<PAGE> 1
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
INDEPENDENCE
DIVERSIFIED CORE
EQUITY FUND
SEMI - ANNUAL REPORT
November 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Bayard Henry*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Vice President, Assistant Secretary
and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 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
INVESTMENT SUB-ADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through November, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by 32%. Investors who
stayed in the market after a disappointing 1994 have been rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/Edward J. Boudreau, Jr.
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY PAUL MCMANUS FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
INDEPENDENCE DIVERSIFIED
CORE EQUITY FUND
STOCKS PROPEL TO NEW HIGHS; CHEAP STOCKS WITH IMPROVING
FUNDAMENTALS ARE FOCUS FOR FUND
The stock market has skyrocketed in the last six months, propelling the rally
that began at the start of 1995 to historic levels. Fueled by declining interest
rates, muted inflation and strong corporate earnings, both the Dow Jones
Industrial Average and the Standard & Poor's 500-Stock Index -- the broadest
measure of stock market performance -- gained 15% between May 31, 1995 and
November 30, 1995 and were up more than 30% from the start of the year. One week
before the end of the Fund's semi-annual period on November 30, the Dow broke
through the 5000 mark, only nine months after passing 4000.
[A 2 1/2" x 2 1/4 " photo of Paul McManus, bottom center. Caption reads: "Paul
McManus."]
The market's performance reflected a growing conviction that the economy's
slowdown, which began early in the year, was not going to turn into recession
and that inflation was under control. Even though slower growth might hold down
company earnings, the fact that interest rates were falling meant that
companies' price/earnings ratios could still go up and stock prices had more
room to advance.
The upshot was gratifying for John Hancock Independence Diversified Core
Equity Fund as well, both in absolute terms and against its peers. For the six
months ended November 30, 1995, the Fund's Class A shares had a total return, at
net asset value, of 15.22%. By comparison, the average growth and income fund
returned 12.72%, according to Lipper Analytical Services.(1) For
[CAPTION]
"The stock market has skyrocketed in the last six months..."
3
<PAGE> 4
John Hancock Funds - Independence Diversified Core Equity Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) Bristol-Myers Squibb 2.8% 2) Pacific Telesis
Group 2.7% 3) Marsh & McLennan 2.6% 4) GTE 2.6% 5) Monsanto 2.4%. A footnote
below reads "As a percentage of net assets on November 30, 1995."]
[Table entitled "Scorecard" at bottom left hand column. The header for the left
column is "Investment"' the header for the right column is "Recent
performance...and what's behind the numbers." The first listing is "AT&T"
followed by an up arrow and the phrase "Announced breakup boosts stock". The
second listing is "UAL Corp." followed by an up arrow and the phrase "Good
earnings momentum". The third listing is "Goodyear Tire & Rubber" followed by a
down arrow and the phrase "Hurt by increased price competition". Footnote below
reads: "See '"Schedule of Investments." Investment holdings are subject to
change."]
the period September 7, 1995 through November 30, 1995, Class B shares had a
total return at net asset value of 6.06%.
PERFORMANCE AND STRATEGY
The Fund certainly benefited from the strong market rally that prevailed during
the period. Technology stocks, which have been the darlings of the rally, served
us well at the beginning of the period, from June through the end of summer.
That was when companies such as IBM, Microsoft and Integrated Device
Technologies, had strong earnings momentum and their stocks reached high levels.
Semiconductor companies benefited in particular from the continued strong demand
for personal computers and the growing use of semiconductors in consumer
products beyond computers, such as cars, appliances and cellular phones. Some of
these tech stocks have pulled back somewhat in the third quarter of 1995, but we
still hold some because we believe they have strong value and a bright outlook.
The strong market upswing didn't cause us to waiver from our established
investment strategy, however. We believe the way to make money in the stock
market is to buy stocks that are cheap and have improving fundamentals. We find
them among all types of companies -- big, small, value and growth. Buying stocks
that are cheap is one way of managing risk. Making sure the stocks have
improving fundamentals is a way to position the Fund for opportunity. Our
disciplined style of choosing stocks doesn't allow us to get caught up, or
bogged down, in short-term market swings. Rather, we keep our focus fixed on
applying our approach consistently over a long period of time. Strict adherence
to discipline and patience are two characteristics that most successful
investors share.
LARGEST HOLDINGS AMONG TOP PERFORMERS
In the last six months, some of our best performers were among our largest
holdings and within a few groups, such as health care, financial stocks and
telecommunications companies. Not coincidentally these are groups that tend to
react favorably to a declining interest rate environment. As rates fall, for
example, banks' profit margins rise on improving credit spreads -- the
difference between what banks charge borrowers and pay depositors. The
consolidation going on in the banking industry is also helping both the earnings
and stock prices of banks involved in mergers. So our holdings in Chemical,
Fleet and NationsBank -- all of which were involved in mergers in 1995 -- have
paid off. Other financial companies that performed well during the period were
American Express and insurance
4
<PAGE> 5
John Hancock Funds - Independence Diversified Core Equity Fund
[Bar chart with heading "FUND PERFORMANCE" at top of left hand column. Under the
heading is the footnote "For Class A shares and the average growth and income
fund, results are for the six months ended November 30, 1995. For Class B
shares, result is for the period September 7, 1995 through November 30, 1995 "
The chart is scaled in increments of 5% from top to bottom with 20% at the top
and 0% at the bottom. Within the chart, there are three solid bars. The first
represents the 15.22% total return for John Hancock Independence Diversified
Core Equity Fund, Class A. The second represents the 6.06% total return for John
Hancock Independence Diversified Core Equity Fund, Class B. The third represents
the 12.72% total return for the average growth and income fund. Footnote below
reads: "The total returns for John Hancock Independence Diversified Core Equity
Fund are at net asset value with all distributions reinvested. The average
growth and income fund is tracked by Lipper Analytical Services. (1) See
following page for historical performance information.]
giants Allstate, Cigna and Marsh & McLennan. The Fund had about 14% of its net
assets in financial stocks at the end of the period.
Telecommunications companies, at approximately 9% of the Fund's net assets,
are reaping the rewards of some major changes occurring in their universe, on
top of scoring in the favorable interest-rate environment. AT&T, for example,
got a boost from its announced plans to split into three separate companies. And
the Bell operating companies such as GTE and Pacific Telesis, two of the Fund's
largest holdings, should benefit from their new ability to tap into the long
distance market.
Within the health-care sector, we had particular success with our
pharmaceutical holdings. Bristol-Meyers Squibb, Merck, Pfizer and
Schering-Plough, all drug companies in various stages of introducing new drugs
to the market, were strong performers. Another winner was Medtronic, a company
that produces electronic pacemakers.
LAGGARDS AND OPPORTUNITIES
Even in a spectacular market there are bound to be some disappointments, and the
last six months were no exception. The larger cyclical companies which are
sensitive to swings in the economy, felt the effects of the slowdown in growth.
One holding, Goodyear Tire & Rubber, suffered from a decline in auto production,
higher prices for raw materials and increased price competition for tires. The
retail sector suffered from slow consumer spending. But we've begun to buy some
retail stocks, like Toys "R" Us and Home Depot, because we think they are
relatively cheap. In addition, their earnings estimates are attractive enough to
belie their current stock prices.
A LOOK AHEAD
After the market's performance to date in 1995, it would be unrealistic to
expect more of the same going forward. However, as long as interest rates stay
low or fall, and the economy continues its slow-growth mode, there's still room
for the market to advance, even at a slower rate. But, as always, we don't spend
much time trying to second guess what's ahead. We'll keep our shoulder to the
wheel and execute our disciplined investment style to find companies across a
diverse range spectrum that are "cheap" with improving fundamentals.
[CAPTION]
"...there's still room for the market to advance, even at a slower rate."
- ---------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
5
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Independence Diversified Core Equity Fund.
Total return is a performance measure that equals the sum of all dividends and
capital gains, assuming reinvestment of these distributions and the change in
the price of the Fund's shares, expressed as a percentage of the Fund's average
net assets. 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. 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 SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE LIFE OF
YEAR FUND
---- ----
<S> <C> <C>
John Hancock Independence Diversified
Core Equity Fund: Class A 23.12% 66.31%(1)
John Hancock Independence Diversified
Core Equity Fund: Class B (2.23%)(2) N/A
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE LIFE OF
YEAR FUND
---- ----
<S> <C> <C>
John Hancock Independence Diversified
Core Equity Fund: Class A(3) 23.12% 12.53%(1)
John Hancock Independence Diversified
Core Equity Fund: Class B N/A N/A
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on June 10, 1991.
(2) Class B shares started on September 7, 1995.
(3) Effective September 1, 1995, the Adviser has undertaken to limit the Fund's
expenses, including the management fee and excluding the 12b-1 fee, to
1.30% and 2.00% attributable to Class A and Class B shares, respectively,
of the Fund's daily net asset value. Prior to September 1, 1995, and the
creation of Class B shares, the limitation of expenses was 0.70% of the
Fund's daily net asset value. Without the limitation of expenses, the
average annualized total returns for the one-year period and since
inception for Class A shares would have been 22.45% and 11.86%,
respectively.
6
<PAGE> 7
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John Hancock
Independence Diversified Core Equity Fund would be worth on November 30, 1995,
assuming you had invested on the day each class of shares started and have
reinvested all distributions. 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 a commonly used measure of stock
market performance.
Independence Diversified Core Equity Fund
Class A shares
Line chart with the heading Independence Diversified Core Equity Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines.
The first line represents the value of the hypothetical $10,000 investment made
in the Independence Diversified Core Equity Fund on June 10, 1991, before sales
charge, and is equal to $18,108 as of November 30, 1995. The second line
represents the value of the Standard & Poor's 500 Stock Index and is equal to
$17,636, as of November 30, 1995. The third line represents the Independence
Diversified Core Equity Fund after sales charge and is equal to $17,196 as of
November 30, 1995.
Independence Diversified Core Equity Fund
Class B shares
Line chart with the heading Independence Diversified Core Equity Fund: Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock Index and
is equal to $10,840 as of November 30, 1995. The second line represents the
value of the hypothetical $10,000 investment made in the Independence
Diversified Core Equity Fund on September 7, 1995, before contingent deferred
sales charge, and is equal to $10,606 as of November 30, 1995. The third line
represents the Independence Diversified Core Equity Fund after contingent
deferred sales charge and is equal to $10,106 as of November 30, 1995.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
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 NOVEMBER 30, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AS OF THAT DATE.
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $5,601,432) .................... $5,863,571
Short-term investments (cost - $1,499,840) ........... 1,499,840
Corporate savings account ............................ 568
----------
7,363,979
Receivable for investments sold ....................... 5,249
Receivable for shares sold ............................ 442,908
Dividends receivable .................................. 10,663
Interest receivable ................................... 510
Receivable from John Hancock Advisers, Inc. - Note B .. 36,701
Deferred organization expenses - Note A ............... 1,697
----------
Total Assets ............................ 7,861,707
-----------------------------------------------------
LIABILITIES:
Payable for investments purchased ..................... 1,298,823
----------
Total Liabilities ....................... 1,298,823
-----------------------------------------------------
NET ASSETS:
Capital paid-in ....................................... 5,855,211
Accumulated net realized gain on investments and
foreign currency transactions ......................... 316,991
Net unrealized appreciation of investments ............ 262,139
Undistributed net investment income ................... 128,543
----------
Net Assets .............................. $6,562,884
=====================================================
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 - $4,278,270 / 265,246 ........................ $ 16.13
===================================================================
Class B** - $2,284,614 / 141,782 ...................... $ 16.11
===================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($16.13 x 105.26%) .......................... $ 16.98
===================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
** Class B shares commenced operations on September 7, 1995.
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.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $665) ........ $ 180,972
Interest .................................................... 15,190
------------
196,162
------------
Expenses:
Investment management fee - Note B ......................... 42,495
Distribution/service fee - Note B
Class A ................................................... 1,351
Class B** ................................................. 1,207
Custodian fee .............................................. 24,475
Registration and filing fees ............................... 13,951
Transfer agent fee - Note B ................................ 9,106
Auditing fee ............................................... 6,562
Legal fees ................................................. 5,671
Printing ................................................... 4,532
Trustees' fees ............................................. 3,626
Miscellaneous .............................................. 3,500
Organization expense - Note A .............................. 1,620
------------
Total Expenses ................................ 118,096
Less expenses reimbursable by
John Hancock Advisers, Inc. -
Note B ........................................ (56,164)
---------------------------------------------------------------
Net Expenses .................................. 61,932
---------------------------------------------------------------
Net Investment Income ......................... 134,230
---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments sold ....................... 13,685,072
Net realized loss on foreign currency transactions .......... (27)
Change in net unrealized appreciation/depreciation
of investments .............................................. (11,541,313)
------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions ................. 2,143,732
---------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ..................... $ 2,277,962
===============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1995 MAY 31,
(UNAUDITED) 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income .................................................................. $ 134,230 $ 2,222,325
Net realized gain on investments sold and foreign currency transactions ................ 13,685,045 2,252,968
Change in net unrealized appreciation/depreciation of investments ...................... (11,541,313) 12,046,702
------------- -------------
Net Increase in Net Assets Resulting from Operations .................................. 2,277,962 16,521,995
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.1282 and $0.2834 per share, respectively) ............................... (427,976) (2,008,180)
Class B** - ($0.0614 and none per share, respectively) ................................ (127) --
Distributions from net realized gain on investments sold
Class A - ($0.2907 and $0.0849 per share, respectively) ............................... (2,049,000) (608,472)
------------- -------------
Total Distributions to Shareholders ................................................... (2,477,103) (2,616,652)
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ..................................................... (94,656,266) 20,901,056
------------- -------------
NET ASSETS:
Beginning of period .................................................................... 101,418,291 66,611,892
------------- -------------
End of period (including undistributed net investment income of $128,543 and $422,416,
respectively) ......................................................................... $ 6,562,884 $ 101,418,291
============= =============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MAY 31, 1995
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .......................................... 318,765 $ 4,891,671 3,969,193 $ 50,176,705
Shares issued to shareholders in reinvestment
of distributions ..................................... 175,075 2,472,472 205,957 2,611,824
------------- ------------- ------------- -------------
493,840 7,364,143 4,175,150 52,788,529
Less shares repurchased .............................. (7,265,784) (104,261,340) (2,389,312) (31,887,473)
------------- ------------- ------------- -------------
Net increase (decrease) .............................. (6,771,944) $ (96,897,197) 1,785,838 $ 20,901,056
============= ============= ============= =============
CLASS B**
Shares sold .......................................... 147,274 $ 2,327,178
Shares issued to shareholders in reinvestment
of distributions ..................................... 666 10,421
------------- -------------
147,940 2,337,599
Less shares repurchased .............................. (6,158) (96,668)
------------- -------------
Net increase ......................................... 141,782 $ 2,240,931
============= =============
</TABLE>
** Class B commenced operations on September 7, 1995
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios, and supplemental data are as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 10, 1991
SIX MONTHS ENDED (COMMENCEMENT OF
NOVEMBER 30, 1995 YEAR ENDED MAY 31, OPERATIONS) TO
-------------------------------------
(UNAUDITED) 1995 1994 1993 MAY 31, 1992
----------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................... $14.41 $ 12.68 $ 12.16 $ 10.98 $10.00
------ -------- -------- ------- ------
Net Investment Income .................................... 0.54 0.32(b) 0.28(b) 0.22 0.15
Net Realized and Unrealized Gain on Investments .......... 1.60 1.77 0.52 1.25 0.94
------ -------- -------- ------- ------
Total from Investment Operations ....................... 2.14 2.09 0.80 1.47 1.09
------ -------- -------- ------- ------
Less Distributions:
Dividends from Net Investment Income .................... (0.13) (0.28) (0.23) (0.23) (0.11)
Distributions from Net Realized Gain
on Investments Sold .................................... (0.29) (0.08) (0.05) (0.06) --
------ -------- -------- ------- ------
Total Distributions .................................... (0.42) (0.36) (0.28) (0.29) (0.11)
------ -------- -------- ------- ------
Net Asset Value, End of Period ........................... $16.13 $ 14.41 $ 12.68 $ 12.16 $10.98
====== ======== ======== ======= ======
Total Investment Return at Net Asset Value (f) ........... 15.22%(e) 16.98% 6.60% 13.58% 10.95%(e)
Total Adjusted Investment Return at Net Asset
Value (a)(c) ............................................ 14.89%(e) 16.94% 6.15% 11.40% 9.23%(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ................ $4,278 $101,418 $ 66,612 $12,488 $2,622
Ratio of Expenses to Average Net Assets .................. 0.73%* 0.70% 0.70% 0.76% 1.66%*
Ratio of Adjusted Expenses to Average Net Assets (a) ..... 1.40%* 0.74% 1.15% 2.94% 3.38%*
Ratio of Net Investment Income to Average Net Assets ..... 1.62%* 2.43% 2.20% 2.36% 1.77%*
Ratio of Adjusted Net Investment Income
to Average Net Assets (a) ................................ 0.95%* 2.39% 1.75% 0.18% 0.05%*
Portfolio Turnover Rate .................................. 25% 71% 43% 53% 53%
** Fee Reduction Per Share ............................... $ 0.04 $ 0.005(b) $ 0.06(b) $ 0.20 $ 0.15
</TABLE>
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.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios, and supplemental data are as
follows:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
SEPTEMBER 7, 1995
(COMMENCEMENT OF
OPERATIONS) TO
NOVEMBER 30, 1995
(UNAUDITED)
------------
<S> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ................................................................ $ 15.25
---------
Net Investment Income ............................................................................... 0.08
Net Realized and Unrealized Gain on Investments ..................................................... 0.84(d)
---------
Total from Investment Operations .................................................................. 0.92
---------
Less Distributions:
Dividends from Net Investment Income ............................................................... (0.06)
---------
Total Distributions ............................................................................... (0.06)
---------
Net Asset Value, End of Period ...................................................................... $ 16.11
=========
Total Investment Return at Net Asset Value (f) ...................................................... 6.06%(e)
Total Adjusted Investment Return at Net Asset Value (a)(c) .......................................... 5.72%(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ........................................................... $ 2,285
Ratio of Expenses to Average Net Assets ............................................................. 2.00%*
Ratio of Adjusted Expenses to Average Net Assets (a) ................................................ 3.45%*
Ratio of Net Investment Income to Average Net Assets ................................................ 2.44%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) ................................... 0.98%*
Portfolio Turnover Rate ............................................................................. 526%
** Fee Reduction Per Share .......................................................................... $ 0.04
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) On average month end shares outstanding.
(c) An estimated total return calculation which takes into consideration fees
and expenses borne by the adviser during the periods shown.
(d) May not accord to amounts shown elsewhere in the financial statements.
(e) Not annualized.
(f) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
SCHEDULE OF INVESTMENTS
November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
INDEPENDENCE DIVERSIFIED CORE EQUITY FUND ON NOVEMBER 30, 1995. IT'S DIVIDED
INTO TWO MAIN CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. COMMON
STOCKS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUP. SHORT-TERM INVESTMENTS, WHICH
REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
AEROSPACE (4.41%)
Boeing Co. (The) ............................... 400* $ 29,150
Lockheed Martin Corp. .......................... 1,472 108,006
Raytheon Co. ................................... 1,100 48,950
United Technologies Corp. ...................... 1,100* 103,125
--------
289,231
--------
AUTOMOBILE/TRUCK (1.75%)
Chrysler Corp. ................................. 1,100* 57,063
Dana Corp. ..................................... 800 23,400
Eaton Corp. .................................... 100 5,450
General Motors Corp. ........................... 600* 29,100
--------
115,013
--------
BANKS (5.85%)
BankAmerica Corp. .............................. 1,000* 63,625
Barnett Banks, Inc. ............................ 100 6,013
Chemical Banking Corp. ......................... 900 54,000
Citicorp ....................................... 400 28,300
First Bank System, Inc. ........................ 1,100* 56,786
First Union Corp. .............................. 800 43,700
Fleet Financial Group, Inc. .................... 400 16,700
NationsBank Corp. .............................. 800 57,100
NBD Bancorp Inc. ............................... 1,500* 57,563
--------
383,787
--------
BEVERAGES (2.42%)
Coca-Cola Co. (The) ............................ 200 15,150
PepsiCo, Inc. .................................. 2,600 143,650
--------
158,800
--------
Building Products (0.29%)
Rayonier Inc. .................................. 500* 19,125
--------
CHEMICALS (5.52%)
Air Products and Chemicals, Inc. ............... 900* 49,950
Du Pont (E.I.) De Nemours & Co. ................ 200 13,300
Eastman Chemical Co. ........................... 200 13,125
Hercules, Inc. ................................. 2,100 115,236
Monsanto Co. ................................... 1,400 160,300
Morton International, Inc. ..................... 300 10,386
--------
362,297
--------
COMPUTERS (2.73%)
Digital Equipment Corp.** ...................... 800* 47,100
International Business Machines Corp. .......... 100 9,663
Komag Inc.** ................................... 500* $ 26,563
Microsoft Corp.** .............................. 1,100* 95,836
--------
179,162
--------
COSMETICS & TOILETRIES (0.22%)
Avon Products, Inc. ............................ 200 14,525
--------
DIVERSIFIED OPERATIONS (0.37%)
Textron Inc. ................................... 200 15,325
Whitman Corp. .................................. 400 8,800
--------
24,125
--------
DRUGS (6.01%)
Abbott Laboratories ............................ 2,000* 81,250
Bristol-Myers Squibb Corp. ..................... 2,300 184,575
Merck & Co., Inc. .............................. 1,800 111,375
Pfizer, Inc. ................................... 100 5,800
Schering-Plough Corp. .......................... 200 11,475
--------
394,475
--------
ELECTRONICS (6.51%)
Analog Devices Inc.** .......................... 200* 7,400
General Electric Co. ........................... 2,100 141,225
General Signal Corp. ........................... 800* 25,800
Hewlett-Packard Co. ............................ 100 8,286
Integrated Device Technology, Inc.** ........... 800* 13,600
Intel Corp. .................................... 700 42,613
Lam Research Corp.** ........................... 400 21,900
Linear Technology Corp. ........................ 300* 13,575
Mentor Graphics Corp. .......................... 700* 14,086
Millipore Corp. ................................ 200 7,450
Motorola, Inc. ................................. 600* 36,750
Tektronix Inc. ................................. 300* 16,163
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
ELECTRONICS (CONTINUED)
Teradyne, Inc.** ............................... 1,000 $ 26,125
Texas Instruments, Inc. ........................ 900 52,088
--------
427,061
--------
ENGINEERING (0.72%)
AlliedSignal, Inc. ............................. 1,000* 47,250
--------
FINANCE (2.09%)
American Express Co. ........................... 1,900 80,750
Dean Witter Discover & Co. ..................... 300 15,300
Equifax, Inc. .................................. 200 8,375
Federal National Mortgage Association .......... 300* 32,850
--------
137,275
--------
FOODS (3.57%)
CPC International, Inc. ........................ 200* 13,750
General Mills, Inc. ............................ 1,000* 55,125
Sara Lee Corp. ................................. 600 19,350
Unilever N.V ................................... 1,100 146,163
--------
234,388
--------
HEALTHCARE (0.90%)
Beverly Enterprises** .......................... 1,000* 11,625
Columbia/HCA Healthcare Corp. .................. 200 10,325
Health Management Associates, Inc. (Class A)** . 1 13
Vencor Inc.** .................................. 1,200* 37,200
--------
59,163
--------
INSURANCE (6.08%)
Aetna Life & Casualty Co. ...................... 1,100* 80,713
Allstate Corp. ................................. 600 24,600
Cigna Corp. .................................... 100 11,000
General Re Corp. ............................... 200* 29,925
Lincoln National Corp. ......................... 1,700 79,475
Marsh & McLennan Cos., Inc. .................... 2,000 173,500
--------
399,213
--------
MACHINERY (1.08%)
Dover Corp. .................................... 1,500* 58,313
Parker-Hannifin Corp. .......................... 350 12,863
--------
71,176
--------
MEDICAL / DENTAL (0.83%)
Baxter International, Inc. ..................... 900 37,800
Medtronic Inc. ................................. 300 16,463
--------
54,263
--------
METALS (0.18%)
Aluminum Co. of America ........................ 200* 11,700
--------
OFFICE EQUIPMENT & SUPPLIES (2.09%)
Xerox Corp. .................................... 1,000 137,125
--------
OIL & GAS (10.06%)
Amoco Corp. .................................... 1,700 $115,175
Anadarko Petroleum Corp. ....................... 300 14,438
British Petroleum Co. PLC (The) ................ 1,000* 95,625
Chevron Corp. .................................. 400 19,750
Exxon Corp. .................................... 1,300 100,588
Halliburton Co. ................................ 1,200* 52,050
Imperial Oil Ltd. .............................. 200 6,975
Mobil Corp. .................................... 1,000 104,375
Phillips Petroleum Co. ......................... 2,100 69,825
Tenneco, Inc. .................................. 1,700 81,600
--------
660,401
--------
PAPER (1.61%)
Kimberly-Clark Corp. ........................... 800* 61,500
Mead Corp. ..................................... 300 17,138
Weyerhauser Co. ................................ 600* 27,150
--------
105,788
--------
PHOTO EQUIPMENT (1.14%)
Eastman Kodak Co. .............................. 1,100 74,800
--------
POLLUTION CONTROL (0.37%)
Browning-Ferris Industries, Inc. ............... 800* 24,100
--------
RETAIL (5.99%)
Albertson's, Inc. .............................. 1,200 36,900
Darden Restaurants, Inc. ....................... 1,500* 17,438
Federated Department Stores, Inc.** ............ 2,000* 58,250
Home Depot, Inc. (The) ......................... 2,100 93,188
McDonald's Corp. ............................... 900* 40,163
Price/Costco Inc.** ............................ 3,000 49,875
Safeway Inc. ................................... 800* 37,200
Wal-Mart Stores, Inc. .......................... 2,500 60,000
--------
393,014
--------
RUBBER (0.71%)
Goodyear Tire & Rubber Co. ..................... 1,100 46,613
--------
SOAP & CLEANING PREPARATIONS (1.45%)
Johnson & Johnson .............................. 1,000 86,625
Proctor & Gamble Co. (The) ..................... 100 8,638
--------
95,263
--------
STEEL (0.20%)
British Steel PLC American Depository Receipt .. 500 13,000
--------
TELECOMMUNICATIONS (8.50%)
Ameritech Corp. ................................ 200 11,000
AT & T Corp. ................................... 2,300 151,800
GTE Corp. ...................................... 4,000 170,500
Pacific Telesis Group .......................... 5,800* 174,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
SBC Communications, Inc. ................... 200 $ 10,800
Sprint Corp. ............................... 1,000* 40,000
----------
558,100
----------
TOBACCO (1.20%)
Philip Morris Cos., Inc. ................... 300 26,325
UST, Inc. .................................. 1,600 52,200
----------
78,525
----------
TOYS/GAMES/HOBBY PRODUCTS (0.75%)
Toys "R" Us, Inc.** ........................ 2,100* 48,825
----------
TRANSPORTATION (1.41%)
Conrail Inc. ............................... 800 55,900
Delta Air Lines, Inc. ...................... 200* 15,525
UAL Corp. .................................. 100 20,925
----------
92,350
----------
UTILITIES (2.34%)
Entergy Corp. .............................. 3,000* 83,625
Pacific Gas & Electric Co. ................. 300 8,250
Panhandle Eastern Corp. .................... 1,500 42,563
Unicom Corp. ............................... 600 19,200
----------
153,638
----------
TOTAL COMMON STOCKS
(Cost $5,601,432) ................. 89.35% 5,863,571
----- ----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- ---- --------------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (7.62%)
Investment in a joint repurchase
agreement with U.B.S. Securities Inc.,
Dated 11-30-95, due 12-01-95
(secured by U.S. Treasury Bond,
7.25% due 05-15-16) - Note A ......... 5.91% $ 500 $ 500,000
----------
SHORT-TERM NOTES (15.23%)
Federal Home Loan
Mortgage Corp.,
Dated 11-30-95,
Due 12-01-95 ......................... 5.75 1,000 999,840
----------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Acount
Current Rate ......................... 5.25 -- 568
----------
TOTAL SHORT-TERM INVESTMENTS 22.86% 1,500,408
--------- ----------
TOTAL INVESTMENTS ........... 112.21% $7,363,979
========= ==========
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended November 30, 1995.
** 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.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Strategic Series (the "Trust"), is an open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of three series portfolios: John Hancock Independence Diversified
Core Equity Fund (the "Fund"), John Hancock Utilities Fund and John Hancock
Strategic Income Fund.
The Trustees, at a meeting held May 1, 1995 approved actions which became
effective September 1, 1995, which changed the marketing focus of the Fund. The
Trustees determined that the Fund's minimum initial investment should be reduced
to $1,000 and that shares of the Fund be marketed to retail investors. The
Trustees also approved the activation of the Fund's existing Rule 12b-1
distribution plan for Class A shares and established a second class (Class B) of
shares of the Fund and adopted a Rule 12b-1 distribution plan for this class of
shares.
During the last several months, the size of the Fund has greatly reduced, due
to the movement of institutional investors from the Fund to a similar mutual
fund that is part of a recently established institutional family of Funds
managed by the Adviser.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, dividends, and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to each
class of shares in accordance with current regulations of the Securities and
Exchange Commission. Shareholders of a class which bears distribution/service
expenses under the terms of a distribution plan, have exclusive voting rights
regarding such distribution plan. On September 7, 1995, Class B shares of
beneficial interest were sold to commence class activity. Significant policies
of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt 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 joint repurchase agreement transactions. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
The Fund follows the tax accounting practice known as equalization by which a
portion of the proceeds from sales and costs of repurchases of Fund shares,
equivalent on a per share basis to the amount of accumulated realized gains on
investments on the date of the transaction was credited or charged to
accumulated realized gains for Federal income tax purposes.
For the period ending November 30, 1995 the Fund reclassified net
equalization debits in the amount of $13,355,274 from accumulated realized gains
on investments to capital paid-in (see Note D).
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles.
Dividends paid by the Fund with respect to each class of shares will be
calculated in the same manner, at the same time and will be in the same amount,
except for the effect of expenses that may be applied differently to each class
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 relative
sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees, if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that commenced with the
investment operations of the Fund.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
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.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Effective September 1, 1995, the Fund pays a monthly management fee to the
Adviser, for a continuous investment program equivalent, on an annual basis, to
the sum of (a) 0.75% of the first $750,000,000 of the Fund's average daily net
asset value and (b) 0.70% of the Fund's average daily net asset value in excess
of $750,000,000. Prior to September 1, 1995, the investment management fee was
0.50% of the Fund's average daily net asset value.
The Fund and the Adviser have a sub-investment management contract with
Independence Investment Associates, Inc. (the "Sub-Adviser"), a wholly-owned
subsidiary of John Hancock Asset Management, under which the Sub-Adviser
provides the Fund with investment research and portfolio management services.
The Adviser pays the Sub-Adviser a quarterly fee at an annual rate of 55% of the
investment management fee paid by the Fund to the Adviser for the preceding
three months. The Fund is not responsible for payment of the Sub-Adviser's fee.
Prior to September 1, 1995, the Sub-Adviser provided services pursuant to a
contract that provided for different compensation. Effective July 1, 1995, the
Sub-Adviser has waived its fee until further notice.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
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 Fund's average daily net asset value.
In addition, as of September 1, 1995, the Adviser has undertaken to limit the
Fund's expenses, including the management fee, to 1.30% and 2.00% attributable
to Class A and Class B shares, respectively, of the Fund's average daily net
assets. The Adviser reserves the right to terminate this fee reduction in the
future. Prior to September 1, 1995, and the creation of Class B shares, the
Adviser had undertaken to limit the Fund's expenses further to the extent
required to prevent expenses from exceeding 0.70% of the Fund's average daily
net asset value. Accordingly, for the period ended November 30, 1995, the
reduction in the Adviser's fee collectively with any additional amounts not
borne by the Fund by virtue of the expense limit amounted to $56,164.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. As of September 1, 1995, a
maximum sales charge of 5.00% was added to sales of Class A shares. Prior to
September 1, 1995, all sales of shares of beneficial interest were sold at net
asset value. For the period September 1, 1995 through November 30, 1995, JH
Funds received net sales charges of $26,216 with regard to sales of Class A
shares. Out of this amount, $1,833 was retained and used for printing of
prospectuses, advertising, sales literature and other purposes, $16,657 was paid
as sales commissions and service fees to unrelated broker-dealers and $7,726 was
paid as sales commissions and service fees to sales 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 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 September 1, 1995
through November 30, 1995, contingent deferred sales charges received by JH
Funds amounted to $1,024.
In addition, as of September 1, 1995, to reimburse JH Funds for the services
it provides as distributor of shares of the Fund, the Fund has activated an
existing Rule 12b-1 Distribution Plan with respect to Class A shares and adopted
a Distribution Plan with respect to Class B shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Under the terms of the Distribution Plan,
the Fund will make payments to JH Funds for distribution and service expenses at
an annual rate not to exceed 0.30% of the Fund's average daily net assets
attributable to Class A shares and 1.00% of the Fund's average daily net assets
attributable to Class B shares, to reimburse JH Funds for its
distribution/service costs. Prior to September 1, 1995, and the creation of
Class B shares, the Fund had a Distribution Plan with JH Funds where the Fund
could make payments to JH Funds at an annual rate not to exceed 0.50% of the
Fund's average daily net asset value. Up to a maximum of 0.25% of these 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 fees could occur under
certain circumstances. There were no payments under the Distribution Plan for
the period June 1, 1995 through August 31, 1995.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to September 1,
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Independence Diversified Core Equity Fund
1995, the Fund paid Investor Services a monthly transfer agent fee equivalent,
on an annual basis, to 0.10% of the Fund's average daily net asset value. As of
September 1, 1995, the Fund pays transfer agent fees based on the number of
shareholder accounts and certain out-of-pocket expenses.
Messrs. Edward J. Boudreau and Richard S. Scipione are directors and officers
of the Adviser and its affiliates, as well as Trustees of the Fund. The
compensation of unaffiliated Trustees is borne by the Fund. Effective with the
fees paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock Group of
Funds Deferred Compensation Plan. The Fund will make investments into other John
Hancock funds, as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
will be recorded on the Fund's books as an other asset. The deferred
compensation liability and the investment to cover the liability will be marked
to market on a periodic basis to reflect income earned by the investment.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities during the period ended November
30, 1995 aggregated $4,891,307 and $101,300,722 respectively.
The cost of investments owned at November 30, 1995 (excluding the corporate
savings account), for Federal income tax purposes was $7,101,272. Gross
unrealized appreciation and depreciation of investments aggregated $287,951 and
$25,812, respectively, resulting in net unrealized appreciation of $262,139.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the period ended November 30, 1995, the Fund has reclassified amounts to
reflect an increase in capital paid-in and a decrease in realized gain on
investments sold of $13,355,274. This represents the cumulative amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of November 30, 1995. 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 use of tax
equalization debits in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
18
<PAGE> 19
ADDITIONAL INFORMATION
John Hancock Funds - Independence Diversified Core Equity Fund
On August 31, 1995, a special meeting of John Hancock Strategic Series, in
respect of John Hancock Independence Diversified Core Equity Fund (the "Fund")
was held to approve a new investment management contract and certain other
matters concerning the Fund.
Specifically, shareholders first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. The terms of the new investment advisory contract would increase the fee
currently paid by the Fund, with all other provisions remaining the same as in
the previous management contract. The shareholder votes tallied were 41,085 FOR,
5,215 AGAINST and 20,949 ABSTAINING.
The shareholders also approved a new sub-advisory contract between the Trust
on behalf of the Fund and John Hancock Advisers, Inc. and the Sub-Adviser. The
terms of the new sub-advisory agreement would increase the fee paid by the
Adviser with all other provisions remaining the same as the previous
sub-advisory contract. The shareholder votes tallied were 46,136 FOR, 164
AGAINST and 20,949 ABSTAINING.
19
<PAGE> 20
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Independence Diversified Core Equity Fund. It may be used as sales literature
when preceded or accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below reads
"A Global Investment Management Firm." A recycled logo in lower left hand corner
with caption "Printed on Recycled Paper."]
