<PAGE> 1
John Hancock Funds
- --------------------------------------------------------------------------------
Emerging
Growth
Fund
ANNUAL REPORT
October 31, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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 and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Ernst & Young llp
200 Clarendon Street
Boston, Massachusetts 02116
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
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.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
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 EDGAR M. LARSEN, PORTFOLIO MANAGER
John Hancock
Emerging Growth Fund
Small stocks shine in 1995; outlook calls
for their good fortune to continue
Although it began somewhat inauspiciously, the past year was a sensational
period for small stocks. While small cap stocks enjoyed a moderate surge along
with their larger counterparts from October 1994 through April 1995, they did so
to a much lesser extent. Investors, hoping to take advantage of the U.S.
dollar's weakness, migrated toward larger companies which tend to derive more of
their revenues overseas. Larger stocks also benefited from a bout of investor
nervousness in the spring; many feared that the market could eventually weaken
and so turned to larger, more liquid names as a defense against a possible
correction.
[A 3 1/4" x 2 1/2" photo of Edgar M. Larsen at bottom center. Caption reads:
"Edgar M. Larsen, Portfolio Manager"]
But from May through October, the tide turned and small-cap stocks handily
outpaced larger stocks. Fueling their outperformance was the rapid rate at which
small companies were able to grow their earnings, especially compared to larger
companies. And once the dollar strengthened and economic growth moderated,
investors' taste for larger stocks started to wane. They moved instead toward
the less dollar-sensitive and economically-sensitive small-company stocks.
Finally, a wave of merger activity sent these stocks soaring even higher.
TECHNOLOGY LEADS THE PACK
Against that backdrop, John Hancock Emerging Growth Fund posted a strong
performance both in absolute terms and
[CAPTION]
"...the past year was a sensational period for small stocks."
3
<PAGE> 4
John Hancock Funds - Emerging Growth Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) U.S. Robotics 2.2% 2) Madge NV 2.0% 3) 3COM
Corp. 1.9% 4) Ascend Communications 1.7% 5) Tencor Instruments 1.5%. A footnote
below reads "As a percentage of net assets on October 31, 1995."]
against the competition. For the year ended October 31, 1995, the Fund's Class A
and Class B shares had total returns of 34.56% and 33.60%, respectively, at net
asset value. Those returns beat the average small-company growth fund's return
of 22.72%, according to Lipper Analytical Services.1
As a group, technology stocks were the market's -- and the Fund's -- biggest
winners for nearly the entire year. Strong earnings gains and exciting new
product enhancements and developments led to an explosion in technology stock
prices. America Online (AOL), the fast-growing on-line service and one of the
Fund's largest holdings, has risen nearly eight-fold since we first bought it in
1992. With more consumers turning to AOL for access to the Internet, personal
financial management, education and entertainment, we remain optimistic about
its prospects. Some of our other large technology holdings -- including U.S.
Robotics, a leading maker of modems, and 3Com, a maker of adapter kits needed to
support the use of integrated services digital network (ISDN) -could be the
future leaders if they continue to grow their earnings as they have recently.
During the past year we attempted to keep our stake in technology stocks to
under 40% of investments. But that wasn't always easy because as the prices of
many stocks in the group appreciated dramatically, they comprised an increasing
percentage of the Fund's market value. Recently, we've cut back some of our
largest technology holdings to rebalance the portfolio and make it less
dependent on the performance of one particular sector. In our view, the best way
to control the risk associated with small-cap stock investing is to broadly
diversify our investments. That's why we have our investments spread out in more
than 500 stocks in 17 different industries.
We're often asked if technology stocks are due for a correction. Of course,
the answer is that no one knows for sure. But it wouldn't surprise us if after
spiking up so far, so quickly, tech stocks could pause to catch their breath
sometime. But a sector's or the market's short-term fluctuations aren't our
focus. Rather, we concentrate on finding companies that can increase their
earnings at roughly 25% or more annually. Since stock prices tend to follow
earnings, companies that can achieve this should be the winners over the long
term. However, since we're growth investors with a value bent, we want to buy
companies at a reasonable price. If we can find a well-managed, quickly growing
company with little or no debt and improving profits, we'll hold
[Table entitled "Scorecard" at bottom of left hand column. The header for the
column is "Investments"; the header for the right column is "Recent
performance...and what's behind the numbers. The first listing is America
Online followed by an up arrow and the phrase "Rapid increase in
subscriptions, earnings explosion." The second listing is Cordis followed by
an up arrow and the phrase "Possible takeover boosts stock." The third listing
is Nuevo Energy followed by a down arrow and the phrase "Weak oil prices
curtailed earnings." Footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."]
[CAPTION]
["...technology stocks were the market's -- and the Fund's -- biggest
winners..."]
4
<PAGE> 5
John Hancock Funds - Emerging Growth Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1995." The chart is
scaled in increments of 10% from bottom to top, with 40% at the top and 0% at
the bottom. Within the chart there are three solid bars. The first represents
the 34.56% total return for the John Hancock Emerging Growth Fund, Class A. The
second represents the 33.60% total return for the John Hancock Emerging Growth
Fund, Class B. The third represents the 22.72% total return for the average
small-company growth fund. A footnote below reads: "The total returns for John
Hancock Emerging Growth Fund are at net asset value with all distributions
reinvested. The average small-company growth fund is tracked by Lipper
Analytical Services. (1) See page seven for historical performance
information."]
onto it for the long term, despite the market's ups and downs. The extra plus
to that strategy is that low-turnover minimizes trading costs and limits our
shareholders' tax liability.
We actively manage the Fund to avoid distributing capital gains and
fortunately we've been successful so far. Over the last five years, the Fund's B
shares have provided an average annual return, at net asset value, of 25.85%
through October 31, 1995. (Class A shares came into existence in 1991.) During
that five-year period, the Fund only paid a total of six cents per share in
capital gains distributions, and that was back in 1991. While there's no
guarantee about future capital gains distributions, our tax strategies prompted
SmartMoney magazine to place the Fund at the top of its "Five Most Tax-Efficient
Funds" list in April 1995.
WINNERS AND LOSERS
Despite all the attention paid to technology stocks, there were other big
winners in the market, including health-care stocks. As investors worried that
technology stocks may have peaked, they began to look elsewhere, including the
health-care sector. And a heightened level of merger and acquisition activity
further buoyed the sector. A good example of that trend was Cordis, a maker of
the materials used to perform angioplasty surgery. A proposed buyout of the
company by Johnson & Johnson sent Cordis' stock soaring.
The financial services sector was also boosted by a wave of merger and
acquisition activity as well as by the strong stock and bond markets. We focused
our financial services holdings in money management firms, including brokerage
firms, mutual-fund houses and insurance companies, including National RE
Corporation and the Municipal Bond Insurance Agency.
Even under ideal market conditions there are always disappointments. This
year was no exception. Energy stocks lagged the overall market, thanks to a
sluggish worldwide economy and low oil prices. Though we remain underweighted in
this sector relative to the market as a whole, we do consider energy stocks like
Nuevo Energy to be excellent long-term values. Finally, many retail stocks were
among the market's laggards during the period due to a high level of consumer
debt that kept a lid on personal spending.
OUTLOOK
There is a probability that the capital-gains tax rate will be reduced in 1996.
Small-company
[CAPTION]
["...many of the factors that contributed to small stocks' success... are still
in place."]
1Figures from Lipper Analytical Services include reinvested dividends and do not
take into account sales charges. Actual load-adjusted performance is lower.
5
<PAGE> 6
John Hancock Funds - Emerging Growth Fund
stocks would benefit most from a change in the tax treatment of capital gains,
since these companies reward investors through capital appreciation, not
dividends. But capital gains cut or not, many of the factors that contributed to
small stocks' success over the past 12 months are still in place as we begin
1996. The earnings growth rate for small companies is attractive compared to
larger companies. And despite their recent rise, small stock prices don't yet
appear to be too expensive relative to their earnings.
Looking out to next year, there are additional reasons to be optimistic. We
expect the wave of mergers and acquisitions to continue in 1996. From January
through October of 1995, 25 of our holdings have merged or been acquired by
other companies. We believe that trend will continue and could even accelerate
if foreigners start acquiring U.S. companies as a way to grow or enhance their
businesses.
6
<PAGE> 7
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Emerging Growth 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. (Prior to May 15, 1995, the maximum applicable sales charge for Class
A shares was 5.75%.) 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.
Note: Participant-directed defined-contribution plans with at least 100 eligible
employees at inception of the Fund account may purchase Class A shares without
an initial sales charge as of March 15, 1995. If those shares are redeemed,
however, during the year following the calendar year end during which they were
purchased, a contingent deferred sales charge will be assessed.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
<S> <C> <C> <C>
John Hancock Emerging Growth Fund: Class A 34.45% 94.26%(1) N/A
John Hancock Emerging Growth Fund: Class B 35.51% 212.63% 384.97%(2)
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
<S> <C> <C> <C>
John Hancock Emerging Growth Fund: Class A 34.45% 17.54%(1) N/A
John Hancock Emerging Growth Fund: Class B 35.51% 25.60% 22.03%(2)
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on August 22, 1991.
(2) Class B shares started on October 26, 1987.
7
<PAGE> 8
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John Hancock
Emerging Growth Fund would be worth on October 31, 1995, assuming you had
invested on the day each class of shares started and 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.
EMERGING GROWTH FUND
CLASS A SHARES
Line chart with the heading Emerging Growth 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 Emerging Growth Fund on August 22, 1991, before sales charge, and is
equal to $19,986 as of October 31, 1995. The second line represents the Emerging
Growth Fund after sales charge and is equal to $18,989 as of October 31, 1995.
The third line represents the value of the Standard & Poor's 500 Stock Index and
is equal to $16,918 as of October 31, 1995.
EMERGING GROWTH FUND
CLASS B SHARES*
Line chart with the heading Emerging Growth Fund: Class B, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are two lines.
The first line represents the value of the hypothetical $10,000 investment made
in the Emerging Growth Fund on October 26, 1987, before contingent deferred
sales charge, and is equal to $47,367 as of October 31, 1995. The second line
represents the value of the Standard & Poor's 500 Stock Index and is equal to
$23,295 as of October 31, 1995.
*No contingent deferred sales charge applicable.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and warrants (cost - $315,147,300) .......... $ 560,712,711
Joint repurchase agreement (cost - $13,738,000) ........... 13,738,000
Corporate savings account ................................. 477,189
-------------
574,927,900
Receivable for shares sold ................................. 1,051,401
Receivable for investments sold ............................ 1,112,500
Dividends receivable ....................................... 153,011
Interest receivable ........................................ 2,372
Other assets ............................................... 40,603
-------------
Total Assets ............................. 577,287,787
-----------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 111,403
Payable for investments purchased .......................... 3,706,000
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ...................................... 386,877
Accounts payable and accrued expenses ...................... 124,750
-------------
Total Liabilities ........................ 4,329,030
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 333,863,246
Accumulated net realized loss on investments ............... (6,469,900)
Net unrealized appreciation of investments ................. 245,565,411
-------------
Net Assets ............................... $ 572,958,757
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - 125,000,000 shares
authorized with $.01 per share par value, respectively)
Class A - $179,481,007/4,973,680 ........................... $ 36.09
=============================================================================
Class B - $393,477,750/11,309,413 .......................... $ 34.79
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($36.09 x 105.26%) ............................... $ 37.99
=============================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE PERIOD
STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS YEAR ENDED
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends .............................................. $ 2,174,731
Interest ............................................... 403,533
-------------
2,578,264
-------------
Expenses:
Investment management fee - Note B .................... 3,474,999
Distribution/service fee - Note B
Class A ............................................. 357,908
Class B ............................................. 3,140,608
Transfer agent fee .................................... 1,140,068
Registration and filing fees .......................... 155,596
Custodian fee ......................................... 153,848
Printing .............................................. 98,467
Auditing fee .......................................... 63,340
Trustees' fees ........................................ 49,191
Legal fees ............................................ 38,145
Advisory board fee .................................... 34,540
Miscellaneous ......................................... 28,284
-------------
Total Expenses ....................... 8,734,994
-----------------------------------------------------------
Net Investment Loss .................. (6,156,730)
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold .................. 10,693,222
Change in net unrealized appreciation/depreciation
of investments ....................................... 134,216,496
-------------
Net Realized and Unrealized
Gain on Investments .................. 144,909,718
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............ $ 138,752,988
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss ............................................................ $ (6,156,730) $ (4,439,725)
Net realized gain (loss) on investments sold ................................... 10,693,222 (8,817,307)
Change in net unrealized appreciation/depreciation of investments .............. 134,216,496 27,047,214
------------- -------------
Net Increase in Net Assets Resulting from Operations .......................... 138,752,988 13,790,182
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ............................................. 19,718,122 99,950,356
------------- -------------
NET ASSETS:
Beginning of period ............................................................ 414,487,647 300,747,109
------------- -------------
End of period .................................................................. $ 572,958,757 $ 414,487,647
============= =============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------------
1995 1994
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold .............................. 5,389,301 $ 177,314,439 4,169,752 $ 107,936,683
Less shares repurchased .................. (5,302,592) (171,990,271) (2,421,719) (62,106,008)
------------- ------------- ------------- -------------
Net increase ............................. 86,709 $ 5,324,168 1,748,033 $ 45,830,675
============= ============= ============= =============
CLASS B
Shares sold .............................. 7,378,294 $ 212,291,363 10,731,824 $ 265,135,236
Less shares repurchased .................. (6,952,481) (197,897,409) (8,513,937) (211,015,555)
------------- ------------- ------------- -------------
Net increase ............................. 425,813 $ 14,393,954 2,217,887 $ 54,119,681
============= ============= ============= =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, AND ANY INCREASE OR
DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES
THE NUMBER OF FUND SHARES SOLD AND REDEEMED DURING THE LAST TWO PERIODS, ALONG
WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
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:
- --------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
AUGUST 22, 1991
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
------------------------------------------------------- OCTOBER 31,
1995(b) 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $ 26.82 $ 25.89 $ 20.60 $ 19.26 $ 18.12
----------- ----------- ----------- ----------- -----------
Net Investment Loss (a) ............................... (0.25) (0.18) (0.16) (0.20) (0.03)
Net Realized and Unrealized Gain on Investments ....... 9.52 1.11 5.45 1.60 1.17
----------- ----------- ----------- ----------- -----------
Total from Investment Operations ..................... 9.27 0.93 5.29 1.40 1.14
----------- ----------- ----------- ----------- -----------
Less Distributions
Distributions from Net Realized Gain on
Investments Sold .................................... -- -- -- (0.06) --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ........................ $ 36.09 $ 26.82 $ 25.89 $ 20.60 $ 19.26
=========== =========== =========== =========== ===========
Total Investment Return at Net Asset Value (c) ........ 34.56% 3.59% 25.68% 7.32% 6.29%(d)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's Omitted) ............. $ 179,481 $ 131,053 $ 81,263 $ 46,137 $ 38,859
Ratio of Expenses to Average Net Assets ............... 1.38% 1.44% 1.40% 1.67% 0.33%*
Ratio of Net Investment Loss to Average Net Assets .... (0.83)% (0.71)% (0.70)% (1.03)% (0.15)%*
Portfolio Turnover Rate ............................... 23% 25% 29% 48% 66%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: INCOME, EXPENSES, DISTRIBUTIONS AND GAINS
(LOSSES) OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A SHARE HAS
CHANGED SINCE THE END OF THE PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
1995(b) 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ................... $ 26.04 $ 25.33 $ 20.34 $ 19.22 $ 11.06
----------- ----------- ----------- ----------- -----------
Net Investment Loss (a) ................................ (0.45) (0.36) (0.36) (0.38) (0.30)
Net Realized and Unrealized Gain on Investments ........ 9.20 1.07 5.35 1.56 8.46
----------- ----------- ----------- ----------- -----------
Total from Investment Operations ...................... 8.75 0.71 4.99 1.18 8.16
----------- ----------- ----------- ----------- -----------
Less Distributions
Distributions from Net Realized Gain on Investments Sold -- -- -- (0.06) --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......................... $ 34.79 $ 26.04 $ 25.33 $ 20.34 $ 19.22
=========== =========== =========== =========== ===========
Total Investment Return at Net Asset Value (c) ......... 33.60% 2.80% 24.53% 6.19% 73.78%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's Omitted) .............. $ 393,478 $ 283,435 $ 219,484 $ 86,923 $ 52,743
Ratio of Expenses to Average Net Assets ................ 2.11% 2.19% 2.28% 2.64% 2.85%
Ratio of Net Investment Loss to Average Net Assets ..... (1.55)% (1.46)% (1.58)% (1.99)% (1.83)%
Portfolio Turnover Rate ................................ 23% 25% 29% 48% 66%
</TABLE>
* On an annualized basis.
(a) On average month end shares outstanding.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charge.
(d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
EMERGING GROWTH FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES:COMMON STOCKS AND WARRANTS 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>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
ADVERTISING (0.32%)
Catalina Marketing Corp.** ................ 27,000 $1,363,500
Katz Media Group ** ....................... 25,000* 450,000
----------
1,813,500
----------
AUTOMOBILE/TRUCK (0.73%)
APS Holding Corp. (Class A) ** ............ 10,000 205,000
Copart, Inc. ** ........................... 50,000 1,137,500
Detroit Diesel Corp. ** ................... 20,000 355,000
Discount Auto Parts, Inc. ** .............. 30,000 802,500
Edelbrock Corp. ** ........................ 10,000 152,500
Pep Boys - Manny, Moe & Jack .............. 20,000 437,500
Rollins Truck Leasing Corp. ............... 22,500 216,562
Stewart & Stevenson Services, Inc. ........ 15,000 341,250
Thompson PBE, Inc. ** ..................... 30,000* 547,500
----------
4,195,312
----------
BANKS (0.03%)
Hibernia Corp. (Class A) ** ............... 15,000 148,125
----------
BEVERAGES (0.06%)
Pepsi-Cola Puerto Rico
Bottling Co. (Class B) .................. 25,000* 340,625
----------
BROADCASTING (1.28%)
American Radio Systems Corp. ** ........... 1,300* 29,250
Clear Channel Communications, Inc. ** ..... 30,075 2,466,150
E-Z Communications, Inc. (Class A) ** ..... 10,000 162,500
Gaylord Entertainment Co. (Class A) ....... 27,300 702,975
Heftel Broadcasting Corp. (Class A) ** .... 125,000 2,281,250
Lodgenet Entertainment Corp. ** ........... 5,000 57,500
SFX Broadcasting, Inc. (Class A) ** ....... 40,000 1,080,000
United International
Holdings, Inc. (Class A)** .............. 6,400 100,800
Westcott Communications, Inc. ** .......... 20,000* 275,000
Young Broadcasting Corp. (Class A) ** ..... 5,100* 155,550
----------
7,310,975
----------
BUILDING PRODUCTS (0.06%)
NCI Building Systems, Inc. ** ............ 15,000 348,750
----------
CHEMICAL (0.22%)
Arcadian Corp. ** ......................... 50,000* 1,031,250
Mallinckrodt Group, Inc. .................. 6,000 208,500
----------
1,239,750
----------
COMPUTERS (24.71%)
Adaptec, Inc. ** .......................... 110,000 $4,895,000
Adobe Systems, Inc. ....................... 70,000 3,990,000
Alantec Corp. ** .......................... 7,500 268,125
American Business Information, Inc. ** .... 7,500 131,250
Applied Voice Technology, Inc. ** ......... 35,000* 406,875
Applix, Inc. ** ........................... 8,000* 222,000
ArcSys, Inc. ** ........................... 2,500* 105,000
Aspen Technology, Inc. ** ................. 5,000 137,500
Astea International, Inc. ** .............. 10,000* 180,000
Auspex Systems, Inc.** .................... 5,000 70,625
Autodesk, Inc. ............................ 29,000 986,000
Bann Co., N.V. ** ......................... 10,000* 425,000
Banyan Systems, Inc.** .................... 25,000 195,312
Bay Networks, Inc. ** ..................... 50,000 3,312,500
BDM International, Inc. ** ................ 10,000* 250,000
Bell & Howell Holdings Co. ** ............ 25,000* 625,000
BISYS Group, Inc. (The)** ................. 41,835* 1,171,380
BMC Software, Inc.** ...................... 34,000 1,211,250
Broderbund Software, Inc. ** .............. 19,000 1,318,125
Cabletron Systems, Inc.** ................. 22,500 1,769,062
Cadence Design Systems, Inc.** ............ 112,544 3,629,528
C*ATS Software, Inc. ** ................... 4,000* 29,500
Cerner Corp. ** ........................... 40,000 1,060,000
CFI ProServices, Inc. ** .................. 35,000 476,875
Cheyenne Software, Inc.** ................. 22,000 459,250
Computer Management Sciences, Inc. ** ..... 10,000* 205,000
Computron Software, Inc. ** ............... 7,500* 127,500
Compuware Corp. ** ........................ 26,600 605,150
Computervision Corp. ** ................... 100,000* 1,175,000
Concentra Corp. ** ........................ 10,000* 95,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMPUTERS (continued)
Conner Peripherals, Inc. ** ................... 25,000* $ 450,000
Continuum, Inc. ** ............................ 75,000 2,953,125
Cornerstone Imaging, Inc. ** .................. 7,000 157,500
Cybex Computer Products Corp. ** .............. 11,500* 235,750
Datalogix International, Inc. ** .............. 10,000* 100,000
Datastream Systems, Inc. ** ................... 20,000* 445,000
Dataware Technologies, Inc. ** ................ 3,000 30,750
Dell Computer Corp. ** ........................ 140,000 6,527,500
Dendrite International, Inc. ** ............... 10,000* 173,750
Diamond Multimedia Systems, Inc. ** ........... 20,000* 590,000
Digital Biometrics, Inc. ** ................... 11,000 68,750
Discreet Logic, Inc. ** ....................... 10,000* 570,000
DST Systems, Inc. ** .......................... 130,000* 2,730,000
Electroglas, Inc. ** .......................... 106,000 7,446,500
Electronic Arts, Inc. ** ...................... 5,000 183,125
EPIC Design Technology, Inc. ** ............... 500 23,000
Expert Software, Inc. ** ...................... 8,000* 166,000
FileNet Corp. ** .............................. 7,000 317,625
Firefox Communications, Inc. ** ............... 3,500* 60,375
Frame Technology Corp. ** ..................... 2,500 69,687
Gateway 2000, Inc. ** ......................... 50,000 1,668,750
General Magic, Inc. ** ........................ 5,000* 63,125
Global Village Communication ** ............... 2,000 34,000
HCIA, Inc. ** ................................. 200* 5,450
HNC Software, Inc. ** ......................... 4,500* 114,750
HPR, Inc. ** .................................. 12,500* 325,000
Hyperion Software Corp. ** .................... 40,000* 1,970,000
Information Resources, Inc. ** ................ 35,000* 380,625
Informix Corp.** .............................. 250,000 7,281,250
Inso Corp. ** (formerly Infosoft
International, Inc.) ........................ 10,000 357,500
Integrated Measurement Systems, Inc. ** ....... 10,000* 135,000
Intuit, Inc. ** ............................... 8,000* 576,000
Kronos, Inc. ** ............................... 21,500 989,000
Lannet Data Communications, Ltd. ** ........... 55,000* 1,581,250
Legato System, Inc. ** ........................ 5,000* 182,500
Logic Works, Inc. ** .......................... 5,000* 76,250
Loronix Information Systems, Inc. ** .......... 265,000 811,563
Madge, N.V. ** ................................ 270,000 11,306,250
MapInfo Corp. ** .............................. 6,000 120,750
Maxis, Inc. ** ................................ 4,000* 177,000
Measurex Corp. ................................ 20,500 630,375
Mercury Interactive Corp. ** .................. 95,000 1,947,500
Micropolis Corp. ** ........................... 96,500 398,063
Minnesota Educational Computing Corp. ** ...... 7,500 232,500
Mustang Software, Inc. ** ..................... 8,000* $ 58,000
National Instruments Corp. ** ................. 6,000* 112,500
NetManage, Inc. ** ............................ 12,000 244,500
Network General Corp.** ....................... 95,000 3,942,500
Norand Corp. ** ............................... 2,500 42,500
Novadigm, Inc. ** ............................. 12,000* 246,000
Oak Technology, Inc. ** ....................... 24,000* 1,314,000
ON Technology Corp. ** ........................ 15,000* 180,000
Open Environment Corp. ** ..................... 20,000* 195,000
OPTi, Inc. ** ................................. 120,000 1,200,000
Parametric Technology Corp.** ................. 70,000 4,681,250
PeopleSoft, Inc. ** ........................... 50,400 4,334,400
Performance Systems International, Inc. ** .... 20,000* 355,000
Phamis, Inc. ** ............................... 5,500* 138,875
Physician Computer Network, Inc. ** ........... 25,000* 171,875
Pinnacle Systems, Inc. ** ..................... 35,000* 1,098,125
PixTech, Inc. ** .............................. 16,500* 162,937
Platinum Technology, Inc. ** .................. 195,000 3,558,750
Policy Management Systems Corp. ** ............ 2,300 108,387
Premenos Technology Corp. ** .................. 12,000* 471,000
PRI Automation, Inc. ** ....................... 27,500 1,017,500
Printronix, Inc. ** ........................... 25,000 475,000
Progress Software Corp.** ..................... 28,500 1,866,750
Project Software & Development, Inc. ** ....... 37,500 993,750
Pure Software, Inc. ** ........................ 5,000* 183,750
Pyxis Corp. ** ................................ 95,000 1,199,375
Quantum Corp. ** .............................. 20,000 347,500
QuickResponse Services, Inc.** ................ 6,000 150,000
Read-Rite Corp. ** ............................ 51,000 1,778,625
Renaissance Solutions, Inc. ** ................ 9,000* 184,500
Seagate Technology, Inc.** .................... 50,000 2,237,500
Security Dynamics Technologies, Inc. ** ....... 10,000* 315,000
Seer Technologies, Inc. ** .................... 27,500* 412,500
Sierra On-Line, Inc. ** ....................... 40,000 1,490,000
Smith Micro Software, Inc. ** ................ 20,000* 245,000
Softdesk, Inc. ** ............................. 40,000 930,000
Software Artistry, Inc. ** .................... 2,500* 41,250
Software Spectrum, Inc. ** .................... 5,000 107,500
SPSS, Inc. ** ................................. 70,000 1,181,250
StorMedia, Inc. ** ............................ 10,000* 460,000
Sybase, Inc.** ................................ 56,000 2,198,000
Symantec Corp. ** ............................. 14,000 340,375
TGV Software, Inc. ** ......................... 3,000* 27,000
3COM Corp.** .................................. 234,770 11,034,190
3D Systems Corp. ** ........................... 2,000* 34,250
Tivoli Systems, Inc. ** ....................... 5,000* 160,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMPUTERS (continued)
Transaction Systems Architects, Inc. ......
(Class A) ** ............................ 10,000* $ 260,000
Unison Software, Inc. ** .................. 17,500* 218,750
Vantive Corp. ** .......................... 15,000* 240,000
Verity, Inc. ** ........................... 22,500* 826,875
Videoserver, Inc. ** ...................... 4,000* 122,000
Western Digital Corp. ** ................. 35,000 542,500
Wind River Systems ** ..................... 10,000* 270,000
Wonderware Corp. ** ....................... 20,000 635,000
Zebra Technologies Corp. (Class A)** ...... 2,200 130,900
Zilog, Inc. ** ............................ 60,000 2,130,000
------------
141,598,509
------------
COMPUTER SERVICES (1.55%)
America Online, Inc. ** ................... 12,000 960,000
Hogan Systems, Inc. ** .................... 90,000 798,750
Learning Co. (The) ** ..................... 15,000 885,000
NETCOM On-Line Communication
Services, Inc. ** ....................... 10,000* 582,500
7th Level, Inc. ** ........................ 40,000 590,000
Sterling Software, Inc. ** ................ 105,000 4,843,125
Sylvan Learning Systems, Inc. ** .......... 5,600 134,400
VMARK Software, Inc. ** ................... 10,000* 68,750
------------
8,862,525
------------
CONTAINERS (0.03%)
Mobile Mini, Inc. ** ...................... 40,000* 175,000
------------
COSMETICS & TOILETRIES (0.42%)
Maybelline Inc. ........................... 65,006 1,535,767
Playtex Products, Inc. ** ................. 125,000 875,000
------------
2,410,767
------------
DRUGS (1.99%)
ALZA Corp. ** ............................. 24,600 541,200
Big B, Inc. ............................... 10,000 147,500
Centocor, Inc. ** ......................... 35,500 399,375
Chronimed, Inc. ** ........................ 20,000 305,000
Eckerd (Jack) Corp. ** .................... 85,000 3,368,125
Elan Corp., PLC, American
Depositary Receipt, (ADR) ** ............ 5,250 210,656
Martek Biosciences Corp. ** ............... 25,000* 478,125
Mylan Laboratories, Inc. .................. 127,500 2,422,500
North American Vaccine, Inc. ** ........... 40,000 420,000
OraVax, Inc. ** ........................... 25,000* 321,875
Syncor International Corp. ** ............ 16,500 132,000
Teva Pharmaceutical Industries Ltd., ADR .. 10,000* 392,500
Watson Pharmaceuticals, Inc. ** ........... 50,000 2,237,500
------------
11,376,356
------------
ELECTRONICS (9.22%)
American Sensors, Inc. ** ................. 25,000* $ 178,125
ANADIGICS, Inc. ** ........................ 6,350* 141,288
Analog Devices, Inc. ** ................... 20,000* 722,500
Atmel Corp. ** ............................ 100,000 3,125,000
Burr-Brown Corp. ** ....................... 12,500* 406,250
C-Cube Microsystems, Inc. ** .............. 15,000 1,036,875
CIDCO, Inc. ** ............................ 15,200 450,300
Cirrus Logic, Inc. ** ..................... 80,000 3,370,000
Clare (C.P.) Corp. ** ..................... 13,500* 349,312
Exar Corp. ** ............................. 96,000 2,280,000
GaSonics International Corp.** ............ 18,000 594,000
General Instrument Corp. ** ............... 26,000 494,000
Integrated Circuit Systems, Inc. ** ....... 42,500* 576,406
Integrated Silicon Solution, Inc. ** ...... 5,000* 156,563
Itron, Inc. ** ............................ 15,000* 435,000
LAM Research Corp.** ...................... 100,000 6,087,500
Level One Communications, Inc.** .......... 4,500 101,250
Mackie Designs, Inc. ** ................... 5,000* 63,750
Macromedia, Inc. ** ....................... 10,000* 370,000
Mattson Technology, Inc. ** ............... 4,000 88,000
Maxim Integrated Products, Inc. ** ........ 54,000 4,036,500
Megatest Corp. ** ......................... 160,000 4,720,000
Micrel, Inc. ** ........................... 17,500* 398,125
PSC, Inc. ** .............................. 70,000* 717,500
Quickturn Design System, Inc. ** .......... 25,000 259,375
SDL, Inc. ** .............................. 25,000* 637,500
S3, Inc.** ................................ 30,000 513,750
Sonic Solutions, Inc. ** .................. 10,000 81,250
Tektronix, Inc. ........................... 2,000 118,500
TelCom Semiconductor, Inc. ** ............ 5,000* 39,375
Tencor Instruments ** ..................... 195,000 8,311,875
Teradyne, Inc. ** ......................... 220,000 7,342,500
Ultratech Stepper, Inc. ** ................ 30,000 1,200,000
VeriFone, Inc.** .......................... 25,000 675,000
Xilinx, Inc.** ............................ 60,000 2,760,000
------------
52,837,369
----------
ENGINEERING (0.13%)
J. Ray Mcdermott, S. A. ** ................ 50,000* 756,250
----------
FINANCE (3.22%)
ADVANTA Corp. (Class A) ** ................ 7,500 290,625
ADVANTA Corp. (Class B) ................... 6,750 241,313
Alex Brown, Inc. ** ....................... 3,000 146,625
Alliance Capital Management, L.P. ......... 110,000 2,310,000
Bear Stearns Cos., Inc. ................... 4,896 97,311
Capital One Financial Corp. ............... 30,000* 735,000
Capital RE Corp. .......................... 30,000 847,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 16
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
FINANCE (CONTINUED)
Concord EFS, Inc. ** ........................ 6,750 $ 232,875
CUC International, Inc. ** .................. 30,000 1,038,750
Donaldson Lufkin & Jenrette, Inc. ........... 20,000* 595,000
Eaton Vance Corp. ........................... 25,000 912,500
Franklin Resources, Inc. .................... 32,000 1,624,000
KBK Capital Corp. ** ........................ 100,000 600,000
Lehman Brothers Holdings, Inc. .............. 25,000* 543,750
Oppenheimer Capital, L.P. ................... 60,000 1,612,500
Price (T. Rowe) & Associates, Inc. .......... 66,000 3,283,500
Raymond James Financial, Inc. ............... 84,750 1,822,125
SEI Corp. ................................... 18,000 382,500
SunAmerica, Inc. ............................ 7,000 435,750
US Order, Inc. ** ........................... 2,500* 37,500
WFS Financial, Inc. ** ...................... 40,000* 665,000
-----------
18,454,124
-----------
FUNERAL SERVICES (0.54%)
Service Corp. International ................. 50,000 2,006,250
Stewart Enterprises, Inc. (Class A) ......... 32,250 1,088,437
-----------
3,094,687
-----------
HEALTHCARE (4.81%)
AHI Healthcare Systems, Inc. ** ............. 25,000* 350,000
American Oncology Resources, Inc. ** ........ 5,500* 192,500
Apogee, Inc. ** ............................. 5,000 43,750
Applied Bioscience International, Inc. ** ... 40,000 255,000
Apria Healthcare Group, Inc. ** ............. 88,200* 1,907,325
Arbor Health Care Co. ** .................... 3,000 51,000
Beverly Enterprises, Inc. ** ................ 25,000 293,750
Cardinal Health, Inc. ....................... 3,750 192,656
Caremark International, Inc. ................ 140,000 2,887,500
Community Care of America, Inc. ** .......... 65,000* 877,500
CorVel Corp. ** ............................. 20,000 640,000
Enterprise Systems, Inc. .................... 4,000* 93,500
Express Scripts, Inc. (Class A) ** .......... 25,000 950,000
Health Care & Retirement Corp. ** ........... 57,100 1,677,312
Health Management Associates, Inc. ..........
(Class A) ** .............................. 25,312 544,219
Health Management Systems, Inc. ** .......... 30,000 960,000
Horizon Healthcare Corp. ** ................. 85,000 1,721,250
Horizon Mental Health Management, Inc. ** ... 5,000* 78,125
Integrated Health Services, Inc. ............ 2,000 45,750
Interim Services, Inc. ** ................... 15,000 446,250
Living Centers Of America, Inc. ** .......... 41,500 1,073,812
Manor Care, Inc. ............................ 37,500 1,228,125
Mariner Health Group, Inc.** ................ 50,000 487,500
MedPartners, Inc. ** ........................ 15,000* 420,000
Mid Atlantic Medical Services ** ............ 20,000* $ 397,500
Multicare Cos., Inc. ** ..................... 50,000 937,500
NovaCare, Inc. ** ........................... 40,000 250,000
OccuSystems, Inc. ** ........................ 15,000* 310,313
OrNda Healthcorp ** ......................... 20,000* 352,500
PhyCor, Inc. ** ............................. 7,875 289,406
Physician Reliance Network ** .............. 10,000* 332,500
Renal Treatment Centers, Inc. ** ............ 15,000 540,000
Summit Care Corp. ** ........................ 40,000 830,000
Sun Healthcare Group, Inc. ** .............. 20,000* 237,500
Surgical Care Affiliates, Inc. .............. 41,000 1,214,625
TheraTx, Inc. ** ............................ 50,000 562,500
Total Renal Care Holdings, Inc. ** .......... 20,000 407,500
Value Health, Inc. ** ....................... 49,750* 1,138,031
Vencor, Inc. ** ............................. 8,437 234,127
Vivra, Inc. ** .............................. 65,000 2,145,000
-----------
27,595,826
-----------
HOTELS & MOTELS (0.44%)
Equity Inns, Inc. ....................... 30,000 352,500
Marcus Corp. ............................ 25,000 865,625
Marriott International, Inc. ............ 10,000 368,750
Primadonna Resorts, Inc. ** ............. 41,000 640,625
Red Lion Hotels, Inc. ** ................ 15,000* 296,250
---------
2,523,750
---------
INSURANCE (5.05%)
ACE, Ltd. ............................... 50,000 1,700,000
Acordia, Inc. ........................... 7,500 206,250
American RE Corp. ....................... 57,000 2,180,250
Berkley (W. R.), Corp. .................. 20,000 865,000
Capital Guaranty Corp. .................. 10,000 221,250
CMAC Investment Corp. ................... 15,000 712,500
Enhance Financial Services
Group, Inc. ........................... 5,000 101,875
Exel Ltd. ............................... 10,500 561,750
Gallagher (Arthur J.) & Co. ............. 15,000 530,625
Guaranty National Corp. ................. 35,000 498,750
HCC Insurance Holdings, Inc.** .......... 27,000 938,250
Hilb, Rogal & Hamilton Co. .............. 10,000 137,500
Horace Mann Educators Corp. ............. 75,000 1,996,875
Insurance Auto Auctions, Inc.** ......... 29,500 199,125
Life Partners Group, Inc. ............... 65,000 1,178,125
Life RE Co. ............................. 5,000 103,750
Maxicare Health Plans, Inc. ** .......... 125,000 2,171,875
MBIA, Inc. .............................. 28,000 1,949,500
Mid Ocean Ltd. .......................... 4,000 141,500
NAC Re Corp. ............................ 30,050 1,055,506
National RE Corp. ....................... 78,000 2,622,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
INSURANCE (continued)
Oxford Health Plans, Inc. ** .............. 10,000 $ 782,500
PacifiCare Health Systems, Inc. ** ........ 5,000 352,500
PartnerRe Holdings, Ltd. .................. 10,000 265,625
Philadelphia Consolidated Holding
Corp. ** ................................ 75,000 1,406,250
Physicians Health Services, Inc. ..........
(Class A) ** ............................ 7,500 249,375
Prudential Reinsurance Holdings, Inc.** ... 12,500* 254,688
PXRE Corp. ................................ 5,000 127,500
RenaissanceRe Holdings, Ltd. .............. 6,500* 176,313
Sierra Health Services, Inc. ** ........... 35,000 1,001,875
TIG Holdings, Inc. ........................ 10,000* 253,750
Transatlantic Holdings, Inc. .............. 17,000 1,145,375
UNUM Corp. ................................ 27,500 1,447,187
Vesta Insurance Group, Inc. ............... 10,000* 403,750
Western National Corp. .................... 75,000* 1,031,250
-----------
28,970,944
-----------
LEISURE & RECREATION (0.66%)
Aztar Corp. ** ............................ 20,000* 162,500
Circus Circus Enterprises, Inc.** ......... 5,050 134,456
Coleman Co., Inc. ** ...................... 5,000 171,250
KingWorld Productions, Inc. ** ............ 25,000* 871,875
Rawlings Sporting Goods Co. ** ............ 10,000* 80,000
Royal Caribbean Cruises Ltd. .............. 40,000 920,000
Trump Hotels & Casino Resorts, Inc. ** .... 85,000* 1,445,000
-----------
3,785,081
-----------
MACHINERY (2.53%)
Asyst Technologies, Inc. ** ............... 20,000 840,000
Bridgeport Machines, Inc. ** .............. 25,000* 437,500
Credence Systems Corp.** .................. 175,000 6,540,625
Duracraft Corp. ** ........................ 9,000 195,750
KLA Instruments Corp. ** .................. 30,000 1,282,500
Novellus Systems, Inc. ** ................. 65,000 4,476,875
Opal, Inc. ** ............................. 15,000* 226,875
Veeco Instruments, Inc. ** ................ 20,000* 480,000
-----------
14,480,125
-----------
MEDICAL/DENTAL (3.66%)
Benson Eyecare Corp. ** ................... 20,000 187,500
BioWhittaker, Inc. ** ..................... 120,000 900,000
Cognex Corp. ** ........................... 42,000* 2,509,500
Cordis Corp. ** ........................... 20,000 2,210,000
EP Technologies, Inc. ** .................. 10,000* 123,750
Forest Laboratories, Inc. ** .............. 10,000 413,750
Gulf South Medical Supply, Inc. ** ........ 20,000 415,000
Haemonetics Corp. ** ...................... 30,000 566,250
HemaSure, Inc. ** ......................... 30,000* 382,500
ICU Medical, Inc. ** ...................... 40,000* $ 510,000
IDEXX Laboratories, Inc. ** ............... 5,000* 203,750
InStent, Inc. ** .......................... 29,500* 497,813
Isolyser Co., Inc. ** ..................... 10,000 178,750
i-STAT Corp. ** ........................... 10,000* 310,000
IVAX Corp. ................................ 32,000 728,000
Liposome Co., Inc. ** ..................... 45,000* 691,875
MAXXIM Medical, Inc. ** ................... 40,000 555,000
MedCath, Inc. ** .......................... 20,000* 470,000
MiniMed, Inc. ** .......................... 60,000* 555,000
Pall Corp. ................................ 6,666 162,484
Patterson Dental, Inc. ** ................. 28,500 712,500
Perrigo Co.** ............................. 60,000 735,000
Rotech Medical Corp. ** ................... 36,000 819,000
Scherer (R.P.) Corp.** .................... 22,000 979,000
Steris Corp. ** ........................... 28,000 945,000
Stryker Corp. ............................. 6,100 275,262
Target Therapeutics, Inc. ** .............. 8,500 658,750
Tecnol Medical Products, Inc. ** .......... 90,000 1,710,000
United Dental Care, Inc. ** ............... 10,000* 305,000
Uromed Corp. ** ........................... 50,000* 531,250
Ventritex, Inc. ** ........................ 15,000 294,375
Vital Signs, Inc. ......................... 25,000* 456,250
-----------
20,992,309
-----------
OFFICE EQUIPMENT & SUPPLIES (0.32%)
Indigo N. V. ** ............................. 45,000* 410,625
Staples, Inc. ** ............................ 54,000 1,437,750
---------
1,848,375
---------
OIL & GAS (4.03%)
Alexander Energy Corp. ** ................... 25,000* 96,875
Anadarko Petroleum Corp. .................... 12,500 542,188
Apache Corp. ................................ 50,000 1,275,000
Baker Hughes, Inc. .......................... 10,000 196,250
Barrett Resources Corp. ** .................. 12,500 290,625
B.J. Services Co. ** ........................ 6,000 141,000
Brown (Tom), Inc. ** ........................ 115,000 1,279,375
Cabot Oil & Gas Corp. (Class A) ** .......... 60,000 802,500
Cairn Energy USA, Inc. ** ................... 52,000 624,000
Camco International, Inc. ................... 20,000* 457,500
Cross Timbers Oil Co. ** .................... 40,000 580,000
Energy Ventures, Inc. ** .................... 40,000* 760,000
Enron Oil & Gas Co. ......................... 65,000 1,300,000
ENSCO International, Inc. ** (formerly
Energy Service Co., Inc.) ................. 20,000 337,500
Falcon Drilling Co., Inc. ** ................ 100,000* 1,037,500
Halliburton Co. ............................. 5,000* 207,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 18
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
OIL & GAS (CONTINUED)
Hornbeck Offshore Services, Inc. ** ......... 10,000 $ 146,250
HS Resources, Inc. ** ....................... 10,000* 138,750
Landmark Graphics Corp. ** .................. 10,000 217,500
Mitchell Energy & Development
Corp. (Class B) ........................... 10,000 162,500
Natural Gas Clearinghouse ................... 65,000* 585,000
Newfield Exploration Co. ** ................. 73,000 2,153,500
Noble Affiliates, Inc. ...................... 70,000 1,732,500
Noble Drilling Corp. ** ..................... 15,000* 105,000
Nuevo Energy Co. ** ......................... 80,000 1,770,000
Oceaneering International, Inc.** ........... 23,000 218,500
Parker & Parsley Petroleum Co. .............. 30,000 555,000
PetroCorp, Inc. ** .......................... 20,000 155,000
Pogo Producing Co. .......................... 75,000 1,509,375
Smith International, Inc. ** ................ 50,000 800,000
Snyder Oil Corp. ............................ 19,000 194,750
Stone Energy Corp. ** ....................... 20,000 227,500
Tidewater, Inc. ............................. 10,000 263,750
Tuboscope Vetco International Corp. ** ...... 90,000 528,750
Weatherford International, Inc. ** .......... 70,000 1,688,750
-----------
23,080,188
-----------
PAPER PRODUCTS (0.20%)
Mercer International, Inc. ** .............. 50,000 1,150,000
-----------
POLLUTION CONTROL (0.52%)
GNI Group, Inc. ** .......................... 125,000 875,000
IMCO Recycling, Inc. ........................ 48,500 1,042,750
Safety-Kleen Corp. .......................... 10,000* 153,750
Tetra Tech, Inc. ** ......................... 15,625 339,844
TRC Companies ** ............................ 30,000 176,250
U.S. Filter Corp. ** ........................ 17,500* 406,875
-----------
2,994,469
-----------
PRINTING (0.56%)
Harte-Hanks Communications, Inc. ............ 50,000 1,512,500
International Imaging Materials, Inc. ** .... 35,000 883,750
Mecklermedia Corp. ** ....................... 70,000 822,500
-----------
3,218,750
-----------
PROTECTION (0.46%)
Checkpoint Systems, Inc. ** ................. 5,000* 144,375
First Alert, Inc. ** ........................ 85,000 1,317,500
Koala Corp. ** .............................. 35,000 319,375
Protection One, Inc. ** ..................... 100,000 787,500
Sensormatic Electronics Corp. ............... 2,250 48,094
-----------
2,616,844
-----------
PUBLISHING (0.73%)
Desktop Data, Inc. ** ....................... 10,500* 375,375
Franklin Electronic Publishers, Inc. ** ..... 19,500 806,812
PUBLISHING (CONTINUED)
Readers Digest Association, Inc. (Class A) .. 20,000 $ 1,005,000
Scholastic Corp.** .......................... 32,500 2,006,875
-----------
4,194,062
-----------
REAL ESTATE (3.68%)
Beacon Properties Corp. ................... 10,000 217,500
Camden Property Trust ..................... 30,000 622,500
Cavaliar Homes, Inc. ...................... 25,000* 425,000
Champion Enterprises, Inc. ** ............ 30,000* 776,250
Clayton Homes, Inc. ....................... 112,546 2,954,332
Crescent Real Estate Equities, Inc. ....... 20,300 649,600
Equity Residential Properties Trust ....... 20,000 560,000
Evans Withycombe Residential, Inc. ........ 5,000* 94,375
Factory Stores Of America, Inc. ........... 30,000 577,500
HGI Realty, Inc. .......................... 17,500* 387,188
Highwoods Properties, Inc. ................ 5,000 133,125
Insignia Financial Group, Inc. ............
(Class A) ** ............................ 25,000 675,000
Liberty Property Trust .................... 10,000 202,500
Manufactured Home Communities, Inc. ....... 40,000 660,000
Mid-America Apartment Communities,
Inc ..................................... 25,400 584,200
NHP, Inc. ** .............................. 25,000* 356,250
Oakwood Homes Corp. ....................... 80,000 3,000,000
Oasis Residential, Inc. ................... 20,000 435,000
Post Properties, Inc. ..................... 11,100 333,000
Redman Industries, Inc. ** ................ 170,000 4,420,000
Regency Realty Corp. ...................... 25,000 425,000
RFS Hotel Investors, Inc. ................. 10,000 151,250
ROC Communities, Inc. ..................... 25,000 562,500
Security Capital Industrial Trust ......... 15,000 245,625
Security Capital Pacific Trust ............ 20,000* 357,500
Storage USA, Inc. ......................... 10,400 304,200
Tanger Factory Outlet Centers, Inc. ....... 18,000 423,000
Vornado Realty Trust ...................... 15,000 538,125
----------
21,070,520
----------
RETAIL (12.60%)
ADFlex Solutions, Inc. ** ................. 54,000 1,431,000
AmeriSource Health Corp. ** ............... 75,000* 2,043,750
Apple South, Inc. ......................... 77,062 1,579,771
Applebee's International, Inc.** .......... 25,000 703,125
Arbor Drugs, Inc. ......................... 9,000 166,500
Au Bon Pain Co., Inc. (Class A) ** ........ 5,000 38,125
Barnes & Noble, Inc. ** ................... 11,000 401,500
Bed Bath & Beyond, Inc. ** ................ 60,000 1,875,000
Best Buy Co., Inc.** ...................... 75,000 1,556,250
Blyth Industries, Inc. ** ................. 10,000 505,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 19
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
RETAIL (CONTINUED)
Borders Group, Inc. ** .................... 65,000* $ 1,113,125
Brookstone, Inc. ** ....................... 50,000 331,250
Campo Electronics, Appliances and
Computers, Inc. ** ...................... 150,000 693,750
Catherine's Stores Corp. ** ............... 10,000 92,500
Chart House Enterprises, Inc. ** .......... 76,000 522,500
Claire's Stores, Inc. ..................... 9,000 176,625
Consolidated Stores Corp. ** .............. 24,000 555,000
Corporate Express, Inc. ** ................ 25,000 653,125
Creative Computers, Inc. ** ............... 25,000* 725,000
Daisytek International Corp. ** ........... 25,000* 706,250
De Rigo S.p.A., ADR ....................... 13,000* 268,125
Department 56, Inc.** ..................... 20,000 907,500
DF & R Restaurants, Inc. ** ............... 10,000 305,000
Dollar Tree Stores, Inc. ** ............... 1,000* 27,000
Dreyer's Grand Ice Cream, Inc. ............ 15,000 517,500
El Chico Restaurants, Inc. ** ............ 110,000 1,086,250
Ellett Brothers, Inc. ..................... 81,000 617,625
Ethan Allen Interiors, Inc.** ............ 41,000 809,750
Federated Department Stores, Inc. ** ...... 90,000 2,283,750
Fingerhut Cos., Inc. ...................... 16,000 218,000
Franklin Quest Co. ** ..................... 41,000 978,875
Friedman's, Inc. (Class A) ** ............ 10,000 202,500
Gadzooks, Inc. ** ......................... 25,000* 462,500
Garden Ridge Corp. ** ..................... 10,000* 357,500
General Nutrition Cos., Inc. ** ........... 4,000 99,500
Global DirectMail Corp. ** ................ 65,000* 1,771,250
Good Times Restaurants, Inc. ** ........... 120,000 116,244
Gymboree Corp. ** ......................... 22,000 497,750
Hollywood Entertainment Corp.** ........... 10,000 267,500
HomeTown Buffet, Inc. ** .................. 40,000 525,000
IHOP Corp. ** ............................. 130,000 2,795,000
Intimate Brands, Inc. ..................... 40,000* 670,000
Just For Feet, Inc. ** .................... 5,625 132,891
Landry's Seafood Restaurants, Inc. ** ..... 90,000 1,215,000
Little Switzerland, Inc. ** ............... 100,000 375,000
Lone Star Steakhouse & Saloon, Inc. ** .... 13,500 521,437
Media Arts Group, Inc. ** ................. 15,000* 49,688
Men's Wearhouse, Inc. (The) ** ............ 12,750 497,250
Michael's Stores, Inc. ** ................. 50,000 681,250
Moovies, Inc. ** .......................... 15,000 245,625
Movie Gallery, Inc. ** .................... 15,000* 577,500
Neiman Marcus Group, Inc. ................. 30,000* 513,750
Neostar Retail Group, Inc. ** ............ 20,000* 305,000
Nine West Group, Inc. ** .................. 75,000 3,337,500
Oakley, Inc. ** ........................... 10,200* 351,900
Office Depot, Inc.** ...................... 35,009 1,002,133
RETAIL (CONTINUED)
OfficeMax, Inc. ** ........................ 39,300* $ 972,675
Oshman's Sporting Goods, Inc. ** .......... 10,000* 135,000
Outback Steakhouse, Inc. ** ............... 105,000 3,294,375
Papa John's International, Inc. ** ........ 2,500 96,250
PetSmart, Inc.** .......................... 12,000 402,000
Pier 1 Imports, Inc. ...................... 145,750 1,402,844
Quality Dining, Inc. ** ................... 31,000 604,500
Revco D.S., Inc. ** ....................... 205,454 4,879,532
Rite-Aid Corp. ............................ 65,000 1,755,000
Sonic Corp. ** ............................ 64,500 1,419,000
Sports Authority, Inc. (The) ** ........... 21,900* 476,325
Sports & Recreation, Inc. ** .............. 50,000 368,750
Starbucks Corp. ** ........................ 10,000 392,500
Sunglass Hut International, Inc.** ........ 190,000 5,177,500
Talbots, Inc. ............................. 50,000 1,212,500
Tiffany & Co. ............................. 31,000 1,352,375
USA Detergents, Inc. ** ................... 30,000* 765,000
U.S. Delivery Systems, Inc. ** ............ 14,000 290,500
Urban Outfitters, Inc. ** ................. 18,000 391,500
Wall Street Deli, Inc. ** ................. 7,500 50,625
Wendy's International, Inc. ............... 145,000 2,881,875
West Marine, Inc. ** ...................... 45,000 1,372,500
Whole Foods Market, Inc. ** ............... 20,000 245,000
Williams-Sonoma, Inc. ** .................. 12,000 208,500
Zale Corp. ** ............................. 40,000 590,000
-----------
72,195,815
-----------
TELECOMMUNICATIONS (9.18%)
ACC Corp. ................................. 12,000 225,000
ACT Networks, Inc. ** ..................... 12,500* 90,625
ANTEC Corp. ** ............................ 40,000 495,000
Applied Digital Access, Inc. ** ........... 5,000 60,000
Ascend Communications, Inc. ** ............ 148,000 9,620,000
Black Box Corp. ** ........................ 25,000* 406,250
BroadBand Technologies, Inc. ** ........... 25,000 437,500
Checkfree Corp. ** ........................ 15,000* 316,875
Communications Center, Inc. ** ............ 15,000 82,500
DSC Communications Corp.** ................ 17,500 647,500
Equifax, Inc. ............................. 71,500 2,788,500
Geoworks ** ............................... 60,000 1,282,500
Gilat Satellite Networks Ltd.** ........... 2,500* 55,625
HighwayMaster Communications, Inc. ** ..... 75,000* 600,000
International Cabletel, Inc. ** ........... 26,666 706,649
Metrocall, Inc. ** ........................ 41,000 1,025,000
MFS Communications Co., Inc. ** ........... 11,200 452,200
MIDCOM Communications, Inc. ** ............ 50,000* 750,000
MobileMedia Corp. ** ...................... 47,500* 1,246,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 20
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
TELECOMMUNICATIONS (continued)
Mobile Telecommunications
Technologies Corp. ** ................... 30,000 $ 851,250
NFO Research, Inc. ** ..................... 25,000 568,750
Octel Communication Corp. ** .............. 20,000 682,500
Paging Network, Inc. ** ................... 7,500 172,500
Pairgain Technologies, Inc. ** ............ 45,000* 1,923,750
PriCellular Corp. (Class A) ** ............ 31,250* 406,250
ProNet, Inc. ** ........................... 40,000 1,020,000
QUALCOMM, Inc. ** ......................... 5,000 192,500
Scientific-Atlanta, Inc. .................. 50,000 618,750
Sitel Corp. ** ............................ 10,500* 238,875
Stanford Telecommunications, Inc. ** ...... 11,000 225,500
Tellabs, Inc. ** .......................... 180,000 6,120,000
Telular Corp. ** .......................... 5,000 69,375
Transaction Network Services, Inc. ** ..... 15,000 352,500
US Long Distance Corp. ** ................. 40,000 515,000
U. S. Robotics, Inc. ** ................... 135,000 12,487,500
UUNET Technologies, Inc. ** ............... 3,000* 182,250
WorldCom, Inc. (formerly
LDDS Communications, Inc.)** ............ 127,996 4,175,869
Zoom Telephonics, Inc.** .................. 30,000 487,500
-----------
52,579,218
-----------
TEXTILES (0.52%)
Ashworth, Inc. ** ......................... 25,000 168,750
Cutter & Buck, Inc. ** .................... 30,000* 195,000
Gucci Group, NV ** (Registered Shares) .... 5,000* 150,000
Haggar Corp. .............................. 8,000 132,000
Nautica Enterprises, Inc. ** .............. 60,000 2,055,000
St. John Knits, Inc. ...................... 5,000 239,375
Tandy Brands Accessories, Inc. ** ......... 6,750 48,938
-----------
2,989,063
-----------
TOYS/GAMES/HOBBY PRODUCTS (1.20%)
Acclaim Entertainment, Inc. ** ............ 30,000 708,750
Callaway Golf Co. ......................... 52,000 851,500
Cannondale Corp. ** ....................... 20,200* 323,200
Cobra Golf, Inc. ** ....................... 37,000 962,000
GTECH Holdings Corp.** .................... 10,000 245,000
Happiness Express, Inc. ** ................ 55,000* 288,750
Intergold Ltd. ** ......................... 100,000 126,390
Players International, Inc. ** ............ 169,000 1,816,750
Station Casinos, Inc. ** .................. 110,000 1,430,000
Toy Biz, Inc. ** .......................... 5,000* 111,875
-----------
6,864,215
-----------
TRANSPORTATION (2.17%)
Alaska Air Group, Inc. ** ................. 25,000 371,875
American Medical Response, Inc. ** ........ 10,000* 288,750
TRANSPORTATION (CONTINUED)
Atlantic Southeast Airlines, Inc. ......... 65,000 $ 1,608,750
Comair Holdings, Inc. ..................... 85,950 2,411,972
Continental Airlines, Inc. (Class B) ** ... 10,000 356,250
Fritz Cos., Inc. ** ....................... 11,300* 395,500
Frontier Airlines, Inc. ** ................ 250,000 1,281,250
Greenbrier Cos., Inc. ..................... 20,000 217,500
Mesa Airlines, Inc.** ..................... 100,000 950,000
Northwest Airlines Corp. ** ............... 70,000 2,808,750
Offshore Logistics, Inc. ** ............... 11,500 142,314
Rural/Metro Corp.** ....................... 15,000 360,000
Skywest, Inc. ............................. 20,000 342,500
Southwest Airlines Co. .................... 45,000 900,000
-----------
12,435,411
-----------
UTILITIES (0.03%)
York Research Corp. ** .................... 22,000* 159,500
-----------
COMMON STOCKS
(Cost $315,097,152) .......... 97.86% 560,707,089
----------- -----------
WARRANTS
--------
WARRANTS
Retail (0.00%)
Good Times Restaurants, Inc. ** ......... 60,000 5,622
-----------
TOTAL WARRANTS
(Cost $50,148) .......... 0.00% 5,622
----------- -----------
TOTAL COMMON STOCKS
AND WARRANTS
(Cost $315,147,300) .......... 97.86% 560,712,711
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 21
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- ---- --------------- -----
<S> <C> <C>
SHORT-TERM INVESTMENTS
joint repurchase agreement (2.40%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Market, Inc. -
Dated 10-31-95, due 11-01-95
(secured by U.S. Treasury Bond,
8.75%, due 05-15-17 and
U.S. Treasury Note 5.75%
due 09-30-97) - Note A ....... 5.89% $ 13,738 $ 13,738,000
------------
corporate savings account (0.08%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% ........... 477,189
------------
TOTAL SHORT-TERM INVESTMENTS . 2.48% 14,215,189
------------ ------------
TOTAL INVESTMENTS . 100.34% $574,927,900
============ ============
</TABLE>
** Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1995
** Non-income producing security.
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at October 31, 1995 were
as follows:
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
- --------------------------------- ---------- ---------------
<S> <C> <C>
Frontier Airlines, Inc. $1,133,125 --
Loronix Information Systems, Inc. $1,595,000 --
</TABLE>
The percentage shown for each investment category is the total value of the
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Corporation") is a diversified, open-end
management investment company, registered under the Investment Company Act of
1940, as amended. The Corporation consists of six series portfolios: John
Hancock Emerging Growth Fund (the "Fund"), John Hancock Global Resources Fund,
John Hancock High Yield Tax Free Fund, John Hancock High Yield Bond Fund, John
Hancock Money Market Fund and John Hancock Government Income Fund (collectively,
the "Funds"). The Board of Directors may authorize the creation of additional
Funds from time to time to satisfy various investment objectives. Effective
December 22, 1994 (see Note B), the Corporation and Funds changed names by
replacing the word Transamerica with John Hancock.
The Board of Directors have authorized the issuance of two classes of shares
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 Board of Directors, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal Revenue
Service. Shareholders of a class which bears distribution/service expenses under
the terms of a distribution plan have exclusive voting rights regarding such
distribution plan. Class A Shares are subject to an initial sales charge of up
to 5.00% and a 12b-1 distribution plan. Prior to May 15, 1995, the maximum sales
charge was 5.75%. Class B Shares are subject to a contingent deferred sales
charge and a separate 12b-1 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 Board of Directors. 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.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S.dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
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. For federal income tax purposes, at October 31, 1995, the Fund has
$6,354,280 of capital loss carryforward available, to the extent provided by
regulations, to offset future net realized capital gains. If such carryforwards
are used by the Fund, no capital gain distributions will be made. The
carryforward expires October 31, 2003.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis. Dividend income on investment securities is
recorded on the ex-dividend date, or, in the case of some foreign securities, on
the date thereafter when the Fund is made aware of the dividend. 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 Corporation 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.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH AFFILIATES AND
OTHERS
On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser
for the Fund with approval of the Board of Directors and shareholders of the
Fund. The Fund's former investment manager was Transamerica Fund Management
Company ("TFMC").
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, to
0.75% of the Fund's average daily net assets. This fee structure is consistent
with the former agreement with TFMC. For the period ended October 31, 1995, the
advisory fee earned by the Adviser and TFMC amounted to $2,978,791 and $496,208,
respectively, resulting in a total fee of $3,474,999.
The Adviser and TFMC, for their respective periods, provided administrative
services to the Fund pursuant to an administrative service agreement through
January 16, 1995 on which day the agreement was terminated.
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.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a wholly-owned
subsidiary of the Adviser, became the principal underwriter of the Fund. Prior
to this date, Transamerica Fund Distributors, Inc. ("TFD") served as the
principal underwriter and distributor of
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
the Fund. For the period ended October 31, 1995, JH Funds and TFD received net
sales charges of $604,527 with regard to sales of Class A shares. Out of this
amount, $67,705 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $489,876 was paid as sales commissions to
unrelated broker-dealers and $46,946 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony,
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). 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, all of which are
broker-dealers.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% 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, formerly TFD, 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
October 31, 1995, contingent deferred sales charges amounted to $934,403.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan with
respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments for
distribution and service expenses which in total will not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% (0.90% effective December 1, 1995) of the Fund's average daily
net assets attributable to Class B shares, to reimburse JH Funds for its
distribution/service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 payments could occur under certain
circumstances. In order to comply with this rule, the 12b-1 fee on Class B
shares was decreased to 0.95% at various times during the fiscal year.
This fee structure and plan is similar to the former arrangement with TFD.
The Board of Directors approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund paid Investor Services a fee based on the number of shareholder
accounts and certain out-of-pocket expenses.
A partner with Baker & Botts was an officer of the Corporation until December
22, 1994. During the period ended October 31, 1995, legal fees paid to Baker &
Botts amounted to $4,849.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates as well as Director of the Corporation. The compensation of
unaffiliated Directors is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Directors may elect to defer their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
The Fund has an independent advisory board composed of certain retired
Directors who provide advice to the current Board of Directors in order to
facilitate a smooth management transition. The Fund pays the advisory board and
its counsel a fee.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Emerging Growth Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term obligations, during the period
ended October 31, 1995 aggregated $110,148,117 and $103,491,275, respectively.
There were no purchases or sales of long-term obligations of the U.S. government
and its agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 for Federal income tax
purposes was $329,000,920. Gross unrealized appreciation and depreciation of
investments aggregated $262,700,162 and $17,250,371, respectively, resulting in
net unrealized appreciation of $245,449,791.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified the
accumulated net investment loss in the amount of $6,156,730 to capital paid-in.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 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 certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
25
<PAGE> 26
John Hancock Funds - Emerging Growth Fund
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Series, Inc. --
John Hancock Emerging Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock Emerging Growth Fund (the
"Fund"), (formerly the Transamerica Emerging Growth Fund), one of the portfolios
constituting John Hancock Series, Inc. (the "Corporation") (formerly
Transamerica Series, Inc.), as of October 31, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers, or other
appropriate auditing procedures when replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
John Hancock Emerging Growth Fund portfolio of John Hancock Series, Inc. at
October 31, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 15, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1995.
The Fund has not paid any distributions of dividends or net realized gains
during the fiscal year.
26
<PAGE> 27
ADDITIONAL INFORMATION
John Hancock Funds - Emerging Growth Fund
On December 16, 1994 , a special meeting of John Hancock (formerly Transamerica)
Series, Inc. (the "Corporation") in respect of John Hancock (formerly
Transamerica) Emerging Growth Fund (the "Fund") was held involving the election
of trustees and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation of
Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 9,431,012 FOR, 166,278 AGAINST and 429,415
ABSTAINING.
The shareholders next approved new Plans of Distribution for each Class A and
Class B shares of the Fund, also effective on December 22, 1994, and also on
substantially the same terms as the prior Plans of Distribution. The Class A
shareholder votes tallied were 2,599,984 FOR, 53,194 AGAINST and 72,895
ABSTAINING. The Class B shareholder votes tallied were 6,658,409 FOR, 163,863
AGAINST and 478,360 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young, LLP as
independent auditors for the Fund for the fiscal year ending October 31, 1995,
and the votes tallied were 9,663,738 FOR, 104,051 AGAINST and 104,051
ABSTAINING.
Lastly, the following directors were elected to serve until their respective
successors shall become duly elected and qualified, with the votes tabulated as
indicated:
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHOLD
- ---------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr.......... 9,435,905 665,140
James F. Carlin................. 9,437,876 663,169
William H. Cunningham........... 9,435,106 665,939
Charles L. Ladner............... 9,434,675 666,370
Leo E. Linbeck, Jr.............. 9,437,770 663,275
Patricia P. McCarter............ 9,436,432 664,615
Steven R. Pruchansky............ 9,433,692 667,354
Norman H. Smith................. 9,435,218 665,827
John P. Toolan.................. 9,437,615 663,430
</TABLE>
27
<PAGE> 28
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
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Permit No. 582
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This report is for the information of the John Hancock Emerging 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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