John Hancock Funds
Growth
Fund
SEMI-ANNUAL REPORT
June 30, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Douglas M. Costle*
Leland O. Erdahl.*
Richard A. Farrell*
William F. Glavin*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Susan S. Newton
Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Thomas H. Connors
Second Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to second paragraph.
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
Since late 1994, prospectus simplification has been a major topic in
the mutual fund industry. At that time, Securities and Exchange
Commission Chairman Arthur Levitt called on fund companies to make their
prospectuses more user-friendly. He noted that prospectuses are
often overloaded with technical detail and are hard for most investors
to understand. Many industry observers agreed, and rightly so.
So it is my pleasure to let you know that John Hancock Funds has
introduced the first in a series of new prospectuses. Covering the John
Hancock growth funds, the new prospectus made its debut on July 1 after
being under development for a year. It is simplified, using shorter,
clearer language with a streamlined design, and consolidated,
incorporating several funds with similar investment objectives into one
document. We are excited about our new prospectus because we believe it
is a bold but sensible step forward. And while it is easier to read, it
still complies with all federal and state guidelines.
We have taken the initiative to create a prospectus that dramatically
departs from the norm. Among its most innovative features is a two-page
spread highlighting each fund's goals and investment strategy, the types
of securities it buys, its portfolio management and risk factors, all in
plainer language. Fund expenses and financial highlights are now found
here, too, as is a new bar chart that shows year-to-year volatility for
each fund. Other features include a better presentation of fund
services, a new glossary of investment risks and a discussion about how
funds are organized, including a diagram showing the connection of the
various players that provide services to your Hancock fund(s).
In the coming months, we will introduce similar prospectuses for our
growth and income, tax-free income, international/global and money
market funds. We believe we have made a significant advancement in the
drive toward better mutual fund prospectuses. We hope you will agree
because in the end, we did it for you, our shareholders.
Sincerely,
/S/EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By Bernice S. Behar, CFA, Portfolio Manager
John Hancock
Growth Fund
Growth stocks forge ahead despite uncertainty
over interest rates
"... stock
prices
continued to
climb ..."
Continued economic growth and sustained investor optimism helped fuel
the stock market to achieve relatively impressive gains during the past
six months, despite the uncertain interest-rate environment. In the
first half of the period, stock prices continued to climb in the face of
higher interest rates, but later backed down after rates showed signs of
holding steady at a little above 7%.
The consumer staple stocks replaced technology as the best performing
stocks during the first half of the period, as the "household" names of
the Dow Jones Industrial Average outperformed the technology-laden
NASDAQ and small-cap stocks. In the first half, investors still believed
that the economy would continue its slow growth, and they were looking
for stable growth companies, including the consumer staples which have
the ability to maintain earnings even when the economy is slow. The Fund
was well-positioned in these large-cap names at the beginning of the
year, which helped us get off to a strong start in 1996. For the six
months ended June 30, 1996, John Hancock Growth Fund Class A and Class B
shares posted total returns at net asset value of 14.56% and 14.18%,
respectively, thus outperforming the average growth fund's return of
10.08%, according to Lipper Analytical Services.1 Please see pages six
and seven for longer-term Fund performance information.
A 2 1/4" x 3 3/4" photo of Bernice S. Behar and Andrew Slabin at
bottom right. Caption reads "Bernice S. Behar and Fund management
team member Andrew Slabin."
Chart with heading "Top Five Common Stock Holdings" at top of left
hand column. The chart lists five holdings: 1) HBO & Company 3.5% 2)
Paychex 3.2% 3) cisco Systems 2.7% 4) Gillette Co. 2.3% 5) Coca-Cola
2.3%. A footnote below reads "As a percentage of net assets on
June 30, 1996."
"... we nearly
doubled
the Fund's
holdings in
retail
stocks."
In addition to having strong positions in consumer non-durable stocks
such as Coca-Cola and Gillette, the Fund's outperformance was
attributable to its holdings in high-quality stocks in other sectors
such as technology, retail and financial services. Familiar names in
these sectors, such as cisco Systems and Nike, were rewarded by the
market during the early part of the year. The Fund was able to hold its
gains because of a series of investment strategies we implemented
throughout the period.
Maximizing performance
One strategy was to cut some of the underperforming names in
underperforming sectors. Because of disappointments relative to
infrastructure-related telecommunications companies, we sold the Fund's
holdings in stocks such as AT&T, Nokia and Ericsson. The digital
revolution in wireless communication, which investors had so eagerly
anticipated, seems to be taking much longer to develop than had
originally been expected. We believe these companies will eventually
achieve what the market expects of them, but it will probably take a bit
longer than initially anticipated. We also sold a couple of
semiconductor companies such as Applied Materials and LSI Logic because
of the correction that's been taking place in that sector for nearly a
year. Finally, we reduced our weighting in health-care stocks, a group
whose valuations were reaching uncomfortably lofty levels. A positive
by-product of cutting out some of these stocks is that the Fund has
become less volatile.
Table entitled "Scorecard" at bottom left hand column. The heading for
the left column is "Investment"; the heading for the center column is
"Recent performance.. and what's behind the numbers". The first listing
is "Home Depot" followed by an up arrow and the phrase "Market share
growth in home improvement sector". The second listing is "Cascade
Communications" followed by an up arrow and the phrase "Integral player
in internet structure." The third listing is "Polygram" followed by a
down arrow and the phrase "Weak sales in film and music." Footnote
below reads "See "Schedule of Investments." Investment holdings are
subject to change."
Cyclical vs. defensive
Another key decision that we made in the second half of the period was
to reduce the consumer defensive names that had performed so well in the
early part of the year, with the more aggressive consumer cyclical
names, those whose performance is more closely tied to swings in the
economy. This was largely based on our recognition that the economy was
growing, and that in a growing economy, the more aggressive cyclical
stocks tend to be more rewarding. One of the best new positions was Apac
Teleservices, a leading outsourcer of telemarketing services which
performed well and quickly rose to be one of the largest positions in
the Fund.
Because we recognized that consumers began to increase spending, we
nearly doubled the Fund's holdings in retail stocks. During the last six
months, the retail sector has begun to break out of the list of poorly-
performing sectors, where it has languished for more than two years, and
has become a much better place to invest. Holdings such as Avon Products
and Federated Department Stores did well and still have a lot of room
for stock price increases to continue. We also re-established the Fund's
holding in Home Depot, a perennial favorite. Though Home Depot's growth
rate had slowed during the past two years, business has improved due to
the strong housing market. The company continues to impress us with its
strong management and market dominance.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the six months ended June 30,
1996." The chart is scaled in increments of 5% from bottom to top, with
15% at the top and 0% at the bottom. Within the chart there are three
solid bars. The first represents the 14.56% total return for the John
Hancock Growth Fund: Class A. The second represents the 14.18% total
return for the John Hancock Growth Fund: Class B. The third represents
the 10.08% total return for the average growth fund. A footnote below
reads: "The total returns for John Hancock Growth Fund are at net asset
value with all distributions reinvested. The average growth fund is
tracked by Lipper Analytical Services. See following page for historical
performance information."
The total returns for John Hancock Growth Fund are at net asset value
with all distributions reinvested. The average growth fund is tracked by
Lipper Analytical Services.1 See following page for historical
performance information.
We maintained the Fund's holding in energy stocks that we established in
late 1995, and that turned out to be a net positive during the first six
months of 1996. Crude oil and natural gas prices have risen steadily for
about a year, making drilling, refining and oil-service companies
attractive. In addition to the positive worldwide supply/demand scenario
for oil and gas and the harsh winter of 1995-1996, we've been encouraged
by the strong demand coming from developing nations.
"We don't
perceive any
real threat
of inflation
over the
next six
months...:
Looking ahead
The changes that we've made to the Fund's holdings during the past six
months were part of an overall effort to position John Hancock Growth
Fund as a well-balanced portfolio without over-emphasizing any one
particular sector. Our general philosophy is to own the best companies
available in a balanced fashion, and to make adjustments as necessary.
Though we don't expect any major changes to the Fund's strategy during
the next six months, managing a mutual fund is an evolutionary process
and we're committed to owning the most dynamic and well-positioned
growth stocks at any given point in time.
We're optimistic as we look toward the second half of the year. We are
anticipating pretty good earnings growth for many companies in the third
and fourth quarters. We don't perceive any real threat of inflation over
the next six months and foresee a leveling off of interest rates. In
fact, even if rates remain where they were on June 30, 1996, it's likely
that the stock market will continue its gains over the next six months
as long as inflation remains in check. Though growth isn't likely to be
explosive, we expect to see growth stocks performing well in a slow-to-
moderate growth environment.
- -----------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the
end of the Fund's period discussed in this report. Of course, the
manager's views are subject to change as market and other conditions
warrant.
1 Figures from Lipper Analytical Services include reinvested dividends
and do not take into account sales charges. Actual load-adjusted
performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Growth Fund. Total
return is a performance measure that equals the sum of all income and
capital gain distributions, assuming reinvestment of these distributions
and the change in the price of the Fund's net asset value per share.
Performance figures include the maximum applicable sales charge of 5%
for Class A shares. The effect of the maximum contingent deferred sales
charge for Class B shares (maximum 5% and declining to 0% over six
years) is included in Class B performance. Performance is affected by a
12b-1 plan, which commenced on January 1, 1990 and January 3, 1994 for
Class A and Class B shares, respectively. Remember that all figures
represent past performance and are no guarantee of how the Fund will
perform in the future. Also, 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.
CUMULATIVE TOTAL RETURNS
For the period ended June 30, 1996
One Five Most Recent
Year Years Ten Years
------ --------- --------
John Hancock Growth Fund:
Class A 17.69% 87.89% 165.02%
John Hancock Growth Fund:
Class B (1) 17.92% 31.45% N/A
AVERAGE ANNUAL TOTAL RETURNS
For the period ended June 30, 1996
One Five Most Recent
Year Years Ten Years
------ --------- --------
John Hancock Growth Fund:
Class A 17.69% 13.44% 10.24%
John Hancock Growth Fund:
Class B (1) 17.92% 11.61% N/A
Notes to Performance
(1) Class B shares started on January 3, 1994.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Growth Fund would be worth on June 30, 1996, assuming you have
been invested and have reinvested all distributions for the entire time
periods represented in the graphs. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is
used often as a measure of stock market performance.
Growth Fund
Class A shares
Line chart with the heading Growth Fund: Class A, representing the growth
of a hypothetical $10,000 investment over the most recent ten years.
Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock
Index and is equal to $43,986 as of June 30, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Growth Fund on December 31, 1985, before sales charge, and is equal to
$36,672 as of June 30, 1996. The third line represents the Growth Fund
after sales charge and is equal to $34,845 as of June 30, 1996.
Growth Fund
Class B shares
Line chart with the heading Growth Fund: Class B, representing the growth
of a hypothetical $10,000 investment over the life of the fund. Within
the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock
Index and is equal to $15,340 as of June 30, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Growth Fund on January 3, 1994, before contingent deferred sales charge,
and is equal to $13,445 as of June 30, 1996. The third line represents
the Growth Fund after contingent deferred sales charge and is equal to
$13,145 as of June 30, 1996.
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on June 30, 1996.
You'll also find the net asset value and the maximum offering price per
share as of that date.
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
- ---------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks (cost $186,465,041) $288,452,196
Joint repurchase agreement (cost - $6,299,000) 6,299,000
Corporate savings account 3,052
------------
294,754,248
Interest receivable 973
Dividends receivable 137,425
Other assets 27,871
------------
Total Assets 294,920,517
- ---------------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 415
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 195,988
Accounts payable and accrued expenses 193,763
------------
Total Liabilities 390,166
- ---------------------------------------------------------------------------------
Net Assets:
Capital paid-in 171,942,913
Accumulated net realized gain on investments 21,777,844
Net unrealized appreciation of investments 101,988,162
Accumulated net investment loss (1,178,568)
------------
Net Assets $294,530,351
=================================================================================
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, respectively)
Class A - $269,139,601 / 12,043,521 $22.35
=================================================================================
Class B - $25,390,750 / 1,155,287 $21.98
=================================================================================
Maximum Offering Price Per Share*
Class A - ($22.35 x 105.26%) $23.53
=================================================================================
*On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows
net gains (losses) for the period stated.
Statement of Operations
Six months ended June 30, 1996 (Unaudited)
- ---------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $6,297) $816,053
Interest 126,935
------------
942,988
------------
Expenses:
Investment management fee - Note B 1,088,768
Distribution/service fee - Note B
Class A 382,692
Class B 94,117
Transfer agent fee - Note B 378,418
Registration and filing fees 51,149
Custodian fee 28,464
Financial services fee - Note B 25,684
Printing 24,996
Auditing fee 18,650
Trustees' fees 12,112
Miscellaneous 11,119
Legal fees 5,387
------------
Total Expenses 2,121,556
- ---------------------------------------------------------------------------------
Net Investment Loss (1,178,568)
- ---------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 21,666,267
Change in net unrealized appreciation/depreciation
of investments 16,872,844
------------
Net Realized and Unrealized Gain
on Investments 38,539,111
- ---------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $37,360,543
=================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30, 1996
1995 (UNAUDITED)
------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($973,581) ($1,178,568)
Net realized gain on investments sold 9,207,214 21,666,267
Change in net unrealized appreciation/
depreciation of investments 30,638,725 16,872,844
------------ ------------
Net Increase in Net Assets Resulting from Operations 38,872,358 37,360,543
------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A -- ($0.6945 and none per
share, respectively) (8,391,968) --
Class B -- ($0.6945 and none per
share, respectively) (552,264) --
------------ ------------
Total Distributions to Shareholders (8,944,232) --
------------ ------------
From Fund Share Transactions -- Net* 75,837,052 (442,834)
------------ ------------
Net Assets:
Beginning of period 151,847,464 257,612,642
------------ ------------
End of period (including accumulated net
investment loss of none and $1,178,568,
respectively) $257,612,642 $294,530,351
============ ============
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, 1996
1995 (UNAUDITED)
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- -----------
CLASS A
Shares sold 1,671,481 $32,932,574 1,451,734 $30,046,586
Shares issued in reorganization -- Note D 3,788,495 77,588,384 -- --
Shares issued to shareholders in
reinvestment of distributions 402,050 7,803,606 -- --
--------- ----------- ---------- -----------
5,862,026 118,324,564 1,451,734 30,046,586
Less shares repurchased (2,691,827) (52,370,704) (1,796,574) (37,424,715)
--------- ----------- ---------- -----------
Net increase (decrease) 3,170,199 $65,953,860 (344,840) ($7,378,129)
========= =========== ========== ===========
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, 1996
1995 (UNAUDITED)
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
CLASS B
Shares sold 333,335 $6,333,583 664,631 $14,007,763
Shares issued in reorganization -- Note D 471,911 9,563,328 -- --
Shares issued to shareholders in
reinvestment of distributions 27,495 526,875 -- --
-------- ----------- -------- -----------
832,741 16,423,786 664,631 14,007,763
Less shares repurchased (246,690) (4,843,723) (335,842) (7,072,468)
-------- ----------- -------- -----------
Net increase 586,051 $11,580,063 328,789 $6,935,295
======== =========== ======== ===========
CLASS C **
Shares sold 841 $15,270
Shares issued to shareholders in
reinvestment of distributions -- --
-------- -----------
841 15,270
Less shares repurchased (99,061) (1,712,141)
-------- -----------
Net decrease (98,220) ($1,696,871)
======== ===========
** All Class C shares were redeemed on March 31, 1995.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Growth 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:
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------------------------------- JUNE 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $12.93 $17.48 $17.32 $17.40 $15.89 $19.51
-------- -------- -------- -------- -------- --------
Net Investment Income (Loss) 0.04 (0.06) (0.11) (0.10) (0.09)(1) (0.08)(1)
Net Realized and Unrealized Gain
(Loss) on Investments 5.36 1.10 2.33 (1.21) 4.40 2.92
-------- -------- -------- -------- -------- --------
Total from Investment Operations 5.40 1.04 2.22 (1.31) 4.31 2.84
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment
Income (0.04) -- -- -- -- --
Distributions from Net Realized
Gain on Investments Sold (0.81) (1.20) (2.14) (0.20) (0.69) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.85) (1.20) (2.14) (0.20) (0.69) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $17.48 $17.32 $17.40 $15.89 $19.51 $22.35
======== ======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value(2) 41.68% 6.06% 13.03% (7.50%) 27.17% 14.56%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted) $145,287 $153,057 $162,937 $146,466 $241,700 $269,140
Ratio of Expenses to Average Net
Assets 1.44% 1.60% 1.56% 1.65% 1.48% 1.50%(7)
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.27% (0.36%) (0.67%) (0.64%) (0.46%) (0.80%)(7)
Portfolio Turnover Rate 82% 71% 68% 52% 68%(3) 42%
Average brokerage commission
rate(4) N/A N/A N/A N/A N/A $0.0693
SIX MONTHS ENDED
JUNE 30, 1996
1994(5) 1995 (UNAUDITED)
-------- -------- --------
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $17.16 $15.83 $19.25
-------- -------- --------
Net Investment Loss (0.20)(1) (0.26)(1) (0.15)(1)
Net Realized and Unrealized Gain
(Loss) on Investments (0.93) 4.37 2.88
-------- -------- --------
Total from Investment Operations (1.13) 4.11 2.73
-------- -------- --------
Less Distributions:
Distributions from Net
Realized Gain on Investments Sold (0.20) (0.69) --
-------- -------- --------
Net Asset Value, End of Period $15.83 $19.25 $21.98
======== ======== ========
Total Investment Return at
Net Asset Value(2) (6.56%)(6) 26.01% 14.18%(6)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $3,807 $15,913 $25,391
Ratio of Expenses to Average
Net Assets 2.38%(7) 2.31% 2.20%(7)
Ratio of Net Investment Loss
to Average Net Assets (1.25%)(7) (1.39%) (1.50%)(7)
Portfolio Turnover Rate 52% 68%(3) 42%
Average brokerage
commission rate(4) N/A N/A $0.0693
PERIOD ENDED YEAR ENDED PERIOD
DECEMBER 31, DECEMBER 31, ENDED
1993 1994 MARCH 31, 1995
-------- -------- --------
CLASS C (8)
Per Share Operating Performance
Net Asset Value, Beginning
of Period $17.05 $17.46 $16.02
-------- -------- --------
Net Investment Income (Loss) (0.02) (0.01) 0.02(1)
Net Realized and Unrealized
Gain (Loss) on Investments 2.57 (1.23) 1.28
-------- -------- --------
Total from Investment
Operations 2.55 (1.24) 1.30
-------- -------- --------
Less Distributions:
Distributions from Net
Realized Gain on Investments Sold (2.14) (0.20) --
-------- -------- --------
Net Asset Value, End
of Period $17.46 $16.02 $17.32
======== ======== ========
Total Investment Return at
Net Asset Value(2) (15.18%)(6) (7.07%) 8.11%(6)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) 1,285% 1,574% 1,672%
Ratio of Expenses to Average
Net Assets 1.05%(7) 1.12% 1.05%(7)
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.17%)(7) (0.08%) 0.44%(7)
Portfolio Turnover Rate 68% 52% 39%
(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) Excludes merger activity.
(4) Per portfolio share traded. Required for fiscal years that began
September 1, 1995 or later.
(5) Class B shares commenced operations on January 3, 1994.
(6) Not annualized.
(7) Annualized.
(8) Class C shares commenced operations on May 7, 1993. Net asset value and net
assets at the end of the period reflect amounts prior to the
redemption of all shares on March 31, 1995.
The Financial Highlights summarizes the impact of the following factors on a single
share for the period indicated: net investment income, gains (losses), dividends
and total investment return of the Fund. It shows how the Fund's net asset value
for a share has changed since the end of the previous period. Additionally,
important relationships between some items presented in the financial statements
are expressed in ratio form.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Growth Fund on June 30, 1996. It's divided into three main categories:
common stocks, preferred stocks and short-term investments. Common and
preferred stocks are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------------------------- ------------- -------------
<S> <C> <C>
COMMON STOCK
Banks - United States (1.50%)
Chase Manhattan Corp. 62,400 $4,407,000
------------
Beverages (2.32%)
Coca-Cola Co. (The) 140,000 6,842,500
------------
Computers (16.88%)
Adaptec, Inc.* 140,000 6,632,500
America Online, Inc.* 70,000 3,062,500
cisco Systems, Inc.* 140,000 7,927,500
Hewlett-Packard Co. 40,000 3,985,000
McAfee Associates, Inc. * 2,000 98,000
Microsoft Corp.* 25,000 3,003,125
Oracle Corp.* 140,000 5,521,250
Seagate Technology, Inc.* 90,000 4,050,000
Sterling Commerce, Inc. * 101,000 3,749,625
Sun Microsystems, Inc.* 100,000 5,887,500
Wang Laboratories, Inc.* 160,000 3,020,000
Xylan Corp.* 60,000 2,790,000
------------
49,727,000
------------
Consumer Products Misc. (1.49%)
PolyGram N.V. 75,000 4,396,875
------------
Cosmetics & Personal Care (4.02%)
Avon Products, Inc. 110,000 4,963,750
Gillette Co. (The) 110,000 6,861,250
------------
11,825,000
------------
Electronics (1.75%)
Intel Corp. 70,000 5,140,625
------------
Finance (6.57%)
Associates First Capital Corp. (Class A) * 87,500 3,292,187
Capital One Financial Corp. 100,000 2,850,000
First Data Corp. 60,000 4,777,500
First USA, Inc. 60,000 3,300,000
MBNA Corp. 180,000 5,130,000
------------
19,349,687
------------
Household (0.63%)
Harman International Industries, Inc. 37,450 1,844,413
------------
Leisure (4.77%)
Disney (Walt) Co., (The) 65,740 $4,133,402
HFS, Inc. * 80,000 5,600,000
ITT Corp. * 45,000 2,981,250
Marriott International, Inc. 25,000 1,343,750
------------
14,058,402
------------
Linen Supply & Related (1.64%)
Cintas Corp. 90,000 4,815,000
------------
Media (6.58%)
Clear Channel Communications, Inc. * 82,500 6,795,937
Gannett Co., Inc. 55,000 3,891,250
Jacor Communications, Inc. * 28,900 892,288
Tribune Co. 55,000 3,994,375
United States Satellite
Broadcasting Co., Inc. * 101,000 3,812,750
------------
19,386,600
------------
Medical (18.72%)
Amgen, Inc. * 60,000 3,240,000
Cardinal Health, Inc. 82,500 5,950,312
Elan Corp., PLC, American Depository
Receipt (ADR) * (Ireland) 70,000 3,998,750
HBO & Co. 150,000 10,162,500
Health Care & Retirement Corp. * 195,000 4,631,250
Health Management
Associates, Inc. (Class A) * 292,500 5,923,125
IDEXX Laboratories, Inc. * 75,000 2,943,750
Johnson & Johnson 130,000 6,435,000
Manor Care, Inc. 110,000 4,331,250
Merck & Co., Inc. 50,000 3,231,250
Pfizer, Inc. 60,000 4,282,500
------------
55,129,687
------------
Oil & Gas (6.97%)
Diamond Offshore Drilling, Inc. * 100,000 5,725,000
Halliburton Co. 70,000 3,885,000
Reading & Bates Corp. * 200,000 4,425,000
Schlumberger, Ltd. 45,000 3,791,250
Western Atlas, Inc. * 46,600 2,714,450
------------
20,540,700
------------
Restaurants (2.83%)
Landry's Seafood Restaurants, Inc. * 120,000 2,970,000
McDonald's Corp. 70,000 3,272,500
Planet Hollywood International, Inc.
(Class A) 77,000 2,079,000
------------
8,321,500
------------
Retail (7.08%)
CUC International, Inc. * 142,500 5,058,750
Federated Department Stores, Inc. * 35,000 1,194,375
Home Depot, Inc. 50,000 2,700,000
Men's Wearhouse, Inc. (The) * 75,000 2,418,750
Nordstrom, Inc. 40,000 1,780,000
PetSmart, Inc.* 100,000 4,775,000
Saks Holdings, Inc. * 48,500 1,655,063
Wal-Mart Stores, Inc. 50,000 1,268,750
------------
20,850,688
------------
Service (8.05%)
APAC Teleservices, Inc. * 161,000 5,796,000
Apollo Group, Inc.* (Class A) 121,950 3,414,600
Checkpoint Systems, Inc. * 25,000 859,375
Corrections Corp of America * 60,000 4,200,000
Paychex, Inc. 196,250 9,444,531
------------
23,714,506
------------
Shoes & Related Apparel (1.40%)
Nike, Inc. (Class B) 40,000 4,110,000
------------
Telecommunications (3.47%)
Cascade Communications Corp.* 70,000 4,760,000
Lucent Technologies, Inc. 100,000 3,787,500
McLeod, Inc. (Class A) * 70,000 1,680,000
------------
10,227,500
------------
Textile (1.27%)
Tommy Hilfiger Corp.* 70,000 $3,753,750
------------
TOTAL COMMON STOCKS
(Cost $186,454,541) (97.93%) $288,441,433
------------
PREFERRED STOCK
Diversified Operations (0.01%)
Teledyne, Inc., Ser E, $1.20 700 10,763
------------
TOTAL PREFERRED STOCK
(Cost $10,500) (0.01%) 10,763
------------
TOTAL COMMON STOCKS
AND PREFERRED STOCK
(Cost $186,465,041) (97.94%) 288,452,196
------------
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000'S OMITTED)
- -------------------------------------------- -------------- --------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.14%)
Investment in a joint repurchase
agreement transaction with
Toronto-Dominion Bank Ltd. --
Dated 06-28-96, Due 07-01-96
(secured by U.S.Treasury Bills,
5.38% Due 12-12-96 and 5.69%
Due 06-26-97; U.S. Treasury Bonds,
7.25% Due 5-15-16 and
7.50% Due 11-15-16 and
U.S Treasury Notes 4.375%
through 7.75% Due 08-15-96
through 11-15-01) -- Note A 5.50% $6,299 6,299,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 3,052
------------
TOTAL SHORT-TERM INVESTMENTS (2.14%) 6,302,052
------------
TOTAL INVESTMENTS (100.08%) $294,754,248
======== ============
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
See notes to financial statements
</TABLE>
Notes To Financial Statements
John Hancock Funds - Growth Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Capital Series (the "Trust"), is an open-end management
investment company, registered under the Investment Company Act of 1940.
Until June 30,1996, the Trust consisted of two series portfolios: John
Hancock Growth Fund (the "Fund") and John Hancock Special Value Fund. As
of July 1, 1996, the Fund became a series of John Hancock Freedom
Investment Trust II. As a result, the Fund's fiscal year end has been
changed to October 31. The investment objective of the Fund is to
achieve long-term appreciation of capital.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A and Class B 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. Shareholders of a class which bears distribution/service
expenses under terms of a distribution plan, have exclusive voting
rights regarding such distribution plan. Significant accounting policies
of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The
Berkeley Financial Group, may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more repurchase agreements, whose underlying securities are obligations
of the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis for
both financial reporting and federal income tax purposes.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on
investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as
applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles. Dividends paid by
the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and will be in the same
amount, except for effect of expenses that may be applied differently to
each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the Fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution/service fees, if any, are calculated
daily at the class level based on the appropriated 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 incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues, and expenses of the Fund.
NOTE B --
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of the
first $250,000,000 of the Fund's average daily net asset value, (b)
0.75% of the next $250,000,000 and (c) 0.70% of the Fund's average daily
net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund is registered to sell shares of beneficial
interest, the fee payable to the Adviser will be reduced to the extent
of such excess and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current limits
are 2.5% of the first $30,000,000 of the Fund's average daily net asset
value, 2.0% of the next $70,000,000 and 1.5% of the remaining average
daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
June 30, 1996, JH Funds received net sales charges of $215,301. Out of
this amount, $24,034 was retained and used for printing prospectuses,
advertising, sales literature, and other purposes, $75,786 was paid as
sales commissions to unrelated broker-dealers, and $115,481 was paid as
sales commissions to personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and
Sutro & Co., Inc. ("Sutro"), all of which are broker-dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company,
is the indirect sole shareholder of Distributors and John Hancock
Freedom Securities Corporation and its subsidiaries, which include
Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.0% of the lesser of the current market value at the
time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of
Class B shares. For the period ended June 30, 1996, contingent deferred
sales charges amounted to $13,940.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution
Plan with respect to Class A and Class B shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. Accordingly, the Fund will
make payments to JH Funds for distribution and service expenses at an
annual rate not to exceed 0.30% of Class A average daily net assets and
1.00% of Class B average daily net assets to reimburse JH Funds for its
distribution/service costs. Up to a maximum of 0.25% of such payments
may be service fees as defined by the amended Rules of Fair Practice of
the National Association of Securities Dealers. Under the amended Rules
of Fair Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corp. ("Investor Services"), a wholly-owned subsidiary of The
Berkeley Financial Group. The Fund pays transfer agent fees based on the
number of shareholder accounts and certain out-of-pocket expenses.
On March 26, 1996, the Board of Directors approved retroactively to
January 1, 1996, an agreement with the Adviser to perform necessary tax
and financial management services for the Funds. The compensation for
1996 is estimated to be at an annual rate of 0.01875% of the average net
assets of each Fund.
Mr. Edward J. Boudreau, Jr. is a director and/or officer of the Adviser
and/or its affiliates, as well as a Trustee of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund. Effective
with the fees paid for 1995, the unaffiliated Trustees may elect to
defer for tax purposes their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund 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. At June 30, 1996, the Fund's investment to cover the
deferred compensation had unrealized appreciation of $1,007.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended June 30, 1996 aggregated
$114,042,500 and $115,305,204, respectively.
The cost of investments owned at June 30, 1996 (excluding the corporate
savings account), for Federal income tax purposes was $192,768,854.
Gross unrealized appreciation and depreciation of investments aggregated
$104,770,096 and $2,787,754, respectively, resulting in net unrealized
appreciation of $101,982,342.
NOTE D --
REORGANIZATION
On September 8, 1995, the shareholders of John Hancock Capital Growth
Fund (JHCGF) approved a plan of reorganization between JHCGF and the
Fund providing for the transfer of substantially all of the assets and
liabilities of JHCGF to the Fund in exchange solely for Class A and
Class B shares of the Fund. The acquisition was accounted for as a tax
free exchange of 3,788,495 Class A shares, and 471,911 Class B shares of
John Hancock Growth Fund for the net assets of JHCGF, which amounted to
$77,588,384 and $9,563,328 for Class A and B shares, respectively,
including $20,624,702 of unrealized appreciation, at the close of
business on September 15, 1995.
Notes
John Hancock Funds - Growth Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
Notes
John Hancock Funds - Growth Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
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Permit No. 75
This report is for the information of shareholders of the John Hancock
Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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200SA 6/96
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