- --------------------------------------------------------------------------------
FINAL REPORT
SPECIAL EQUITIES
FUND
John Hancock Funds
December 10, 1999
<PAGE>
John Hancock Funds -Special Equities Fund
Trustees
Dennis S. Aronowitz *
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt *
Richard S. Scipione
* Members of the Audit Committee
Officers
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President,Chief
Operating Officer and
Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and
Compliance Officer
Custodian
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-5072
Transfer Agent
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Legal Counsel
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
<PAGE>
John Hancock Funds - Special Equities Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 10, 1999 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $ 476,694,539 ) $708,957,967
Joint repurchase agreement (cost - $ 71,545,000 ) 71,545,000
Corporate savings account 470
-----------------
780,503,437
Receivable for shares sold 18,004
Dividends receivable 17,767
Interest receivable 53,016
Other assets 87,176
-----------------
Total Assets 780,679,400
---------------------------------------------
Liabilities:
Payable for shares repurchased 140,127
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 852,284
Accounts payable and accrued expenses 370,409
-----------------
Total Liabilities 1,362,820
---------------------------------------------
Net Assets:
Capital paid-in 547,308,555
Accumulated net realized loss on investments (194,517)
Net unrealized appreciation of investments 232,263,428
Accumulated net investment loss (60,886)
=================
Net Assets $779,316,580
=============================================
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 - $373,954,348 14,884,568 $25.12
=============================================================================================================================
Class B - $388,850,706 16,417,326 $23.69
=============================================================================================================================
Class C - $90,874 3,836 $23.69
=============================================================================================================================
Class Y - $16,420,652 624,246 $26.30
=============================================================================================================================
Maximum Offering Price Per Share*
Class A - ( $25.12 x105.26%) $26.44
=============================================================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
John Hancock Funds - Special Equities Fund
Statement of Operations
For the Period November 1, 1999 to December 10, 1999 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividends $ 125,963
Interest 585,413
----------------------------
711,376
----------------------------
Expenses:
Investment management fee - Note B 647,274
Distribution and service fee - Note B
Class A 113,692
Class B 397,221
Class C 86
Transfer agent fee - Note B 350,900
Custodian fee 13,553
Accounting and legal services fee - Note B 16,490
Registration and filing fees 9,925
Trustees' fees 1,722
----------------------------
Total Expenses 1,550,863
-----------------------------------------------------------------------------
Net Investment Loss (839,487)
-----------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 72,117,158
Change in net unrealized appreciation/depreciation
of investments 69,642,702
----------------------------
Net Realized and Unrealized Gain on
Investments 141,759,860
-----------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $140,920,373
=============================================================================
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
John Hancock Funds - Special Equities Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
NOVEMBER 1, 1999 TO
YEAR ENDED DECEMBER 10, 1999
OCTOBER 31, 1999 (UNAUDITED)
Increase (Decrease) in Net Assets: ----------------- ----------------------
From Operations:
Net investment loss ($14,209,441) ($839,487)
Net realized gain on investments sold and financial futures contracts 183,454,406 72,117,158
Change in net unrealized appreciation/depreciation of investments 51,251,144 69,642,702
------------------ -----------------------
Net Increase in Net Assets Resulting from Operations 220,496,109 140,920,373
Distributions to Shareholders: ------------------ -----------------------
Distributions from net realized gain on investments sold
Class A - ($0.3730 and $6.4820 per share, respectively) (8,117,761) (77,364,356)
Class B - ($0.3730 and $6.4820 per share, respectively) (8,822,320) (84,762,594)
Class C** - (none and $6.4820 per share, respectively) - (19,476)
Class Y - ($0.3730 and $6.4820 per share, respectively) (583,124) (3,236,742)
------------------------------------------
Total Distributions to Shareholders (17,523,205) (165,383,168)
------------------ -----------------------
From Fund Share Transactions - Net: * (486,308,214) 131,933,417
------------------ -----------------------
Net Assets:
Beginning of period 955,181,268 671,845,958
End of period (including accumulated net investment loss ------------------ -----------------------
of $60,886 and $60,886, respectively) $671,845,958 $779,316,580
================== =======================
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
* Analysis of Fund Share Transactions:
FOR THE PERIOD FROM
NOVEMBER 1, 1999 TO
YEAR ENDED DECEMBER 10, 1999
OCTOBER 31, 1999 (UNAUDITED)
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ---------- ---------- ------------
CLASS A
Shares sold 55,124,810 $1,238,433,262 1,074,553 $29,874,677
Shares issued to shareholders in reinvestment of distributions 327,026 6,662,070 2,788,412 69,208,379
------------ -------------- ----------- ------------
55,451,836 1,245,095,332 3,862,965 99,083,056
Less shares repurchased (65,584,449)(1,475,529,331 (1,301,761) (36,914,608)
------------ -------------- ----------- ------------
Net increase (decrease) (10,132,613) ($230,433,999) 2,561,204 $62,168,448
============ ============== =========== ============
CLASS B
Shares sold 1,546,196 $33,605,852 568,131 $13,307,250
Shares issued to shareholders in reinvestment of distributions 348,167 6,821,932 2,860,326 66,931,621
------------ -------------- ----------- ------------
1,894,363 40,427,784 3,428,457 80,238,871
Less shares repurchased (12,078,839) (263,898,001) (527,353) (14,187,950)
------------ -------------- ----------- ------------
Net increase (decrease) (10,184,476) ($223,470,217) 2,901,104 $66,050,921
============ ============== =========== ============
CLASS C **
Shares sold 2,645 $58,121 762 $19,621
Shares issued to shareholders in reinvestment of distributions - - 574 13,439
------------ -------------- ----------- ------------
2,645 58,121 1,336 33,060
Less shares repurchased (143) (3,402) (2) (43)
------------ -------------- ----------- ------------
Net increase 2,502 $54,719 1,334 $33,017
============ ============== =========== ============
CLASS Y
Shares sold 132,438 $3,098,000 30,015 $906,529
Shares issued to shareholders in reinvestment of distributions 27,910 583,047 124,538 3,236,742
------------ -------------- ----------- ------------
160,348 3,681,047 154,553 4,143,271
Less shares repurchased (1,619,660) (36,139,764) (16,108) (462,240)
------------ -------------- ----------- ------------
Net increase (decrease) (1,459,312) ($32,458,717) 138,445 $3,681,031
============ ============== =========== ============
** Class C shares commenced operations on March 1, 1999.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 as
follows:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FROM NOVEMBER
1, 1999 TO
YEAR ENDED OCTOBER 31, DECEMBER
---------------------------------------------------- 10, 1999
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------ ------ ------ ------ --------------
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 16.11 $ 22.15 $ 24.53 $ 26.32 $ 20.21 $ 26.10
------- ------- ------- ------- ------- -------
Net Investment Loss (1) (0.18) (0.22) (0.29) (0.27) (0.33) (0.02)
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 6.22 3.06 2.08 (5.84) 6.59 5.52
------- ------- ------- ------- ------- -------
Total from Investment Operations 6.04 2.84 1.79 (6.11) 6.26 5.50
------- ------- ------- ------- ------- -------
Less Distribution:
Distributions from Net Realized Gains on Investments Sold - (0.46) - - (0.37) (6.48)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 22.15 $ 24.53 $ 26.32 $ 20.21 $ 26.10 $ 25.12
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 37.49% 12.96% 7.30% -23.21% 31.51% 21.38% (4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $555,655 $972,312 $807,371 $453,919 $321,671 $373,954
Ratio of Expenses to Average Net Assets 1.48% 1.42% 1.43% 1.41% 1.71% 1.62% (5)
Ratio of Net Investment Loss to Average Net Assets (0.97%) (0.89%) (1.18%) (1.09%) (1.50%) (0.73%)(5)
Portfolio Turnover Rate 82% 59% 41% 107% 136% 14%
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 as
follows:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FROM NOVEMBER
1, 1999 TO
YEAR ENDED OCTOBER 31, DECEMBER
---------------------------------------------------- 10, 1999
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------ ------ ------ ------ --------------
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 15.97 $ 21.81 $ 23.96 $ 25.52 $ 19.45 $ 24.93
------- ------- ------- ------- ------- -------
Net Investment Loss (1) (0.31) (0.40) (0.46) (0.45) (0.47) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 6.15 3.01 2.02 (5.62) 6.32 5.28
------- ------- ------- ------- ------- -------
Total from Investment Operations 5.84 2.61 1.56 (6.07) 5.85 5.24
------- ------- ------- ------- ------- -------
Less Distribution:
Distributions from Net Realized Gains on Investments Sold - (0.46) - - (0.37) (6.48)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 21.81 $ 23.96 $ 25.52 $ 19.45 $ 24.93 $ 23.69
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 36.57% 12.09% 6.51% -23.79% 30.62% 21.35% (4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $454,934 $956,374 $951,449 $460,971 $336,979 $388,851
Ratio of Expenses to Average Net Assets 2.20% 2.16% 2.19% 2.16% 2.38% 2.32% (5)
Ratio of Net Investment Loss to Average Net Assets (1.69%) (1.65%) (1.95%) (1.84%) (2.16%) (1.47%)(5)
Portfolio Turnover Rate 82% 59% 41% 107% 136% 14%
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 as
follows:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
MARCH 1, 1999 NOVEMBER 1, 1999
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 10, 1999
TO OCTOBER 31, 1999 (UNAUDITED)
---------------------------- ---------------------
CLASS C (3)
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 20.92 $ 24.94
---------------------------- ---------------------
Net Investment Loss (1) (0.35) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 4.37 5.27
============================ =====================
Total from Investment Operations 4.02 5.23
---------------------------- ---------------------
Less Distribution:
Distributions from Net Realized Gains on Investments Sold - (6.48)
---------------------------- ---------------------
Net Asset Value, End of Period $ 24.94 $ 23.69
============================ =====================
Total Investment Return at Net Asset Value (2) 19.22% (4) 21.30% (4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $62 $91
Ratio of Expenses to Average Net Assets 2.39% (5) 2.32% (5)
Ratio of Net Investment Loss to Average Net Assets (2.25%)(5) (1.47%)(5)
Portfolio Turnover Rate 136% 14%
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 as
follows:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FROM NOVEMBER
1, 1999 TO
YEAR ENDED OCTOBER 31, DECEMBER
---------------------------------------------------- 10, 1999
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------ ------ ------ ------ --------------
CLASS Y (3)
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 16.20 $ 22.40 $ 24.91 $ 26.86 $ 20.71 $ 27.04
------- ------- ------- ------- ------- -------
Net Investment Loss (1) (0.09) (0.14) (0.18) (0.17) (0.18) 0.17
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 6.29 3.11 2.13 (5.98) 6.88 5.57
------- ------- ------- ------- ------- -------
Total from Investment Operations 6.20 2.97 1.95 (6.15) 6.70 5.74
------- ------- ------- ------- ------- -------
Less Distribution:
Distributions from Net Realized Gains on Investments Sold - (0.46) - - (0.37) (6.48)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 22.40 $ 24.91 $ 26.86 $ 20.17 $ 27.04 $ 26.30
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 38.27% 13.40% 7.83% -22.90% 32.90% 21.52% (4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 13,701 $ 67,498 $104,476 $ 40,291 $ 13,134 $ 16,421
Ratio of Expenses to Average Net Assets 1.01% 1.03% 0.97% 0.97% 1.02% 0.97% (5)
Ratio of Net Investment Loss to Average Net Assets -0.50% -0.54% -0.73% -0.66% -0.78% 1.29% (5)
Portfolio Turnover Rate 82% 59% 41% 107% 136% 14%
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) Effective June 1, 1998, Class C shares were renamed Class Y shares. The Fund
issued new Class C shares on March 1, 1999.
(4) Not annualized.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
John Hancock Funds - Special Equities Fund
Schedule of Investments
December 10, 1999 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -------
COMMON STOCK
Advertising (2.29%)
Catalina Marketing Corp.* 80,000 $9,055,000
Getty Images, Inc.* 200,000 8,200,000
Lifeminders.com, Inc.* 17,000 607,750
----------------
17,862,750
----------------
Automobile / Trucks (0.48%)
Monaco Coach Corp.* 171,100 3,721,425
----------------
Broker Services (0.46%)
Web Street, Inc.* 225,500 3,579,812
----------------
Business Services - Misc (6.13%)
Coinstar, Inc.* 548,100 5,755,050
Exactis.com, Inc.* 20,400 569,925
InsWeb Corp.* 151,700 3,944,200
MedQuist, Inc.* 260,000 7,670,000
Modem Media . Poppe Tyson, Inc.* 56,900 3,883,425
Multex.com, Inc.* 57,200 2,044,900
NCO Group, Inc.* 92,500 2,907,969
Profit Recovery Group International, Inc. (The)* 275,000 10,432,812
Quanta Services, Inc.* 270,000 8,555,625
S1 Corp.* 31,700 2,052,575
----------------
47,816,481
----------------
Chemicals (0.10%)
Symyx Technologies, Inc.* 26,800 757,100
----------------
Computers (28.51%)
Accrue Software, Inc.* 69,200 3,183,200
Advantage Learning Systems, Inc.* 202,000 4,633,375
Advent Software, Inc.* 214,050 12,816,244
Apex, Inc. 280,000 7,840,000
Aspen Technology, Inc.* 350,000 9,581,250
Be Free, Inc.* 148,100 10,422,537
BindView Development Corp.* 380,000 16,915,928
Broadbase Software, Inc.* 93,100 9,030,700
Clarus Corp.* 131,400 8,146,800
Cognizant Technology Solutions Corp.* 80,000 6,300,000
Data Return Corp.* 200,000 6,537,500
Dendrite International, Inc.* 130,000 3,656,250
Digex, Inc.* 116,100 5,863,050
FactSet Research Systems, Inc. 49,000 3,246,250
Fundtech Ltd.* (Israel) 200,000 4,300,000
iManage, Inc.* 49,900 1,690,362
JDA Software Group, Inc.* 70,000 1,312,500
Maxtor Corp.* 1,100,000 6,015,680
<PAGE>
John Hancock Funds - Special Equities Fund
Schedule of Investments
December 10, 1999 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -------
Media Metrix, Inc.* 128,950 $4,835,625
Mediaplex, Inc.* 41,500 2,176,156
Medscape, Inc.* 157,300 1,681,144
Micromuse, Inc.* 52,200 7,082,888
National Computer Systems, Inc. 290,000 10,893,125
Network Solutions, Inc.* 40,700 8,903,125
Orckit Communications Ltd.* (Israel) 300,900 10,982,850
Packeteer, Inc. * 52,900 3,974,112
Paradyne Networks, Inc.* 147,100 4,339,450
pcOrder.com, Inc.* 89,300 4,660,344
SCM Microsystems, Inc.* 61,100 3,608,719
Software.com, Inc.* 39,800 4,303,375
SportsLine USA, Inc.* 120,100 5,944,950
VerticalNet, Inc.* 46,300 5,784,606
Visual Networks, Inc.* 27,100 1,941,038
WebTrends Corp.* 82,800 7,276,050
Whittman-Hart, Inc.* 155,000 12,283,750
--------------
222,162,933
--------------
Electronics (7.28%)
Alpha Industries, Inc.* 110,000 7,012,500
DuPont Photomasks, Inc.* 50,000 3,456,250
Micrel, Inc.* 160,000 7,800,000
Novellus Systems, Inc.* 60,000 5,013,750
PLX Technology, Inc.* 370,000 6,845,000
PMC-Sierra, Inc.* (Canada) 59,000 6,969,375
Powerwave Technologies, Inc.* 135,000 8,673,750
QLogic Corp.* 62,000 7,994,125
Rudolph Technologies, Inc.* 21,600 639,900
Sage, Inc.* 65,000 1,616,875
Virata Corp.* 18,450 720,703
--------------
56,742,228
--------------
Finance (2.73%)
Medallion Financial Corp. 330,300 6,564,712
Metris Cos., Inc. 250,000 9,500,000
NextCard, Inc.* 145,700 5,245,200
--------------
21,309,912
--------------
Food (0.56%)
American Italian Pasta Co. (Class A)* 160,000 4,370,000
--------------
Leisure (2.37%)
Cinar Films, Inc. (Class B)* (Canada) 290,000 5,963,125
Premier Parks, Inc.* 330,000 8,559,375
Steiner Leisure Ltd.* 255,000 3,920,625
--------------
18,443,125
--------------
<PAGE>
John Hancock Funds - Special Equities Fund
Schedule of Investments
December 10, 1999 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -------
Machinery (0.79%)
CVC, Inc.* 79,900 $1,018,725
Terex Corp.* 180,000 5,107,500
--------------
6,126,225
--------------
Media (10.63%)
Acme Communications, Inc.* 144,600 5,305,012
Citadel Communications Corp.* 219,100 11,420,588
Cumulus Media, Inc. (Class A)* 255,000 10,694,062
Network Event Theater, Inc.* 240,000 6,900,000
Pegasus Communications Corp.* 165,500 13,581,344
Radio One, Inc.* 133,350 10,584,656
Radio Unica Corp.* 133,800 3,069,038
TiVo, Inc.* 88,900 3,305,969
Westwood One, Inc.* 205,000 11,685,000
Wink Communications, Inc.* 152,700 6,270,244
--------------
82,815,913
--------------
Medical (4.69%)
Alkermes, Inc.* 225,000 9,281,250
Alpharma, Inc. (Class A)* 200,200 5,780,775
Cytyc Corp.* 50,000 2,225,000
Gilead Sciences, Inc.* 49,200 1,918,800
IDEC Pharmaceuticals Corp.* 27,700 3,292,838
King Pharmaceuticals, Inc.* 200,000 11,500,000
Triangle Pharmaceuticals, Inc.* 211,100 2,533,200
--------------
36,531,863
--------------
Metal (1.24%)
Maverick Tube Corp.* 467,000 9,661,063
--------------
Oil & Gas (1.48%)
Pride International, Inc.* 410,000 4,894,375
Stone Energy Corp.* 190,000 6,673,750
--------------
11,568,125
--------------
Retail (8.05%)
99 Cents Only Stores* 230,000 7,360,000
Brightpoint, Inc.* 588,800 7,212,800
CSK Auto Corp.* 210,000 3,373,125
Chemdex Corp.* 117,900 10,898,381
Cost Plus, Inc.* 150,000 5,812,500
Linens 'n Things, Inc.* 220,000 5,500,000
Pacific Sunwear of California, Inc.* 325,000 10,359,375
ScanSource, Inc.* 129,800 4,981,075
Wild Oats Markets, Inc.* 330,000 7,260,000
--------------
62,757,256
--------------
<PAGE>
John Hancock Funds - Special Equities Fund
Schedule of Investments
December 10, 1999 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -------
Telecommunications (10.36%)
AirGate PCS, Inc.* 126,900 $5,805,675
Allegiance Telecom, Inc.* 80,000 5,475,000
CoreComm Ltd.* 118,400 5,772,000
Crown Castle International Corp.* 400,700 9,616,800
Efficient Networks, Inc.* 100,300 8,237,138
NEXTLINK Communications, Inc. (Class A)* 80,000 5,130,000
Pinnacle Holdings, Inc.* 74,500 2,574,906
Powertel, Inc.* 89,700 8,123,456
RF Micro Devices, Inc.* 80,000 5,455,000
Rural Cellular Corp. (Class A)* 89,100 8,475,638
Terayon Communication Systems, Inc.* 167,600 10,935,900
XM Satellite Radio Holdings, Inc.* 213,500 5,124,000
------------
80,725,513
------------
Transport (2.82%)
Expeditors International of Washington, Inc. 226,336 9,308,068
Forward Air Corp.* 381,900 12,698,175
------------
22,006,243
------------
TOTAL COMMON STOCK
(Cost $476,694,539) (90.97%) 708,957,967
-------- ------------
INTEREST PAR VALUE
ISSUER DESCRIPTION RATE (000s OMITTED)
- ------------------ -------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.18%)
Investment in a joint repurchase agreement transaction
with Lehman Brothers Holdings, Inc. - Dated 12-10-99
due 12-13-99 (Secured by U.S. Treasury Bonds 5.25%
thru 8.75% due 05-15-20 thru 11-15-28) - Note A 5.530% $71,545 71,545,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.30% 470
------------
TOTAL SHORT-TERM INVESTMENTS. (9.18%) 71,545,470
--------- ------------
TOTAL INVESTMENTS (100.15%) 780,503,437
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.15%) (1,186,857)
--------- ------------
TOTAL NET ASSETS (100.00%) $779,316,580
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
<PAGE>
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Special Equities Fund (the "Fund") was a diversified open-end
management investment company registered under the Investment Company Act of
1940. The investment objective of the Fund was to seek growth of capital by
investing in a diversified portfolio of equity securities consisting primarily
of emerging growth companies and companies in "special" situations.
The Trustees had authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B, Class C and Class Y shares. The
Fund issued Class C shares on March 1, 1999. The shares of each class
represented an interest in the same portfolio of investments of the Fund and had
equal rights to voting, redemptions, dividends and liquidation, except that
certain expenses, subject to the approval of the Trustees, may have been 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 bore distribution and service expenses under terms
of a distribution plan had exclusive voting rights to that distribution plan.
On December 6, 1999, shareholders approved a vote on a proposed merger
between the Fund and the John Hancock Small Cap Growth Fund ("Small Cap Growth
Fund"). The reorganization provides for a transfer of substantially all the
assets and liabilities of the Fund to the Small Cap Growth Fund in exchange
solely for shares of beneficial interest of Small Cap Growth Fund. After the
transaction and as of the close of business on December 10, 1999, the Fund will
be terminated. The financial statements presented herein reflect the position of
the Fund prior to the exchange of net assets and termination of the Fund.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio were 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
were 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., could have participated in a joint repurchase agreement transaction.
Aggregate cash balances were 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 received delivery of the
underlying securities for the joint account on the Fund's behalf. The Adviser
was responsible for ensuring that the agreement was fully collateralized at all
times.
<PAGE>
INVESTMENT TRANSACTIONS Investment transactions were recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments were determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualified as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and was
not subject to federal income tax on taxable income which was distributed to
shareholders. Therefore, no federal income tax provision was required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
was recorded on the ex-dividend date. Interest income on investment securities
was recorded on the accrual basis.
The Fund recorded all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions were
determined in conformity with income tax regulations, which could have differed
from generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares were calculated in the same manner, at the same
time and were in the same amount, except for the effect of expenses that could
have been applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) were calculated at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, were 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporated estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could have differed from these
estimates.
BANK BORROWINGS The Fund was permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might have required the untimely disposition of securities. The Fund entered
into a syndicated line of credit agreement with various banks, that enabled the
Fund to participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permitted borrowings up to $500 million,
collectively. Interest was charged to each fund, based on its borrowing. In
addition, a commitment fee based on the average daily unused portion of the line
of credit was allocated among the participating funds. The Fund had no borrowing
activity for the period ended December 10, 1999.
SECURITIES LENDING The Fund lent its securities to certain qualified brokers who
paid the Fund negotiated lender fees. These fees were included in interest
income. The loans were 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 bore 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 December 10, 1999, the Fund had
no securities on loan.
<PAGE>
FINANCIAL FUTURES CONTRACTS The Fund could buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. Buying futures tended to increase the Fund's exposure
to the underlying instrument. Selling futures tended to decrease the Fund's
exposure to the underlying instrument or hedge other Fund instruments. At the
time the Fund entered into a financial futures contract, it was required to
deposit with its custodian a specified amount of cash or U.S. government
securities, known as "initial margin," equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the futures
contract was valued at the official settlement price of the board of trade or
U.S. commodities exchange on which it trades. Subsequent payments, known as
"variation margin," to and from the broker were made on a daily basis as the
market price of the financial futures contract fluctuated. Daily variation
margin adjustments, arising from this "mark to market," were recorded by the
Fund as unrealized gains or losses.
When the contracts were closed, the Fund recognized a gain or loss.
Risks of entering into futures contracts included the possibility that there may
have been an illiquid market and/or that a change in the value of the contracts
may not have correlated with changes in the value of the underlying securities.
In addition, the Fund could have been prevented from opening or realizing the
benefits of closing out futures positions because of position limits or limits
on daily price fluctuation imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses could have been affected as a result of futures
contracts.
At December 10, 1999, there were no open positions in financial futures
contracts.
NOTE B-
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the investment management contract, the Fund paid 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 asset value and (b) 0.80% of the Fund's average daily net asset value
in excess of $250,000,000.
The Fund had a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the period ended
December 10, 1999 net sales charges received with regard to sales of Class A
shares amounted to $21,735. Of this amount, $1,874 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $10,190
was paid as sales commissions to unrelated broker-dealers and $9,671 was paid as
sales commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer. The Adviser's indirect parent, John
Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Signator Investors.
<PAGE>
Class B shares which were redeemed within six years of purchase were
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC were paid to JH Funds and were 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 December 10,
1999, contingent deferred sales charges paid to JH Funds amounted to $212,702.
Class C shares which were redeemed within one year of purchase were
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 were paid to JH Funds and were used in whole or
in part to defray its expenses for providing distribution related services to
the Fund in connection with the sale of Class C shares. For the period ended
December 10 , 1999, there was no contingent deferred sales charges.
In addition, to reimburse JH Funds for the services they provided as
distributor of shares of the Fund, the Fund had 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 would 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
have occurred under certain circumstances.
The Fund had a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. Class
A, Class B and Class C shares paid transfer agent fees based on the number of
shareholder accounts and certain out-of-pocket expenses. Class Y shares paid a
monthly transfer agent fee equivalent to 0.10% of the average daily net assets
of the Class Y shares of the Fund.
The Fund had 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.
<PAGE>
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Maureen R. Ford,
Ms. Anne C. Hodsdon and Mr. Richard S. Scipione were directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Fund, through
December 10, 1999. The compensation of unaffiliated Trustees was borne by the
Fund. The unaffiliated Trustees could have elected to defer, for tax purposes,
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund made 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 were recorded on
the Fund's books as an other asset. The deferred compensation liability and the
related other asset were always equal and were 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 then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended December 10, 1999, aggregated $90,766,430 and $154,098,957, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended December 10, 1999.
The cost of investments owned at December 10, 1999 (excluding the
corporate savings account) for federal income tax purposes was $548,434,055.
Gross unrealized appreciation and depreciation of investments aggregated
$258,949,667 and $26,880,755 respectively, resulting in net unrealized
appreciation of $232,068,912.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended December 10, 1999, the Fund had reclassified amounts to
reflect a decrease in accumulated net realized gain on investments and foreign
currency transactions of $848,790 , a decrease in accumulated net investment
loss of $839,487 and an increase in capital paid-in of $9,303. This represented
the amount necessary to report these balances on a tax basis, excluding certain
temporary differences, as of December 10, 1999. These reclassifications, which
had no impact on the net asset value of the Fund, were primarily attributable to
the treatment of net operating losses in the computation of distributable income
and capital gains under federal tax rules versus generally accepted accounting
principles and the Fund's use of the tax accounting practice known as
equalization. The calculation of net investment income per share in the
financial highlights excluded these adjustments.
<PAGE>
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
December 10, 1999.
The Fund has designated distributions to shareholders of $112,539,914
as a long-term capital gain dividend. These amounts were reported on the 1999
U.S. Treasury 1099-DIV.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended December 10, 1999, 0.23% of the dividends qualify for the corporate
dividends received deduction.
SHAREHOLDER MEETING
On December 6, 1999, a special meeting of the Fund was held. The shareholders
approved the proposal to approve an Agreement and Plan of Reorganization between
the Fund and Small Cap Growth Fund. 12,235,735 shares were voted for the
proposal, 488,043 shares were voted against the proposal and 1,000,924 shares
abstained.
