---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
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Growth Trends
Fund
OCTOBER 31, 2000
[LOGO] John Hancock
-------------------
JOHN HANCOCK FUNDS
<PAGE>
-----------------------------------------
TRUSTEES
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.
William J. Cosgrove*
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Brown Brothers Harriman & Company
40 Water Street
Boston, Massachusetts 02109
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 ADVISERS
American Fund Advisors, Inc.
1415 Kellum Place
Garden City, New York 11530
Mercury Advisors
800 Scudders Mill Road
Plainsboro, New Jersey 08536
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
-------------------------------------------
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years, the
financial markets have brought investors back down to earth in 2000. Rising
interest rates and oil prices, the prospects of a slowing economy and earnings
fears all caught up with pricey growth stocks - technology in particular. A
dramatic plunge in the spring and again in the fall caused the major indexes to
end October in negative territory for the year to date. The tech-heavy NASDAQ
Composite Index was hardest hit, returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their attention to
broader swaths of the market, including old economy stocks in sectors like
financials, health care and energy, that combined both strong fundamentals and
more attractive valuation levels. Since April, less expensive value stocks have
outperformed growth stocks.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
--------------------------------------------------------------------------------
Bonds also began to make a comeback as the year progressed and investors grew
more confident that the series of Fed rate hikes might be coming to an end.
Pockets of strength have emerged there, including municipal bonds and
longer-maturity Treasury bonds. The 30-year bond, for instance, returned 13.53%
year to date through October.
The market's shifts in leadership so far this year highlight one of the key
investment tenets that we can't emphasize enough: investing should be a
marathon, not a sprint. If your portfolio is diversified and you have an
up-to-date financial plan crafted with an investment professional to meet your
goals, it becomes easier to ride out the market's short-term ups and downs. It
could also provide you with a greater chance of success over time.
Sincerely,
/s/Maureen R. Ford
------------------
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
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John Hancock
Growth Trends Fund
Fund debuts in mixed investment environment
-------------------------------------------
The three industry groups that make up John Hancock Growth Trends Fund -
financials, health care and technology - posted mixed results from the Fund's
inception September 22, 2000 through October 31, 2000. Overall, the market
struggled against a number of cross currents including evidence of an economic
slowdown, expectations for steady interest rates, uncertainty over the upcoming
elections and rising energy costs. Financial stocks benefited primarily from
anticipation that interest rates had stopped rising, but also from strong demand
as investors increasingly sought out companies that produced stable and
predictable earnings. Health-care stocks, too, got a lift from investors looking
for shelter against slower economic growth. Technology stocks slumped in
response to concerns that the slowing economy would weaken profitability for the
group. Against that backdrop, the Fund's Class A, Class B and Class C shares
posted total returns of -4.60%, -4.60% and -4.60%, respectively, at net asset
value from inception September 22, 2000 through October 31, 2000.
What follows are reports by each management team on their investment strategies
and stock selections for the portion of the Fund that they manage.
Financials - by James K. Schmidt, CFA,
Portfolio Management Team Leader
In choosing financial stocks for the Fund, we target companies that are poised
to benefit from one or more important changes currently affecting the industry:
strong demand, deregulation and consolidation. A greater portion of the
population in the United States, Europe and Japan is just beginning to move into
years when they are peak consumers of financial services and products. On the
deregulation front, the passage of the Gramm-Leach-Bliley Act last year broke
down Depression-era barriers that prevented banks, insurance companies and
securities brokers from affiliating. We believe this signals the beginning of a
lengthy period of consolidation, featuring combinations among commercial banks,
securities brokers and insurance companies. Not only will those companies that
merge, acquire or are acquired be expected to benefit from this trend, but we
also believe that consolidation will encourage all companies to become more
profitable and cost-effective. In choosing stocks for the Fund, we look for
companies that are leaders in their industry and have a bright outlook for
growth. Although acquisition potential isn't our primary criterion in
considering a
"...we have built significant positions in brokerage stocks..."
3
<PAGE>
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John Hancock Funds - Growth Trends Fund
"Our focus is on companies that have new medical products that support their
growth prospects."
--------------------------------------------------------------------------------
[Table at top left-hand column entitled "Top Five Stock Holdings." The first
listing is Bristol-Myers Squibb 3.5%, the second is Eli Lilly 3.4%, the third
Pfizer 3.3%, the fourth Amgen 2.6% and the fifth Schering AG 2.2%. A note below
the table reads "As a percentage of net assets on October 31, 2000."]
--------------------------------------------------------------------------------
stock, it is likely that a number of our holdings will receive takeover bids.
In the early stages of the Fund, we have built significant positions in
brokerage stocks Charles Schwab and Morgan Stanley Dean Witter. Schwab has
evolved from its "discount brokerage" roots to become a value-added provider
that, unlike typical electronic brokers, attracts customers for other reasons
than price. For the first time, it is making significant inroads into serving
high-net-worth investors. Morgan Stanley stock has weakened because of concern
about the impact of the sell-off in technology stocks on the firm's investment
banking business. But we feel Morgan's diversified business mix will help to
protect earnings until some of the more market-sensitive areas rebound. We
recently have adopted a more positive outlook on property and casualty insurance
companies, such as American International Group, which are benefiting from
long-awaited pricing increases. Among U.S. commercial banks, we have
concentrated on those, such as Mellon Financial and Northern Trust, that have
substantial growth opportunities in non-banking areas like trust, custody and
investment management. We have also invested nearly 8% of the financial
portfolio in European banks. We think these institutions will benefit from the
move toward pan-European banking and the likelihood of a stronger currency next
year.
Health care - by Jordan Schreiber, CFA,
Portfolio Management Team Leader
The health-care sector provides excellent growth opportunities because of the
long-term trends of the aging population and revolutionary scientific advances.
Our focus is on companies that have new medical products that support their
growth prospects. For example, Eli Lilly has a new drug in advanced development
that treats septic shock, a condition that kills thousands of people each year.
QLT, Inc. has a treatment for halting the progression of a form of macular
degeneration, a condition that is the leading cause of blindness in the United
States. Emisphere Technologies has an innovative, patent-protected method of
delivering drugs orally rather than by injection.
We have emphasized investments in large pharmaceutical companies. In a
slowing economy these companies provide stable, predictable and superior
earnings growth and help cushion against economic and stock-market downturns,
because people need drugs no matter what the business climate. We built
positions in Bristol-Myers Squibb, Pfizer and Eli Lilly. We also invested in
biotechnology companies such as Amgen, COR Therapeutics and OSI Pharmaceuticals.
These companies have new drug developments that are focused on treatments for
cancer, heart disease and kidney disease. Hospital management companies also
present an especially attractive area of investment for us. Legislation is
likely that would restore Medicare funds to hospitals, HMOs and other service
providers, offsetting some of the cutbacks that took place two years ago. As a
result, one of our
4
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John Hancock Funds - Growth Trends Fund
--------------------------------------------------------------------------------
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "From inception September 22, 2000 through
October 31, 2000." The chart is scaled in increments of 1% with -5% at the
bottom and 1% at the top. The first bar represents the -4.60% total return for
John Hancock Growth Trends Fund Class A. The second bar represents the -4.60%
total return for John Hancock Growth Trends Fund Class B. The third bar
represents the -4.60% total return for John Hancock Growth Trends Fund Class C.
A note below the chart reads "Total returns for John Hancock Growth Trends Fund
are at net asset value with all distributions reinvested."]
--------------------------------------------------------------------------------
largest holdings in the Fund is HCA-The Healthcare Company, a prospective
beneficiary of this protective action.
Technology - by Marc Klee, CFA,
Barry Gordon and Alan Loewenstein, CFA
We believe the key to investing in technology is to keep our eyes focused on the
basics. We avoid falling under the spell of technology as a phenomenon, or
swooning over each new idea, such as the Internet. Instead, we draw on our
decades of industry and investment experience, using in-depth research and
fundamental analysis to understand a company and the environment in which it
operates. We then determine its true value and what we're willing to pay for it.
This includes realistically assessing a company's long-term business prospects
and its potential for profit growth.
Some of the companies that have met our investment criteria since the
Fund's inception are business software maker i2 Technologies, Web performance
management program maker Mercury Interactive and EMC, the leading maker of
computer data-storage devices for large systems. We also built a significant
weighting in companies involved with fiber-optical networking, such as Nortel
Networks, JDS Uniphase and Corning, Inc. Fiber optics, which transfer
information down glass fibers at the speed of light, are now the most efficient
way to move large volumes of communication traffic. As a result, companies
within the industry should benefit from a quick shift to broadband-centric
networks by the world's largest telecommunications carriers.
Outlook
By the end of October, there was growing evidence that previous interest-rate
hikes had slowed economic growth and removed the impetus for the Federal Reserve
to continue to raise interest rates. Over the next six months, we believe that
economic growth will continue to moderate and that interest rates will
stabilize, if not decline. That macroeconomic backdrop, coupled with a continued
trend toward consolidation, should bode well for the financial group. We are
also optimistic for health care. We think that demand for health-care stocks
will remain strong as investors look for companies that can supply steady,
predictable earnings growth in a slowing economy. History shows that tech
stocks, too, eventually tend to do well in periods of slow but positive economic
growth, as investors look to them for better-than-average earnings growth.
--------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
"We also built a significant weighting in companies involved with fiber-optical
networking..."
5
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John Hancock Funds - Growth Trends Fund
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A LOOK AT PERFORMANCE
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The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Growth Trends Fund. Total return measures the
change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include an up-front maximum applicable
sales charge of 5%. Class B performance reflects a maximum contingent deferred
sales charge (maximum 5% and declining to 0% over six years). Class C
performance includes an up-front sales charge of 1% and a contingent deferred
sales charge (maximum 1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus carefully before you invest or send money.
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------
For the period ended October 31, 2000
SINCE
INCEPTION
(9/22/00)
---------
Cumulative Total Return (9.40%)
Average Annual Total Return(1) (9.40%)(2)
--------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------------------
For the period ended October 31, 2000
SINCE
INCEPTION
(9/22/00)
---------
Cumulative Total Return (9.37%)
Average Annual Total Return(1) (9.37%)(2)
--------------------------------------------------------------------------------
CLASS C
--------------------------------------------------------------------------------
For the period ended October 31, 2000
SINCE
INCEPTION
(9/22/00)
---------
Cumulative Total Return (6.49%)
Average Annual Total Return(1) (6.49%)(2)
Notes to Performance
(1) The Adviser has voluntarily agreed to limit the Fund's total expenses
(excluding 12b-1 fees) to 1.35% of the Fund's average daily net assets. Without
the limitation of expenses the average non-annualized total returns would have
been (9.41%) for Class A shares, (9.38%) for Class B shares and (6.50%) for
Class C shares.
(2) Not annualized.
6
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John Hancock Funds - Growth Trends Fund
--------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
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The chart on the right shows how much a $10,000 investment in the John Hancock
Growth Trends Fund would be worth, assuming all distributions were reinvested
for the period indicated, as of October 31, 2000. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500 Index - an unmanaged
index that includes 500 widely traded common stocks and is a commonly used
measure of stock market performance. It is not possible to invest in an index.
Past performance is not indicative of future results.
Class A Class B Class C
--------------------------------------------------------------------------------
Inception Date 9/22/00 9/22/00 9/22/00
--------------------------------------------------------------------------------
Without Sales Charge $9,540 $9,540 $9,540
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With Maximum Sales Charge $9,060 $9,063 $9,350
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Standard & Poor's 500 Index $9,958 $9,958 $9,958
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7
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on October 31, 2000. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 2000
--------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $271,375,331)........................... $259,032,898
Repurchase agreement (cost - $4,333,000) ..................... 4,333,000
--------------
263,365,898
Receivable for investments sold ............................... 2,416,295
Receivable for shares sold .................................... 443,803
Dividends receivable .......................................... 83,020
Interest receivable ........................................... 790
Deferred offering costs - Note A .............................. 93,742
--------------
Total Assets ..................... 266,403,548
-------------------------------------------------
Liabilities:
Due to custodian .............................................. 172,255
Payable for shares repurchased ................................ 54,422
Payable for investments purchased ............................. 828,468
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ...................................... 327,109
Accounts payable and accrued expenses ......................... 150,799
--------------
Total Liabilities ................ 1,533,053
-------------------------------------------------
Net Assets:
Capital paid-in ............................................... 277,342,115
Accumulated net realized loss on investments and
foreign currency transactions ................................ (332,187)
Net unrealized depreciation of investments
and foreign currency ......................................... (12,336,131)
Undistributed net investment income 196,698
--------------
Net Assets ....................... $264,870,495
=================================================
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 - $86,010,984/9,014,888 ............................... $9.54
==============================================================================
Class B - $125,429,652/13,152,833 ............................. $9.54
==============================================================================
Class C - $53,429,859/5,603,121 ............................... $9.54
==============================================================================
Maximum Offering Price Per Share
Class A * - ($9.54/95%) ....................................... $10.04
==============================================================================
Class C - ($9.54/99%) ......................................... $9.64
==============================================================================
* 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 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 For the
period September 22, 2000 (commencement
of operations) to October 31, 2000
--------------------------------------------------------------------------------
Investment Income:
Interest ...................................................... $476,345
Dividends ..................................................... 102,380
--------------
578,725
--------------
Expenses:
Investment management fee - Note B ........................... 260,426
Distribution and service fee - Note B
Class A ..................................................... 25,280
Class B ..................................................... 123,662
Class C ..................................................... 52,497
Transfer agent fee - Note B ................................. 50,000
Auditing fee ................................................ 20,000
Organizational expense - Note A ............................. 10,258
Printing .................................................... 10,000
Registration and filing fees ................................ 10,000
Custodian fee ............................................... 7,000
Offering costs - Note A ..................................... 5,000
Accounting and legal services fee - Note B .................. 4,693
Trustees' fees .............................................. 100
Legal fees .................................................. 100
Miscellaneous ............................................... 49
--------------
Total Expenses ................... 579,065
-------------------------------------------------
Less Expense Reduction -
Note B ........................... (26,051)
-------------------------------------------------
Net Expenses ..................... 553,014
-------------------------------------------------
Net Investment Income ............ 25,711
-------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ......................... (332,187)
Net realized loss on foreign currency transactions ............ (40,670)
Change in net unrealized appreciation (depreciation)
of investments ............................................... (12,342,433)
Change in net unrealized appreciation (depreciation)
of foreign currency .......................................... 6,302
--------------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions .... (12,708,988)
-------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ........ ($12,683,277)
=================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends Fund
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 2000(1)
------------------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ........................................................................................ $25,711
Net realized loss on investments sold and foreign currency transactions ...................................... (372,857)
Change in net unrealized appreciation (depreciation) of investments and foreign currency transactions ........ (12,336,131)
-------------
Net Decrease in Net Assets Resulting from Operations ........................................................ (12,683,277)
-------------
From Fund Share Transactions - Net: * ......................................................................... 277,553,772
-------------
Net Assets:
End of period (including undistributed net investment income of $196,698) .................................... $264,870,495
=============
*Analysis of Fund Share Transactions:
PERIOD ENDED
OCTOBER 31, 2000(1)
------------------------------------------
SHARES AMOUNT
------------------ ------------------
CLASS A
Shares sold ........................................................................... 9,089,790 $90,800,820
Less shares repurchased ............................................................... (74,902) (721,825)
-------------- ---------------
Net increase .......................................................................... 9,014,888 $90,078,995
============== ===============
CLASS B
Shares sold ........................................................................... 13,245,850 $132,402,084
Less shares repurchased ............................................................... (93,017) (922,621)
--------------- ---------------
Net increase .......................................................................... 13,152,833 $131,479,463
=============== ===============
CLASS C
Shares sold ........................................................................... 5,615,948 $56,117,981
Less shares repurchased ............................................................... (12,827) (122,667)
--------------- ---------------
Net increase .......................................................................... 5,603,121 $55,995,314
=============== ===============
(1) Class A, Class B and Class C shares began operations on September 22, 2000.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the Fund began operations. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and redeemed during the last two periods, along with the
corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends 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:
--------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 2000(1)
-------------------
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period .................................................. $10.00
------
Net Investment Income(2) .............................................................. 0.01
Net Realized and Unrealized Loss on Investments
and Foreign Currency Transactions .................................................... (0.47)
------
Total from Investment Operations ..................................................... (0.46)
------
Net Asset Value, End of Period ........................................................ $9.54
======
Total Investment Return at Net Asset Value(3) ......................................... (4.60%)(4)
Total Adjusted Investment Return at Net Asset Value(3,5) .............................. (4.61%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .............................................. $86,011
Ratio of Expenses to Average Net Assets ............................................... 1.65%(6)
Ratio of Adjusted Expenses to Average Net Assets(7) ................................... 1.75%(6)
Ratio of Net Investment Income to Average Net Assets .................................. 0.57%(6)
Ratio of Adjusted Net Investment Income to Average Net Assets(7) ...................... 0.47%(6)
Portfolio Turnover Rate ............................................................... 11%
Fee Reduction Per Share(2) ............................................................ - (8)
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period .................................................. $10.00
------
Net Investment Loss(2) ................................................................ - (8)
Net Realized and Unrealized Loss on Investments
and Foreign Currency Transactions .................................................... (0.46)
------
Total from Investment Operations ..................................................... (0.46)
------
Net Asset Value, End of Period ........................................................ $9.54
======
Total Investment Return at Net Asset Value(3) ......................................... (4.60%)(4)
Total Adjusted Investment Return at Net Asset Value(3,5) .............................. (4.61%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .............................................. $125,430
Ratio of Expenses to Average Net Assets ............................................... 2.34%(6)
Ratio of Adjusted Expenses to Average Net Assets(7) ................................... 2.44%(6)
Ratio of Net Investment Loss to Average Net Assets .................................... (0.13%)(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets(7) ........................ (0.23%)(6)
Portfolio Turnover Rate ............................................................... 11%
Fee Reduction Per Share(2) ............................................................ - (8)
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends Fund
Financial Highlights (continued)
--------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 2000(1)
-------------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period .................................................. $10.00
------
Net Investment Loss(2) ................................................................ - (8)
Net Realized and Unrealized Loss on Investments
and Foreign Currency Transactions .................................................... (0.46)
------
Total from Investment Operations ..................................................... (0.46)
------
Net Asset Value, End of Period ........................................................ $9.54
======
Total Investment Return at Net Asset Value(3) ......................................... (4.60%)(4)
Total Adjusted Investment Return at Net Asset Value(3,5) .............................. (4.61%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .............................................. $53,430
Ratio of Expenses to Average Net Assets ............................................... 2.34%(6)
Ratio of Adjusted Expenses to Average Net Assets(7) ................................... 2.44%(6)
Ratio of Net Investment Loss to Average Net Assets .................................... (0.13%)(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets(7) ........................ (0.23%)(6)
Portfolio Turnover Rate ............................................................... 11%
Fee Reduction Per Share(2) ............................................................ - (8)
(1) Class A, Class B and Class C shares began operations on September 22, 2000.
(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 which does not take into consideration
fee reductions by the Adviser during the period shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of each class. It shows how the Fund's net
asset value for a share has changed since the beginning of the Fund's
operations. Additionally, important relationships between some items presented
in the financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends Fund
Schedule of Investments
October 31, 2000
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Growth Trends Fund on October 31, 2000. It's divided into two main categories:
common stocks and short-term investments. Common stocks are further broken down
by industry group. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
COMMON STOCKS
Banks - Foreign (2.49%)
Bipop-Carire SpA (Italy) ..................... 184,000 $1,455,419
HSBC Holdings Plc (United Kingdom) ........... 239,000 3,405,233
Julius Baer Holding Ltd. (Switzerland) ....... 350 1,733,059
----------
6,593,711
----------
Banks - United States (7.24%)
Dexia SA (Belgium) ........................... 12,900 1,938,932
Fifth Third Bancorp .......................... 65,000 3,339,375
Mellon Financial Corp. ....................... 67,000 3,232,750
Northern Trust Corp. ......................... 44,000 3,756,500
State Street Corp. ........................... 25,900 3,230,766
Wells Fargo & Co. ............................ 79,600 3,686,475
----------
19,184,798
----------
Broker Services (1.68%)
Consors Discount Broker AG*
(Germany) ................................... 7,695 613,106
Schwab (Charles) Corp. ....................... 109,000 3,828,625
----------
4,441,731
----------
Computers (16.34%)
America Online, Inc.* ........................ 60,000 3,025,800
Automatic Data Processing, Inc. .............. 32,000 2,090,000
Cisco Systems, Inc.* ......................... 60,000 3,232,500
Dell Computer Corp.* ......................... 100,000 2,950,000
EMC Corp.* ................................... 30,000 2,671,875
Exodus Communications, Inc.* ................. 70,000 2,349,375
Fiserv, Inc.* ................................ 59,000 3,093,813
Gateway, Inc.* ............................... 50,000 2,580,500
i2 Technologies, Inc.* ....................... 10,000 1,700,000
Infospace.com, Inc.* ......................... 140,000 2,817,500
Inktomi Corp* ................................ 40,000 2,537,500
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Computers (continued)
Intuit, Inc.* ................................ 38,000 $2,334,625
Mercury Interactive Corp.* ................... 25,000 2,775,000
Oracle Corp.* ................................ 80,000 2,640,000
Seagate Technology, Inc.* .................... 50,000 3,493,750
Vignette Corp.* .............................. 100,000 2,981,250
----------
43,273,488
----------
Electronics (8.03%)
Altera Corp.* ................................ 65,000 2,660,938
Analog Devices, Inc.* ........................ 35,000 2,275,000
Applied Materials, Inc.* ..................... 60,000 3,187,500
Caliper Technologies Corp.* .................. 30,000 1,691,250
Integrated Device Technology, Inc.* .......... 25,000 1,407,813
KLA-Tencor Corp.* ............................ 67,500 2,282,344
Micron Technology, Inc.* ..................... 80,000 2,780,000
PMC-Sierra, Inc.* (Canada) ................... 10,000 1,695,000
Solectron Corp.* ............................. 75,000 3,300,000
----------
21,279,845
----------
Fiber Optics (2.64%)
Finisar Corp.* ............................... 70,000 2,016,875
JDS Uniphase Corp.* .......................... 30,000 2,441,250
Sycamore Networks, Inc.* ..................... 40,000 2,530,000
----------
6,988,125
----------
Finance (9.41%)
American Express Co. ......................... 47,000 2,820,000
Amvescap Plc, American Depositary Receipt
(ADR) (United Kingdom) ...................... 38,000 4,308,250
Banca Fideuram SpA (Italy) ................... 100,000 1,537,844
Citigroup, Inc. .............................. 80,000 4,210,000
Golden West Financial Corp. .................. 60,000 3,363,750
MBNA Corp. ................................... 91,000 3,418,188
MLP AG (Germany) ............................. 17,000 2,322,892
Morgan Stanley Dean Witter & Co. ............. 36,500 2,931,406
----------
24,912,330
----------
Insurance (10.05%)
AFLAC, Inc. .................................. 56,500 4,128,031
Ambac Financial Group, Inc. .................. 39,000 3,112,688
American General Corp. ....................... 48,000 3,864,000
American International Group, Inc. ........... 34,500 3,381,000
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Growth Trends Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Insurance (continued)
Hartford Financial Services Group, Inc.
(The) ....................................... 38,000 $2,828,625
Marsh & McLennan Cos., Inc. .................. 28,500 3,726,375
Reinsurance Group of America, Inc. ........... 60,000 2,242,500
XL Capital Ltd. (Class A) .................... 43,500 3,344,063
----------
26,627,282
----------
Medical (32.77%)
Allergan, Inc. ............................... 20,000 1,681,250
Amgen, Inc.* ................................. 120,000 6,952,500
Bristol-Myers Squibb Co. ..................... 150,000 9,140,625
Caremark Rx, Inc.* ........................... 143,400 1,792,500
Cell Genesys, Inc.* .......................... 60,000 1,383,750
COR Therapeutics, Inc.* ...................... 87,400 4,938,100
Datascope Corp. .............................. 50,000 1,731,250
Emisphere Technologies, Inc.* ................ 60,000 1,518,750
Foundation Health Systems, Inc.* ............. 8,700 175,631
Galen Holdings Plc (United Kingdom) .......... 115,000 1,497,510
Genentech, Inc.* ............................. 40,000 3,300,000
Genzyme Corp.* ............................... 27,800 1,973,800
Guidant Corp.* ............................... 30,000 1,588,125
HCA-The Healthcare Co. ....................... 30,000 1,198,125
HEALTHSOUTH Corp.* ........................... 50,000 600,000
ILEX Oncology Inc.* .......................... 20,000 725,000
InKine Pharmaceutical Co., Inc.* ............. 110,000 990,000
Johnson & Johnson ............................ 20,000 1,842,500
Lilly (Eli) & Co. ............................ 100,000 8,937,500
Medtronic, Inc. .............................. 30,000 1,629,375
Millennium Pharmaceuticals, Inc.* ............ 40,000 2,902,500
Novartis AG (Switzerland) .................... 2,000 3,034,383
OSI Pharmaceuticals, Inc.* ................... 40,000 2,880,000
Pfizer, Inc. ................................. 200,000 8,637,500
QLT, Inc.* (Canada) .......................... 50,000 2,486,720
Schering AG (Germany) ........................ 102,300 5,712,886
Sepracor, Inc. * ............................. 30,000 2,043,750
Smith & Nephew Plc, (ADR)
(United Kingdom) ............................. 3,300 135,713
Smith & Nephew Plc (United Kingdom) .......... 167,000 685,710
Syncor International Corp. ................... 50,000 1,284,375
WebMD Corp.* ................................. 300,000 3,412,500
----------
86,812,328
----------
Mortgage Banking (1.13%)
Fannie Mae ................................... 39,000 3,003,000
----------
Telecommunications (6.01%)
Advanced Switching Communications,
Inc.* ....................................... 300 3,056
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Telecommunications (continued)
Corning, Inc. ................................ 35,000 $2,677,500
Global Crossing Ltd.* (Bermuda) .............. 110,000 2,598,750
Lucent Technologies, Inc. .................... 100,000 2,331,250
Nokia Corp. (ADR) (Finland) .................. 70,000 2,992,500
Nortel Networks Corp. ........................ 50,000 2,275,000
Primus Telecommunications Group,
Inc. * ...................................... 150,000 759,375
QUALCOMM, Inc.* .............................. 35,000 2,278,829
----------
15,916,260
----------
TOTAL COMMON STOCKS
(Cost $271,375,331) (97.79%) 259,032,898
-------- -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Repurchase Agreement (1.64%)
Investment in a repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
10-31-00, due 11-01-00
(Secured by U.S. Treasury
Bond, 5.25%, due 02-15-29)
- Note A .......................... 6.56% $4,333 4,333,000
----------
TOTAL SHORT-TERM INVESTMENTS (1.64%) 4,333,000
-------- ------------
TOTAL INVESTMENTS (99.43%) 263,365,898
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.57%) 1,504,597
-------- ------------
TOTAL NET ASSETS (100.00%) $264,870,495
======== ============
* Non-income producing security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Growth Trends Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock Growth Trends Fund (the "Fund") is a diversified series of John
Hancock Equity Trust, an open-end management investment company, registered
under the Investment Company Act of 1940. The investment objective of the Fund
is to achieve long-term growth of capital. The Fund will invest in a number of
industry groups without concentration in any particular industry.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights to voting, redemptions, dividends and liquidation,
except that certain expenses, subject to the approval of the Trustees, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal Revenue
Service. Shareholders of a class which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class level
based on the appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
EXPENSES The majority of the expenses are directly identifiable to an individual
fund. Expenses which are not readily identifiable to a specific fund will be
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been borne by the Fund. Offering costs have been deferred and are
charged to the Fund's operations ratably over a twelve-month period from the
commencement of the operations of the Fund.
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
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Growth Trends Fund
income tax provision is required. For federal income tax purposes, at October
31, 2000 the fund has $307,599 of capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized capital gains. If
such carryforwards are used by the Fund, no capital gain distribution will be
made. The Fund's carryforwards expire as follows: October 31, 2008 - $307,599.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund identifies the dividend. Interest income on
investment securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes, which are accrued as applicable.
The Fund records all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles. Dividends paid by the
Fund with respect to each class of shares will be calculated in the same manner,
at the same time and will be in the same amount, except for the effect of
expenses that may be applied differently to each class.
USE OF ESTIMATES The preparation of these financial statements in accordance
with accounting principles generally accepted in the United States of America
incorporates estimates made by management in determining the reported amount of
assets, liabilities, revenues and expenses of the Fund. Actual results could
differ from these estimates.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to the
Adviser equivalent, on an annual basis, to the sum of 1.00% of the Fund's
average daily net asset value. The Adviser has subadvisory agreements with
American Fund Advisors, Inc. and Mercury Advisors. The Fund is not responsible
for the payment of the subadvisers' fees.
The Adviser has voluntarily agreed to limit the Fund's total expenses
(excluding 12b-1 fees) to 1.35% of the Fund's average daily net asset value, at
least until February 28, 2001. During the period ended October 31, 2000, the
expense reduction amounted to $26,051.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. To reimburse JH Funds
for the services it provides as distributor of shares of the Fund, the Fund has
adopted 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
makes payments to JH Funds at an annual rate not to exceed 0.30% of Class A
average daily net assets and 1.00% of Class B and Class C average daily net
assets, to reimburse JH Funds for its distribution and service costs. A maximum
of 0.25% of such payments may be service fees as defined by the Conduct Rules of
the National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under certain
circumstances.
During the period ended October 31, 2000, JH Funds received net
up-front sales charges of $244,182 with regard to sales of Class A shares. Of
this amount, $37,514 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $151,271 was paid as sales
commissions to unrelated broker-dealers and $55,397 was paid as sales
commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer. The Adviser's indirect parent, John
Hancock Life Insurance Company ("JHLICo"), is the indirect sole shareholder of
Signator Investors. All Class C shares retail purchases are assessed a 1.00%
up-front sales charge. During the period ended October 31, 2000, JH Funds
received net up-front sales charges of $387,732 with regard to sales of Class C
shares. Of this amount, $380,235 was paid as sales commissions to unrelated
broker-dealers and $7,497 was paid as sales commissions to sales personnel of
Signator Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.00% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Class C
shares which are redeemed within one year of purchase
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Growth Trends Fund
will be subject to a CDSC at a rate of 1.00% of the lesser of the current market
value at the time of redemption or the original purchase cost of the shares
being redeemed. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses for providing distribution-related
services to the Fund in connection with the sale of Class B and Class C shares.
For the period ended October 31, 2000, the Fund received $17,478 related to
Class B shares and no CDSCs related to Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo. The
Fund pays monthly transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund. The unaffiliated
Trustees may elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover its liability
for the deferred compensation. Investments to cover the Fund's deferred
compensation liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always equal and
are marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. The Deferred Compensation
Plan investments had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 2000, aggregated $287,094,187 and $15,386,669, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $275,732,919. Gross unrealized
appreciation and depreciation of investments aggregated $7,466,190 and
$19,833,211, respectively, resulting in net unrealized depreciation of
$12,367,021.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 2000, the Fund has reclassified amounts to
reflect a decrease in net realized loss on investments of $40,670, an increase
in undistributed net investment income of $170,987 and a decrease in capital
paid-in of $211,657. This represents the amount necessary to report these
balances on a tax basis, excluding certain temporary difference, as of October
31, 2000. Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of the
Fund, are primarily attributable to the treatment of net realized gain/loss on
foreign currency transactions and treatment of offering costs in computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles. The calculation of net investment income (loss)
per share in the financial highlights excludes these adjustments.
16
<PAGE>
================================================================================
John Hancock Funds - Growth TRends Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
John Hancock Growth Trends Fund
and the Trustees of John Hancock Equity Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Growth Trends Fund (a
series of John Hancock Equity Trust), at October 31, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
period from September 22, 2000 (commencement of operations) through October 31,
2000, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities owned at October 31, 2000 by
correspondence with the custodian and brokers, provides a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
17
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Growth Trends Fund
18
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Growth Trends Fund
19
<PAGE>
================================================================================
-----------------
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101 Huntington Avenue Randolph, MA
Boston, MA 02199-7603 Permit No. 75
-----------------
1-800-225-5291
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www.jhfunds.com
--------------------------------------------------------------------------------
This report is for the information of the shareholders of the John
Hancock Growth Trends Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus, which
details charges, investment objectives and operating policies.
Printed on Recycled Paper 4600A 10/00
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