (0.02)
------- ------- -------- -------- -------- --------
Net Asset Value, End of Period ................. $ 17.03 $ 16.11 $ 16.13 $ 10.99 $ 9.71 $ 4.97
======= ======= ======== ======== ======== ========
Total Investment Return at Net Asset
Value (a) .................................... 5.71% (0.12%) 47.83% 20.25% 95.37% (21.89%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ..... $341,682 $310,625 $296,793 $ 44,665 $ 19,713 $ 8,166
Ratio of Expenses to Average Net Assets (a) ... 1.58%* 1.62% 1.84% 2.24% 2.75% 2.63%
Ratio of Net Investment Loss to Average Net
Assets (a) .................................. (1.18%)* (1.40%) (1.49%) (1.91%) (2.12%) (1.58%)
Portfolio Turnover Rate ....................... 52% 66% 33% 114% 163% 113%
CLASS B (c)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .......... $ 15.97 $ 16.08 $ 12.30
------- ------- --------
Net Investment Loss ........................... (0.15)(b) (0.30)(b) (0.18)(b)
Net Realized and Unrealized Gain on
Investments ................................. 1.00 0.19 3.96
------- ------- --------
Total from Investment Operations ............. 0.85 (0.11) 3.78
------- ------- --------
Net Asset Value, End of Period ................ $ 16.82 $ 15.97 $ 16.08
======= ======= ========
Total Investment Return at Net Asset Value .... 5.32% (0.68%) 30.73%(d)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ..... $247,065 $191,979 $158,281
Ratio of Expenses to Average Net Assets ....... 2.33%* 2.25% 2.34%*
Ratio of Net Investment Loss to Average
Net Assets .................................. (1.94)* (2.02%) (2.03%)*
Portfolio Turnover Rate ....................... 52% 66% 33%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
FINANCIAL HIGHLIGHTS (continued)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
-----------------------
(UNAUDITED) 1994 1993
-------- -------- -------
<S> <C> <C> <C>
CLASS C (d)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............. $ 16.20 $ 16.14 $ 14.90
------- ------- -------
Net Investment Loss .............................. (0.05)(b) (0.13)(b) (0.03)(b)
Net Realized and Unrealized Gain on Investments .. 1.03 0.19 1.27
------- ------- -------
Total from Investment Operations ................ 0.98 0.06 1.24
------- ------- -------
Net Asset Value, End of Period ................... $ 17.18 $ 16.20 $ 16.14
======= =======
Total Investment Return at Net Asset Value ....... 6.05%(d) 0.37% 8.32%(d)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ........ $ 9,178 $ 7,123 $ 2,838
Ratio of Expenses to Average Net Assets .......... 0.98%* 1.11% 1.45%*
Ratio of Net Investment Loss to Average
Net Assets (0.59%)* (0.89%) (1.35%)*
Portfolio Turnover Rate .......................... 52% 66% 33%
</TABLE>
* On an annualized basis.
(a) Reflects expense limitation in effect during the years ended October 31,
1990 through 1991 (see Note B). As a result of such limitations, expenses of
the Fund for the years ended October 31, 1991 and 1990 reflect reductions of
$.002 and $.02, respectively. Absent of such limitations, for the years
ended October 31, 1991 and 1990 the ratio of net expenses would have been
2.79% and 2.95%, respectively, and the ratio of net investment loss to
average net assets would have been (2.16%) and (1.90%), respectively.
Without the limitation, total investment return would be lower.
(b) On average month end shares outstanding.
(c) Class B shares commenced operations on March 1, 1993.
(d) Class C shares commenced operations on September 1, 1993.
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: INCOME, EXPENSES, DISTRIBUTIONS AND GAINS
(LOSSES) OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A SHARE HAS
CHANGED SINCE THE END OF THE PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
COMMON STOCKS
APPLIANCES - HOUSEHOLD (0.78%)
Fedders Corp. **.......................... 475,000 $ 3,325,000
Fedders Corp. (Class A) **................ 237,500 1,365,625
-----------
4,690,625
-----------
BROADCASTING (3.64%)
Infinity Broadcasting Corp.
(Class A) **............................ 425,000 18,115,625
Renaissance Communications Corp.**........ 131,800* 3,624,500
-----------
21,740,125
-----------
COMPUTERS (24.75%)
Adaptec, Inc. **.......................... 600,000 19,200,000
American Online, Inc. **.................. 650,000 30,143,750
Atria Software, Inc.**.................... 250,000* 10,765,625
BMC Software, Inc. **..................... 200,000 12,450,000
Cognos, Inc.**............................ 520,000* 12,610,000
Diamond Multimedia Systems, Inc.** ....... 50,000* 1,000,000
Electronics for Imaging, Inc. **.......... 200,000 9,100,000
Macromedia, Inc.**........................ 250,000* 8,375,000
Medic Computer Systems, Inc.**............ 192,500* 8,470,000
MicroTouch Systems, Inc. **............... 70,000 2,555,000
Seagate Technology, Inc. **............... 300,000 9,562,500
Softkey International, Inc. **............ 600,000 14,700,000
Systemsoft Corp.**........................ 300,000* 3,900,000
Wind River Systems**...................... 300,000* 3,675,000
Wonderware Corp. **....................... 45,000 1,490,625
-----------
147,997,500
-----------
ELECTRONICS (17.09%)
Altera Corp. **........................... 150,000 12,131,250
Atmel Corp. **............................ 400,000 17,600,000
Cypress Semiconductor Corp. **............ 700,000 21,175,000
Emulex Corp.**............................ 300,000* 5,850,000
FSI International, Inc.**................. 200,000* 9,300,000
Linear Technology Corp.................... 100,000 5,975,000
Novellus Systems, Inc. **................. 250,000 15,187,500
Ultratech Stepper, Inc.**................. 50,000* 2,800,000
Vicor Corp.**............................. 161,000* 6,198,500
X-Rite, Inc............................... 90,000 1,755,000
Xilinx, Inc. **........................... 55,000 4,221,250
-----------
102,193,500
-----------
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
SPECIAL EQUITIES FUND ON APRIL 30, 1995. 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.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (1.10%)
American Business Information, Inc.**..... 207,500* $ 4,876,250
RTW, Inc.**............................... 115,000* 1,667,500
-----------
6,543,750
-----------
HEALTHCARE (10.67%)
Abbey Healthcare Group, Inc.**............ 320,000* 12,720,000
Coventry Corp.**.......................... 650,000 15,275,000
Health Management, Inc.**................. 170,000* 3,081,250
Health Management Systems, Inc. **........ 225,000 5,175,000
Healthsource, Inc. **..................... 381,200 13,675,550
Lincare Holdings, Inc. **................. 450,000 13,893,750
-----------
63,820,550
-----------
LEISURE & RECREATION (2.33%)
Cobra Golf, Inc. **....................... 640,000 13,920,000
-----------
MEDICAL/DENTAL (4.65%)
Gulf South Medical Supply, Inc.**+........ 350,000* 14,700,000
Hologic, Inc.**........................... 115,000 1,437,500
I-Stat Corp.**............................ 500,000* 11,687,500
-----------
27,825,000
-----------
OFFICE EQUIPMENT & SUPPLIES (1.52%)
Office Depot, Inc. **..................... 102,100 2,322,775
Viking Office Products, Inc. **........... 245,000 6,737,500
-----------
9,060,275
-----------
OIL & GAS - EXPLORATION & PRODUCTION (2.66%)
Benton Oil & Gas Co.**.................... 300,000* 3,693,750
Petroleum Geo-Services A.S.,
American Depositary Receipts (ADR)**.... 160,000* 4,370,000
Pride Petroleum Services, Inc.**.......... 479,100* 3,832,800
Seitel, Inc.**............................ 125,000* 4,000,000
-----------
15,896,550
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
POLLUTION CONTROL (0.67%)
Tetra Technologies, Inc.**.............. 300,000* $ 4,012,500
----------
RETAIL (8.56%)
CUC International, Inc.**............... 300,000* 12,225,000
Dollar Tree Stores, Inc.**.............. 180,000* 4,050,000
PetSmart, Inc.**........................ 280,000 9,345,000
Rock Bottom Restaurants, Inc.**......... 240,000* 4,860,000
Seattle Filmworks, Inc.**............... 270,000* 4,455,000
Sunglass Hut International, Inc. **..... 567,000 16,265,813
-----------
51,200,813
-----------
TELECOMMUNICATIONS (8.00%)
Brite Voice Systems, Inc.**............. 200,000 3,650,000
Cidco, Inc. **.......................... 410,000 14,760,000
Colonial Data Technologies Corp. **..... 100,000 1,975,000
EIS International, Inc.**............... 250,000* 4,125,000
Global Village Communication, Inc.**.... 345,000* 4,657,500
Lin Television Corp.**.................. 275,000* 9,900,000
Spectrian Corp. **...................... 300,000* 8,737,500
-----------
47,805,000
-----------
TEXTILES (2.69%)
Tommy Hilfiger Corp. **................. 700,000 16,100,000
-----------
TOTAL COMMON STOCKS
(Cost $ 387,058,532)....... (89.11%) 532,806,188
------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (4.34%)
Investment in a joint repurchase
agreement transaction with Bankers
Trust Security Corp. dated 04-28-95,
due 05-01-95 (secured by US
Treasury Bonds, 10.750% due
08-15-05 and US Treasury Note,
6.875% due 10-31-96) - Note A............ 5.93% $25,927 $ 25,927,000
------------
SHORT-TERM NOTES (5.17%)
Countrywide Funding Corp.,
due 5-09-95............................ 6.00 12,000 11,980,000
Merrill Lynch & Co., Inc.,
due 5-15-95............................ 5.97 12,000 11,968,160
Sears Roebuck Acceptance
Corp., due 5-12-95..................... 5.97 7,000 6,984,908
------------
30,933,068
------------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%.................... 39,580
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $ 56,853,758)........ (9.52%) 56,899,648
------- ------------
TOTAL INVESTMENTS....... (98.63%) $589,705,836
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Non-income producing security.
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at April 30, 1995 were as
follows:
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
--------- ---- ---------------
<S> <C> <C>
Gulf South Medical Supply, Inc. $13,752,500 --
</TABLE>
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Special Equities Fund (the "Fund") is a diversified open-end
management investment company, registered under the Investment Company Act of
1940.
The Trustees have authorized the issuance of three classes of the Fund,
designated as Class A, Class B, and Class C. The shares of each class represent
an interest in the same portfolio of investments of the Fund and have equal
rights to voting, redemption, 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/service expenses under the terms of a
distribution plan, have exclusive voting rights regarding such distribution
plan. The Fund was reopened to new shareholders on February 15, 1995.
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,
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.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $26,020,140 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforwards expire as follows:
October 31, 2001 -- $5,311,412, and October 31, 2002 -- $20,708,728.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis. The Fund records all distributions payable to
shareholders from net investment income and realized gains on the ex-dividend
date. Such distributions are determined in conformity with income tax
regulations. Dividends paid by the Fund, if any, 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 as explained previously.
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/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.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES
AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of: (a) 0.85% of the first $250,000,000 of the
Fund's average daily net assets and (b) 0.80% of the Fund's average daily net
asset value in excess of $250,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1, 1995, JH
Funds was known as John Hancock Broker Distribution Services, Inc. For the
period ended April 30, 1995, JH Funds received net sales charges of $1,263,408
with regard to sales of Class A shares. Out of this amount, $168,975 was
retained and used for printing prospectuses, advertising, sales literature and
other purposes, $846,295 was paid as sales commissions to unrelated
broker-dealers and $248,138 was paid as sales commissions to personnel of John
Hancock Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). Distributors is a
wholly-owned subsidiary of The Berkeley Financial Group. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include Tucker Anthony and Sutro, which are
broker-dealers.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% (4.0% on purchases made prior to January 1, 1994) of the
lesser of the current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSC are paid to
JH Funds and are used in whole or in part to defray its expenses related to
providing distribution related services to the Fund in connection with the sale
of Class B shares. For the period ended April 30, 1995 contingent deferred sales
charges paid to JH Funds amounted to $352,115.
In addition, to compensate 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 and Class B 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 which, in total, will not exceed on an annual
basis 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse JH Funds for its distribution/service costs. Up to a
maximum of 0.25% of such payments may be service fees as defined by the amended
Rules of Fair Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid a monthly transfer agent fee equivalent,
on an annual basis, to 0.40%, 0.42% and 0.10% of the average daily net asset
value, attributable to Class A,Class B and Class C shares of the Fund,
respectively, plus out of pocket expenses incurred by Fund Services on behalf of
the Fund for proxy mailings.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Equities Fund
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors and/or
officers of the Adviser, and/or its affiliates as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund. Effective with
the fees paid for 1995, 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 will make investments into other John
Hancock funds, as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
will be recorded on the Fund's books as an other asset. The deferred
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $277,574,028 and
$256,161,080, respectively.
The cost of investments owned at April 30, 1995 for Federal income tax
purposes was $443,918,600. Gross unrealized appreciation and depreciation of
investments aggregated $148,889,913, and $3,142,257, respectively, resulting in
net unrealized appreciation of $145,747,656.
15
<PAGE> 16
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- --------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
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accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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