The latest report from your
Fund's management team
SEMIANNUAL REPORT
Institutional
Series
Trust
Active Bond Fund
Dividend Performers Fund
Medium Capitalization Growth Fund
(formerly Multi-Sector Growth Fund)
Small Capitalization Growth Fund
Small Capitalization Value Fund
International Equity Fund
AUGUST 31, 1999
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TABLE OF CONTENTS
John Hancock Funds -- Institutional Series Trust
Page
1) Chairman's Message 3
2) Portfolio Manager Commentary
This commentary reflects the views of the portfolio
managers or portfolio management team through the end
of each Fund's period discussed in this report. Of course,
the managers' or team's views are subject to change
as market and other conditions warrant.
John Hancock Active Bond Fund 4
John Hancock Dividend Performers Fund 7
John Hancock Medium Capitalization Growth Fund 10
John Hancock Small Capitalization Growth Fund 13
John Hancock Small Capitalization Value Fund 16
John Hancock International Equity Fund 19
3) Financial Statements 22
4) Notes To Financial Statements 64
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer and
Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
International Equity Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Active Bond Fund
Dividend Performers Fund
Medium Capitalization Growth Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
SUB-INVESTMENT ADVISER
International Equity Fund
John Hancock Advisers International Ltd.
Dukes Court, 6th Floor
32-36 Duke Street St. James's
London, England SWIY 6DF
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109
CHAIRMAN'S MESSAGE
[A 1" x 1-1/2" photo of Edward J. Boudreau, Jr., Chairman and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the
champagne corks just yet. Rather, we are staying on the course that we set
more than two years ago to ensure that the transition to a new millennium
is a smooth one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the
world with a challenge: making sure that older computers, and any
equipment powered by computer chips, can properly read and process the
date "00" as 2000, not 1900. Much has been written about how the world
will weather the change. Some view it as a non-event, while others see the
potential for disruptions. How much disruption, and for how long, depends
on whom you talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with
our business partners and continuing to participate in industry testing.
We have also established additional contingency plans beyond our regular
ones to prepare for any challenges that the Year 2000 might present. In
the end, John Hancock will spend approximately $90-$95 million to ensure
we make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Foresight" newsletters is
featuring articles with more detailed information on Y2K matters of
importance to our shareholders. I encourage you to read them, or contact
one of our Customer Service Representatives at 1-800-540-2788 for another
copy. For your own peace of mind, we also recommend that you save your
1999 statements, especially those you receive between October and
December, so that you are able to check them against the first one you
receive in 2000. It's a measure of prudence, not panic. Good record
keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although
we cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND ANTHONY A.
GOODCHILD, BENJAMIN A. MATTHEWS AND TRIET NGUYEN, PORTFOLIO MANAGERS
[A 2-1/2" x 2" photo at bottom right side of page of John Hancock Active Bond
Fund. Caption below reads "Fund management team members (l-r): Ben Matthews,
Jim Ho, Triet Nguyen and Tony Goodchild."]
John Hancock
Active Bond Fund
Strong U.S. economy gives rise to inflation concerns and rate hikes
The past six months were a study in contrasts yet again for John Hancock
Active Bond Fund. At the outset, credit-sensitive bond sectors had
regained their footing from last August's global financial meltdown.
Investment-grade corporate and high-yield bonds, mortgage-backed and
asset-backed issues, as well as emerging-market debt began posting
significant gains. U.S. Treasury securities went into a tailspin as the
flight-to-quality trade reversed itself and they continued under pressure
through period's end. The recovery of yield-enhanced bonds lasted through
April and then began to lose steam in earnest during May. The market
environment remained unfavorable for most bonds as the summer progressed.
An abundant supply of new corporate issues, a strengthening U.S. economy,
inflation concerns and two interest-rate hikes by the Federal Reserve
Board characterized the final three months of the semiannual period.
"...we have
better
positioned
the portfo-
lio to take
advantage
of buying
opportuni-
ties..."
Fund performance
For the six months ended August 31, 1999, the Fund returned a total of
- -0.39% at net asset value, outperforming the -1.52% return of the average
corporate debt A-rated fund, according to Lipper, Inc. The Fund's
benchmark, the Lehman Brothers Government/Corporate Bond Index, produced
results of -0.96% in the same period. Historical performance information
can be found on page six.
What we did over the period
We began the fiscal period with several strategies in place, then modified
some of our tactics in late spring to take advantage of new opportunities.
* Extended duration and increased Treasury exposure. Used to gauge a
fund's sensitivity to interest rate changes, duration is a mathematical
measure that can play a role in performance. When interest rates rise, a
shorter duration can help buoy a portfolio's share price. When rates
decline, a shorter duration may inhibit a portfolio from participating
fully in price appreciation possibilities. For much of the period, we kept
the Fund's average duration relatively short in anticipation of a
rising-rate environment. As yields rose across the board and prices
declined in anticipation of the Fed's two rate increases, this approach
helped the Fund.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of .5% with -2.0% at the bottom and 0% at
the top. The first bar represents the -0.39% total return for John Hancock
Active Bond Fund. The second bar represents the -1.52% total return for
Average corporate debt A-rated fund. The third bar represents the -0.96%
total return for Lehman Brothers Government/Corporate Bond Index. A note
below the chart reads "The total return for John Hancock Active Bond Fund is
at net asset value with all distributions reinvested. The average corporate
debt A-rated fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
By period's end, however, the yield on the 30-year Treasury bond had risen
to nearly 6.25% -- a level we believed presented considerable value. While
the Fed may yet again raise short-term interest rates, we believe the
market has already discounted such an event and that yields should not
move much higher. We view the current environment as an opportunity to
slightly increase the Fund's weighting in long-term Treasury bonds and
extend duration a bit. Mortgage-backed securities have also reached
attractive price levels and we are selectively adding positions as
appropriate opportunities arise.
* Trimmed back on corporate bonds. The Fund's traditional investment bias
is toward corporate bonds. This remained so over the period, although we
trimmed the Fund's investment-grade corporate and high-yield bond exposure
as the period progressed. Our approach proved timely, as we were able to
move out of some securities prior to the worst of the summer's downdraft.
Some holdings we sold included Integrated Health Services, Seagrams,
Household Finance and Ford Motor Company. By slightly decreasing the
Fund's corporate-bond weighting, we believe we have better positioned the
portfolio to take advantage of buying opportunities that we anticipate
will materialize near calendar year end in response to Year 2000 concerns
and new issuance supply.
Over the period, we also capitalized on some relatively new themes. We
increased our stake in real estate investment trust securities, such as
ProLogis Trust, and added some high-yield cyclical and industrial bonds,
including Ocean Energy, Lyondell Chemical and Packaging Corp. of America.
We continued to place significant emphasis on media, telecommunications,
cable and finance holdings.
"...we also
capitalized
on some
relatively
new
themes."
Long-term promising; short-term choppy
While no one can predict whether or not the Fed will raise rates again
this year, the market is sure to experience pockets of uncertainty as
investors speculate on the matter. Once the markets settle down, we
believe the Treasury reduction plan bodes well for the price appreciation
potential of Treasury securities, by producing a favorable supply versus
demand scenario. The downturn now being experienced by the
credit-sensitive sectors has created attractive valuations, and we shall
actively seek to take advantage of these buying opportunities as we deem
appropriate.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
------- -------
Cumulative Total Returns 3.28% 35.63%
Average Annual Total Returns(1) 3.28% 7.43%
YIELD
As of August 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock Active Bond Fund 6.81%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.60% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 1.49% and 3.65%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
Active Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in the Lehman Brothers Government/Corporate Bond Index
- -- an unmanaged index that measures the performance of U.S. government
bonds, U.S. corporate bonds and Yankee bonds. Past performance is no
guarantee of future results.
[Line chart with the heading John Hancock Active Bond Fund, representing the
growth of a hypothetical $250,000 investment over the life of the fund.
Within the chart are two lines. The first line represents the Lehman Brothers
Government/Corporate Bond Index and is equal to $341,872 as of August 31,
1999. The second line represents the value of the hypothetical $250,000
investment made in the John Hancock Active Bond Fund on March 30, 1995 and is
equal to $337,666 as of August 31, 1999.]
BY JOHN F. SNYDER, III, AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 2-1/2" x 1-1/2" photo at bottom right side of page of John Hancock
Dividend Performers Fund. Caption below reads "Fund management team (l-r):
William W. Young, Steve Paspal, John Snyder and Peter Schofield."]
John Hancock
Dividend Performers Fund
Market leadership briefly changes amid robust economy,
rising interest rates
The stock market continued to advance over the last six months, but the
period was marked by an important change. In April, the market broadened
beyond the narrow group of high- flying large-company growth stocks --
many of them technology names -- that had dominated 1998's market gains.
Investors buoyed by evidence of stronger earnings growth and a continuing
robust economy turned their attentions elsewhere. That boosted cyclical
companies, whose fortunes are more tied to shifts in the economy.
Smaller-sized companies and value stocks, those that are inexpensive
compared to their fundamentals or assets, also rebounded. The market grew
more volatile later in the period, however, and its strength narrowed
again, as interest rates rose on fears that the strong economy and low
unemployment would spark inflation. Despite the summer jitters, the broad
market, as measured by the S&P 500 Index, rose 7.32% in the last six
months.
Fund results
John Hancock Dividend Performers Fund, with its emphasis on larger
companies and an underweighting in cyclical stocks, was held back by the
market's shift in April. For the six months ended August 31, 1999, the
Fund posted a total return of 3.86% at net asset value. That compared to
the 7.09% return of the average growth and income fund, according to
Lipper, Inc. Historical performance information can be found on page nine.
"By the end
of August,
we held a
market
weighting in
technology..."
Performance explained
After helping us last year, our overweightings in consumer cyclical and
consumer staples stocks hurt during the last six months. These groups
paused after a strong run-up at the end of 1998 and earlier this year that
had sent their valuations to lofty levels. What's more, investors feared
that rising interest rates would curtail consumer spending, although that
has yet to occur. The downturn hurt our stakes in such household names as
PepsiCo, Philip Morris and Nabisco Holdings in the consumer staples area
and retailers Home Depot, Lowe's and Wal-Mart Stores. We still believe in
these groups, however, and are keeping our overweighted stakes. The
fundamentals remain rock-solid in these "dividend performer" companies
with their relatively stable earnings and dominant market share.
"We expect
to see the
global
economy
continue on
the road to
recovery."
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 5% with 0% at the bottom and 20% at the
top. The first bar represents the 3.86% total return for John Hancock
Dividend Performers Fund. The second bar represents the 7.09% total return
for Average growth and income fund. The third bar represents the 7.32% total
return for S&P 500 Index. A note below the chart reads "The total return for
John Hancock Dividend Performers Fund is at net asset value with all
distributions reinvested. The average growth and income fund is tracked by
Lipper, Inc. See the following page for historical performance information."]
Technology double-edged
The Fund was able to capture some of the technology sector's advances
earlier this year because of our expanded investment criteria that allow
us to invest in companies with stable earnings growth, even if they do not
have a 10-year history of rising dividends. As a result, we benefited from
owning IBM, Hewlett-Packard and Cisco Systems. But Compaq Computer's fall
on disappointing earnings results hurt us and we sold the stock.
If anything, we would have been better served owning more technology
stocks earlier. But we have been adding to our stake cautiously, at times
when we could buy solid companies for relatively attractive prices. By the
end of August, we held a market weighting in technology with the addition
of Dell Computer and Computer Associates International, and MCI WorldCom
within the telecommunications subsector. The Fund continues to focus
primarily on "dividend performer" companies, and as we branch out beyond
this group we are still targeting companies with most of the same
characteristics as our dividend performers. That means they generate
stable earnings, are market leaders in their subsectors and display the
ability to increase market share.
Finance mixed
Our finance holdings produced mixed results. Banking giant Citigroup was
strong, but rising interest rates and earnings shortfalls hurt our
holdings in insurer UNUMProvident, which we sold, and Bank One. Since
financial-stock valuations have become more attractive lately, we have
added a few select names, including financial services company XL Capital,
a solid company for the long term whose stock was tainted by the sector's
weakness.
A look ahead
We expect to see the global economy continue on the road to recovery. As
it takes even greater hold around the world, multinational companies --
including Fund holdings Tyco International, Honeywell, Mobil Corp. and
Emerson Electric -- could continue to rebound. Potential challenges could
come from further interest-rate hikes or a slowdown in consumer spending.
In this environment, corporate earnings can still improve; however, stock
selectivity will be critical, given the market's high valuations.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
------- -------
Cumulative Total Returns 13.89% 136.75%
Average Annual Total Returns(1) 13.89% 22.47%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.70% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 13.61% and 21.32%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
Dividend Performers Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance. Past performance is no
guarantee of future results.
[Line chart with the heading John Hancock Dividend Performers Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $715,731 as of August 31,
1999. The second line represents the value of the hypothetical $250,000
investment made in the John Hancock Dividend Performers Fund on March 30,
1995 and is equal to $565,749 as of August 31, 1999.]
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
[A 3" x 2" photo at bottom right side of page of John Hancock Medium
Capitalization Growth Fund. Caption below reads "Fund management team members
(l-r): Barbara Friedman, Lisa Welch and John Golden."]
John Hancock
Medium Capitalization
Growth Fund
Mid-cap stocks outperform large-caps in market shift
Effective July 1, 1999, John Hancock Multi-Sector Growth Fund was renamed
John Hancock Medium Capitalization Growth Fund to better describe how the
Fund invests.
Despite continued volatility, the U.S. stock market reached new highs
during the last six months. The U.S. economy remained strong with few
signs of rising inflation. Corporate earnings also continued to grow, even
as U.S. interest rates climbed higher. Most important, the market's gain,
which had been dominated by a select group of large-company growth stocks,
broadened to include a wide variety of sectors. This shift in investor
interest led to outperformance by medium-sized companies over large caps.
During the last six months, the Russell Midcap Growth Index returned
11.68%.
"We kept
our largest
sector
weighting in
technology
and this
served the
Fund well."
Fund rebounds
John Hancock Medium Capitalization Growth Fund benefited from the market's
broadening to an even greater degree than its peers or benchmark. For the
six months ended August 31, 1999, the Fund returned 16.11% at net asset
value. That compared to the 13.28% return of the average mid-cap fund,
according to Lipper, Inc. Historical performance information can be found
on page 12.
Telecommunications boosts returns
We kept our largest sector weighting in technology and this served the
Fund well. We continued to add to telecommunications services companies, a
group benefiting from the build-out of long distance and local fiber-
optic networks. Among our biggest gainers were NEXTLINK Communications and
McLeodUSA. Another holding, Global Crossing, a company laying fiber lines
across the Atlantic, announced its intention to acquire Frontier Corp., a
U.S. telecommunications company. With that announcement, we sold Global
Crossing at a substantial gain and redeployed the assets into Frontier.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 5% with 0% at the bottom and 20% at the
top. The first bar represents the 16.11% total return for John Hancock Medium
Capitalization Growth Fund. The second bar represents the 13.28% total return
for Average mid-cap fund. The third bar represents the 11.68% total return
for Russell Midcap Growth Index. A note below the chart reads "The total
return for John Hancock Medium Capitalization Growth Fund is at net asset
value with all distributions reinvested. The average mid-cap fund is tracked
by Lipper, Inc. See the following page for historical performance
information."]
Energy is new
During the winter when oil prices dropped to what we considered
unsustainably low levels, we started buying energy stocks with the
expectation that prices would rise and exploration would pick up. Our
overweighted position contributed to our outperformance, as the group's
rebound was even beyond what we expected. Among our purchases were BJ
Services and Baker Hughes, which provide services and equipment used on
oil-drilling rigs, and Burlington Resources, a company that focuses on gas
production.
Health care and finance cut
We pared our health-care stake because ongoing concern over government
reimbursement for Medicare has hurt health-care service stocks, and we
believe the rhetoric will remain high until after the presidential
election. The focus of our reduced health-care position shifted to
pharmaceutical and biotech companies. We also trimmed our position in
finance, as these interest-sensitive stocks suffered from rising rates,
and a number of insurance companies have announced disappointing earnings.
Cyclicals offer potential
During the period, we moved more into cyclical stocks, which tend to move
in tandem with the economy. In particular, we increased our investment in
media companies by buying stocks such as Hispanic Broadcasting, which is
building a network of Spanish radio stations. We also added to our
position in Outdoor Systems, a billboard company that Infinity
Broadcasting subsequently announced plans to buy. These stocks are
benefiting as consumer companies look for more targeted and cost-effective
ways to advertise.
"...many
areas -
including
mid-cap
stocks -
still offer
strong
earnings
growth
prospects
and
attractive
valua-
tions..."
Mid-cap takovers
During the period, several of the Fund's holdings announced takeover bids
by larger companies. The mid-cap area is ripe for takeover activity, as
these are more seasoned, yet attractively valued, companies that provide
larger-cap companies with solid opportunities to enhance their growth
prospects. Beyond Outdoor Systems, our shares in Reynolds Metals, which we
sold, Hannaford Brothers and Omnipoint were boosted by takeover news.
A look ahead
We expect the stock market to remain volatile in the near term, as
investors continue to sort out the strength of the economy and direction
of interest rates. The recent hikes in U.S. interest rates point to a
cooling off of the domestic economy in the coming months. Any slowdown
here, however, may be somewhat offset by a pickup in European and Asian
economic growth. The broader sector participation should continue, given
that many areas -- including mid-cap stocks -- still offer strong earnings
growth prospects and attractive valuations relative to large-company
names. This bodes well for investors with a long-term perspective who are
willing to ride out near-term volatility.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (4/11/95)
------- -------
Cumulative Total Returns 9.65% 100.23%
Average Annual Total Returns(1) 9.65% 17.89%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.90% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 9.36% and 17.11%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
Medium Capitalization Growth Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Russell Midcap Growth
Index -- an unmanaged index that contains those Russell Midcap securities
with a greater-than-average growth orientation. Past performance is no
guarantee of future results.
[Line chart with the heading John Hancock Medium Capitalization Growth Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Russell Midcap Growth Index and is equal to $561,089 as of August 31, 1999.
The second line represents the value of the hypothetical $250,000 investment
made in the John Hancock Medium Capitalization Growth Fund on April 11, 1995
and is equal to $483,534 as of August 31, 1999.]
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND LAURA
ALLEN, CFA, AND ANURAG PANDIT, CFA, PORTFOLIO MANAGERS
[A 2-1/2" x 1-1/2" photo at bottom right side of page of John Hancock Small
Capitalization Growth Fund. Caption below reads "Fund management team members
(l-r): Scott Mayo, Laura Allen, Anurag Pandit and Bernice Behar."]
John Hancock
Small Capitalization
Growth Fund
Small-cap stocks lifted by market broadening
Small-company stocks staged a strong rally during the past six months,
sparked by stabilizing global markets and a surprisingly robust U.S.
economy. Even though they pulled back in July and August with the rest of
the market, small-cap stocks, as measured by the broad Russell 2000 Index,
outperformed larger caps, advancing by 9.91% in the last six months,
compared to the 7.32% gain of the S&P 500 Index.
Fund outperforms
We are pleased to report that for the six months ended August 31, 1999,
John Hancock Small Capitalization Growth Fund posted a total return of
23.86% at net asset value. That was better than the 10.85% return of the
Russell 2000 Growth Index and the average small cap fund, which returned
13.95%, according to Lipper, Inc. Historical performance information can
be found on page 15.
"Individual
stock selec-
tion and our
investments
in several
technology
sub-sectors
were the
keys..."
Biotech, technology, energy
Individual stock selection and our investments in several technology
sub-sectors were the keys to the Fund's outperformance. Biotechnology
company IDEC Pharmaceuticals, our largest holding, saw its stock soar on
strong sales of its treatment for non-Hodgkins lymphoma and rising hopes
for a second cancer drug.
Within the technology group, semiconductor stocks fared particularly well,
as rebounding Asian economies and surging demand for Internet access
fueled sales of personal computers. More recently, we shifted our
semiconductor exposure, slightly decreasing PC-related semiconductors and
increasing our exposure to semiconductor chips for telecom products. One
of our top holdings, RF Micro Devices, continued to profit from providing
chips for Nokia, the top-selling cell-phone manufacturer in a booming
wireless communications market here and abroad. Telecom services companies
such as NEXTLINK Communications and Allegiance Telecom, which both provide
enhanced communications services to small and mid-sized markets, also
posted strong results.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 5% with 0% at the bottom and 25% at the
top. The first bar represents the 23.86% total return for John Hancock Small
Capitalization Growth Fund. The second bar represents the 13.95% total return
for Average small-cap fund. The third bar represents the 9.91% total return
for Russell 2000 Index. The fourth bar represents the 10.85% total return for
Russell 2000 Growth Index. A note below the chart reads "The total return for
John Hancock Small Capitalization Growth Fund is at net asset value with all
distributions reinvested. The average small-cap fund is tracked by Lipper,
Inc. See the following page for historical performance information."]
We also increased our weighting in energy stocks such as Newfield
Exploration and Maverick Tube due to a stronger global economy and firming
oil prices.
"...small-cap
growth
stocks
remain
com-
pellingly
attractive."
Internet volatile
Internet stocks were the market's darlings in the first quarter of 1999,
and we rode the surge up and took profits in several Internet companies
that had grown too big for the Fund, including RealNetworks. Although we
pared our Internet stake in the spring, we were unable to avoid some of
the repercussions from a sharp decline in April. Investors grew more
nervous about Internet stocks' high valuation levels, particularly among
the smaller Internet companies in our size range. That hurt our stake in
web companies like AboveNet Communications and Multex.com. In this group,
we remained focused on infrastructure-type companies like web-hosting
company Digex.
We had several companies that produced disappointing results because of
management issues and we sold them, including Manhattan Associates, which
makes software to manage warehouse inventories and Boron, LePore, provider
of educational services to drug-company representatives.
Takeovers abound
The Fund has also benefited from owning stakes in a number of companies
that have recently announced takeovers by larger companies, which we
believe is an inevitable result of small-cap stocks' historically low
relative valuations. Included were International Network Services, being
acquired by Lucent Technologies; catalogue mailing-list provider Abacus
Direct, bought by premier on-line advertiser DoubleClick, and Nielsen
Media Research, being taken over by Dutch company VNU.
A look ahead
Our outlook for small-cap growth stocks is tinged with caution in the near
term. A rising interest-rate environment such as we have seen in the last
six months tends to hit small companies particularly hard, since they rely
heavily on borrowing to finance their growth. That said, small-cap growth
stocks remain compellingly attractive. Regardless of the market's moves,
we will continue to run the Fund in a diversified, risk-managed fashion,
an approach that has served the Fund well.
See the prospectus for a discussion of the risks of investing in
small-company stocks.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (5/2/96)
------- -------
Cumulative Total Returns 25.78% 77.88%
Average Annual Total Returns(1) 25.78% 19.98%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.90% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 22.84% and 13.68%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock Small
Capitalization Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in the Russell 2000 Index and the Russell 2000 Growth
Index. The Russell 2000 Index is an unmanaged small-cap index comprised of
2,000 U.S. stocks. The Russell 2000 Growth Index is an unmanaged index
containing Russell 2000 Index stocks with a greater-than-average growth
orientation. Past performance is no guarantee of future results.
[Line chart with the heading John Hancock Small Capitalization Growth Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are three lines. The first line represents the
value of the hypothetical $250,000 investment made in the John Hancock Small
Capitalization Growth Fund on May 2, 1996 and is equal to $448,441 as of
August 31, 1999. The second line represents the Russell 2000 Index and is
equal to $321,037 as of August 31, 1999. The third line represents the
Russell 2000 Growth Index and is equal to $293,945 as of August 31, 1999.]
BY TIMOTHY E. KEEFE, CFA, AND TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGERS
[A 2-1/2" x 2" photo at bottom right side of page of John Hancock Small
Capitalization Value Fund. Caption below reads "Fund management team members
(l-r): Tim Keefe, Tim Quinlisk and Lisa Welch."]
John Hancock Small
Capitalization Value Fund
Small-cap stocks rebound during last six months
Small-company stocks made strong headway this past spring, as investors
began shifting away from the high-priced large-company growth stocks that
had previously led the market's charge. Reflecting strong economic growth
domestically and improving demand globally, both large and small companies
delivered solid earnings growth. But the prospect of rising interest rates
turned investors toward cheaper stocks. Both economically sensitive and
small-cap names benefited, rebounding until mid-summer inflation concerns
and the possibility of further interest rate hikes stalled the market's
climb. For the six months ended August 31, 1999, the Russell 2000 Index
returned 9.91%.
"Strong
stock
selection --
particularly
among our
larger
investments
- -- helped
the
Fund..."
Performance and strategy review
At John Hancock Small Capitalization Value Fund, our strategy focuses on
buying shares of great businesses selling at a discount. We also look for
catalysts -- spin-offs, restructurings or new management -- with the
potential to unlock a stock's intrinsic value. Strong stock selection --
particularly among our larger investments -- helped the Fund return 33.19%
at net asset value for the six months ended August 31, 1999. Among our
best performers were Data General, Nielsen Media Research and Transaction
Network Services, stocks which were bought out when larger companies
recognized their value. Strong gains from these names, as well as others
in the top-performing technology, capital goods and energy sectors allowed
the Fund to outpace the average small-cap fund's 13.95% return during the
period, according to Lipper, Inc. Historical performance information can
be found on page 18.
Technology, capital goods, energy winners
The Fund's biggest stake continued to be in technology. Although investors
don't traditionally view technology as a value category, we don't exclude
it from our selection process. That's because our search for value is
based on finding good businesses that are relatively cheap, as opposed to
bad businesses that are just cheap.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 5% with 0% at the bottom and 35% at the
top. The first bar represents the 33.19% total return for John Hancock Small
Capitalization Value Fund. The second bar represents the 13.95% total return
for Average small-cap fund. The third bar represents the 9.91% total return
for Russell 2000 Index. A note below the chart reads "The total return for
John Hancock Small Capitalization Value Fund is at net asset value with all
distributions reinvested. The average small-cap fund is tracked by Lipper,
Inc. See the following page for historical performance information."]
CommScope, a spin-off from General Instruments that provides co-axial
cable, did exceptionally well and we took profits, as the company
benefited from the ongoing infrastructure build-out in the cable-TV area.
Applied Science & Technology, a semiconductor capital equipment
manufacturer, and Anadigics, a semiconductor company, also boosted the
Fund's performance. In the capital goods sector, our largest investment
was Vicor, a power conversion company whose stock took off as the company
rolled out its next generation products and began seeing signs of
acceptance in the marketplace. We also benefited from owning Millipore, a
water filtration business that sells to the pharmaceutical and
biotechnology industries. In the energy sector, Calpine's stock soared as
more investors began to recognize how strategically positioned this
company is in the deregulating electric utility industry. Disappointments
included health-care stocks like DENTSPLY International and Total Renal
Care Holdings, which languished for the period, and finance stocks like
Financial Security Assurance Holdings that suffered amidst rising interest
rates.
Buying opportunities
During the period, we found plenty of buying opportunities. A major
addition was Danka Business Systems, a recently restructured company that
distributes and services office equipment. This business has many of the
attributes we look for -- recurring revenues, new management, a new
product offering and accelerating earnings prospects. We also built
sizable positions in Intermedia Communications, a competitive local
exchange carrier with attractive assets in the consolidating
telecommunications service industry, and Dexter, a specialty chemicals
company whose stock price does not yet reflect its transition into
higher-margin, faster-growth businesses. Finally, we took advantage of a
temporary setback at Oak Industries, a company that provides
communications components to the cable and data communications industries,
making it our largest investment at period end.
"During the
period, we
found plenty
of buying
opportuni-
ties."
Going forward
Going forward, we expect to maintain our large stake in technology, but
shift toward software and technology service companies like Wind River
Systems and Metamor Worldwide, which offer products that will be in demand
post 2000. We'll also be looking for opportunities in the beaten-down
finance sector. As long as the overall economy remains sound, global
growth continues and inflation remains in check, we're optimistic that
stocks will continue to climb. Small-cap valuations remain particularly
attractive, which bodes well for both the sector's and the Fund's
long-term prospects.
See the prospectus for a discussion about the risks of investing in
small-company stocks.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (4/19/95)
------- -------
Cumulative Total Returns 28.12% 111.99%
Average Annual Total Returns(1) 28.12% 19.60%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.80% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 27.45% and 18.23%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock Small
Capitalization Value Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in the Russell 2000 Index -- an unmanaged, small-cap
index comprised of 2,000 U.S. stocks. Past performance is no guarantee of
future results.
[Line chart with the heading John Hancock Small Capitalization Value Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
value of the hypothetical $250,000 investment made in the John Hancock Small
Capitalization Value Fund on April 19, 1995 and is equal to $528,293 as of
August 31, 1999. The second line represents the Russell 2000 Index and is
equal to $436,441 as of August 31, 1999.]
BY MIREN ETCHEVERRY AND JOHN L.F. WILLS, PORTFOLIO MANAGERS
[A 2-1/2" x 2" photo at bottom right side of page of John Hancock
International Equity Fund. Caption below reads "Fund management team members
(l-r): John Wills, Gerardo Espinoza, Jean-Marc Berteaux and Miren
Etcheverry."]
John Hancock
International Equity Fund
Japan and emerging markets come roaring back
Leadership in overseas markets changed dramatically over the last six
months, as last summer's global economic turmoil began to subside. Perhaps
the biggest story was the resurgence of Japan and the recession-ravaged
emerging Asian and Latin American markets. In Japan, foreign investors
began pouring money into the market as signs of life re-appeared in the
economy, several large corporate restructurings were announced and a bank
rescue program was implemented. Latin American markets began to soar after
Brazil demonstrated its ability to control the effects of its currency
devaluation early in the year. A strong U.S. economy and market, a rebound
in cyclical stocks and rising commodity prices also helped Latin America's
commodity-dependent markets. On the other hand, Europe, which led foreign
markets in 1998, took a breather because of a slowdown in economic growth
and the unexpected decline of the new common currency, the euro.
"Our stake
in Japan
more than
doubled
over the
period..."
Stability holds Fund back
For the six months ended August 31, 1999, John Hancock International
Equity Fund posted a total return of 6.29% at net asset value. By
comparison, the Morgan Stanley Capital International (MSCI) All Country
World Free Ex-U.S. Index returned 12.68% and the average international
fund returned 13.09%, according to Lipper, Inc. Historical performance
information can be found on page 22.
Given the uncertainty that reigned in world markets in early 1999, we
sought to maintain a portfolio that represented stability in a volatile
world. This emphasis, which helped us last year, held us back versus our
benchmark and peers this year, since it meant we had an overweighting in
stable-growth stocks and Europe as they lagged, and underweighted stakes
in Asia, the emerging markets and cyclical stocks as they rebounded.
"...we will
keep the
portfolio
more
balanced
between
Europe and
the rest of
the world."
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 3% with 0% at the bottom and 15% at the
top. The first bar represents the 6.29% total return for John Hancock
International Equity Fund. The second bar represents the 13.09% total return
for Average international fund. The third bar represents the 12.68% total
return for MSCI All Country World Free Ex-U.S. Index. A note below the chart
reads "The total return for John Hancock International Equity Fund is at net
asset value with all distributions reinvested. The average international fund
is tracked by Lipper, Inc. See the following page for historical performance
information."]
Shifting assets to Asia, emerging markets
Because we actively manage the Fund's risk, we tend not to be the first
ones back into markets on the verge of recovery. This means we may miss
the first part of a move up, but it also means we are aiming to fall less
in times of sharp declines. Once we grew more confident in the improved
prospects for recoveries in Japan and emerging markets, we repositioned
the portfolio to up our stakes in those regions. In particular, we
re-established positions in South Korea, Taiwan, Singapore, Thailand,
Indonesia and China, which, along with an increase in Japan, caused our
Asian exposure to more than double in the last six months. We also
re-established small footholds in Brazil, Chile and Mexico.
Japan grows
Our stake in Japan more than doubled over the period through a combination
of strong performance and additional names, so that we ended the period
slightly overweighted versus our benchmark. Some of our top holdings were
also our best-performing stocks, including Sony, which benefited from
announcing a new corporate restructuring, and financial stocks Sakura
Bank, Nomura Securities and Sumitomo Trust & Banking. They rebounded after
the proposed merger of three large banks bolstered confidence. Recovering
consumers boosted department store Ito-Yokado's stock, and Takeda Chemical
Industries, with its strong leadership and string of new drug products,
also advanced.
Europe: Cut but still important
Although we moved to a more average weighting in Europe to take advantage
of opportunities elsewhere, we nonetheless plan to keep an important stake
there because we still believe in the long-term opportunities stemming
from corporate restructurings, mergers and industry consolidation. What's
more, there is a growing sense that European recovery is underway,
bolstered by Germany's rebound from near recession and its potential to
benefit most from Asia's rebound. While we like France, we cut our
overweighting there to bolster our German stake.
Optimism ahead
Our optimism is growing about the prospect for international equities.
Stronger-than-expected world economic growth and a further recovery in
Europe are bolstering our enthusiasm. It also means we will keep the
portfolio more balanced between Europe and the rest of the world. At the
corporate level, restructuring is becoming a global theme, moving from the
U.S. to Europe and now Asia. We will continue to emphasize those companies
actively pursuing restructurings. We will also keep monitoring U.S.
interest rate policies to determine their possible impact on our growth
expectations.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
------- -------
Cumulative Total Returns 1.49% 27.88%
Average Annual Total Returns(1) 1.49% 5.96%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 1.00% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been (0.20%) and 3.09%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
International Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in the Morgan Stanley Capital International (MSCI) All
Country World Free Ex-U.S. Index -- an unmanaged index that measures the
performance of both developed and emerging foreign stock markets. The index
represents freely traded stocks. Past performance is no guarantee of future
results.
[Line chart with the heading John Hancock International Equity Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
MSCI All Country World Free Ex-U.S. Index and is equal to $396,912 as of
August 31, 1999. The second line represents the value of the hypothetical
$250,000 investment made in the John Hancock International Equity Fund on
March 30, 1995 and is equal to $330,399 as of August 31, 1999.]
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
August 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments at value - Note C:
Bonds (cost - $5,039,717, none and
none, respectively) $4,865,676 $-- $--
Common stocks and rights (cost -
none, $12,868,128 and $14,909,811,
respectively) -- 16,323,327 17,219,777
Warrants (cost - $103, none and
none, respectively) 1,060 -- --
Short-term investments (cost -
$275,000, $831,000 and $953,000,
respectively) 275,000 831,000 953,000
Corporate savings account 482 175 35
----------- ----------- -----------
5,142,218 17,154,502 18,172,812
Receivable for investments sold 5,345 -- 450,479
Receivable for shares sold 76 -- --
Interest receivable 75,362 127 145
Dividends receivable -- 14,996 2,655
Deferred organization expenses -
Note A 950 959 1,247
Receivable from John Hancock
Advisers, Inc. and affiliates -
Note B 6,152 -- --
Other assets 248 884 2,348
----------- ----------- -----------
Total Assets 5,230,351 17,171,468 18,629,686
- --------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 96,366 -- 511,946
Payable for shares repurchased -- 25 4,308
Dividend payable 1,106 -- --
Payable to John Hancock Advisers,
Inc. and affiliates - Note B -- 4,392 10,387
Accounts payable and accrued
expenses 19,242 19,343 14,663
----------- ----------- -----------
Total Liabilities 116,714 23,760 541,304
- --------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 5,361,765 12,525,262 14,757,408
Accumulated net realized gain
(loss) on investments and foreign
currency transactions (74,150) 1,155,973 1,044,026
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions (173,084) 3,455,199 2,309,966
Undistributed net investment income
(distributions in excess of net
investment income) (894) 11,274 (23,018)
----------- ----------- -----------
Net Assets $5,113,637 $17,147,708 $18,088,382
======================================================================================
Net Asset Value Per Share:
(Based on 618,350, 1,146,442 and
1,417,051 shares, respectively, of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value) $8.27 $14.96 $12.76
======================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and shows the value
of what the Fund owns, is due and owes as of August 31, 1999. You'll also find the net
asset value per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (continued)
August 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------------
SMALL SMALL INTERNATIONAL
CAPITALIZATION CAPITALIZATION EQUITY
GROWTH FUND VALUE FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments at value - Note C:
Common stocks, rights and warrants
(cost - $2,619,557, $9,056,607 and
$6,667,132, respectively) $3,541,485 $10,401,261 $7,724,030
Preferred stocks (cost - none,
$277,500 and none, respectively) -- 265,734 --
Short-term investments (cost -
$42,000, $214,000 and $404,421,
respectively) - Note A 42,000 214,000 404,421
Corporate savings account 228 581 --
----------- ----------- -----------
3,583,713 10,881,576 8,128,451
Cash -- -- 734
Foreign currency, at value (cost -
none, none and $599, respectively) -- -- 593
Receivable for investments sold 144,887 212,456 37,266
Receivable for shares sold -- 66 --
Interest receivable 8 34 13
Dividends receivable 504 1,359 8,018
Foreign tax receivable -- -- 9,538
Deferred organization expenses -
Note A 6,833 1,038 949
Receivable from John Hancock
Advisers, Inc. and affiliates -
Note B 2,518 5,474 14,120
Other assets 107 492 706
----------- ----------- -----------
Total Assets 3,738,570 11,102,495 8,200,388
- --------------------------------------------------------------------------------------
Liabilities:
Payable for open forward foreign
currency exchange contracts sold -
Note A -- -- 476
Payable for investments purchased 67,963 208,123 --
Payable for shares repurchased 8 -- 85
Payable upon return of securities
on loan - Note A -- -- 321,421
Accounts payable and accrued
expenses 16,211 9,331 23,356
----------- ----------- -----------
Total Liabilities 84,182 217,454 345,338
- --------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 2,426,808 8,366,295 6,648,449
Accumulated net realized gain on
investments and foreign currency
transactions 315,379 1,144,783 134,900
Net unrealized appreciation of
investments and foreign currency
transactions 921,928 1,332,888 1,056,809
Undistributed net investment income
(distributions in excess of net
investment income) (9,727) 41,075 14,892
----------- ----------- -----------
Net Assets $3,654,388 $10,885,041 $7,855,050
======================================================================================
Net Asset Value Per Share:
(Based on 253,265, 892,029 and
725,792 shares, respectively, of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value) $14.43 $12.20 $10.82
======================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Six months ended August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Interest $197,893 $12,542 $28,059
Dividends (net of foreign
withholding tax of none, none and
$37, respectively) -- 111,613 30,886
----------- ----------- -----------
197,893 124,155 58,945
----------- ----------- -----------
Expenses:
Investment management fee - Note B 13,577 54,104 71,662
Custodian fee 30,476 6,510 13,991
Registration and filing fees 12,232 14,429 14,061
Auditing fee 8,044 9,301 8,350
Printing 1,893 2,194 1,993
Transfer agent fee - Note B 1,358 4,509 4,479
Organization expense - Note A 828 835 1,029
Accounting and legal services fee -
Note B 453 1,705 1,509
Miscellaneous 400 705 678
Trustees' fees 193 808 490
Legal fees 37 272 380
Interest expense - Note A -- -- 1,554
----------- ----------- -----------
Total Expenses 69,491 95,372 120,176
- ----------------------------------------------------------------------------------------
Less Expenses Reductions - Note B (53,172) (32,160) (39,405)
- ----------------------------------------------------------------------------------------
Net Expenses 16,319 63,212 80,771
- ----------------------------------------------------------------------------------------
Net Investment Income (Loss) 181,574 60,943 (21,826)
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) on
investments sold (68,578) 799,417 1,287,341
Change in net unrealized
appreciation (depreciation) of
investments (127,596) (164,705) 1,256,804
----------- ----------- -----------
Net Realized and Unrealized Gain
(Loss) on Investments (196,174) 634,712 2,544,145
- ----------------------------------------------------------------------------------------
Net Increase (Decrease) in Net
Assets Resulting from Operations ($14,600) $695,655 $2,522,319
========================================================================================
The Statement of Operations summarizes, for each of the Funds, the investment income earned
and expenses incurred in operating the Fund. It also shows net gains (losses) for the
period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations (continued)
Six months ended August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------
SMALL SMALL
CAPITALIZATION CAPITALIZATION INTERNATIONAL
GROWTH VALUE EQUITY
FUND FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Interest $2,685 $2,764 $2,620
Dividends (net of foreign
withholding tax of none, $139 and
$13,596, respectively) 1,279 65,367 93,197
----------- ----------- -----------
3,964 68,131 95,817
----------- ----------- -----------
Expenses:
Investment management fee - Note B 12,155 32,793 34,876
Custodian fee 16,606 9,057 51,230
Registration and filing fees 9,089 15,320 10,597
Auditing fee 7,038 7,541 8,546
Organization expense - Note A 2,063 828 828
Printing 1,530 2,652 1,991
Transfer agent fee - Note B 760 2,342 1,938
Miscellaneous 377 273 292
Accounting and legal services fee -
Note B 260 801 650
Trustees' fees 107 253 296
Legal fees 37 106 68
----------- ----------- -----------
Total Expenses 50,022 71,966 111,312
- ----------------------------------------------------------------------------------------
Less Expenses Reductions - Note B (36,338) (34,456) (72,523)
- ----------------------------------------------------------------------------------------
Net Expenses 13,684 37,510 38,789
- ----------------------------------------------------------------------------------------
Net Investment Income (Loss) (9,720) 30,621 57,028
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions:
Net realized gain on investments
sold 146,480 1,263,545 289,853
Net realized loss on foreign
currency transactions -- (197) (135,802)
Change in net unrealized
appreciation of investments 466,925 1,168,479 271,867
Change in net unrealized
appreciation of foreign currency
transactions -- -- 524
----------- ----------- -----------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 613,405 2,431,827 426,442
- ----------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $603,685 $2,462,448 $483,470
========================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
ACTIVE BOND DIVIDEND PERFORMERS
FUND FUND
---------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED) FEBRUARY 28, 1999 (UNAUDITED)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $353,845 $181,574 $188,995 $60,943
Net realized gain (loss) on
investments sold 63,900 (68,578) 1,169,983 799,417
Change in net unrealized
appreciation (depreciation) of
investments (87,318) (127,596) 46,410 (164,705)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 330,427 (14,600) 1,405,388 695,655
----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment income (353,845) (181,574) (204,553) (70,782)
Distributions in excess of net
investment income (677) (73) -- --
Distributions from net realized
gain on investments sold (139,091) -- (1,850,025) --
----------- ----------- ----------- -----------
Total Distributions to Shareholders (493,613) (181,647) (2,054,578) (70,782)
----------- ----------- ----------- -----------
From Portfolio Share Transactions: **
Shares sold 3,910,036 1,545,328 6,443,397 2,971,251
Shares issued to shareholders in
reinvestment of distributions 487,064 181,605 2,053,566 71,102
----------- ----------- ----------- -----------
4,397,100 1,726,933 8,496,963 3,042,353
Less shares repurchased (3,705,926) (2,102,662) (10,989,374) (4,262,362)
----------- ----------- ----------- -----------
Net Increase (Decrease) 691,174 (375,729) (2,492,411) (1,220,009)
----------- ----------- ----------- -----------
Net Assets:
Beginning of period 5,157,625 5,685,613 20,884,445 17,742,844
----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($821), ($894), $21,113 and
$11,274, respectively) $5,685,613 $5,113,637 $17,742,844 $17,147,708
=========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income $0.5633 $0.2886 $0.1544 $0.0583
----------- ----------- ----------- -----------
Per share distributions in excess
of net investment income $0.0011 $0.0001 -- --
----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold $0.2195 -- $1.5008 --
----------- ----------- ----------- -----------
** Analysis of Portfolio Share
Transactions:
Shares sold 440,336 180,867 432,497 195,477
Shares issued to shareholders in
reinvestment of distributions 55,263 21,468 140,269 4,778
----------- ----------- ----------- -----------
495,599 202,335 572,766 200,255
Less shares repurchased (417,608) (246,242) (745,329) (280,864)
----------- ----------- ----------- -----------
Net Increase (Decrease) 77,991 (43,907) (172,563) (80,609)
=========== =========== =========== ===========
The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the previous period. The difference reflects
net investment income, any investment gains and losses, distributions paid
to shareholders and any increase or decrease in money shareholders
invested in each Fund. The footnotes illustrate the number of Fund shares
sold, reinvested and repurchased during the period, along with the per
share amount of distributions made to shareholders of each Fund for the
period indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------------
MEDIUM CAPITALIZATION SMALL CAPITALIZATION
GROWTH FUND GROWTH FUND
---------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED) FEBRUARY 28, 1999 (UNAUDITED)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($42,177) ($21,826) ($13,678) ($9,720)
Net realized gain (loss) on
investments sold (98,184) 1,287,341 386,742 146,480
Change in net unrealized
appreciation (depreciation) of
investments (2,469,617) 1,256,804 (133,026) 466,925
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations (2,609,978) 2,522,319 240,038 603,685
----------- ----------- ----------- -----------
Distributions to Shareholders: *
Distributions from net realized
gain on investments sold (2,304,137) -- (134,250) --
Distributions in excess of net
realized gain on investments sold (130,832) -- -- --
----------- ----------- ----------- -----------
Total Distributions to Shareholders (2,434,969) -- (134,250) --
----------- ----------- ----------- -----------
From Portfolio Share Transactions: **
Shares sold 10,062,888 4,098,242 1,965,870 2,056,039
Shares issued to shareholders in
reinvestment of distributions 2,416,095 -- 134,329 --
----------- ----------- ----------- -----------
12,478,983 4,098,242 2,100,199 2,056,039
Less shares repurchased (31,049,470) (5,218,764) (2,855,403) (1,458,127)
----------- ----------- ----------- -----------
Net Increase (Decrease) (18,570,487) (1,120,522) (755,204) 597,912
----------- ----------- ----------- -----------
Net Assets:
Beginning of period 40,302,019 16,686,585 3,102,207 2,452,791
----------- ----------- ----------- -----------
End of period (including
distributions in excess of net
investment income of $1,192,
$23,018, $7 and $9,727,
respectively) $16,686,585 $18,088,382 $2,452,791 $3,654,388
=========== =========== =========== ===========
* Distributions to Shareholders:
Per share distributions from net
realized gain on investments sold $1.7180 -- $0.6321 --
----------- ----------- ----------- -----------
Per share distributions in excess
of net realized gain on
investments sold $0.0975 -- -- --
----------- ----------- ----------- -----------
** Analysis of Portfolio Share
Transactions:
Shares sold 789,843 330,075 174,923 151,480
Shares issued to shareholders in
reinvestment of distributions 217,862 -- 11,640 --
----------- ----------- ----------- -----------
1,007,705 330,075 186,563 151,480
Less shares repurchased (2,472,121) (430,694) (240,362) (108,726)
----------- ----------- ----------- -----------
Net Increase (Decrease) (1,464,416) (100,619) (53,799) 42,754
=========== =========== =========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------------
SMALL CAPITALIZATION INTERNATIONAL
VALUE FUND EQUITY FUND
---------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED) FEBRUARY 28, 1999 (UNAUDITED)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $35,793 $30,621 $58,714 $57,028
Net realized gain (loss) on
investments sold and foreign
currency transactions (106,535) 1,263,348 263,779 154,051
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions (817,107) 1,168,479 246,447 272,391
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations (887,849) 2,462,448 568,940 483,470
----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment income (32,061) -- (58,714) --
Distributions in excess of net
investment income ----------- ----------- (38,609) -----------
Distributions from net realized
gain on investments sold (855,792) -- -- --
Distributions in excess of net
realized gain on investments sold (116,108) -- -- --
----------- ----------- ----------- -----------
Total Distributions to Shareholders (1,003,961) -- (97,323) --
----------- ----------- ----------- -----------
From Portfolio Share Transactions: **
Shares sold 3,189,293 2,378,670 4,778,538 1,245,079
Shares issued to shareholders in
reinvestment of distributions 1,003,958 -- 97,210 --
----------- ----------- ----------- -----------
4,193,251 2,378,670 4,875,748 1,245,079
Less shares repurchased (4,432,149) (1,374,199) (5,525,145) (1,678,586)
----------- ----------- ----------- -----------
Net Increase (Decrease) (238,898) 1,004,471 (649,397) (433,507)
----------- ----------- ----------- -----------
Net Assets:
Beginning of period 9,548,830 7,418,122 7,982,867 7,805,087
----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
$10,454, $41,075, ($42,136) and
$14,892, respectively) $7,418,122 $10,885,041 $7,805,087 $7,855,050
=========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0426 -- $0.0687 --
----------- ----------- ----------- -----------
Per share distributions in excess
of net investment income -- -- $0.0451 --
----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold $1.1962 -- -- --
----------- ----------- ----------- -----------
Per share distributions in excess
of net realized gain on
investments sold $0.1623 -- -- --
----------- ----------- ----------- -----------
** Analysis of Portfolio Share
Transactions:
Shares sold 306,719 206,570 475,462 119,187
Shares issued to shareholders in
reinvestment of distributions 114,375 -- 9,438 --
----------- ----------- ----------- -----------
421,094 206,570 484,900 119,187
Less shares repurchased (424,679) (123,994) (546,741) (160,255)
----------- ----------- ----------- -----------
Net Increase (Decrease) (3,585) 82,576 (61,841) (41,068)
=========== =========== =========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Active Bond Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM MARCH 30, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $8.64 $8.54 $8.83 $8.59
-------- -------- -------- -------- --------
Net Investment Income (6) 0.51 0.60 0.59 0.56 0.28
Net Realized and Unrealized Gain (Loss) on
Investments 0.16 (0.09) 0.34 (0.02) (0.32)
-------- -------- -------- -------- --------
Total from Investment Operations 0.67 0.51 0.93 0.54 (0.04)
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.51) (0.60) (0.59) (0.56) (0.28)
Distributions in Excess of Net Investment
Income -- -- (0.00)(8) (0.00)(8) (0.00)(8)
Distributions from Net Realized Gain on
Investments Sold (0.02) (0.01) (0.05) (0.22) --
-------- -------- -------- -------- --------
Total Distributions (0.53) (0.61) (0.64) (0.78) (0.28)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $8.64 $8.54 $8.83 $8.59 $8.27
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (5) 7.76%(3) 6.17% 11.25% 6.24% (0.39%)(3)
Total Adjusted Investment Return at Net
Asset Value (5,7) (0.46%)(3) 2.72% 9.21% 4.51% (1.37%)(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,171 $2,191 $5,158 $5,686 $5,114
Ratio of Expenses to Average Net Assets 0.65%(2) 0.60% 0.60% 0.60% 0.60%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 9.60%(2) 4.05% 2.64% 2.33% 2.55%(2)
Ratio of Net Investment Income to Average
Net Assets 6.53%(2) 7.10% 6.78% 6.36% 6.67%(2)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (1,4) (2.42%)(2) 3.65% 4.74% 4.63% 4.72%(2)
Portfolio Turnover Rate 71% 136% 230% 356% 165%
Fee Reduction Per Share (6) $0.75 $0.30 $0.18 $0.15 $0.08
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser during the
periods shown.
(8) Less than $0.01 per share
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated:
net investment income, gains (losses), dividends and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the commencement of operations. Additionally, important relationships
between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM MARCH 30, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $10.15 $11.91 $14.92 $14.46
-------- -------- -------- -------- --------
Net Investment Income (6) 0.23 0.21 0.18 0.15 0.06
Net Realized and Unrealized Gain on
Investments 1.68 1.92 3.92 1.04 0.50
-------- -------- -------- -------- --------
Total from Investment Operations 1.91 2.13 4.10 1.19 0.56
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.19) (0.18) (0.17) (0.15) (0.06)
Distributions from Net Realized Gain on
Investments Sold (0.07) (0.19) (0.92) (1.50) --
-------- -------- -------- -------- --------
Total Distributions (0.26) (0.37) (1.09) (1.65) (0.06)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $10.15 $11.91 $14.92 $14.46 $14.96
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (5) 22.79%(3) 21.26% 35.55% 7.97% 3.86%(3)
Total Adjusted Investment Return at Net
Asset Value (5,7) 19.79%(3) 20.07% 35.23% 7.72% 3.68%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $3,319 $8,668 $20,884 $17,743 $17,148
Ratio of Expenses to Average Net Assets 0.75%(2) 0.70% 0.70% 0.70% 0.70%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 4.02%(2) 1.89% 1.02% 0.95% 1.06%(2)
Ratio of Net Investment Income to Average
Net Assets 2.51%(2) 1.94% 1.31% 0.95% 0.67%(2)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (1,4) (0.76%)(2) 0.75% 0.99% 0.70% 0.31%(2)
Portfolio Turnover Rate 70% 37% 77% 64% 25%
Fee Reduction Per Share (6) $0.30 $0.13 $0.04 $0.04 $0.03
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser during the
periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM APRIL 11, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $10.69 $12.67 $13.51 $10.99
-------- -------- -------- -------- --------
Net Investment Income (Loss)(6) (0.01) 0.01 0.00(7) (0.02) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions 2.22 2.02 2.06 (0.68) 1.79
-------- -------- -------- -------- --------
Total from Investment Operations 2.21 2.03 2.06 (0.70) 1.77
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) -- (0.00)(7) -- --
Distributions from Net Realized Gain on
Investments Sold -- (0.05) (1.22) (1.72) --
Distributions in Excess of Net Realized Gain
on Investments Sold -- -- -- (0.10) --
-------- -------- -------- -------- --------
Total Distributions (0.02) (0.05) (1.22) (1.82) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $10.69 $12.67 $13.51 $10.99 $12.76
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (5) 25.98%(3) 19.00% 17.39% (5.34%) 16.11%(3)
Total Adjusted Investment Return at Net
Asset Value (5,8) 23.70%(3) 18.48% 17.19% (5.55%) 15.89%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $8,399 $29,085 $40,302 $16,687 $18,088
Ratio of Expenses to Average Net Assets 0.93%(2) 0.90% 0.90% 0.90% 0.90%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 3.51%(2) 1.42% 1.10% 1.11% 1.34%(2)
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.10%)(2) 0.06% 0.03% (0.13%) (0.24%)(2)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (1,4) (2.68%)(2) (0.46%) (0.17%) (0.34%) (0.68%)(2)
Portfolio Turnover Rate 189% 281% 341% 116% 83%
Fee Reduction Per Share (6) $0.23 $0.06 $0.03 $0.03 $0.03
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) Less than $0.01 per share.
(8) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser
during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
PERIOD FROM MAY 2, 1996 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ------------------------ AUGUST 31, 1999
TO FEBRUARY 28, 1997 1998 1999 (UNAUDITED)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.24 $11.74 $11.65
-------- -------- -------- --------
Net Investment Income (Loss)(5) 0.03 (0.03) (0.07) (0.04)
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 0.73 2.53 0.61 2.82
-------- -------- -------- --------
Total from Investment Operations 0.76 2.50 0.54 2.78
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.00)(6) -- --
Distributions from Net Realized Gain on
Investments Sold -- -- (0.63) --
-------- -------- -------- --------
Total Distributions (0.02) (0.00)(6) (0.63) --
-------- -------- -------- --------
Net Asset Value, End of Period $9.24 $11.74 $11.65 $14.43
======== ======== ======== ========
Total Investment Return at Net Asset Value (7) 8.89%(3) 27.07% 4.67% 23.86%(3)
Total Adjusted Investment Return at Net
Asset Value (7,8) (3.84%)(3) 23.92% 1.45% 22.66%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $999 $3,102 $2,453 $3,654
Ratio of Expenses to Average Net Assets 0.90%(2) 0.90% 0.90% 0.90%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 16.24%(2) 4.05% 4.12% 3.29%(2)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.35%(2) (0.25%) (0.60%) (0.64%)(2)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (1,4) (14.99%)(2) (3.40%) (3.82%) (3.03%)(2)
Portfolio Turnover Rate 92% 117% 125% 72%
Fee Reduction Per Share (5) $1.22 $0.34 $0.35 $0.16
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment
income as a percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Based on the average of the shares outstanding at the end of each month.
(6) Less than $0.01 per share.
(7) Total investment return assumes dividend reinvestment.
(8) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser
during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM APRIL 19, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.09 $9.38 $11.74 $9.16
-------- -------- -------- -------- --------
Net Investment Income (6) 0.17 0.14 0.07 0.05 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 0.56 1.08 3.65 (1.23) 3.00
-------- -------- -------- -------- --------
Total from Investment Operations 0.73 1.22 3.72 (1.18) 3.04
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.14) (0.12) (0.10) (0.04) --
Distributions from Net Realized Gain on
Investments Sold -- (0.81) (1.26) (1.20) --
Distributions in Excess of Net Realized Gain
on Investments Sold -- -- -- (0.16) --
-------- -------- -------- -------- --------
Total Distributions (0.14) (0.93) (1.36) (1.40) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.09 $9.38 $11.74 $9.16 $12.20
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (5) 8.61%(3) 13.78% 41.81% (9.46%) 33.19%(3)
Total Adjusted Investment Return at Net
Asset Value (5,7) 5.40%(3) 12.75% 41.19% (10.12%) 32.82%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $5,293 $6,011 $9,549 $7,418 $10,885
Ratio of Expenses to Average Net Assets 0.83%(2) 0.80% 0.80% 0.80% 0.80%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 4.55%(2) 1.83% 1.42% 1.46% 1.53%(2)
Ratio of Net Investment Income to Average
Net Assets 2.04%(2) 1.46% 0.62% 0.45% 0.65%(2)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (1,4) (1.68%)(2) 0.43% 0.00% (0.21%) (0.08%)(2)
Portfolio Turnover Rate 0% 96% 216% 126% 65%
Fee Reduction Per Share (6) $0.30 $0.10 $0.07 $0.07 $0.04
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser during the
periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- International Equity Fund
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM MARCH 30, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.24 $9.35 $9.63 $10.18
-------- -------- -------- -------- --------
Net Investment Income (6) 0.15 0.12 0.06 0.07 0.08
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 0.68 0.14 0.23 0.59 0.56
-------- -------- -------- -------- --------
Total from Investment Operations 0.83 0.26 0.29 0.66 0.64
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.08) (0.10) (0.01) (0.07) --
Distributions in Excess of Net Investment
Income -- -- -- (0.04) --
Distributions from Net Realized Gain on
Investments Sold (0.01) (0.05) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.09) (0.15) (0.01) (0.11) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.24 $9.35 $9.63 $10.18 $10.82
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (5) 9.81%(3) 2.79% 3.07% 6.88% 6.29%(3)
Total Adjusted Investment Return at Net
Asset Value (5,7) 3.26%(3) 0.47% 2.05% 5.15% 5.35%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,897 $4,204 $7,983 $7,805 $7,855
Ratio of Expenses to Average Net Assets 1.05%(2) 1.00% 1.00% 1.00% 1.00%(2)
Ratio of Adjusted Expenses to Average Net
Assets (1,4) 8.19%(2) 3.32% 2.02% 2.73% 2.87%(2)
Ratio of Net Investment Income to Average
Net Assets 1.75%(2) 1.26% 0.60% 0.69% 1.47%(2)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (1,4) (5.39%)(2) (1.06%) (0.42%) (1.04%) (0.40%)(2)
Portfolio Turnover Rate 59% 68% 125% 83% 58%
Fee Reduction Per Share (6) $0.60 $0.22 $0.10 $0.17 $0.10
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into consideration fee reductions by the Adviser during the
periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Active Bond Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Active Bond Fund on August 31, 1999.
It's divided into three main categories: bonds, warrants and short-term investments. The bonds are further broken
down by industry groups. Short-term investments, which represent the Fund's "cash" position, are listed last.
PAR VALUE
INTEREST CREDIT (000S MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- -------- -------- ---------- --------
<S> <S> <C> <C> <C>
BONDS
Banks - Foreign (1.14%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04 (Y) 8.200% AA- $20 $20,905
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom)
11-01-06 (R) (Y) 8.850 A+ 35 37,550
----------
58,455
----------
Banks - United States (3.86%)
Banc One Corp.,
Sub Deb 10-15-26 7.625 A 15 14,476
BankBoston Corp.,
Sub Note 12-01-05 6.625 BBB+ 15 14,413
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 25 23,928
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 25 26,990
First Union National Bank,
Sub Note 12-01-28 6.500 A 15 12,562
National Westminster Bank Plc - New York Branch,
Sub Note 05-01-01 9.450 AA- 15 15,649
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 10 9,703
Norwest Corp.,
Med Term Sr Note Ser G 09-15-02 6.375 A+ 20 19,754
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 30 33,154
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 25 26,488
----------
197,117
----------
Beverages (0.29%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 15 14,700
----------
Broker Services (0.56%)
Merrill Lynch & Co., Inc.,
Note 11-15-18 6.875 AA- 15 13,633
Salomon Smith Barney Holdings, Inc.,
Note 10-15-02 6.500 A 15 14,811
----------
28,444
----------
Building (0.36%)
Oakwood Homes Corp.,
Sr Note 03-01-04 7.875 BBB- 5 4,510
Owens Corning,
Note 03-15-09 7.000 BBB- 15 13,656
----------
18,166
----------
Business Services (0.18%)
Primark Corp.,
Sr Sub Note 12-15-08 9.250 B+ 10 9,300
----------
Chemicals (0.57%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A 15 14,293
Equistar Chemicals, L.P.,
Sr Note 02-15-04 (R) 8.500 BBB- 15 15,019
----------
29,312
----------
Computers (1.15%)
Ceridian Corp.,
Sr Note 06-01-04 (R) 7.250 BBB 15 14,776
International Business Machines Corp.,
Med Term Note 09-22-03 5.370 A+ 20 19,132
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 10 10,150
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 15 14,925
----------
58,983
----------
Diversified Operations (0.17%)
Monsanto Co.,
Deb 12-01-28 (R) 6.600 A 10 8,921
----------
Energy (0.82%)
AES Corp.,
Sr Sub Note 07-15-06 10.250 B+ 17 17,000
CalEnergy Co., Inc.,
Sr Bond 09-15-28 8.480 BBB- 10 10,153
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 15 14,588
----------
41,741
----------
Finance (8.34%)
Associates Corp. of North America,
Sr Note 04-15-03 6.000 AA- 45 43,704
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 BBB+ 20 19,412
Chrysler Financial Co. LLC,
Med Term Note Ser S 11-15-01 5.690 A+ 15 14,689
CIT Group Holdings, Inc.,
Med Term Note 06-17-02 7.125 A+ 20 20,200
Note 10-15-01 5.500 A+ 20 19,503
Commercial Credit Co.,
Note 07-01-02 6.450 AA- 30 29,735
Constitution Capital Trust I,
Gtd Cap Security 04-15-27 (R) 9.150 BBB 16 15,806
FINOVA Capital Corp.,
Note 11-01-02 6.250 A- 15 14,616
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 (Y) 9.875 A 35 37,420
Ford Motor Credit Co.,
Note 04-28-03 6.125 A 20 19,446
General Motors Acceptance Corp.,
Med Term Note 04-17-01 6.850 A 30 30,177
Note 12-01-01 6.375 A 20 19,831
HomeSide Lending, Inc.,
Note 05-15-03 6.200 A+ 20 19,369
Household Finance Corp.,
Note 11-01-02 5.875 A 25 24,166
Note 09-25-04 5.875 A 25 23,579
Marlin Water Trust & Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 BBB 15 14,963
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 55 53,250
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) 8.400 BBB- 7 6,679
----------
426,545
----------
Food (0.19%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 10 9,750
----------
Government - Foreign (0.32%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19, (Y) 8.250 A- 15 16,353
----------
Government - U.S. (28.14%)
United States Treasury,
Bond 08-15-17 8.875 AAA 137 171,250
Bond 02-15-23 7.125 AAA 624 675,580
Note 05-15-01 8.000 AAA 57 59,039
Note 05-15-02 7.500 AAA 106 110,306
Note 08-15-03 5.750 AAA 152 150,931
Note 02-15-05 7.500 AAA 109 115,983
Note 07-15-06 7.000 AAA 149 155,681
----------
1,438,770
----------
Government - U.S. Agencies (6.33%)
Federal National Mortgage Assn.,
30 Yr Pass Thru Ctf 06-01-29 6.000 AAA 20 18,266
Note 05-14-04 5.625 AAA 45 43,256
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 04-15-28 to
04-15-29 6.500 AAA 144 135,294
30 Yr SF Pass Thru Ctf 04-15-29 to
12-25-29+ 7.000 AAA 54 52,797
30 Yr SF Pass Thru Ctf 09-15-29+ 7.500 AAA 20 19,834
30 Yr SF Pass Thru Ctf 11-15-24 to
09-01-29+ 8.000 AAA 53 54,415
----------
323,862
----------
Insurance (2.46%)
Conseco, Inc.,
Note 06-15-05 6.800 BBB+ 5 4,624
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R) 6.950 A 10 9,866
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26 (Y) 8.300 BBB+ 10 9,231
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) 8.200 A+ 15 15,352
Surplus Note 10-15-26 (R) 7.875 A+ 5 4,864
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 15 14,651
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 15 14,018
Phoenix Home Life Mutual Insurance Co.,
Surplus Note 12-01-06 (R) 6.950 A+ 15 14,333
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 18,650
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 20 20,090
----------
125,679
----------
Leasing Companies (0.19%)
United Rentals, Inc.,
Sr Sub Note Ser B 04-01-09 9.000 BB- 10 9,575
----------
Leisure (1.59%)
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 7.500 BBB- 10 9,398
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 7.875 BB 10 9,200
Marvel Enterprises, Inc.,
Sr Note 06-15-09 (R) 12.000 NR 15 14,400
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 10 9,825
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 10 9,900
Sun International Hotels Ltd.,
Gtd Sr Sub Note (Bahamas) 03-15-07 (Y) 9.000 B+ 7 6,860
Gtd Sr Sub Note (Bahamas) 12-15-07 (Y) 8.625 B+ 7 6,703
Trump Hotels & Casino Resorts Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 15.500 B- 10 10,000
Waterford Gaming LLC/Waterford Gaming Finance Corp.,
Sr Note 03-15-10 (R) 9.500 B+ 5 5,013
----------
81,299
----------
Manufacturing (0.03%)
Globe Manufacturing Corp.,
Sr Sub Note Ser B 08-01-08 10.000 B- 2 1,340
----------
Media (6.15%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 15 15,075
Sr Note Ser B 07-15-03 8.125 B 8 7,680
American Media Operations, Inc.,
Sr Sub Note 05-01-09 (R) 10.250 B- 5 4,838
AMFM, Inc.,
Sr Sub Note 10-01-08 9.000 B 10 9,975
Comcast Cable Communications, Inc.,
Note 11-15-08 6.200 BBB 10 9,037
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB 15 15,539
CSC Holdings, Inc.,
Sr Note 07-15-09 (R) 8.125 BB+ 15 14,591
Sr Sub Deb 05-15-16 10.500 BB- 10 10,900
EchoStar DBS Corp.,
Sr Note 02-01-09 (R) 9.375 B 10 9,925
Falcon Holdings Group L.P./Falcon Funding Corp.,
Sr Deb Ser B 04-15-10 8.375 B 10 9,900
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 10 9,200
Sr Sub Note Ser B 10-01-09 8.750 B+ 8 7,440
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BBB- 20 19,950
Lenfest Communications, Inc.,
Sr Sub Note 06-15-06 10.500 BB- 20 22,950
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 10 9,375
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 16 16,013
Pegasus Communications Corp.,
Sr Note Ser B 10-15-05 9.625 B- 5 4,900
Rogers Cablesystems Ltd.,
Sr Sec 2nd Priority Note (Canada)
08-01-02 (Y) 9.625 BB+ 29 29,725
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 10.750 B 10 10,800
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 20 20,638
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 16 18,045
Deb 05-15-29 6.625 BBB 15 12,906
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 AA- 15 15,887
TV Guide, Inc.,
Sr Sub Note Ser B 03-01-09 8.125 B+ 10 9,350
----------
314,639
----------
Medical (1.32%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 18 18,090
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security
02-01-08 7.875 B+ 15 13,800
Guidant Corp.,
Note 02-15-06 6.150 A- 15 13,870
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 11 12,540
Sola International, Inc.,
Note 03-15-08 6.875 BBB- 5 4,381
Watson Pharmaceuticals, Inc.,
Sr Note 05-15-08 7.125 BBB- 5 4,600
----------
67,281
----------
Metal (0.20%)
Golden Northwest Aluminium, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 10 10,300
----------
Mortgage Banking (4.91%)
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9
02-15-29 6.570 AAA 40 38,725
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4
03-20-25 6.600 AAA 20 19,256
JCP Master Credit Card Trust,
Pass Thru Ctf Ser C Class A
06-15-00 9.625 AA+ 55 56,186
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7
12-15-38 6.485 AAA 24 23,347
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class
A-1 10-15-06 (R) 6.830 AAA 73 72,418
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2
Class A-2 07-25-24 6.750 Aaa 11 10,790
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8
06-15-28 7.220 AAA 30 30,248
----------
250,970
----------
Oil & Gas (2.03%)
Burlington Resources, Inc.,
Deb 03-01-29 7.375 A- 15 14,009
Camuzzi Gas Pampeana S.A.,
Bond (Argentina) 12-15-01 (Y) 9.250 BBB- 5 4,800
CMS Panhandle Holding Co.,
Sr Note 07-15-29 (R) 7.000 BBB- 10 9,000
El Paso Energy Corp.,
Sr Note 05-15-09 6.750 BBB- 10 9,400
Lyondell Chemical Co.,
Sr Sec Note Ser A 05-01-07 9.625 BB 5 4,988
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07 8.875 BB- 10 10,050
PEMEX Finance Ltd.,
Note (Cayman Islands) 02-15-08 (R) (Y) 6.550 AAA 15 13,575
Petroleos Mexicanos,
Gtd Sr Note (Mexico) 12-02-08 (R) (Y) 9.375 BB 5 4,775
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 20 18,511
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 B+ 15 14,792
----------
103,900
----------
Paper & Paper Products (0.70%)
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB 10 9,882
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) 9.625 B 10 10,100
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 12.000 B+ 15 15,938
----------
35,920
----------
Real Estate Investment Trusts (1.37%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 20 16,930
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 15 14,466
Camden Property Trust,
Note 04-15-04 7.000 BBB 10 9,618
Liberty Property L.P.,
Med Term Note 06-05-02 6.600 BBB- 10 9,650
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 10 9,606
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BBB- 10 9,888
----------
70,158
----------
Retail (1.44%)
Great Atlantic & Pacific Tea Co., Inc. (The),
Note 04-15-07 7.750 BBB- 20 19,189
Meyer (Fred), Inc.,
Note 03-01-08 7.450 BBB- 25 24,712
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 20 20,150
Safeway, Inc.,
Note 11-15-01 5.875 BBB 10 9,783
----------
73,834
----------
Steel (0.73%)
EES Coke Battery Co., Inc.,
Sr Note 04-15-02 (R) 7.125 BBB 6 6,272
National Steel Corp.,
1st Mtg Ser D 03-01-09 9.875 B+ 10 10,000
UCAR Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 12.000 B 20 21,100
----------
37,372
----------
Telecommunications (4.38%)
AXIA, Inc.,
Sr Sub Note 07-15-08 10.750 B- 10 9,400
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%,
05-01-04) (Canada) 05-01-09 (A) (Y) Zero B3 10 5,875
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 9.625 BB 10 10,000
Hermes Europe Railtel BV,
Sr Note (Netherlands) 08-15-07 (Y) 11.500 B 10 10,375
Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 5 5,000
LCI International, Inc.,
Sr Note 06-15-07 7.250 BB+ 15 14,663
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 15 14,925
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B 20 19,700
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 10 11,550
Nextel Communications, Inc.,
Sr Disc Note 08-15-04 9.750 B- 8 8,020
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 10 10,075
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 15 15,937
Orange Plc,
Sr Note (United Kingdom) 08-01-08 (Y) 8.000 BB- 15 14,250
Qwest Communications International, Inc.,
Sr Note Ser B 11-01-08 7.250 BB+ 5 4,750
RCN Corp.,
Sr Note Ser B 10-15-07 10.000 B3 10 9,750
Viatel, Inc.,
Sr Sec Note 04-15-08 11.250 B- 10 9,800
WorldCom, Inc.,
Note 08-15-01 6.125 A- 35 34,666
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (R) (Y) 12.500 B- 15 15,375
----------
224,111
----------
Textile (0.28%)
WestPoint Stevens, Inc.,
Sr Note 06-15-05 7.875 BB 15 14,438
----------
Tobacco (0.49%)
Philip Morris Companies, Inc.,
Note 09-15-01 7.250 A 5 5,036
Note 08-15-02 7.125 A 20 20,021
----------
25,057
----------
Transport (3.84%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08 6.930 A- 4 3,486
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 08-02-20 6.545 AA+ 20 18,069
Pass Thru Ctf Ser 1997-2C 06-30-04 7.206 BBB 22 21,327
Sr Note 12-15-05 8.000 BB- 15 14,100
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 21 20,129
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 B 15 13,200
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 5 4,704
Northwest Airlines, Inc.,
Note 03-15-04 8.375 BB 20 19,125
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 34 36,188
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB 25 26,839
Union Pacific Corp.,
Deb 02-01-29 6.625 BBB- 15 12,498
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 7 6,455
----------
196,120
----------
Utilities (10.62%)
AES Eastern Energy,
Pass Thru Ctf 01-02-17 (R) 9.000 BBB- 15 14,395
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) (Y) 6.730 A- 10 9,908
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BB- 19 19,831
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 7 7,359
Calpine Corp.,
Sr Note 04-01-08 7.875 BB 5 4,700
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 35 36,531
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 19,794
CMS Energy Corp.,
Sr Note Ser B 01-15-04 6.750 BB 15 13,944
Sr Note 05-15-02 8.125 BB 15 14,987
Sr Note 01-15-09 7.500 BB 20 18,750
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02 7.750 BBB- 15 15,186
East Coast Power, LLC,
Sr Sec Note 03-31-12 (R) 7.066 BBB- 15 13,500
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 23 25,213
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 13 12,193
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 AA- 20 17,993
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 15 17,981
Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 10 10,916
Gtd Deb (Canada) 02-01-03 (Y) 7.375 A+ 25 25,389
Iberdrola International B.V.,
Note (Spain) 10-01-02 (Y) 7.500 AA- 28 28,499
Note (Spain) 06-01-03 (R) (Y) 7.125 AA- 25 25,317
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 20 19,950
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 16 16,861
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 20 22,649
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 25 25,738
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB- 9 9,203
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB- 4 3,953
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6
03-01-09 6.050 AAA 15 14,067
Philadelphia Electric Co.,
1st Ref Mtg 09-01-02 7.125 A 20 20,017
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 15 16,134
System Energy Resources, Inc.,
1st Mtg 08-01-01 7.710 BBB- 5 5,013
U S WEST Capital Funding, Inc.,
Deb 07-15-28 6.875 A- 10 8,652
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 29 28,641
----------
543,264
----------
TOTAL BONDS
(Cost $5,039,717) (95.15%) 4,865,676
------ ----------
NUMBER OF
WARRANTS
---------
WARRANTS
MetroNet Communications Corp.
(Canada) (R)** 10 1,060
----------
TOTAL WARRANTS
(Cost $103) (0.02%) 1,060
----- ----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.38%)
Investment in a joint repurchase agreement transaction with
Barclay's, Inc. - Dated 08-31-99, due 09-01-99
(Secured by U.S. Treasury Bonds, 5.250% thru 9.125%,
due 05-15-18 thru 11-15-28 and U.S. Treasury Notes, 4.500% thru
7.750%, due 09-30-00 thru 02-15-05) - Note A 5.440% $275 $275,000
----------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 482
----------
TOTAL SHORT-TERM INVESTMENTS (5.39%) 275,482
------- ----------
TOTAL INVESTMENTS (100.56%) 5,142,218
------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.56%) (28,581)
------- ----------
TOTAL NET ASSETS (100.00%) $5,113,637
======= ==========
* Credit ratings are unaudited and rated by Standard & Poor's where available, or Moody's Investors Service or John
Hancock Advisers, Inc. where Standard & Poor's ratings are not available.
** Non-income producing security.
+ These securities having an aggregate value of $37,889 or 0.74% of the Fund's net assets, have been purchased as
a forward commitment; that is, the Fund has agreed on trade date to take delivery of and make payment for such
securities on a delayed basis subsequent to the date of this schedule. The purchase price and interest rate of
such securities are fixed at trade date, although the Fund does not earn any interest on such securities until
settlement date. The Fund has instructed its Custodian Bank to segregate assets with a current value at least
equal to the amount of the forward commitment. Accordingly, the market value of $38,976 of United States Treasury
Bonds, 7.125%, 02-15-23, has been segregated to cover the forward commitment.
(A) Cash interest will be paid on this obligation at the stated rate beginning on the stated date.
(R) These securities are exempt from registration under rule 144A of the Securities Act of 1933. Such securities may
be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $547,762 or 10.71% of net assets as of August 31, 1999.
(Y) Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer;
however, security is U.S. dollar denominated.
The percentage shown for each investment category is the total value of that category as a percentage of the net assets
of the Fund.
NR = Not rated.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Dividend Performers Fund
n August 31, 1999. It's divided into two main categories: common stocks and short-term investments.
The common stocks are further broken down by industry groups. Short-term investments, which represent
the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (1.16%)
Interpublic Group of Companies, Inc. (The) 5,000 $198,125
----------
Banks - United States (2.53%)
Bank of America Corp. 4,000 242,000
Bank One Corp. 4,800 192,600
----------
434,600
----------
Beverages (3.05%)
Anheuser-Busch Cos., Inc. 2,800 215,600
PepsiCo, Inc. 9,000 307,125
----------
522,725
----------
Building (0.99%)
Masco Corp. 6,000 169,875
----------
Computers (14.66%)
Cisco Systems, Inc.* 6,600 447,563
Computer Associates International, Inc. 4,600 259,900
Dell Computer Corp.* 6,000 292,875
EMC Corp.* 4,400 264,000
Hewlett-Packard Co. 2,500 263,438
International Business Machines Corp. 3,000 373,688
Microsoft Corp.* 3,600 333,225
Sun Microsystems, Inc.* 3,500 278,250
----------
2,512,939
----------
Diversified Operations (2.40%)
Du Pont (E.I.) De Nemours & Co. 2,500 158,438
Tyco International Ltd. 2,500 253,281
----------
411,719
----------
Electronics (7.67%)
Emerson Electric Co. 4,000 250,500
General Electric Co. 4,000 449,250
Honeywell, Inc. 1,800 204,300
Intel Corp. 5,000 410,938
----------
1,314,988
----------
Finance (3.71%)
Citigroup, Inc. 7,500 333,281
Household International, Inc. 8,000 302,000
----------
635,281
----------
Food (2.76%)
Bestfoods 5,000 245,625
Nabisco Holdings Corp. 5,800 228,013
----------
473,638
----------
Furniture (0.84%)
Leggett & Platt, Inc. 6,500 143,812
----------
Insurance (7.84%)
AFLAC, Inc. 4,000 179,750
American General Corp. 2,200 156,200
American International Group, Inc. 4,375 405,508
ReliaStar Financial Corp. 9,600 432,600
XL Capital, Ltd. (Class A) 3,400 171,063
----------
1,345,121
----------
Leisure (1.71%)
Hasbro, Inc. 12,000 293,250
----------
Machinery (1.86%)
Pentair, Inc. 7,000 318,500
----------
Media (3.28%)
Gannett Co., Inc. 6,000 407,625
McGraw-Hill Cos., Inc. (The) 3,000 155,063
----------
562,688
----------
Medical (10.17%)
Abbott Laboratories 5,200 225,550
Baxter International, Inc. 5,500 368,842
Bristol-Myers Squibb Co. 4,400 309,650
Johnson & Johnson 2,000 204,500
Merck & Co., Inc. 2,200 147,811
Schering-Plough Corp. 6,000 315,373
Warner-Lambert Co. 2,600 172,250
----------
1,743,976
----------
Mortgage Banking (1.27%)
Fannie Mae 3,500 217,438
----------
Office Equipment (4.25%)
Pitney Bowes, Inc. 6,700 395,300
Xerox Corp. 7,000 334,250
----------
729,550
----------
Oil & Gas (4.06%)
Conoco, Inc. (Class A)* 10,700 286,225
Mobil Corp. 4,000 409,500
----------
695,725
----------
Retail (9.58%)
Albertson's, Inc. 4,000 191,750
Dayton Hudson Corp. 5,000 290,000
Home Depot, Inc. (The) 5,500 336,188
Lowe's Cos., Inc. 6,000 271,500
SYSCO Corp. 8,800 287,100
Wal-Mart Stores, Inc. 6,000 265,875
----------
1,642,413
----------
Soap & Cleaning Preparations (3.26%)
Clorox Co. (The) 4,000 181,000
Ecolab, Inc. 4,800 180,300
Procter & Gamble Co. (The) 2,000 198,500
----------
559,800
----------
Telecommunications (4.41%)
Bell Atlantic Corp. 3,200 196,000
CenturyTel, Inc. 4,300 169,044
Lucent Technologies, Inc. 3,500 224,219
MCI WorldCom, Inc.* 2,200 166,650
----------
755,913
----------
Tobacco (1.96%)
Philip Morris Cos., Inc. 9,000 336,938
----------
Utilities (1.77%)
ALLTEL Corp. 4,500 304,313
----------
TOTAL COMMON STOCKS
(Cost $12,868,128) (95.19%) 16,323,327
----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.85%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $831 $831,000
----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 175
-----------
TOTAL SHORT-TERM INVESTMENTS (4.85%) 275,482
------- -----------
TOTAL INVESTMENTS (100.04%) 17,154,502
------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.04%) (6,794)
------- -----------
TOTAL NET ASSETS (100.00%) $17,147,708
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Medium Capitalization
Growth Fund on August 31, 1999. It's divided into three main categories: common stocks, rights and
short-term investments. The common stocks and rights are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (2.60%)
DoubleClick, Inc.* 800 $79,900
Interpublic Group of Companies, Inc. (The) 2,200 87,175
Omnicom Group, Inc. 1,550 116,831
Outdoor Systems, Inc.* 5,800 187,413
----------
471,319
----------
Banks - United States (1.97%)
Comerica, Inc. 1,300 67,681
First Tennessee National Corp. 3,200 102,400
Northern Trust Corp. 2,200 186,587
----------
356,668
----------
Broker Services (1.29%)
Merrill Lynch & Co., Inc. 1,500 111,937
Schwab (Charles) Corp. 3,100 122,450
----------
234,387
----------
Business Services - Misc. (1.71%)
Modis Professional Services, Inc.* 7,200 113,850
Navigant Consulting, Inc.* 2,100 92,137
Select Appointments Holdings Plc,
American Depositary Receipts,
(ADR) (United Kingdom) 2,409 67,151
Snyder Communications, Inc.* 1,800 36,675
----------
309,813
----------
Computers (14.44%)
BMC Software, Inc.* 2,000 107,625
CMGI, Inc.* 1,450 121,709
Citrix Systems, Inc.* 1,170 66,690
Computer Sciences Corp.* 2,850 197,184
Compuware Corp.* 6,300 190,181
DST Systems, Inc.* 1,950 129,675
E*TRADE Group, Inc.* 2,700 67,500
EMC Corp.* 1,530 91,800
Fiserv, Inc.* 5,550 171,009
Gateway, Inc.* 1,150 111,478
i2 Technologies, Inc.* 2,150 68,262
IMS Health, Inc. 2,650 73,206
Inktomi Corp.* 650 73,694
Intuit, Inc.* 1,000 89,562
Lexmark International Group, Inc.
(Class A)* 3,240 255,150
Network Appliance, Inc.* 1,200 78,825
Novell, Inc.* 6,080 144,020
RealNetworks, Inc.* 500 40,875
SunGard Data Systems, Inc.* 4,420 110,500
Unisys Corp.* 5,550 238,650
VERITAS Software Corp.* 1,300 77,025
Whittman-Hart, Inc.* 4,050 106,566
----------
2,611,186
----------
Containers (0.47%)
Sealed Air Corp.* 1,450 85,187
----------
Cosmetics & Personal Care (0.82%)
Dial Corp. (The) 5,335 148,046
----------
Electronics (13.39%)
Altera Corp.* 4,140 174,397
Analog Devices, Inc.* 2,100 108,150
Applied Materials, Inc.* 1,735 123,293
ASM Lithography Holding N.V.*
(Netherlands) 2,200 138,875
Broadcom Corp. (Class A)* 500 64,375
Conexant Systems, Inc.* 1,950 140,156
Flextronics International, Ltd.* 1,750 102,703
Jabil Circuit, Inc.* 3,510 157,292
KLA-Tencor Corp.* 1,710 107,409
Linear Technology Corp. 2,500 157,344
Maxim Intergrated Products, Inc.* 1,400 94,238
Novellus Systems, Inc.* 1,750 94,391
Sanmina Corp.* 1,570 117,750
Solectron Corp.* 1,500 117,375
STMicroelectronics (Netherlands) 1,250 83,437
Teradyne, Inc.* 2,250 153,141
Vitesse Semiconductor Corp.* 1,150 78,200
Waters Corp.* 4,170 274,959
Xilinx, Inc.* 1,920 134,280
----------
2,421,765
----------
Finance (2.31%)
Capital One Financial Corp. 2,450 92,487
Charter One Financial, Inc. 5,145 120,425
Concord EFS, Inc.* 3,515 130,494
Providian Financial Corp. 950 73,744
----------
417,150
----------
Household (0.70%)
WestPoint Stevens, Inc. 5,300 127,200
----------
Insurance (3.29%)
AFLAC, Inc. 2,550 114,591
Ace, Ltd. (Bermuda) 7,750 166,141
Mutual Risk Management, Ltd. 2,300 63,250
Reinsurance Group of America, Inc. 6,420 194,205
ReliaStar Financial Corp. 1,250 56,328
----------
594,515
----------
Leisure (0.95%)
Polaroid Corp. 4,900 132,912
Royal Caribbean Cruises, Ltd. 850 39,791
----------
172,703
----------
Linen Supply & Related (0.60%)
Cintas Corp. 2,100 107,888
----------
Machinery (0.75%)
SPX Corp.* 1,600 135,600
----------
Media (5.35%)
AMFM, Inc.* 4,610 227,043
Adelphia Communications Corp.
(Class A)* 2,320 143,840
Cox Radio, Inc. (Class A)* 1,100 58,300
Harcourt General, Inc. 2,930 128,371
Hispanic Broadcasting Corp.* 1,825 136,419
Insight Communications Co., Inc.* 2,900 79,025
Reader's Digest Association, Inc.
(Class A) 2,900 90,625
Univision Communications, Inc.
(Class A)* 1,400 103,250
----------
966,873
----------
Medical (6.02%)
Allergan, Inc. 1,150 114,856
AmeriSource Health Corp. (Class A)* 1,750 45,172
Biogen, Inc.* 2,600 199,550
Cardinal Health, Inc. 2,675 170,531
Forest Laboratories, Inc.* 2,250 108,984
Genzyme Corp.* 2,400 135,450
Genzyme Molecular Oncology* 845 3,803
Immunex Corp.* 1,300 87,506
Mylan Laboratories, Inc. 3,595 71,226
Total Renal Care Holdings, Inc.* 8,750 70,547
Watson Pharmaceutical, Inc.* 2,250 80,719
----------
1,088,344
----------
Office (0.59%)
Avery Dennison Corp. 1,950 107,006
----------
Oil & Gas (7.29%)
Anadarko Petroleum Corp. 2,500 85,000
Apache Corp. 4,150 188,825
Baker Hughes, Inc. 3,800 129,200
BJ Services Co.* 6,300 215,775
Burlington Resources, Inc. 2,350 98,259
Cooper Cameron Corp.* 2,610 108,641
Diamond Offshore Drilling, Inc. 2,050 78,413
Halliburton Co. 3,450 159,994
Noble Affiliates, Inc. 2,400 74,400
Petroleum Geo-Services (ADR)*
(Norway) 2,720 55,590
Santa Fe International Corp. 3,200 84,400
Tidewater, Inc. 1,250 40,625
----------
1,319,122
----------
Paper & Paper Products (1.56%)
Bowater, Inc. 2,900 155,513
Fort James Corp. 3,900 125,775
----------
281,288
----------
Retail (7.25%)
Best Buy Co., Inc.* 2,050 144,013
Circuit City Stores-Circuit City
Group 2,150 92,450
Ethan Allen Interiors, Inc. 2,475 72,239
Hannaford Brothers Co. 2,550 182,963
Kohl's Corp.* 2,550 181,688
Kroger Co.* 3,050 70,531
Lowe's Cos., Inc. 3,250 147,063
Outback Steakhouse, Inc.* 1,250 37,031
SYSCO Corp. 2,100 68,513
Tandy Corp. 2,600 122,850
TJX Cos., Inc. 4,250 122,719
U.S. Foodservice* 3,300 68,681
----------
1,310,741
----------
Soap & Cleaning Preparations (0.29%)
Ecolab, Inc. 1,400 52,588
----------
Steel (0.53%)
Nucor Corp. 2,050 95,453
----------
Telecommunications (18.38%)
Allegiance Telecom, Inc.* 3,050 183,381
American Tower Corp. (Class A) 5,500 125,125
COLT Telecom Group Plc (ADR)*
(United Kingdom) 620 54,328
Comverse Technology, Inc.* 2,595 202,410
Corning, Inc. 3,520 234,080
Crown Castle International Corp.* 7,000 105,875
DSP Communications, Inc.* 5,200 122,200
Frontier Corp. 8,650 362,759
Global TeleSystems Group, Inc.* 2,400 77,550
ICG Communications, Inc.* 4,500 93,375
Intermedia Communications, Inc.* 2,700 70,200
McLeodUSA, Inc. (Class A)* 7,810 260,659
Metromedia Fiber Network, Inc.
(Class A)* 1,650 48,572
Nextel Communications, Inc. (Class A)* 2,900 167,656
NEXTLINK Communications, Inc.
(Class A)* 4,400 221,650
Omnipoint Corp.* 4,600 186,300
Orange Plc (ADR)* (United Kingdom) 1,468 126,248
QUALCOMM, Inc.* 700 134,531
RCN Corp.* 1,550 65,100
TALK.com, Inc.* 6,900 71,156
Teligent, Inc. (Class A)* 850 53,603
Time Warner Telecom, Inc. (Class A)* 1,650 44,550
UnitedGlobalCom, Inc. (Class A)* 1,850 135,513
VoiceStream Wireless Corp.* 3,100 127,875
WinStar Communications, Inc.* 1,000 50,813
----------
3,325,509
----------
Textile (0.65%)
Jones Apparel Group, Inc.* 4,550 118,016
----------
Utilities (2.00%)
Conectiv, Inc. 4,050 86,822
MCN Energy Group, Inc. 3,300 58,988
Montana Power Co. 3,200 99,000
Potomac Electric Power Co. 4,400 116,600
----------
361,410
----------
TOTAL COMMON STOCKS
(Cost $14,909,811) (95.20%) 17,219,777
------- -----------
RIGHTS
Telecommunications (0.00%)
TALK.com, Inc.* 345 0
----------
TOTAL RIGHTS
(Cost $0) (0.00%) 0
------- -----------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $14,909,811) (95.20%) 17,219,777
------- -----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.27%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $953 953,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 35
-----------
TOTAL SHORT-TERM INVESTMENTS (5.27%) 953,035
------- -----------
TOTAL INVESTMENTS (100.47%) 18,172,812
------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.47%) (84,430)
------- -----------
TOTAL NET ASSETS (100.00%) $18,088,382
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Medium Capitalization Growth Fund invests primarily in common stocks of U.S. and foreign
issuers. The performance of the Fund is closely tied to the economic and financial conditions
within the countries in which it invests. The concentration of investments by industry category
for individual securities held by the Fund is shown in the schedule of investments. In addition,
concentration of investments can be aggregated by various countries. The table below shows the
percentages of the Fund's investments at August 31, 1999 assigned to country categories.
MARKET VALUE AS A
PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
<S> <C>
Bermuda 0.92%
Netherlands 1.23
Norway 0.31
United Kingdom 1.37
United States 96.64
------
TOTAL INVESTMENTS 100.47%
======
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Small Capitalization
Growth Fund on August 31, 1999. It's divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (1.42%)
Catalina Marketing Corp.* 300 $27,225
Getty Images, Inc.* 1,200 24,750
------------
51,975
------------
Automobile/Trucks (2.01%)
Dollar Thrifty Automotive Group, Inc. 750 14,109
Gentex Corp.* 900 17,212
Monaco Coach Corp.* 700 20,300
United Rentals, Inc.* 900 21,994
------------
73,615
------------
Banks - United States (0.56%)
Greater Bay Bancorp. 600 20,550
------------
Beverages (0.46%)
Beringer Wine Estates Holdings, Inc.
(Class B)* 400 16,650
------------
Broker Services (0.63%)
Hambrecht & Quist Group* 600 22,912
------------
Building (0.42%)
Crossmann Communities, Inc.* 600 15,150
------------
Business Services - Miscellaneous (10.54%)
Abacus Direct Corp.* 350 35,678
Charles River Associates, Inc.* 400 9,700
Coinstar, Inc.* 1,400 32,375
Corporate Executive Board Co. (The)* 400 14,050
Forrester Research, Inc.* 1,000 33,500
INSpire Insurance Solutions, Inc.* 1,150 11,284
InsWeb Corp.* 200 6,400
Interim Services, Inc.* 950 17,516
MedQuist, Inc.* 700 24,369
META Group, Inc.* 500 8,125
Metro Networks, Inc.* 500 28,500
Modem Media . Poppe Tyson, Inc.* 250 8,000
Navigant Consulting, Inc.* 550 24,131
Nielsen Media Research, Inc. 1,000 36,687
On Assignment, Inc.* 800 23,900
ProBusiness Services, Inc.* 350 9,363
Profit Recovery Group International, Inc. (The)* 1,050 39,966
Quanta Services, Inc.* 800 17,950
Viant Corp.* 100 3,800
------------
385,294
------------
Chemicals (0.54%)
OM Group, Inc. 500 19,688
------------
Computers (19.06%)
AboveNet Communications, Inc.* 350 11,878
Advantage Learning Systems, Inc.* 600 13,463
Advent Software, Inc.* 525 25,791
Agile Software Corp.* 100 4,975
Apex, Inc.* 1,250 41,484
Aspect Development, Inc.* 900 14,119
BindView Development Corp.* 1,050 22,444
Bottomline Technologies, Inc.* 50 1,388
CBT Group Plc, American Depositary
Receipt (ADR)* (Ireland) 926 19,446
Clarent Corp.* 100 3,325
Cognizant Technology Solutions Corp.* 750 18,094
Dendrite International, Inc.* 550 22,894
Digex, Inc.* 750 24,937
F5 Networks, Inc.* 450 30,516
Fundtech Ltd.* (Israel) 1,200 27,750
International Network Services, Inc. 400 21,275
Intraware, Inc.* 250 4,500
Maxtor Corp.* 3,000 19,219
Media Metrix, Inc.* 500 23,984
Micromuse, Inc.* 650 37,131
Mpath Interactive, Inc.* 50 591
Multex.com, Inc.* 900 14,962
National Computer Systems, Inc. 950 37,050
National Instruments Corp.* 900 26,944
Network Appliance, Inc.* 450 29,559
Network Solutions, Inc. (Class A)* 400 23,050
Packeteer, Inc.* 100 3,688
Paradyne Networks, Inc.* 250 11,016
Pervasive Software, Inc.* 1,050 22,313
Prodigy Communications Corp.* 1,000 18,562
Quantum Corp. - Hard Disk Drive* 2,100 14,962
Quest Software, Inc.* 100 4,188
SilverStream Software, Inc.* 50 1,506
Software.com, Inc.* 350 15,903
TenFold Corp.* 100 2,731
Verio, Inc.* 600 22,313
Western Digital Corp.* 4,000 24,500
Whittman-Hart, Inc.* 1,300 34,206
------------
696,657
------------
Electronics (9.83%)
Alpha Industries, Inc. 500 28,469
ATMI, Inc.* 700 23,100
Credence Systems Corp.* 600 25,800
DSP Communications, Inc.* 850 19,975
DuPont Photomasks, Inc.* 500 26,812
Flextronics International Ltd.* 450 26,409
GlobeSpan, Inc.* 50 3,025
Micrel, Inc.* 350 26,819
Novellus Systems, Inc.* 200 10,787
PLX Technology, Inc.* 850 20,400
PMC-Sierra, Inc.* (Canada) 200 18,600
Powerwave Technologies, Inc.* 850 36,072
PRI Automation, Inc.* 500 14,312
QLogic Corp.* 500 43,531
Semtech Corp.* 500 35,031
------------
359,142
------------
Finance (2.82%)
Affiliated Managers Group, Inc.* 650 17,347
AmeriCredit Corp.* 500 6,406
DVI, Inc.* 1,300 21,856
Medallion Financial Corp. 1,100 21,794
Metris Cos., Inc. 850 23,428
NextCard, Inc.* 500 12,250
------------
103,081
------------
Food (0.69%)
American Italian Pasta Co. (Class A)* 900 25,200
------------
Leisure (2.89%)
Cinar Films, Inc. (Class B)*
(Canada) 1,300 32,500
Imax Corp.* (Canada) 900 18,956
Premier Parks, Inc. 800 26,200
Steiner Leisure Ltd.* 1,000 27,875
------------
105,531
------------
Linen Supply & Related (0.11%)
G & K Services, Inc. (Class A) 100 4,156
------------
Machinery (0.88%)
JLG Industries, Inc. 900 15,975
Terex Corp. 600 16,125
------------
32,100
------------
Media (6.69%)
Adelphia Communications Corp.
(Class A)* 400 24,800
Citadel Communications Corp.* 900 33,412
Cumulus Media, Inc. (Class A) * 900 25,087
Entercom Communications Corp.* 300 10,950
Hispanic Broadcasting Corp.* 400 29,900
Network Event Theater, Inc.* 1,400 35,350
Pegasus Communications Corp.* 800 33,600
Radio One, Inc.* 500 20,844
Wiley (John) & Sons, Inc. (Class A) 1,000 16,250
Wink Communications, Inc.* 350 14,263
------------
244,456
------------
Medical (10.32%)
Alkermes, Inc.* 700 25,988
Alpharma, Inc. (Class A) 700 23,712
Andrx Corp.* 350 25,156
Coulter Pharmaceutical, Inc.* 700 13,956
Cytyc Corporation 300 10,125
Gilead Sciences, Inc.* 400 31,175
Human Genome Sciences, Inc.* 300 20,419
IDEC Pharmaceuticals Corp.* 350 44,472
Interpore International, Inc.* 1,500 9,656
King Pharmaceuticals, Inc.* 600 20,775
Millennium Pharmaceuticals, Inc.* 400 23,575
MiniMed, Inc.* 350 31,828
Perclose, Inc.* 250 13,234
Pharmacyclics, Inc.* 800 22,600
Renal Care Group, Inc.* 550 10,519
Triangle Pharmaceuticals, Inc.* 800 14,700
Xomed Surgical Products, Inc.* 600 35,288
------------
377,178
------------
Metal (0.92%)
Maverick Tube Corp.* 1,900 33,606
------------
Oil & Gas (2.80%)
Core Laboratories N.V.*
(Netherlands) 1,000 19,125
Dril-Quip, Inc.* 600 16,763
Newfield Exploration Co.* 800 24,300
Pride International, Inc.* 800 11,900
Stone Energy Corp.* 400 21,300
Veritas DGC, Inc.* 500 8,938
------------
102,326
------------
Pollution Control (0.27%)
Newpark Resources, Inc.* 1,100 9,900
------------
Printing - Commercial (0.23%)
Mail-Well, Inc.* 600 8,550
------------
Retail (9.33%)
Applebee's International, Inc. 700 21,744
bebe stores, Inc.* 150 3,600
Cost Plus, Inc.* 500 22,250
CSK Auto Corp.* 854 20,282
David's Bridal, Inc.* 1,300 11,903
Duane Reade, Inc.* 400 12,600
Ethan Allen Interiors, Inc. 600 17,513
Garden Fresh Restaurant Corp.* 1,300 24,862
GoTo.com, Inc.* 50 1,813
Insight Enterprises Inc.* 900 27,225
Linens 'N Things, Inc.* 550 18,837
99 Cents Only Stores* 556 20,016
O'Reilly Automotive, Inc.* 600 22,950
P.F. Chang's China Bistro, Inc.* 500 11,000
Pacific Sunwear of California, Inc. 1,075 24,994
RARE Hospitality International, Inc. 800 15,750
Sunglass Hut International, Inc.* 1,300 16,413
Whole Foods Market, Inc.* 500 17,969
Wild Oats Markets, Inc.* 800 29,100
------------
340,821
------------
Schools/Education (0.38%)
ITT Educational Services, Inc.* 900 14,062
------------
Steel (0.55%)
Lone Star Technologies, Inc.* 1,000 20,000
------------
Telecommunications (8.92%)
Allegiance Telecom, Inc.* 700 42,088
Copper Mountain Networks, Inc.* 100 11,700
Crown Castle International Corp.* 1,700 25,713
Efficient Networks, Inc.* 100 4,694
Global TeleSystems Group, Inc.* 400 12,925
Intermedia Communications, Inc.* 850 22,100
Latitude Communications, Inc.* 500 6,969
Metromedia Fiber Network, Inc.
(Class A)* 450 13,247
Microwave Power Devices, Inc.* 700 5,906
Net2Phone, Inc.* 100 8,500
Netro Corp.* 300 9,319
NEXTLINK Communications, Inc.
(Class A)* 600 30,225
Orckit Communications Ltd.*
(Israel) 900 28,069
Powertel, Inc.* 650 24,050
RF Micro Devices, Inc.* 1,000 43,937
Terayon Communication Systems, Inc. 500 18,000
US LEC Corp. (Class A) * 100 3,250
WinStar Communications, Inc.* 300 15,244
------------
325,936
------------
Textile (0.37%)
Cutter & Buck, Inc.* 1,050 13,650
------------
Transportation (2.62%)
Circle International Group, Inc. 900 22,275
Eagle USA Airfreight, Inc.* 600 16,800
Expeditors International of
Washington, Inc. 800 25,850
Forward Air Corp.* 950 21,375
MotivePower Industries, Inc. 750 9,280
------------
95,580
------------
Waste Disposal Service & Equipment (0.65%)
Waste Connections, Inc.* 1,100 23,719
------------
TOTAL COMMON STOCKS
(Cost $2,619,557) (96.91%) 3,541,485
------- -----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.15%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.440% $42 $42,000
-----------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 228
-----------
TOTAL SHORT-TERM INVESTMENTS (1.16%) 42,228
------- -----------
TOTAL INVESTMENTS (98.07%) 3,583,713
------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.93%) 70,675
------- -----------
TOTAL NET ASSETS (100.00%) $3,654,388
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Small Capitalization
Value Fund on August 31, 1999. It's divided into three main categories: common stocks, preferred
stock and short-term investments. Common and preferred stocks are further broken down by industry
groups. Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (1.45%)
Penton Media, Inc. 11,500 $158,125
------------
Broker Services (3.09%)
Investment Technology Group, Inc. 6,000 163,500
Jefferies Group, Inc. 7,000 173,250
------------
336,750
------------
Business Services - Misc. (7.89%)
Iron Mountain, Inc.* 7,300 229,950
Metamor Worldwide, Inc.* 12,050 193,177
Nielsen Media Research, Inc. 4,383 160,801
Sensormatic Electronics Corp.* 23,550 275,241
------------
859,169
------------
Computers (11.48%)
AXENT Technologies, Inc. * 10,450 131,931
Data General Corp. * 16,250 299,609
Datalink Corp.* 6,200 84,475
DSET Corp.* 10,500 126,000
IMRglobal Corp.* 9,150 156,122
MAPICS, Inc.* 8,000 69,000
Wind River Systems, Inc.* 24,000 382,500
------------
1,249,637
------------
Electronics (14.62%)
Amphenol Corp. (Class A)* 4,300 201,294
ANADIGICS, Inc.* 3,000 107,250
ESCO Electronics Corp.* 20,250 251,859
Oak Industries, Inc.* 17,950 563,181
Vicor Corp.* 24,250 468,328
------------
1,591,912
------------
Energy (3.04%)
Calpine Corp.* 3,650 330,781
------------
Finance (3.98%)
Core Cap, Inc. (Class A) (r) 11,100 179,820
Duff & Phelps Credit Rating Co. 1,400 106,575
Federated Investors, Inc. (Class B) 8,000 147,000
------------
433,395
------------
Instruments - Scientific (1.23%)
Millipore Corp. 3,550 134,013
------------
Insurance (9.58%)
Capital Re Corp. 12,500 151,563
Financial Security Assurance
Holdings Ltd. 6,557 328,260
MIIX Group, Inc.* 5,600 98,000
Radian Group, Inc. 6,000 277,875
Reinsurance Group of America, Inc.
(Non-voting) 3,000 90,750
Reinsurance Group of America, Inc. 3,000 96,000
------------
1,042,448
------------
Leisure (0.30%)
Metromedia International Group, Inc. 5,000 31,563
------------
Machinery (0.71%)
Applied Science & Technology, Inc.* 4,000 77,000
------------
Manufacturing (2.78%)
Dexter Corp. (The) 8,300 302,431
------------
Medical (8.53%)
DENTSPLY International, Inc. 12,500 310,156
Haemonetics Corp.* 5,500 107,594
ProxyMed, Inc.* 3,250 43,672
Shire Pharmaceuticals Group, Plc*
(United Kingdom) 27,000 223,592
Total Renal Care Holdings, Inc.* 30,250 243,891
------------
928,905
------------
Metal (0.98%)
Brush Wellman, Inc. 6,250 106,250
------------
Office (4.92%)
Danka Business Systems, Plc, American
Depositary Receipts (ADR)
(United Kingdom) 54,595 535,713
------------
Oil & Gas (4.96%)
Basin Exploration 8,800 200,200
Chieftain International, Inc.*
(Canada) 5,000 101,250
Grey Wolf, Inc.* 42,300 124,256
Veritas DGC, Inc.* 6,400 114,400
------------
540,106
------------
Pollution Control (0.70%)
Newpark Resources, Inc.* 8,500 76,500
------------
Retail (0.66%)
Whole Foods Market, Inc.* 2,000 71,875
------------
Telecommunications (13.86%)
CFW Communications Co. 10,000 211,875
Com21, Inc.* 6,000 108,000
Commonwealth Telephone Enterprises, Inc. 8,000 341,000
CT Communications, Inc. 5,500 222,750
Intermedia Communications, Inc.* 14,150 367,900
RCN Corp.* 4,000 168,000
Transaction Network Services, Inc.* 2,000 87,750
------------
1,507,275
------------
Waste Disposal Service & Equipment (0.80%)
Waste Systems International, Inc.* 12,600 87,413
------------
TOTAL COMMON STOCKS
(Cost $9,056,607) (95.56%) 10,401,261
------- ------------
PREFERRED STOCK
Finance (2.44%)
Core Cap, Inc., Ser A/I, 10.00% (r) 11,100 265,734
------------
TOTAL PREFERRED STOCK
(Cost $277,500) (2.44%) 265,734
------- ------------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.97%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $214 $214,000
------- ------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 581
-----------
TOTAL SHORT-TERM INVESTMENTS (1.97%) 214,581
------- -----------
TOTAL INVESTMENTS (99.97%) 10,881,576
------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.03%) 3,465
------- -----------
TOTAL NET ASSETS (100.00%) $10,885,041
======= ===========
* Non-income producing security.
(r) The securities listed below are direct placement securities and are restricted as to resale. The Fund has limited
rights to registration under the Securities Act of 1933 with respect to restricted securities (not including rule
144A securities). In certain circumstances the Fund may bear a portion of the cost of such registrations; otherwise,
such costs would be borne by the issuer. Additional information on these restricted securities is as follows:
MARKET VALUE
AS A PERCENTAGE MARKET VALUE
ACQUISITION ACQUISITION OF FUND'S AS OF
DATE COST NET ASSETS AUGUST 31, 1999
---- ---- ---------- ---------------
Core Cap, Inc. (Common) 10-31-97 $222,000 1.65% $179,820
Core Cap, Inc. (Preferred) 10-31-97 277,500 2.44 265,734
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- International Equity Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the International Equity
Fund on August 31, 1999. It's divided into four main categories: common stocks, rights, warrants,
and short-term investments. Common stocks, rights and warrants and are further broken down by country.
Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Australia (1.84%)
Australia & New Zealand Banking Group
Ltd., American Depositary Receipts
(ADR) (Banks - Foreign) 2 $66
Macquarie Bank Ltd. (Banks -
Foreign) 806 10,754
National Australia Bank Ltd.
(Banks - Foreign) 1,424 21,536
National Foods Ltd. (Food) 6,082 10,367
News Corp. Ltd. (The) (Media) 2,504 18,303
Smorgon Steel Group Ltd.* (Steel) 12,026 18,656
Telstra Corp. Ltd.
(Telecommunications) 12,317 64,085
Westpac Banking Corp. Ltd.
(Banks - Foreign) 78 473
------------
144,240
------------
Belgium (0.84%)
Fortis (B) (Insurance) 1,917 65,907
Fortis (B) (Certificate De Valeur Garantie)*
(Insurance) 63 337
Fortis (B)* (Insurance) 567 6
------------
66,250
------------
Brazil (1.42%)
Telecomunicacoes Brasileiras S.A.
(Preferred Shares) (ADR)
(Telecommunications) 1,499 111,207
Telecomunicacoes Brasileiras S.A. (ADR)*
(Telecommunications) 808 38
------------
111,245
------------
Canada (3.88%)
Bombardier, Inc. (Diversified
Operations) 8,684 134,971
Nortel Networks Corp.
(Telecommunications) 3,338 137,233
Royal Bank of Canada
(Banks - Foreign) 1 43
Toronto Dominion Bank
(Banks - Foreign) 1,657 32,400
------------
304,647
------------
Chile (0.43%)
Cia. de Telecomunicaciones de Chile S.A.
(ADR) (Telecommunications) 720 16,200
Enersis S.A. (ADR) (Utilities) 780 17,501
------------
33,701
------------
China (0.66%)
Shandong International Power
Development Co. Ltd.* (Utilities) 98,000 19,562
Yanzhou Coal Mining Co. Ltd.
(Metal) 73,000 31,964
------------
51,526
------------
Finland (2.37%)
Nokia AB (Telecommunications) 2,228 186,194
------------
France (9.94%)
Accor SA (Leisure) 327 78,800
Axa SA (Insurance) 837 104,303
Banque Nationale de Paris
(Banks - Foreign) 633 48,480
Bouygues SA (Building) 83 22,916
Carrefour SA (Retail) 180 29,324
France Telecom SA
(Telecommunications) 1,197 93,322
Legrand SA (Electronics) 69 16,423
L'Oreal SA (Cosmetics & Personal
Care) 160 103,500
Pinault-Printemps-Redoute SA
(Retail) 534 92,642
Schneider Electric SA (Machinery) 330 22,167
Suez Lyonnaise des Eaux SA
(Diversified Operations) 314 52,449
Total Fina SA (Oil & Gas) 392 50,591
Vivendi SA (Diversified Operations) 850 65,730
------------
780,647
------------
Germany (7.45%)
Allianz AG (Insurance) 158 41,668
BASF AG (Chemicals) 1,101 49,965
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign) 673 39,939
DaimlerChrysler AG
(Automobile/Trucks) 779 58,838
Degussa-Huels AG* (Chemicals) 699 27,063
Deutsche Telekom AG
(Telecommunications) 859 38,074
Fresenius AG (Medical) 150 22,453
Hochtief AG (Building) 644 28,000
Linde AG (Engineering/R&D Services) 480 29,349
Mannesmann AG (Machinery) 684 105,062
Preussag AG (Diversified
Operations) 541 30,847
SAP AG (Computers) 86 30,204
Siemens AG (Diversified Operations) 467 39,324
Veba AG (Diversified Operations) 557 35,530
Viag AG (Diversified Operations) 416 8,867
------------
585,183
------------
Hong Kong (2.68%)
Aeon Credit Service Co. Ltd.
(Finance) 36,000 15,763
Amoy Properties Ltd.
(Real Estate Operations) 23,500 23,152
Cheung Kong Holdings Ltd.
(Real Estate Operations) 5,000 43,626
China Resources Enterprises Ltd.
(Real Estate Operations) 16,000 26,272
First Pacific Co. Ltd.
(Diversified Operations) 14,000 10,818
Henderson Land Development Co. Ltd.
(Real Estate Operations) 4,000 21,121
HSBC Holdings Plc (Banks - Foreign) 1,221 15,135
Hutchison Whampoa Ltd.
(Diversified Operations) 2,000 19,511
New World Development Co. Ltd.
(Real Estate Operations) 7,121 17,149
Swire Pacific Ltd. (Diversified
Operations) 3,500 18,030
------------
210,577
------------
Indonesia (0.28%)
PT Bank Internasional Indonesia*
(Banks - Foreign) 755,000 14,765
PT Bank Negara Indonesia*
(Banks - Foreign) 243,000 7,128
------------
21,893
------------
Ireland (1.01%)
CRH Plc (Building) 3,516 79,781
------------
Italy (3.32%)
Alleanza Assicurazioni SpA
(Insurance) 1,674 17,478
Assicurazioni Generali SpA
(Insurance) 1,172 39,612
Bipop SpA (Banks - Foreign) 1,229 53,889
Eni SpA (Oil & Gas) 5,135 30,908
Istituto Nazionale delle Assicurazioni SpA
(Insurance) 7,037 16,973
Telecom Italia Mobile SpA
(Telecommunications) 11,236 65,492
Telecom Italia SpA
(Telecommunications) 2,899 29,226
UniCredito Italiano SpA
(Banks - Foreign) 1,641 7,586
------------
261,164
------------
Japan (27.53%)
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) 10,000 149,540
Daiwa House Industry Co., Ltd.
(Building) 3,000 30,182
Denso Corp. (Automobile/Trucks) 2,000 44,633
Fuji Heavy Industries Ltd.
(Automobile/Trucks) 1,000 7,976
Fuji Photo Film Co., Ltd. (Leisure) 1,000 36,585
Fujitsu Ltd. (Computers) 5,000 146,797
Fujitsu Systems Construction Ltd.
(Engineering/R&D Services) 1,000 19,481
Ito-Yokado Co., Ltd. (Retail) 1,000 73,718
Marubeni Corp. (Diversified
Operations) 31,000 73,435
Matsushita Electric Industrial Co., Ltd.
(Electronics) 4,000 79,023
Mitsui Marine & Fire Insurance Co., Ltd.
(Insurance) 4,000 21,987
NIDEC Corp. (Machinery) 400 78,987
Nippon Telegraph & Telephone Corp.
(Telecommunications) 13 146,248
Nomura Securities Co., Ltd.
(Broker Services) 11,000 161,476
NTT Data Corp. (Telecommunications) 4 38,780
NTT Mobile Communication Network, Inc.
(Telecommunications) 1 16,646
NTT Mobile Communication Network, Inc.
(New Shares)* (Telecommunications) 4 66,219
Orix Corp. (Leasing Companies) 1,000 96,401
Ricoh Co., Ltd. (Office) 3,000 53,560
Sakura Bank, Ltd. (The)
(Banks - Foreign) 19,000 100,791
Sankyo Co., Ltd. (Medical) 1,000 27,896
Secom Co., Ltd.
(Protection - Safety Equip. & Svc.) 1,000 136,736
Sekisui House, Ltd. (Building) 5,000 53,825
Shin-Etsu Chemical Co., Ltd.
(Chemicals) 1,000 40,792
Sony Corp. (Electronics) 1,400 181,570
Sumitomo Trust & Banking Co., Ltd.
(Banks - Foreign) 10,000 66,767
Takeda Chemical Industries, Ltd.
(Medical) 3,000 150,912
Takefuji Corp. (Finance) 200 32,213
Toyota Motor Corp.
(Automobile/Trucks) 1,000 29,542
------------
2,162,718
------------
Mexico (0.83%)
Carso Global Telecom SA*
(Telecommunications) 6,002 33,174
Cifra SA de CV* (Retail) 10,239 16,923
Grupo Televisa SA (ADR)* (Media) 417 15,168
------------
65,265
------------
Netherlands (3.79%)
ABN AMRO Holding NV (ADR)
(Banks - Foreign) 159 3,846
Aegon NV (Insurance) 666 58,335
ING Groep NV (ADR) (Banks -
Foreign) 460 25,243
Royal KPN NV (Telecommunications) 900 40,368
Royal Philips Electronics NV
(Electronics) 1,056 108,972
STMicroelectronics NV (Electronics) 436 28,988
TNT Post Group NV (Transport) 900 22,231
Versatel Telecom International NV
(ADR)* (Computers) 700 9,494
------------
297,477
------------
Norway (0.79%)
Orkla ASA (Diversified Operations) 3,988 62,118
------------
Portugal (0.80%)
Portugal Telecom SA
(Telecommunications) 1,498 62,737
------------
Singapore (0.92%)
First Capital Corp. Ltd.
(Real Estate Operations) 15,000 20,849
Overseas-Chinese Banking Corp. Ltd.
(Banks - Foreign) 5,374 37,668
Singapore Telecommunications, Ltd.
(Telecommunications) 8,000 14,209
------------
72,726
------------
South Korea (1.75%)
Hanvit Bank* (Banks - Foreign) 2,600 10,880
Housing & Commercial Bank*
(Banks - Foreign) 300 7,014
Korea Line Co.* (Transport) 900 12,656
Korea Telecom Corp.
(Telecommunications) 400 25,074
Korea Telecom Corp. (ADR)*
(Telecommunications) 180 5,985
Samsung Electronics Co.
(Electronics) 200 37,950
Shinhan Bank (Banks - Foreign) 1,700 18,289
SK Telecom Co. Ltd.
(Telecommunications) 20 20,008
------------
137,856
------------
Spain (2.89%)
Argentaria SA (Banks - Foreign) 1,451 33,078
Banco Bilbao Vizcaya SA
(Banks - Foreign) 1,033 13,791
Banco Santander Central Hispano, SA
(Banks - Foreign) 104 1,046
Endesa SA (Utilities) 1,057 21,245
Grupo Ferrovial, SA* (Building) 196 4,109
Iberdrola SA (Utilities) 546 7,873
Repsol-YPF, SA (Oil & Gas) 2,322 48,537
Telefonica SA* (Telecommunications) 6,075 97,039
------------
226,718
------------
Sweden (2.29%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 787 25,427
Investor AB (Finance) 7,516 91,748
Nordbanken Holding AB
(Banks - Foreign) 10,368 58,559
Saab AB (Aerospace) 494 3,870
------------
179,604
------------
Switzerland (4.53%)
Adecco SA (Business Services -
Misc.) 119 65,687
Barry Callebaut AG (Food) 28 4,813
Credit Suisse Group (Banks -
Foreign) 127 24,011
Nestle SA (Food) 20 39,532
Novartis AG (Medical) 5 7,206
Roche Holding AG (Medical) 6 69,492
UBS AG (Banks - Foreign) 252 71,217
Zurich Allied AG (Insurance) 126 74,049
------------
356,007
------------
Taiwan (1.16%)
China Steel Corp. (ADR) (Steel) 1,509 26,973
D-Link Corp. (Computers) 11,000 22,311
Far Eastern Textile Ltd. (Textile) 18,190 26,370
Vanguard International Semiconductor Corp.* (Electronics) 13,000 15,248
------------
90,902
------------
Thailand (0.26%)
Golden Land Property Development Plc*
(Real Estate Operations) 31,500 14,796
Land & Houses Plc*
(Real Estate Operations) 3,900 5,903
------------
20,699
------------
United Kingdom (14.67%)
Abbey National Plc (Banks -
Foreign) 578 9,941
Anglian Water Plc (B shares)
(Utilities) 2,000 1,480
BP Amoco Plc (Oil & Gas) 4,421 82,007
British Aerospace Plc (Aerospace) 2,823 20,596
British Telecommunications Plc
(Telecommunications) 6,374 97,623
Cadbury Schweppes Plc (Food) 4,781 30,151
Diageo Plc (Beverages) 1,784 18,110
General Electric Co. Plc
(Electronics) 2,573 25,706
Glaxo Wellcome Plc (Medical) 988 25,960
Granada Group Plc
(Diversified Operations) 78 695
Hanson Plc (Building) 3,866 32,933
Hays Plc (Business Services -
Misc.) 3,166 33,668
Imperial Chemical Industries Plc
(Chemicals) 2,795 31,791
Kingfisher Plc (Retail) 2,554 30,734
Lloyds TSB Group Plc (Banks -
Foreign) 7,030 97,321
Morrison (Wm.) Supermarkets Plc
(Retail) 9,709 24,367
Orange Plc* (Telecommunications) 4,245 71,674
Pearson Plc (Media) 1,731 35,702
Pennon Group Plc (Utilities) 274 4,730
Prudential Corp. Plc (Insurance) 1,490 22,053
Rank Group Plc (Leisure) 7,101 29,588
Royal & Sun Alliance Insurance Group Plc
(Insurance) 2,462 20,498
Royal Bank of Scotland Group Plc
(Banks - Foreign) 1,114 22,976
Scottish & Southern Energy Plc
(Utilities) 2,686 24,718
SEMA Group Plc (Computers) 6,069 65,906
SmithKline Beecham Plc (Medical) 6,940 90,326
United Kingdom (continued)
Tesco Plc (Retail) 8,251 24,425
Unilever Plc (Food) 9,142 86,040
Vodafone Group Plc
(Telecommunications) 2,357 47,475
WPP Group Plc (Advertising) 4,589 42,894
------------
1,152,088
------------
TOTAL COMMON STOCKS
(Cost $6,667,042) (98.33%) 7,723,963
------- ------------
RIGHTS
Taiwan (0.00%)
Vanguard International Semiconductor Corp.* (Electronics) 13,000 0
------------
TOTAL RIGHTS
(Cost $0) (0.00%) 0
------- ------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-
Gesellschaft AG* (Insurance) 2 67
------------
TOTAL WARRANTS
(Cost $90) (0.00%) 67
------- ------------
TOTAL COMMON STOCKS,
RIGHTS AND WARRANTS
(Cost $6,667,132) (98.33%) 7,724,030
------- ------------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.06%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 6.375% thru
11.250% due 02-15-15 thru
08-15-27) and U.S. Treasury
Note, 6.500% due 05-31-02)
- - Note A 5.440% $83 $83,000
------- ------------
Cash Equivalents (4.09%)
Navigator Securities Lending
Prime Portfolio ** 321,421
------------
TOTAL SHORT-TERM INVESTMENTS (5.15%) 404,421
------- ------------
TOTAL INVESTMENTS (103.48%) 8,128,451
------- ------------
OTHER ASSETS AND LIABILITIES, NET (3.48%) (273,401)
------- ------------
TOTAL NET ASSETS (100.00%) $7,855,050
======= ============
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries. The performance of
the Fund is closely tied to the economic conditions within the countries in which it invests. The
concentration of investments by country for individual securities held by the Fund is shown in the
schedule of investments. In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's investments at August 31, 1999
assigned to the various investment categories.
MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
- --------------------- --------------------
<S> <C>
Advertising 0.55%
Aerospace 0.31
Automobile/Trucks 1.79
Banks - Foreign 12.78
Beverages 0.23
Broker Services 2.06
Building 3.20
Business Services - Misc. 1.26
Chemicals 1.90
Computers 3.50
Cosmetics & Personal Care 1.32
Diversified Operations 7.03
Electronics 6.29
Engineering/R&D Services 0.62
Finance 1.78
Food 2.18
Insurance 6.15
Leasing Companies 1.23
Leisure 1.85
Machinery 2.62
Media 0.88
Medical 5.02
Metal 0.41
Office 0.68
Oil & Gas 2.70
Protection - Safety Equip & Svc. 1.74
Real Estate Operations 2.20
Retail 3.72
Steel 0.58
Telecommunications 19.73
Textile 0.34
Transport 0.44
Utilities 1.24
Short-Term Investments 5.15
-------
TOTAL INVESTMENTS 103.48%
======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Active Bond Fund ("Active Bond Fund"), John Hancock Dividend
Performers Fund ("Dividend Performers Fund"), John Hancock Medium
Capitalization Growth Fund ("Medium Capitalization Growth Fund"), John
Hancock Small Capitalization Growth Fund ("Small Capitalization Growth
Fund"), John Hancock Small Capitalization Value Fund ("Small
Capitalization Value Fund") and John Hancock International Equity Fund
("International Equity Fund") (each, a "Fund" and collectively, the
"Funds") are separate portfolios of John Hancock Institutional Series
Trust (the "Trust") an open-end management investment company registered
under the Investment Company Act of 1940. The Trust, organized as a
Massachusetts business trust in 1994, consists of eleven series
portfolios: the Funds, John Hancock Independence Balanced Fund, John
Hancock Core Growth Fund, John Hancock Core Value Fund, John Hancock
Independence Diversified Core Equity Fund II and John Hancock Independence
Medium Capitalization Fund. The other five series of the Trust are
reported in separate financial statements. Prior to July 1, 1999, Medium
Capitalization Growth Fund was known as John Hancock Multi-Sector Growth
Fund, John Hancock Core Growth Fund was known as John Hancock Independence
Growth Fund and John Hancock Core Value Fund was known as John Hancock
Independence Value Fund. Each Fund currently has one class of shares with
equal rights as to voting, redemption, dividends and liquidation within
its respective Fund. The Trustees may authorize the creation of additional
portfolios from time to time to satisfy various investment objectives.
The investment objective of the Active Bond Fund is a high rate of total
return, consistent with prudent investment risk. The investment objective
of the Dividend Performers Fund is long-term growth of capital and of
income without assuming undue market risk. The investment objective of the
Medium Capitalization Growth Fund is long-term capital appreciation. The
investment objective of the Small Capitalization Growth Fund is long-term
growth of capital. The investment objective of the Small Capitalization
Value Fund is capital appreciation. The investment objective of the
International Equity Fund is long-term growth of capital.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolios are valued on
the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value. All portfolio transactions initially expressed
in terms of foreign currencies have been translated into U.S. dollars as
described in "Foreign Currency Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., 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 Funds' custodian bank receives
delivery of the underlying securities for the joint account on the Funds'
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales
of investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Funds' policy is to comply with the requirements
of the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of their taxable income, including net
realized gain on investments, to their shareholders. Therefore, no federal
income tax provisions are required.
The following Funds had capital loss carryforwards available, to the
extent provided by regulations, and to offset future net realized gains.
To the extent such carryforwards are used by the Fund, no capital gain
distribution will be made. Additionally, net capital losses attributable
to security transactions occurring after October 31, 1998 are treated as
arising on the first day (March 1, 1999) of the Funds' next taxable year.
<TABLE>
<CAPTION>
POST
POST OCTOBER 31, 1998
CAPITAL LOSS OCTOBER 31, 1998 CURRENCY
CARRYFORWARD LOSS TREATED LOSS TREATED
EXPIRING AS ARISING AS ARISING
FUND FEBRUARY 28, 2007 MARCH 1, 1999 MARCH 1, 1999
- ---- ----------------- ------------- -------------
<S> <C> <C> <C>
Active Bond Fund $-- $811 $--
Dividend Performers Fund -- -- --
Medium Capitalization Growth Fund 141,762 -- --
Small Capitalization Growth Fund -- -- --
Small Capitalization Value Fund 29,564 -- --
International Equity Fund -- -- 20,465
</TABLE>
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Funds record 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.
DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the Funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization
of the Funds have been capitalized and are being charged to the Funds'
operations ratably over a five-year period that began with the
commencement of investment operations of the Funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Funds. Actual results
could differ from these estimates.
BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. Effective March 12, 1999, the Funds entered into a syndicated
line of credit agreement with various banks and the agreements previously
in effect were terminated. This agreement enables the Funds to participate
with other funds managed by the Adviser in unsecured lines of credit with
banks, which permit borrowings up to $500 million, collectively. Interest
is charged to each of the Funds based on its borrowings. In addition, a
commitment fee is charged per annum based on the average daily unused
portion of the line of credit, and is allocated among the participating
funds. The maximum loan balance for the Medium Capitalization Growth Fund
during the period was $1,550,000 with a rate of 6.00%. There was no
borrowing activity for the period ended August 31, 1999 for all other
Funds.
SECURITIES LENDING The Funds may lend their securities to certain
qualified brokers who pay the Funds negotiated lender fees. These fees are
included in interest income. The loans are collateralized at all times
with cash or securities with a market value at least equal to the market
value of the securities on loan. As with other extensions of credit, the
Funds may bear the risk of delay of the loaned securities in recovery or
even loss of rights in the collateral should the borrower of the
securities fail financially. At August 31, 1999, the International Equity
Fund loaned securities having a market value of $304,174 collateralized by
cash in the amount of $321,421, which was invested in a short-term
instrument. There was no securities lending for the period ended August
31, 1999 for all other Funds.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Funds.
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 Funds do 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 Funds' 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds, other than Dividend
Performers Fund, may enter into forward foreign currency exchange
contracts as a hedge against the effect of fluctuations in currency
exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date at a
set price. The aggregate principal amounts of the contracts are marked to
market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of
the Funds' daily net assets. The Funds record realized gains and losses at
the time the forward foreign currency contract is closed out or offset by
a matching contract. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of the
contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Funds' Statement of Assets and Liabilities.
The Funds may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which it intends to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction.
Open forward foreign currency exchange contracts for the Trust at August
31, 1999 were as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT MONTH DEPRECIATION
- -------- ------------------- ----- ------------
INTERNATIONAL EQUITY
Sells
Euro Currency 34,332 SEPT 99 $476
====
FINANCIAL FUTURES CONTRACTS The Funds may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Funds' exposure to the
underlying instrument. Selling futures tends to decrease the Funds'
exposure to the underlying instrument or hedge other Fund instruments. At
the time the Fund enters into a financial futures contract, it is required
to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain
percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price
of the board of trade or U.S. commodities exchange on which it trades.
Subsequent payments, known as "variation margin," to and from the broker
are made on a daily basis as the market price of the financial futures
contract fluctuates. Daily variation margin adjustments, arising from this
"mark to market," are recorded by the Funds as unrealized gains or
losses.
When the contracts are closed, the Funds recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the contracts
may not correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
There were no open positions in financial futures contracts at August 31,
1999 for the Funds.
OPTIONS The Funds may enter into option contracts. Listed options will be
valued at the last quoted sales price on the exchange on which they are
primarily traded. Over-the-counter options are valued at the mean between
the last bid and asked prices. Upon the writing of a call or put option,
an amount equal to the premium received by the Funds will be included in
the Statement of Assets and Liabilities as an asset and corresponding
liability. The amount of the liability will be subsequently marked to
market to reflect the current market value of the written option.
The Funds may use option contracts to manage their exposure to the price
volatility of financial instruments. Writing puts and buying calls will
tend to increase the Funds' exposure to the underlying instrument and
buying puts and writing calls will tend to decrease the Funds' exposure to
the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face
(or "notional") amount of each contract at value will reflect the maximum
exposure of the Funds in these contracts, but the actual exposure will be
limited to the change in value of the contract over the period the
contract remains open.
Risks may also arise if counterparties do not perform under the contract's
terms ("credit risk") or if the Funds are unable to offset a contract
with a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as counterparties to
each transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over-the-counter
option contracts, the Fund will continuously monitor the creditworthiness
of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Funds'
period-end Statement of Assets and Liabilities.
There were no written option transactions for the period ended August 31,
1999 for the Funds.
NOTE B -
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, each Fund pays a monthly
management fee to the Adviser, for a continuous investment program
equivalent, on an annual basis as follows:
<TABLE>
<CAPTION>
FUND RATE
- ---- ----
<S> <C>
Active Bond Fund 0.50% of average daily net assets up to $1.5 billion
0.45% of such assets in excess of $1.5 billion
Dividend Performers Fund 0.60% of average daily net assets up to $500 million
0.55% of such assets in excess of $500 million
Medium Capitalization Growth Fund 0.80% of average daily net assets up to $500 million
0.75% of such assets in excess of $500 million
Small Capitalization Growth Fund 0.80% of average daily net assets
Small Capitalization Value Fund 0.70% of average daily net assets up to $500 million
0.65% of such assets in excess of $500 million
International Equity Fund 0.90% of average daily net assets up to $500 million
0.65% of such assets in excess of $500 million
</TABLE>
Effective September 12, 1995, the Adviser agreed to limit the Funds'
expenses further to the extent required to prevent expenses from
exceeding: 0.60% of Active Bond Fund's average daily net assets, 0.70% of
Dividend Performers Fund's average daily net assets, 0.90% of Medium
Capitalization Growth Fund's average daily net assets, 0.90% of Small
Capitalization Growth Fund's average daily net assets, 0.80% of Small
Capitalization Value Fund's average daily net assets, and 1.00% of
International Equity Fund's average daily net assets. The Adviser reserves
the right to terminate this limitation in the future. Accordingly, for the
period ended August 31, 1999, the reduction in the Funds' expenses with
any additional amounts not borne by the Funds by virtue of the expense
limit amounted to $53,172 for the Active Bond Fund, $32,160 for the
Dividend Performers Fund, $39,405 for the Medium Capitalization Growth
Fund, $36,338 for the Small Capitalization Growth Fund, $34,456 for the
Small Capitalization Value Fund and $72,523 for the International Equity
Fund.
John Hancock Advisers International, Ltd. (the "Sub-Adviser") serves as
subadviser to International Equity Fund pursuant to a subadvisory
agreement with that Fund and the Adviser. Formed in 1987, it is a wholly
owned subsidiary of the Adviser. The Adviser pays John Hancock Advisers
International, Ltd. a monthly management fee, equivalent on an annual
basis, to the sum of (a) 70% of the advisory fee payable on the Fund's
average daily net assets up to $500 million and (b) 90% of the advisory
fee payable on the Fund's assets exceeding $500 million. The Funds are not
responsible for payment of these subadvisory fees.
The Funds have a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
August 31, 1999, all sales of shares of beneficial interest were sold at
net asset value. The Funds pay all expenses of printing prospectuses and
other sales literature, all fees and expenses in connection with
qualification as a dealer in various states, and all other expenses in
connection with the sale and offering for sale of the shares of the Funds
which have not been herein specifically allocated to the Trust.
The Funds have a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned subsidiary
of JHMLICo. Each fund pays transfer agent fees at an annual fee accrued
daily of 0.05% of its average daily net assets, plus certain out-of-pocket
expenses.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
period was at an annual rate of less than 0.02% of the average net assets
of each Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione are directors and/or officers of the Adviser,
and/or its affiliates, as well as Trustees of the Funds. The compensation
of unaffiliated Trustees is borne by the Funds. The Adviser owned 11,765
shares of beneficial interest of the Medium Capitalization Growth Fund, as
of August 31, 1999. The unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock Group
of Funds Deferred Compensation Plan. The Funds make investments into other
John Hancock funds, as applicable, to cover their liability for the
deferred compensation. Investments to cover the Funds' deferred
compensation liability are recorded on the Funds' books as another asset.
The deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
investment had no impact on the operation of the Funds.
NOTE C -
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, excluding
short-term obligations, for the period ended August 31, 1999 were as
follows:
PURCHASES PROCEEDS
--------- --------
Active Bond Fund
U.S. Government Securities $3,583,989 $3,722,064
Other Investments 4,773,216 4,953,863
Dividend Performers Fund 4,200,611 5,900,425
Medium Capitalization Growth Fund 13,879,277 14,552,462
Small Capitalization Growth Fund 2,634,096 2,138,448
Small Capitalization Value Fund 7,283,527 6,035,505
International Equity Fund 4,334,277 4,693,874
At August 31, 1999, the cost (excluding the corporate savings accounts)
and gross unrealized appreciation and depreciation in value of investments
owned by the Funds, as computed on a federal income tax basis, were as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Active Bond Fund $5,315,155 $10,709 $184,128 ($173,419)
Dividend Performers Fund 13,699,128 3,797,543 342,344 3,455,199
Medium Capitalization Growth Fund 15,919,978 3,360,101 1,107,302 2,252,799
Small Capitalization Growth Fund 2,661,773 1,078,360 156,648 921,712
Small Capitalization Value Fund 9,580,267 1,923,787 623,059 1,300,728
International Equity Fund 7,086,763 1,337,864 296,176 1,041,688
</TABLE>
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Institutional Series Trust. It may be used as sales literature when preceded
or accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
KB0SA 8/99
10/99
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Institutional
Series
Trust
Independence Balanced Fund
Independence Diversified Core Equity Fund II
Independence Medium Capitalization Fund
AUGUST 31, 1999
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TABLE OF CONTENTS
Page
1) Chairman's Message 3
2) Portfolio Manager Commentary
This commentary reflects the views of the portfolio
management teams through the end of the Fund's period
discussed in this report. Of course, the teams' views
are subject to change as market and other conditions
warrant.
John Hancock Independence Balanced Fund 4
John Hancock Independence Diversified Core Equity Fund II 7
John Hancock Independence Medium Capitalization Fund 10
3) Financial Statements 13
4) Notes To Financial Statements 32
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109
CHAIRMAN'S MESSAGE
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the champagne
corks just yet. Rather, we are staying on the course that we set more than
two years ago to ensure that the transition to a new millennium is a smooth
one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the world
with a challenge: making sure that older computers, and any equipment
powered by computer chips, can properly read and process the date "00" as
2000, not 1900. Much has been written about how the world will weather the
change. Some view it as a non-event, while others see the potential for
disruptions. How much disruption, and for how long, depends on whom you
talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with our
business partners and continuing to participate in industry testing. We
have also established additional contingency plans beyond our regular ones
to prepare for any challenges that the Year 2000 might present. In the end,
John Hancock will spend approximately $90-$95 million to ensure we make a
successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Foresight" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-540-2788 for another copy. For your own
peace of mind, we also recommend that you save your 1999 statements,
especially those you receive between October and December, so that you are
able to check them against the first one you receive in 2000. It's a
measure of prudence, not panic. Good record keeping is part of good
planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JANE A. SHIGLEY AND JEFFREY B. SAEF
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Balanced Fund
Strong profits boost stocks,
higher interest rates pressure bonds
While a surprisingly strong U.S. economy and continued healthy corporate
profitability boosted stocks, ever-stronger inflationary fears and rising
interest rates tripped up bonds during the past six months. For the six-
month period ended August 31, 1999, John Hancock Independence Balanced Fund
posted a total return of 2.72% at net asset value, compared to the average
balanced fund's 3.52% return, according to Lipper, Inc. In the same period,
a 50/50 blended index combining the Standard & Poor's 500 Index and the
Lehman Brothers Aggregate Bond Index returned 3.26%. For historical
performance information, see page six.
"Our asset
allocation
was
neutral..."
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into four sections (from top to left):
Short-Term Investments & Other 1%, U.S. Government & Agencies 22%, Corporate
Bonds 16% and Common Stocks 61%. A note below the chart reads "As a
percentage of net assets on August 31, 1999."]
The main reason for the Fund's slight lag was our relatively large
weightings in some stocks that did not perform well during the period,
especially in the financial and health-care sectors. We also were slightly
disadvantaged by our modest overweighting relative to our benchmark in
mortgage and corporate bond holdings. Our asset allocation was neutral,
with a relatively constant 60% stake in stocks and 40% in bonds.
Stocks: Leaders and laggards
Two of our best-performing stocks during the period were telecommunications
company Tellabs and aerospace company United Technologies. Tellabs, which
designs, manufactures, markets and services voice and data transport and
access systems, was driven higher primarily by continued strong demand for
its major product lines. United Technologies exceeded profit estimates,
thanks in large measure to restructuring and cost-cutting efforts. Other
winners included Citigroup, which realized revenue and expense synergies
from the merger between Citicorp and Travelers Group, as well as CBS, which
turned its T.V. network profitable and enjoyed strong results from its
cable business.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 1% with 0% at the bottom and 5% at the
top. The first bar represents the 2.72% total return for John Hancock
Independence Balanced Fund. The second bar represents the 3.52% total return
for Average balanced fund. The third bar represents the 3.26% total return
for 50% S&P 500 Index/50% L.B. Aggregate Bond Index. A note below the chart
reads "The total return for John Hancock Independence Balanced Fund is at net
asset value with all distributions reinvested. The average balanced fund is
tracked by Lipper, Inc. See the following page for historical performance
information."]
Among our disappointments was drug distributor Cardinal Health, which
languished due to charges related to a recent acquisition. In addition, the
company came under pressure when rival McKesson reported accounting
irregularities. Mortgage giant Fannie Mae weakened over fears of a market-
share war with Freddie Mac and the potential impact of rising interest
rates on mortgage activity. In our view, the company is fundamentally sound
and will earn through these concerns. Midwest bank Comerica, one of the
strongest banks fundamentally, struggled on unfounded rumors that it was
bidding for the branch banks Fleet would have to sell in its merger with
BankBoston.
Mortgages, corporates trail Treasuries
All bonds came under pressure as interest rates moved higher during the
period, although a supply glut further pressured mortgage and corporate
securities. Mortgage securities suffered on fears that interest rates would
move higher. Corporations, meanwhile, significantly stepped up their
issuance in advance of potential Y2K-related problems in the financial
markets.
Our slight overweighting in mortgages and our larger overweighting in
corporate securities modestly detracted from our performance. Even so, we
maintained our exposure there because we believe that their higher yields
and more attractive prices give them better total return potential than
Treasuries, once the supply glut works its way through the system. We've
already seen mortgage securities rebound a bit as rates stabilized toward
the end of the period, and we expect corporations to limit new issuance as
we near the Y2K event.
"We're
optimistic
about
corporate
profitability
for the year
2000..."
Outlook
We're optimistic about corporate profitability for the year 2000, although
we believe profit growth will slow a bit from its strong pace so far this
year. But the performance of both stocks and bonds will depend largely on
the direction of interest rates. Our view is that rates may rise a bit more
during the next several months. Beyond that, it's difficult to say whether
higher current interest rates will rein in domestic growth or whether
currently undetectable inflationary pressures will send rates higher in the
future. No matter what the direction of interest rates, we'll continue to
seek out stocks that are cheap and have improving fundamentals and
concentrate on mortgage and corporate fixed-income securities.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (7/6/95)
----- ------
Cumulative Total Returns 13.72% 80.79%
Average Annual Total Returns(1) 13.72% 16.01%
YIELD
As of August 31, 1999
SEC 30-DAY
YIELD
------
John Hancock Independence Balanced Fund 2.25%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.90% of the
Fund's average daily net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception periods
would have been 13.67% and 15.00%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart on the right shows how much a $250,000 investment in the John
Hancock Independence Balanced Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in a 50/50 blend of the Standard &
Poor's 500 Index and the Lehman Brothers Government/Corporate Bond Index.
The Standard & Poor's 500 Index is an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance. The Lehman Brothers Government/ Corporate Bond Index is an
unmanaged index that measures the performance of U.S. corporate bonds and
Yankee bonds. In addition, the fund is compared to a 50/50 blend of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index,
an unmanaged index that includes Treasury issues, agency issues, corporate
bond issues and mortgage-backed securities. For future reports the Adviser
has chosen to use the Lehman Brothers Aggregate Bond Index in place of the
Lehman Brothers Government/Corporate Bond Index because it, blended 50/50
with the Standard & Poor's 500 Index, more closely represents the
investment strategy of the Fund.
[Line chart with the heading John Hancock Independence Balanced Fund,
representing the growth of a hypothetical $250,000 investment over the life
of the fund. Within the chart are three lines. The first line represents the
50/50 blended index of the Standard & Poor's 500 Index and Lehman Brothers
Aggregate Bond Index and is equal to $464,321 as of August 31, 1999. The
second line represents the 50/50 blended index of the Standard & Poor's 500
Index and Lehman Brothers Government/Corporate Bond Index and is equal to
$463,542 as of August 31, 1999. The third line represents the value of the
hypothetical $250,000 investment made in the John Hancock Independence
Balanced Fund on July 6, 1995 and is equal to $439,323 as of August 31,
1999.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Diversified
Core Equity Fund II
Rising interest rates cap a period of
moderately higher share prices
Over the last six months, stocks continued to advance, with volatility
decreasing somewhat from the extreme levels of 1998's second half. Economic
growth remained moderate and inflation was minimal. One negative factor was
interest rates, as the Federal Reserve Board boosted short-term rates in
June and August. Against the backdrop of a surprisingly resilient U.S.
economy and signs of a recovery in Asia, some analysts speculated that the
Fed was "taking back" the interest-rate cuts it made during last fall's
financial crisis.
[Table at bottom left hand column entitled "Top Five Common Stock Holdings."
The first listing is Microsoft 5.0%, the second is General Electric 3.9%, the
third Intel 3.3%, the fourth Citigroup 3.0% and the fifth MCI WorldCom 2.5%.
A note below the table reads "As a percentage of net assets on August 31,
1999."]
Early in the period, growth stocks -- those with high valuations bought in
anticipation of sizeable earnings and share-price growth -- were once again
where most investors chose to concentrate their buying. This was especially
so for the so-called "nifty fifty" large-cap growth stocks that are
weighted heavily in the Standard & Poor's 500 Index. In April and May,
responding to a stronger-than-expected economy and surging energy prices,
growth stocks took a breather, and value stocks -- those perceived to be
selling for less than their real value -- took their turn as market leaders.
During the summer, leadership alternated between growth and value shares as
the market went essentially sideways.
"...technology
and
health-care
holdings
once again
figured
prominently
in the
Fund's
performance."
Performance review
The Fund attempts to blend growth and value components in its strategy of
owning reasonably valued stocks of companies with improving fundamentals.
While this bias-neutral strategy generally serves us well, it held us back
in the recent six-month period of extreme, and rapidly shifting, market
bias. In addition, the Fund's emphasis on diversification was detrimental
in a market where the strongest performance was so narrowly concentrated
for much of the period. As a result, the Fund underperformed both the
Standard & Poor's 500 Index and its peers. For the six months that ended
August 31, 1999, the John Hancock Independence Diversified Core Equity Fund
II had a total return of 5.09% at net asset value, compared to 7.32% for
the Index and 7.09% for the average growth and income fund, according to
Lipper, Inc. See page nine for historical performance information.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 2% with 0% at the bottom and 8% at the
top. The first bar represents the 5.09% total return for John Hancock
Independence Diversified Core Equity Fund II. The second bar represents the
7.09% total return for Average growth and income fund. The third bar
represents the 7.32 % total return for S&P 500 Index. A note below the chart
reads "The total return for John Hancock Independence Diversified Core Equity
Fund II is at net asset value with all distributions reinvested. The average
growth and income fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
Technology and health care
The Fund does not make big sector bets, but rather tries to keep its risk
profile close to that of the S&P 500. That said, technology and health-care
holdings once again figured prominently in the Fund's performance. On the
positive side, Intel helped performance. The chip maker benefited from an
upturn in the personal computer market, as well as the improved pricing
that resulted from the recent demise of some lower-end competitors.
Citigroup was a bright spot in the financial services sector, as investors
continued to see bright prospects for the company because of the synergies
made possible by the Citicorp and Travelers Group merger. Tyco
International, a core holding of the Fund for some time, also turned in a
solid performance based on the strong earnings momentum generated by recent
acquisitions.
Technology holdings that hurt performance included Compaq Computer and J.D.
Edwards. Compaq, a personal computer manufacturer, encountered a number of
problems, including unanticipated delays in integrating the operations of
Digital Equipment Corporation and the firing of Compaq's CEO. Enterprise
software maker J.D. Edwards suffered from customers' increasing preference
for Internet enterprise solutions. We sold both stocks. Also detracting
from performance were two health-care holdings: Omnicare and HEALTHSOUTH.
Omnicare provides drug distribution to skilled nursing facilities, while
HEALTHSOUTH owns rehabilitation and therapy facilities. Both stocks were
adversely affected by recent changes in Medicare reimbursement and
speculation about the possibility of further negative developments. We
think investors overreacted in the case of Omnicare, which we still hold.
We've trimmed our holding in HEALTHSOUTH.
"...we are
back to a
game of
watching
interest
rates and
inflation."
Outlook
With fears of an economic slowdown receded, we are back to a game of
watching interest rates and inflation. Indeed, it would not be surprising
to see one more rate increase over the next six months, which would
effectively offset the three cuts made last fall. Although investors
generally don't like to see higher interest rates, they should be
reasonably happy if the Fed's actions maintain an environment of stable
growth with low inflation. In that environment, market advances should be
broader, which would be beneficial to the Fund.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (3/10/95)
----- -------
Cumulative Total Returns 19.12% 179.32%
Average Annual Total Returns(1) 19.12% 26.92%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses for institutional
class shares to 0.70% of the Fund's average daily net assets. However, for
the period ended August 31, 1999, the Fund's expense ratio was 0.63% of
the Fund's average daily net assets. Without the limitation of expenses,
the average annual total return for the since inception period would have
been 26.91%.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
Independence Diversified Core Equity Fund II would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Standard
& Poor's 500 Stock Index -- an unmanaged index that includes 500 widely
traded common stocks and is often used as a measure of stock market
performance.
[Line chart with the heading John Hancock Independence Diversified Core Equity
Fund II, representing the growth of a hypothetical $250,000 investment over
the life of the fund. Within the chart are two lines. The first line represents
the Standard & Poor's 500 Stock Index and is equal to $736,817 as of August 31,
1999. The second line represents the value of the hypothetical $250,000
investment made in the John Hancock Independence Diversified Core Equity Fund
II on March 10, 1995 and is equal to $688,176 as of August 31, 1999.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Medium
Capitalization Fund
Mid-cap stocks rise but advance remains narrow
The market rewarded mid-cap stock investors over the past six months, but
investors' preference for growth stocks with high valuations prevented the
Fund from participating in the move as fully as we would have liked. The
exception occurred in April and May, when value stocks of all kinds -- that
is, those with more modest price-to-earnings ratios that are perceived to
be selling at a discount to their true value -- rallied sharply, taking many
undervalued mid-cap shares with them. For most of the rest of the period,
however, the growth-at-any-price mentality prevailed.
"...we try to
keep the
Fund well
diversified..."
[Table at bottom left hand column entitled "Top Five Common Stock Holdings."
The first listing is Analog Devices 2.2%, the second is Tellabs 2.2%, the
third Marsh & McLennan 1.8%, the fourth United Technologies 1.8% and the
fifth Teradyne 1.8%. A note below the table reads "As a percentage of net
assets on August 31, 1999."]
The advance of stocks in most sectors was curtailed by rising interest
rates, which came in the form of one-quarter percent increases by the
Federal Reserve Board in June and August. On the positive side, U.S.
economic growth remained solid, but not excessive, while inflation
maintained a low profile. With formerly depressed Asian economies
recovering more rapidly than expected and energy prices rising, the Fed
felt comfortable "taking back" some of the interest-rate reductions used to
bolster the financial system during last fall's crisis.
Performance review
The Fund's strategy is designed to blend growth and value elements by
selecting undervalued stocks of companies with improving fundamentals. Our
value component prevents the Fund from chasing wildly overvalued stocks. In
addition, we try to keep the Fund well diversified, with a risk profile
close to that of the Standard & Poor's MidCap 400 Index. Unfortunately, in
a market where most of the buying was concentrated in a select group of
growth stocks, the Fund's value orientation and its broad diversification
hurt performance relative to both our peers and our benchmark index. For
the six months ended August 31, 1999, the John Hancock Independence Medium
Capitalization Fund returned 3.32% at net asset value. In comparison, the S&P
MidCap 400 Index gained 10.92%, while the average mid-cap fund tracked by
Lipper, Inc. rose 13.28%. See page 12 for historical performance information.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 3% with 0% at the bottom and 15% at the
top. The first bar represents the 3.32% total return for John Hancock
Independence Medium Capitalization Fund. The second bar represents the 13.28%
total return for Average mid-cap fund. The third bar represents the 10.92%
total return for S&P MidCap 400 Index. A note below the chart reads "The
total return for John Hancock Independence Medium Capitalization Fund is at
net asset value with all distributions reinvested. The average mid-cap fund
is tracked by Lipper, Inc. See the following page for historical performance
information."]
Strength and weakness
Included in the list of stocks that helped performance was Tandy Corp. The
company experienced very strong sales growth on the basis of its
participation in the exploding market for cellular phones and cell-phone
service contracts. Adobe Systems performed well in response to the
continued success of its Acrobat Reader product, and we took profits on the
stock in August when it reached our valuation target. PE Biosystems Group,
a maker of equipment for biotechnology research, benefited from the
favorable earnings prospects resulting from a healthy backlog of orders for
the company's products and a resurgence of interest in biotechnology
generally.
On the negative side, Allied Waste, which operates a trash and recycling
business, sank in sympathy with competitors Waste Management and Republic
Services, both of which reported earnings disappointments. Cadence Design
Systems, a maker of software used in the manufacture of computer chips,
also detracted from the Fund's performance. Although earnings have slowed
from their previously torrid pace and the stock price weakened, more
conservative accounting policies, together with the company's fundamentally
sound business prospects, led to our decision to hang on to this stock.
Finally, office supply retailer Staples declined when rival Office Depot
reported an earnings shortfall late in August. In addition, sales of office
supply products were perceived to be vulnerable to rising interest rates.
Our long-term outlook for Staples remains positive, though, and the Fund
still holds the stock.
"...good
values to be
found in
mid-cap
stocks..."
Outlook
The general market outlook, while somewhat clouded over the short term by
higher interest rates and uncertainty due to the Year 2000 phenomenon,
remains generally favorable. Although stronger-than-expected economic
growth raises the possibility of further hikes in interest rates, it may
also result in a broadening of investor interest beyond the narrow group of
growth stocks that have led the market higher for most of the past two
years. And despite the equity market's aversion to higher interest rates,
investors should remain reasonably happy if the Fed's actions maintain an
environment of stable growth with low inflation. The good values to be
found in mid-cap stocks, together with their minimal exposure to emerging
markets, bode well for these stocks in that kind of environment.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
----- -------
Cumulative Total Returns 7.65% 101.59%
Average Annual Total Returns(1) 7.65% 20.59%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 1.00% of the
Fund's average daily net assets. Without the limitation of expenses, the
total return for the one-year and since inception periods would have been
6.65% and 19.00%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in the John Hancock
Independence Medium Capitalization Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Callan Medium
Capitalization Index -- an unmanaged index that covers 25% of the Callan
Broad Market Index, with companies that range from approximately $1 billion
to $5 billion in capitalization. In addition, the Fund is compared to
Standard & Poor's MidCap 400 Index, an unmanaged capitalization-weighted
index that measures the performance of the mid-range sector of the U.S.
stock market. It consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation. For future reports the Adviser
has chosen to remove the Callan Medium Capitalization Index, but will
continue to compare the Fund's performance to the broad-based Standard &
Poor's MidCap 400 Index, which more closely represents the investment
strategy of the Fund.
[Line chart with the heading John Hancock Independence Medium Capitalization
Fund, representing the growth of a hypothetical $250,000 investment over the
life of the fund. Within the chart are three lines. The first line represents
the Standard & Poor's 400 MidCap Index and is equal to $481,006 as of August
31, 1999. The second line represents the Callan Medium Capitalization Index
and is equal to $473,161 as of August 31, 1999. The third line represents the
value of the hypothetical $250,000 investment made in the John Hancock
Independence Medium Capitalization Fund on October 2, 1995 and is equal to
$460,320 as of August 31, 1999.]
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENCE
INDEPENDENCE MEDIUM
INDEPENDENCE DIVERSIFIED CORE CAPITALIZATION
BALANCED FUND EQUITY FUND II FUND
------------- -------------- -----------
<S> <C> <C> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $38,497,354, $424,369,455 and $9,521,828, respectively) $47,911,892 $554,390,104 $10,771,827
Corporate bonds (cost - $13,269,900, none and none, respectively) 12,785,276 -- --
U.S. government and agencies securities
(cost - $17,566,811, none and none, respectively) 17,502,290 -- --
Joint repurchase agreement
(cost - $10,981,000, $4,392,000 and $157,000, respectively) 10,981,000 4,392,000 157,000
Corporate savings account 475 817 735
Cash 518,834 -- --
----------- ----------- -----------
89,699,767 558,782,921 10,929,562
Receivable for investments sold 1,156,421 409,191 428,420
Dividends receivable 49,607 647,062 14,464
Interest receivable 287,436 1,122 26
Deferred organization expenses - Note A 1,586 980 1,890
Other assets 3,109 37,364 622
----------- ----------- -----------
Total Assets 91,197,926 559,878,640 11,374,984
============================================================================================================================
Liabilities:
Payable for investments purchased 12,064,679 2,240,239 493,516
Payable for shares repurchased -- 242,742 --
Payable to John Hancock Advisers, Inc. and affiliates - Note B 59,643 318,187 7,887
Accounts payable and accrued expenses 52,871 37,332 21,882
----------- ----------- -----------
Total Liabilities 12,177,193 2,838,500 523,285
============================================================================================================================
Net Assets:
Capital paid-in 65,937,854 368,191,263 8,871,557
Accumulated net realized gain on investments 3,942,314 58,263,875 692,058
Net unrealized appreciation of investments 8,865,393 130,020,649 1,249,999
Undistributed net investment income 275,172 564,353 38,085
----------- ----------- -----------
Net Assets $79,020,733 $557,040,140 $10,851,699
============================================================================================================================
Net Asset Value Per Share:
(Based on 6,489,640, 33,891,800 and 872,029 shares, respectively,
of beneficial interest outstanding - unlimited number of shares
authorized with no par value) $12.18 $16.44 $12.44
============================================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and
shows the value of what the Fund owns, is due and owes as of August 31, 1999.
You'll also find the net asset value per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Six months ended August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENCE
INDEPENDENCE MEDIUM
INDEPENDENCE DIVERSIFIED CORE CAPITALIZATION
BALANCED FUND EQUITY FUND II FUND
------------- -------------- -----------
<S> <C> <C> <C>
Investment Income:
Interest $987,268 $115,833 $8,317
Dividends (net of foreign withholding tax of
$3,417, $44,432 and $593, respectively) 303,597 3,472,695 82,093
----------- ----------- -----------
1,290,865 3,588,528 90,410
----------- ----------- -----------
Expenses:
Investment management fee - Note B 289,200 1,430,779 45,644
Custodian fee 26,927 105,204 8,359
Transfer agent fee - Note B 20,657 143,078 2,853
Registration and filing fees 16,825 19,805 9,367
Auditing fee 12,719 13,698 8,044
Accounting and legal services fee - Note B 6,918 48,033 958
Printing 4,702 3,480 3,616
Miscellaneous 2,152 8,281 537
Trustees' fees 2,141 18,350 340
Organization expense - Note A 944 957 881
Legal fees 839 4,785 145
----------- ----------- -----------
Total Expenses 384,024 1,796,450 80,744
- ----------------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note B (11,837) -- (23,645)
- ----------------------------------------------------------------------------------------------------------------------------
Net Expenses 372,187 1,796,450 57,099
- ----------------------------------------------------------------------------------------------------------------------------
Net Investment Income 918,678 1,792,078 33,311
- ----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold 2,014,536 41,038,389 281,720
Change in net unrealized appreciation/depreciation of investments (681,050) (15,069,233) 24,874
----------- ----------- -----------
Net Realized and Unrealized Gain on Investments 1,333,486 25,969,156 306,594
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $2,252,164 $27,761,234 $339,905
============================================================================================================================
The Statement of Operations summarizes, for each of the Funds, the investment
income earned and expenses incurred in operating the Fund. It also shows net
gains for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
INDEPENDENCE INDEPENDENCE DIVERSIFIED
BALANCED FUND CORE EQUITY FUND II
---------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED) FEBRUARY 28, 1999 (UNAUDITED)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $1,768,480 $918,678 $4,155,133 $1,792,078
Net realized gain on investments sold 5,998,751 2,014,536 71,775,828 41,038,389
Change in net unrealized appreciation/depreciation
of investments 2,931,412 (681,050) 17,841,527 (15,069,233)
----------------- --------------- ---------------- ---------------
Net Increase in Net Assets from Operations 10,698,643 2,252,164 93,772,488 27,761,234
----------------- --------------- ---------------- ---------------
Distributions to Shareholders: *
Dividends from net investment income (1,883,494) (914,332) (4,534,833) (1,637,322)
Distributions from net realized gain on investments sold (4,942,695) -- (74,134,615) --
----------------- --------------- ---------------- ---------------
Total Distributions to Shareholders (6,826,189) (914,332) (78,669,448) (1,637,322)
----------------- --------------- ---------------- ---------------
From Fund Share Transactions: **
Shares sold 22,172,670 9,180,118 141,552,444 70,924,074
Shares issued to shareholders in reinvestment
of distributions 6,826,699 914,318 77,658,752 1,632,355
----------------- --------------- ---------------- ---------------
28,999,369 10,094,436 219,211,196 72,556,429
Less shares repurchased (27,019,194) (15,380,625) (254,111,398) (93,936,456)
----------------- --------------- ---------------- ---------------
Net Increase (Decrease) 1,980,175 (5,286,189) (34,900,202) (21,380,027)
----------------- --------------- ---------------- ---------------
Net Assets:
Beginning of period 77,116,461 82,969,090 572,093,417 552,296,255
----------------- --------------- ---------------- ---------------
End of period (including undistributed net investment
income of $270,826, $275,172, $409,597 and $564,353,
respectively) $82,969,090 $79,020,733 $552,296,255 $557,040,140
================= =============== ================ ===============
* Distributions to Shareholders
Per share dividends from net investment income $0.29 $0.14 $0.14 $0.05
----------------- --------------- ---------------- ---------------
Per share distributions from net realized gain
on investments sold $0.77 -- $2.39 --
----------------- --------------- ---------------- ---------------
**Analysis of Fund Share Transactions:
Shares sold 1,880,717 743,852 8,858,010 4,277,188
Shares issued to shareholders in reinvestment
of distributions 573,736 75,294 4,981,738 100,918
----------------- --------------- ---------------- ---------------
2,454,453 819,146 13,839,748 4,378,106
Less shares repurchased (2,286,756) (1,249,315) (15,920,888) (5,697,542)
----------------- --------------- ---------------- ---------------
Net Increase (Decrease) 167,697 (430,169) (2,081,140) (1,319,436)
----------------- --------------- ---------------- ---------------
The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the end of the previous period. The
difference reflects net investment income, any investment gains and losses,
distributions paid to shareholders and any increase or decrease in money
shareholders invested in each Fund. The footnotes illustrate the number of
Fund shares sold, reinvested and repurchased during the period, along with
the per share amount of distributions made to shareholders of each Fund for
the period indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------------
INDEPENDENCE MEDIUM
CAPITALIZATION FUND
----------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $60,605 $33,311
Net realized gain on investments sold 1,069,926 281,720
Change in net unrealized appreciation/depreciation of investments (1,128,728) 24,874
---------------- ---------------
Net Increase in Net Assets from Operations 1,803 339,905
---------------- ---------------
Distributions to Shareholders: *
Dividends from net investment income (63,104) --
Distributions from net realized gain on investments sold (958,878) --
---------------- ---------------
Total Distributions to Shareholders (1,021,982) --
---------------- ---------------
From Fund Share Transactions: **
Shares sold 3,319,841 1,490,553
Shares issued to shareholders in reinvestment of distributions 1,021,983 --
---------------- ---------------
4,341,824 1,490,553
Less shares repurchased (2,636,138) (1,386,042)
---------------- ---------------
Net Increase 1,705,686 104,511
---------------- ---------------
Net Assets:
Beginning of period 9,721,776 10,407,283
---------------- ---------------
End of period (including undistributed net investment
income of $4,774 and $38,085, respectively) $10,407,283 $10,851,699
================ ===============
* Distributions to Shareholders
Per share dividends from net investment income $0.09 --
---------------- ---------------
Per share distributions from net realized gain on investments sold $1.31 --
---------------- ---------------
**Analysis of Fund Share Transactions:
Shares sold 256,677 114,029
Shares issued to shareholders in reinvestment of distributions 84,531 --
---------------- ---------------
341,208 114,029
Less shares repurchased (207,351) (106,732)
---------------- ---------------
Net Increase 133,857 7,297
================ ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Balanced Fund
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout each period, total investment return, key ratios
and supplemental data.
PERIOD FROM JULY 6, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ------------------------ AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------------------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.25 $9.94 $11.42 $11.99
------ ------ ------ ------ ------
Net Investment Income (3) 0.25 0.38 0.38 0.26 0.14
Net Realized and Unrealized Gain on Investments 0.63 0.73 1.60 1.37 0.19
------ ------ ------ ------ ------
Total from Investment Operations 0.88 1.11 1.98 1.63 0.33
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (0.13) (0.34) (0.35) (0.29) (0.14)
Distributions from Net Realized Gain on Investments Sold -- (0.08) (0.15) (0.77) --
------ ------ ------ ------ ------
Total Distributions (0.13) (0.42) (0.50) (1.06) (0.14)
------ ------ ------ ------ ------
Net Asset Value, End of Period $9.25 $9.94 $11.42 $11.99 $12.18
====== ====== ====== ====== ======
Total Investment Return at Net Asset Value (6) 10.42%(2) 12.36% 20.44% 14.50% 2.72%(2)
Total Adjusted Investment Return at Net Asset Value (6,7) 7.36%(2) 11.62% 20.28% 14.45% 2.71%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $5,155 $13,093 $77,116 $82,969 $79.02
Ratio of Expenses to Average Net Assets 0.90%(1) 0.90% 0.90% 0.90% 0.90%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 5.58%(1) 1.64% 1.06% 0.95% 0.93%(1)
Ratio of Net Investment Income to Average Net Assets 3.96%(1) 3.96% 3.52% 2.26% 2.22%(1)
Ratio of Adjusted Net Investment Income (Loss)
to Average Net Assets (4,5) (0.72%)(1) 3.22% 3.36% 2.21% 2.19%(1)
Portfolio Turnover Rate 31% 149% 224% 158% 124%
Fee Reduction Per Share (3) $0.29 $0.07 $0.02 $0.01 $0.00(8)
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income
as a percentage of average net assets is expected to increase as the net assets of the Fund grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into consideration fee reductions by the Adviser during the
periods shown.
(8) Less than $0.01 per share.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income, gains
(losses), distributions and total investment return of each Fund. It shows
how the Fund's net asset value for a share has changed since the commencement
of operations. Additionally, important relationships between some items
presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Diversified Core Equity Fund II
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout each period, total investment return, key ratios
and supplemental data.
PERIOD FROM MARCH 10, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ------------------------ AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------------------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $10.96 $12.76 $15.34 $15.69
------ ------ ------ ------ ------
Net Investment Income (3) 0.20 0.20 0.17 0.12 0.05
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 2.38 2.23 3.91 2.76 0.75
------ ------ ------ ------ ------
Total from Investment Operations 2.58 2.43 4.08 2.88 0.80
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (0.11) (0.19) (0.17) (0.14) (0.05)
Distributions from Net Realized Gains on Investments Sold
and Foreign Currency Transactions (0.01) (0.44) (1.33) (2.39) --
------ ------ ------ ------ ------
Total Distributions (0.12) (0.63) (1.50) (2.53) (0.05)
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.96 $12.76 $15.34 $15.69 $16.44
====== ====== ====== ====== ======
Total Investment Return at Net Asset Value (6) 30.48%(2) 22.63% 33.61% 18.98% 5.09%(2)
Total Adjusted Investment Return at Net Asset Value (6,7) 30.42%(2) N/A N/A N/A N/A
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $188,679 $320,029 $572,093 $552,296 $557,040
Ratio of Expenses to Average Net Assets 0.70%(1) 0.67% 0.65% 0.63% 0.63%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 0.76%(1) N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net Assets 2.00%(1) 1.65% 1.12% 0.76% 0.63%(1)
Ratio of Adjusted Net Investment Income
to Average Net Assets (4,5) 1.94%(1) N/A N/A N/A N/A
Portfolio Turnover Rate 39% 81% 76% 55% 49%
Fee Reduction Per Share (3) $0.01 N/A N/A N/A N/A
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income
as a percentage of average net assets is expected to increase as the net assets of the Fund grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into consideration fee reductions by the Adviser during the
periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Medium Capitalization Fund
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout each period, total investment return, key ratios
and supplemental data.
PERIOD FROM OCTOBER 2, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ------------------------ AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------------------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.29 $10.45 $13.30 $12.04
------ ------ ------ ------ ------
Net Investment Income (3) 0.08 0.12 0.09 0.08 0.04
Net Realized and Unrealized Gain on Investments 0.74 1.45 3.69 0.06 0.36
------ ------ ------ ------ ------
Total from Investment Operations 0.82 1.57 3.78 0.14 0.40
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (0.03) (0.12) (0.09) (0.09) --
Distributions from Net Realized Gain on Investments Sold -- (0.29) (0.84) (1.31) --
------ ------ ------ ------ ------
Total Distributions (0.03) (0.41) (0.93) (1.40) --
------ ------ ------ ------ ------
Net Asset Value, End of Period $9.29 $10.45 $13.30 $12.04 $12.44
====== ====== ====== ====== ======
Total Investment Return at Net Asset Value (6) 9.71%(2) 17.19% 37.30% 0.96% 3.32%(2)
Total Adjusted Investment Return at Net Asset Value (6,7) 7.00%(2) 15.49% 36.94% 0.36% 3.11%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $3,923 $5,240 $9,722 $10,407 $10,852
Ratio of Expenses to Average Net Assets 1.00%(1) 1.00% 1.00% 1.00% 1.00%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 7.55%(1) 2.70% 1.36% 1.60% 1.41%(1)
Ratio of Net Investment Income to Average Net Assets 1.94%(1) 1.26% 0.75% 0.59% 0.58%(1)
Ratio of Adjusted Net Investment Income (Loss)
to Average Net Assets (4,5) (4.61%)(1) (0.44%) 0.39% (0.01%) 0.17%(1)
Portfolio Turnover Rate 3% 78% 65% 67% 50%
Fee Reduction Per Share (3) $0.26 $0.17 $0.04 $0.08 $0.03
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income
as a percentage of average net assets is expected to increase as the net assets of the Fund grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into consideration fee reductions by the Adviser during the
periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Balanced Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- -----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Independence Balanced Fund
on August 31, 1999. It's divided into four main categories: common stocks, corporate bonds, U.S. government
and agencies securities and short-term investments. The Common Stocks and Corporate Bonds are further broken
down by industry groups. Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Aerospace (2.29%)
General Dynamics Corp. 6,600 $415,800
Goodrich (B.F.) Co. (The) 12,600 465,413
Precision Castparts Corp. 4,500 159,750
United Technologies Corp. 11,600 767,050
--------------
1,808,013
--------------
Automobile / Trucks (1.36%)
Dana Corp. 3,600 156,825
Ford Motor Co. 14,000 729,750
Lear Corp.* 4,600 184,863
--------------
1,071,438
--------------
Banks - United States (3.02%)
AmSouth Bancorp. 12,000 262,500
Bank of America Corp. 7,700 465,850
Chase Manhattan Corp. 4,700 393,331
Comerica, Inc. 14,900 775,731
First Tennessee National Corp. 6,000 192,000
Mellon Bank Corp. 3,600 120,150
Wells Fargo Co. 4,400 175,175
--------------
2,384,737
--------------
Beverages (0.92%)
Anheuser-Busch Cos., Inc. 9,400 723,800
--------------
Building (1.56%)
Black & Decker Corp. (The) 9,700 510,463
Centex Corp. 4,100 115,313
Danaher Corp. 4,800 282,000
Georgia-Pacific Corp. 2,600 107,575
Masco Corp. 7,800 220,838
--------------
1,236,189
--------------
Chemicals (0.20%)
Grace (W. R.) & Co.* 8,400 160,650
--------------
Computers (7.77%)
America Online, Inc.* 7,500 684,844
Cadence Design Systems, Inc.* 3,500 47,688
Cisco Systems, Inc.* 17,400 1,179,938
Computer Associates International, Inc. 4,100 231,650
Dell Computer Corp.* 2,600 126,913
Hewlett-Packard Co. 3,700 389,888
Microsoft Corp.* 25,500 2,360,344
International Business Machines Corp. 9,000 1,121,063
--------------
6,142,328
--------------
Consumer Products (0.18%)
American Greetings Corp. (Class A) 5,100 141,206
--------------
Cosmetics & Personal Care (0.14%)
Avon Products, Inc. 2,500 109,688
--------------
Diversified Operations (2.87%)
AlliedSignal, Inc. 4,700 287,875
Monsanto Co. 14,500 595,406
Textron, Inc. 3,500 282,625
Tyco International Ltd. 10,900 1,104,306
--------------
2,270,212
--------------
Electronics (5.16%)
General Electric Co. 17,400 1,954,238
Honeywell, Inc. 3,200 363,200
Intel Corp. 20,000 1,643,750
Motorola, Inc. 1,300 119,925
--------------
4,081,113
--------------
Finance (2.28%)
Associates First Capital Corp. (Class A) 8,752 300,303
Citigroup, Inc. 29,850 1,326,459
MBNA Corp. 7,000 172,813
--------------
1,799,575
--------------
Food (1.14%)
Flowers Industries, Inc. 14,300 226,119
General Mills, Inc. 1,200 100,500
Heinz (H.J.) Co. 5,200 242,775
Quaker Oats Co. 5,000 334,063
--------------
903,457
--------------
Insurance (2.88%)
American International Group, Inc. 6,125 567,711
Equitable Companies, Inc. (The) 6,500 401,375
Hartford Financial Services Group, Inc. (The) 8,400 381,675
Hartford Life, Inc. (Class A) 2,800 121,625
Marsh & McLennan Cos., Inc. 7,900 575,219
Travelers Property Casualty Corp. (Class A) 6,400 227,200
--------------
2,274,805
--------------
Leisure (0.48%)
Mattel, Inc. 17,800 379,363
--------------
Machinery (0.85%)
Ingersoll-Rand Co. 10,600 674,425
--------------
Media (2.50%)
CBS Corp. 21,800 1,024,600
Clear Channel Communications, Inc.* 5,800 406,363
Time Warner, Inc. 7,200 427,050
Viacom, Inc. (Class B)* 2,800 117,775
--------------
1,975,788
--------------
Medical (6.32%)
Abbott Laboratories 14,100 611,586
Amgen Inc.* 7,600 632,225
Bristol-Myers Squibb Co. 7,100 499,663
Cardinal Health, Inc. 10,300 656,625
HEALTHSOUTH Corp.* 16,200 132,636
Johnson & Johnson 4,600 470,350
Lilly (Eli) & Co. 3,200 238,800
Lincare Holdings, Inc.* 5,500 145,063
Merck & Co., Inc. 11,400 765,936
Omnicare, Inc. 9,900 95,286
Schering-Plough Corp. 10,400 546,650
Warner-Lambert Co. 3,100 205,375
--------------
5,000,195
--------------
Mortgage Banking (0.97%)
Fannie Mae 12,300 764,138
--------------
Office (0.28%)
Reynolds & Reynolds Co. (The) (Class A) 10,100 220,938
--------------
Oil & Gas (2.19%)
Atlantic Richfield Co. 7,000 615,563
BP Amoco PLC ADR (United Kingdom) 1,200 134,550
El Paso Energy Corp. 3,500 127,969
Mobil Corp. 2,800 286,650
Royal Dutch Petroleum Co. (Netherlands) 9,100 563,063
--------------
1,727,795
--------------
Pollution Control (0.12%)
Allied Waste Industries, Inc.* 7,300 93,075
--------------
Retail (3.15%)
Dayton Hudson Corp. 3,400 197,200
Home Depot, Inc. (The) 12,400 757,950
Lowe's Cos., Inc. 6,200 280,550
Outback Steakhouse, Inc.* 5,700 168,863
Tandy Corp. 6,000 283,500
Wal-Mart Stores, Inc. 18,000 797,625
--------------
2,485,688
--------------
Soap & Cleaning Preparations (0.68%)
Proctor & Gamble Co. (The) 5,400 535,950
--------------
Telecommunications (4.09%)
Bell Atlantic Corp. 4,200 257,250
Lucent Technologies, Inc. 16,200 1,037,813
MCI WorldCom, Inc.* 17,000 1,287,750
Tellabs, Inc.* 10,900 649,231
--------------
3,232,044
--------------
Textile (0.57%)
Tommy Hilfiger Corp.* 13,200 447,975
--------------
Tobacco (1.05%)
Philip Morris Cos., Inc. 16,400 613,975
UST, Inc. 6,900 218,644
--------------
832,619
--------------
Transportation (1.53%)
Alaska Air Group, Inc.* 2,800 121,100
Burlington Northern Santa Fe Corp. 8,700 252,300
Delta Air Lines, Inc. 1,200 60,975
Kansas City Southern Industries, Inc. 7,300 338,081
Southwest Airlines Co. 9,300 155,194
UAL Corp.* 4,400 285,175
--------------
1,212,825
--------------
Utilities (4.08%)
Ameren Corp. 8,900 356,554
Ameritech Corp. 9,500 599,686
BellSouth Corp. 18,400 832,600
Dominion Resources, Inc. 3,800 175,750
Florida Progress Corp. 7,700 360,936
GTE Corp. 2,300 157,836
PECO Energy Co. 7,400 300,625
PG&E Corp. 6,200 187,938
Reliant Energy, Inc. 6,600 182,738
SBC Communications, Inc. 1,400 67,200
--------------
3,221,863
--------------
TOTAL COMMON STOCKS
(Cost $38,497,354) (60.63%) 47,911,892
--------------
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
- -------------------------- --------- -------- -------------- ----------
CORPORATE BONDS
Aerospace (0.52%)
Raytheon Co.,
Sr Note 11-01-03 5.700% BBB $430 $410,650
----------
Automobile/Trucks (0.50%)
Ford Motor Co.,
Bond 10-01-28 6.625 A 450 394,533
----------
Banks - United States (3.11%)
AmSouth Bancorp.,
Sub Note 03-01-09 6.125 BBB+ 800 738,200
Capital One Bank,
Sr Note 10-30-01 7.080 BBB- 600 599,712
PNC Funding Corp.,
Gtd Sub Note 09-01-03 6.125 BBB+ 490 469,763
Popular, Inc.,
Med Term Note Ser 3 04-30-01 6.200 N/A 650 650,000
----------
2,457,675
----------
Beverages (0.40%)
Coca-Cola Enterprises Inc.,
Deb 09-15-28 6.750 A+ 360 319,910
----------
Broker Services (0.63%)
Lehman Brothers Holdings, Inc.,
Med Term Note Ser E 03-15-01 6.375 A 200 199,190
Note 04-01-04 6.625 A 310 298,679
----------
497,869
----------
Computers (0.37%)
Comdisco, Inc.,
Note 04-30-02 5.950 BBB+ 300 289,167
----------
Diversified Operations (0.85%)
Tyco International Group S.A.,
Gtd Note (Luxembourg) 06-15-01, (Y) 6.125 A- 230 226,939
Gtd Bond (Luxembourg) 01-15-29, (Y) 6.875 A- 510 449,749
----------
676,688
----------
Finance (1.47%)
American General Finance Corp.,
Med Term Note Ser E 11-23-01 5.750 A+ 390 384,813
AT&T Capital Corp.,
Gtd Note Ser F 01-16-01 6.875 BBB 370 369,900
Green Tree Financial Corp.,
Pass Thru Ctf Ser 1997-6 Class A-5 01-15-29 6.680 AAA 410 409,615
----------
1,164,328
----------
Government - Foreign (0.69%)
Quebec, Province of,
Deb (Canada) 07-15-23, (Y) 7.500 A+ 550 548,427
----------
Media (0.38%)
Cox Communications, Inc.,
Note 08-15-01 7.000 A 300 299,673
----------
Mortgage Banking (3.29%)
AMRESCO Commercial Mortgage Funding I Corp.,
Mtg Pass Thru Ctf Ser 1997-C1 Class A3 06-17-29 7.190 AAA 348 354,194
Chase Commercial Mortgage Securities Corp.,
Commercial Pass Thru Ctf Ser 1997-1 Class A2 02-19-07 7.370 AAA 140 143,612
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1997-C1 Class A1C 04-20-07 7.240 AAA 580 583,248
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1999-2 Class A-2F 06-25-11 6.223 AAA 310 308,202
First Union Corp.,
Note 08-15-04 7.100 A 320 319,011
Merrill Lynch Mortgage Investors, Inc.,
Mtg Pass Thru Ctf Ser 1997-C1 Class A3 06-18-29 7.120 AAA 90 91,098
Money Store Trust (The),
Pass Thru Ctf Ser 1996-B Class A-7 02-15-20 7.550 AAA 430 432,688
Mortgage Capital Funding, Inc.,
Commercial Mtg Pass Thru Ctf Ser 1996-MC2 Class A1 12-21-26 6.758 Aaa 44 43,815
Residential Funding Mortgage Securities II, Inc.,
Home Loan Backed Notes Ser 1999-HI4 Class A-2 07-25-10 6.780 AAA 320 320,400
----------
2,596,268
----------
Oil & Gas (1.08%)
Conoco, Inc.,
Sr Note 04-15-04 5.900 A- 230 221,260
Williams Cos., Inc. (The),
Note 02-01-01 6.125 BBB- 640 635,059
----------
856,319
----------
Telecommunications (0.57%)
AT & T Corp.,
Note 03-15-29 6.500 AA- 275 242,369
Sprint Capital Corp.,
Note 11-15-28 6.875 BBB+ 230 205,712
----------
448,081
----------
Tobacco (0.51%)
Philip Morris Cos., Inc.,
Deb 05-15-02 7.625 A 190 192,738
Deb 10-15-03 8.250 A 200 207,578
----------
400,316
----------
Transportation (0.38%)
Norfolk Southern Corp.,
Bond 05-15-27 7.800 BBB+ 100 99,908
Southern Pacific Secured Assets Corp.,
Pass Thru Ctf Ser 1998-1 Class A-2 02-25-18 6.270 AAA 200 198,900
----------
298,808
----------
Utilities (1.43%)
Coastal Corp. (The),
Sr Note 09-15-02 8.125 BBB 300 308,733
K N Energy, Inc.,
Sr Note 11-30-01 6.450 BBB- 600 588,666
U.S. West Capital Funding, Inc.,
Note 08-15-01 (R) 6.875 A- 230 229,165
----------
1,126,564
----------
TOTAL CORPORATE BONDS
(Cost $13,269,900) (16.18%) 12,785,276
------- -----------
U.S. GOVERNMENT AND AGENCIES SECURITIES
Government - U.S. (6.53%)
United States Treasury,
Bond 02-15-02 5.250 AAA 2,950 2,580,336
Note 07-31-01 6.625 AAA 725 735,991
Note 10-31-01 6.250 AAA 830 837,653
Note 05-15-04 5.250 AAA 490 476,829
Note 08-15-04 7.250 AAA 500 526,015
----------
5,156,824
----------
Government - U.S. Agencies (15.62%)
Fannie Mae REMIC Trust,
Gtd REMIC Pass Thru Ctf SEr 1999-19 Class UD 04-25-12 6.000 AAA 370 368,964
CMO REMIC Ser 1998-36 Class PA 07-18-13 6.250 AAA 340 338,300
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 09-20-14*** 6.000 AAA 2,400 2,284,128
15 Yr Pass Thru Ctf 09-20-14*** 6.500 AAA 780 757,700
30 Yr Pass Thru Ctf 09-15-29*** 6.000 AAA 1,500 1,380,000
30 Yr Pass Thru Ctf 09-15-29 6.500 AAA 1,590 1,505,030
30 Yr Pass Thru Ctf 09-15-29*** 7.000 AAA 2,377 2,338,063
30 Yr Pass Thru Ctf 09-15-29*** 7.500 AAA 1,650 1,638,665
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 12-25-49 7.000 AAA 1,790 1,734,616
----------
12,345,466
----------
TOTAL U.S. GOVERNMENT AND AGENCIES SECURITIES
(Cost $17,566,811) (22.15%) 17,502,290
------- -----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (13.90%)
Investment in a joint repurchase agreement transaction with
Barclay's, Inc. - Dated 08-31-99, due 09-01-99
(Secured by U.S. Treasury Bonds, 5.250% thru 9.125%,
due 05-15-18 thru 11-15-28 and U.S. Treasury Notes, 4.500% thru
7.750%, due 09-30-00 thru 02-15-05) - Note A 5.440% $10,981 $10,981,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 475
Cash (0.66%) 518,834
-----------
TOTAL SHORT-TERM INVESTMENTS (14.55%) 11,500,309
------- -----------
TOTAL INVESTMENTS (113.51%) 89,699,767
------- -----------
OTHER ASSETS AND LIABILITIES, NET (13.51%) (10,679,034)
------- -----------
TOTAL NET ASSETS (100.00%) $79,020,733
======= ===========
* Non-income producing security.
** Credit ratings are rated by Moody's Investors Service or John
Hancock Advisers, Inc. where Standard and Poor's ratings are not
available.
*** These securities having an aggregate value of $8,398,556 or 10.63%
of the Fund's net assets, have been purchased on a when-issued basis.
The purchase price and the interest rate of such securities are fixed
at trade date, although the Fund does not earn any interest on such
securities until settlement date. The Fund has instructed its Custodian
Bank to segregate assets with a current value at least equal to the
amount of its when-issued commitments. Accordingly, the market value of
$8,436,888 of U.S. Treasury Note, 6.625%, due 7-31-01 and U.S. Treasury
Note, 6.250%, due 10-31-01 and Repurchase Agreement, 5.440%, due 9-01-
99 have been segregated to cover the when-issued commitments.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $229,165 or 0.29% of net
assets as of August 31, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Diversified Core Equity Fund II
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Independence
Diversified Core Equity Fund II on August 31, 1999. It's divided into two main categories:
common stocks and short-term investments. Common stocks are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Aerospace (3.76%)
General Dynamics Corp. 47,800 $3,011,400
Goodrich (B.F.) Co. (The) 95,900 3,542,306
Precision Castparts Corp. 53,600 1,902,800
United Technologies Corp. 189,000 12,497,625
--------------
20,954,131
--------------
Automobile / Trucks (2.42%)
Borg-Warner Automotive, Inc. 40,000 1,895,000
Ford Motor Co. 141,500 7,375,687
Lear Corp.* 72,800 2,925,650
Meritor Automotive, Inc. 59,400 1,295,663
--------------
13,492,000
--------------
Banks - United States (8.32%)
Bank of America Corp. 98,000 5,929,000
Chase Manhattan Corp. 102,800 8,603,075
Citigroup, Inc. 376,650 16,737,384
Comerica, Inc. 62,800 3,269,525
First Tennessee National Corp. 29,300 937,600
Mellon Bank Corp. 193,000 6,441,375
Wells Fargo Co. 111,000 4,419,187
--------------
46,337,146
--------------
Beverages (1.51%)
Anheuser-Busch Cos., Inc. 109,500 8,431,500
--------------
Building (3.15%)
Black & Decker Corp. (The) 113,700 5,983,462
Centex Corp. 46,900 1,319,063
Clayton Homes, Inc. 98,700 937,650
Danaher Corp. 78,500 4,611,875
Georgia-Pacific Group 65,700 2,718,338
Masco Corp. 69,700 1,973,381
--------------
17,543,769
--------------
Chemicals (0.55%)
Grace (W. R.) & Co.* 91,100 1,742,288
Solutia, Inc. 66,100 1,322,000
--------------
3,064,288
--------------
Computers (13.49%)
America Online, Inc.* 86,800 7,925,925
Cadence Design Systems, Inc.* 107,200 1,460,600
Cisco Systems, Inc.* 171,800 11,650,187
Computer Associates International, Inc. 58,800 3,322,200
Dell Computer Corp.* 75,400 3,680,463
Hewlett-Packard Co. 74,800 7,882,050
International Business Machines Corp. 91,900 11,447,294
Microsoft Corp.* 300,100 27,778,006
--------------
75,146,725
--------------
Consumer Products Miscellaneous (0.24%)
American Greetings Corp. (Class A) 48,300 1,337,306
--------------
Cosmetics & Personal Care (0.32%)
Avon Products, Inc. 40,600 1,781,325
--------------
Diversified Operations (5.33%)
AlliedSignal, Inc. 60,600 3,711,750
Monsanto Co. 204,400 8,393,175
National Service Industries, Inc. 31,900 1,020,800
Textron, Inc. 59,800 4,828,850
Tyco International Ltd. 115,900 11,742,119
--------------
29,696,694
--------------
Electronics (8.20%)
General Electric Co. 192,100 21,575,231
Honeywell, Inc. 39,600 4,494,600
Intel Corp. 220,600 18,130,562
PE Corp.-PE Biosystems Group 21,000 1,445,063
--------------
45,645,456
--------------
Finance (3.16%)
Associates First Capital Corp. (Class A) 114,582 3,931,595
Fannie Mae 154,900 9,623,162
MBNA Corp. 119,300 2,945,219
Morgan Stanley Dean Witter & Co. 12,800 1,098,400
--------------
17,598,376
--------------
Food (1.25%)
Heinz (H.J.) Co. 58,400 2,726,550
Quaker Oats Co. 63,600 4,249,275
--------------
6,975,825
--------------
Household (0.19%)
Premark International, Inc. 31,200 1,037,400
--------------
Insurance (5.05%)
American International Group, Inc. 49,000 4,541,687
Equitable Cos., Inc. (The) 70,100 4,328,675
Hartford Financial Services Group, Inc.
(The) 149,700 6,801,994
Hartford Life, Inc. (Class A) 48,200 2,093,687
Marsh & McLennan Cos., Inc. 108,400 7,892,875
Travelers Property Casualty Corp.
(Class A) 69,400 2,463,700
--------------
28,122,618
--------------
Leisure (0.84%)
Mattel, Inc. 218,800 4,663,175
--------------
Machinery (1.31%)
AK Steel Holding Corp. 51,700 1,085,700
Ingersoll-Rand Co. 97,800 6,222,525
--------------
7,308,225
--------------
Media (4.84%)
CBS Corp.* 230,200 10,819,400
Clear Channel Communications, Inc.* 79,500 5,569,969
Time Warner, Inc. 178,500 10,587,281
--------------
26,976,650
--------------
Medical (10.23%)
Abbott Laboratories 93,300 4,046,887
Amgen Inc.* 78,700 6,546,856
Bristol-Myers Squibb Co. 83,600 5,883,350
Cardinal Health, Inc. 84,100 5,361,375
HEALTHSOUTH Corp.* 124,000 1,015,250
Johnson & Johnson 24,400 2,494,900
Lilly (Eli) & Co. 59,600 4,447,650
Lincare Holdings, Inc.* 54,500 1,437,438
Merck & Co., Inc. 119,200 8,008,750
Mylan Laboratories, Inc. 67,600 1,339,325
Omnicare, Inc. 66,300 638,138
Pfizer, Inc. 153,300 5,787,075
Schering-Plough Corp. 149,500 7,858,094
Warner-Lambert Co. 32,200 2,133,250
--------------
56,998,338
--------------
Office (0.20%)
Reynolds & Reynolds Co. (The) (Class A) 51,400 1,124,375
--------------
Oil & Gas (3.62%)
Atlantic Richfield Co. 78,100 6,867,919
Royal Dutch Petroleum Co. (Netherlands) 186,900 11,564,437
Texaco, Inc. 27,200 1,727,200
--------------
20,159,556
--------------
Paper & Paper Products (0.18%)
Smurfit-Stone Container Corp.* 47,800 1,012,763
--------------
Retail (3.95%)
Dayton Hudson Corp. 55,100 3,195,800
Home Depot, Inc. (The) 89,100 5,446,237
Lowe's Cos., Inc. 65,600 2,968,400
Outback Steakhouse, Inc.* 33,600 995,400
Tandy Corp. 30,000 1,417,500
Wal-Mart Stores, Inc. 180,300 7,989,544
--------------
22,012,881
--------------
Soap & Cleaning Preparations (0.58%)
Procter & Gamble Co. (The) 32,300 3,205,775
--------------
Telecommunications (6.06%)
AT&T Corp. 13,500 607,500
Bell Atlantic Corp. 36,900 2,260,125
Lucent Technologies, Inc. 173,800 11,134,062
MCI WorldCom, Inc.* 182,700 13,839,525
Tellabs, Inc.* 99,600 5,932,425
--------------
33,773,637
--------------
Textile (0.70%)
Tommy Hilfiger Corp.* 89,200 3,027,225
WestPoint Stevens, Inc. 36,700 880,800
--------------
3,908,025
--------------
Tobacco (1.92%)
Philip Morris Cos., Inc. 184,000 6,888,500
UST, Inc. 120,000 3,802,500
--------------
10,691,000
--------------
Transportation (1.87%)
Airborne Freight Corp. 39,400 992,388
Alaska Air Group, Inc.* 44,000 1,903,000
Delta Air Lines, Inc. 19,900 1,011,169
Kansas City Southern Industries, Inc. 75,400 3,491,962
Northwest Airlines Corp. * 51,700 1,525,150
UAL Corp.* 23,200 1,503,650
--------------
10,427,319
--------------
Utilities (6.28%)
Ameren Corp. 75,400 3,020,713
Ameritech Corp. 127,200 8,029,500
BellSouth Corp. 158,700 7,181,175
Florida Progress Corp. 99,500 4,664,062
GTE Corp. 80,200 5,503,725
PECO Energy Co. 54,800 2,226,250
Reliant Energy, Inc. 65,400 1,810,763
Southern Co. (The) 93,400 2,527,638
--------------
34,963,826
--------------
TOTAL COMMON STOCK
(Cost $424,369,455) (99.52%) 554,390,104
--------------
INTEREST PAR VALUE
RATE (000S OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.79%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $4,392 4,392,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 817
--------------
TOTAL SHORT-TERM INVESTMENTS (0.79%) 4,392,817
-------- --------------
TOTAL INVESTMENTS (100.31%) 558,782,921
-------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.31%) (1,742,781
-------- --------------
TOTAL NET ASSETS (100.00%) $557,040,140
======== ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a
percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Medium Capitalization Fund
Schedule of Investments
August 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Independence Medium
Capitalization Fund on August 31, 1999. It is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
Advertising (1.82%)
Omnicom Group, Inc. 2,000 $150,750
WPP Group Plc, American Depositary
Receipts (ADR) (United Kingdom) 500 46,969
----------
197,719
----------
Aerospace (4.08%)
General Dynamics Corp. 1,900 119,700
Goodrich (B.F.) Co. (The) 2,400 88,650
Precision Castparts Corp. 1,200 42,600
United Technologies Corp. 2,902 191,895
----------
442,845
----------
Automobile / Trucks (2.28%)
Borg-Warner Automotive, Inc. 900 42,637
Dana Corp. 1,300 56,631
Lear Corp.* 1,400 56,263
Meritor Automotive, Inc. 2,100 45,806
Ryder System, Inc. 2,100 46,331
----------
247,668
----------
Banks - United States (8.21%)
AmSouth Bancorp. 4,600 100,625
Comerica, Inc. 3,000 156,187
Fifth Third Bancorp. 1,500 99,375
First Tennessee National Corp. 1,900 60,800
Fleet Financial Group, Inc. 1,800 71,662
Mellon Bank Corp. 3,000 100,125
Mercantile Bancorp., Inc. 700 38,631
Morgan (J.P.) & Co., Inc. 400 51,675
Northern Trust Corp. 1,200 101,775
State Street Corp. 800 47,900
U.S. Bancorp. 2,000 61,750
----------
890,505
----------
Building (5.31%)
Black & Decker Corp. (The) 2,700 142,087
Centex Corp. 1,600 45,000
Danaher Corp. 2,000 117,500
Georgia-Pacific Group. 800 33,100
Masco Corp. 2,800 79,275
Ryland Group, Inc. 1,800 43,312
Webb (Del E.) Corp. 2,400 52,200
Willamette Industries, Inc. 1,600 63,400
----------
575,874
----------
Chemicals (1.01%)
Grace (W. R.) & Co.* 1,700 32,512
Imperial Chemical Industries, Plc
(ADR) (United Kingdom) 900 41,175
Solutia, Inc. 1,800 36,000
----------
109,687
----------
Computers (3.40%)
Cadence Design Systems, Inc.* 11,600 158,050
Computer Associates International, Inc. 1,400 79,100
Computer Sciences Corp.* 700 48,431
Parametric Technology Corp.* 2,400 33,600
Policy Management Systems Corp.* 1,600 48,900
----------
368,081
----------
Consumer Products Miscellaneous (0.51%)
American Greetings Corp. (Class A) 2,000 55,375
----------
Cosmetics & Personal Care (1.32%)
Avon Products, Inc. 2,000 87,750
Dial Corp. (The) 2,000 55,500
----------
143,250
----------
Diversified Operations (2.44%)
Monsanto Co. 1,700 69,806
Ogden Corp. 2,300 52,325
Textron, Inc. 1,100 88,825
Viad Corp. 1,800 53,888
----------
264,844
----------
Electronics (11.21%)
Altera Corp.* 900 37,912
Analog Devices, Inc.* 4,700 242,050
Honeywell, Inc. 1,500 170,250
Jabil Circuit, Inc.* 2,700 120,994
Linear Technology Corp. 1,400 88,112
LSI Logic Corp.* 1,200 68,100
PE Corp.-PE Biosystems Group 1,600 110,100
Sanmina Corp.* 900 67,500
Teradyne, Inc.* 2,800 190,575
Thomas & Betts Corp. 1,100 49,500
Xilinx, Inc.* 1,000 69,938
----------
1,215,031
----------
Finance (2.75%)
Associates First Capital Corp. (Class A) 2,000 68,625
Charter One Financial, Inc. 1,900 44,472
Golden West Financial Corp. 800 72,650
Household International, Inc. 1,100 41,525
MBNA Corp. 2,900 71,594
----------
298,866
----------
Food (1.32%)
Flowers Industries, Inc. 2,300 36,368
Quaker Oats Co. 1,100 73,494
Universal Foods Corp. 1,600 33,800
----------
143,662
----------
Household (0.37%)
Premark International, Inc. 1,200 39,900
----------
Insurance (9.11%)
Equitable Cos., Inc. (The) 2,500 154,375
Hartford Financial Services Group, Inc.
(The) 3,400 154,488
Hartford Life, Inc. (Class A) 1,300 56,469
Lincoln National Corp. 2,800 131,250
Marsh & McLennan Cos., Inc. 2,700 196,594
PartnerRe Ltd. (Bermuda) 900 33,075
St. Paul Cos., Inc. 1,800 57,712
Travelers Property Casualty Corp.
(Class A) 3,100 110,050
UnumProvident Corp. 1,100 39,669
XL Capital, Ltd. (Class A) 1,100 55,344
----------
989,026
----------
Leisure (1.64%)
Hasbro, Inc. 2,100 51,319
Marriott International, Inc. (Class A) 1,100 37,675
Mattel, Inc. 4,200 89,512
----------
178,506
----------
Machinery (1.72%)
AK Steel Holding Corp. 1,900 39,900
Ingersoll-Rand Co. 2,300 146,338
----------
186,238
----------
Media (2.95%)
Clear Channel Communications, Inc.* 2,400 168,150
Knight-Ridder, Inc. 800 43,150
Viacom, Inc. (Class B)* 2,600 109,363
----------
320,663
----------
Medical (3.87%)
Bausch & Lomb, Inc. 600 39,637
Biogen, Inc.* 1,400 107,450
Cardinal Health, Inc. 2,500 159,375
Guidant Corp. 1,400 82,163
Lincare Holdings, Inc.* 1,200 31,650
----------
420,275
----------
Metal (0.85%)
Illinois Tool Works, Inc. 700 54,556
Ryerson Tull, Inc. 2,000 37,875
----------
92,431
----------
Office (2.11%)
Avery Dennison Corp. 1,800 98,775
Pitney Bowes, Inc. 800 47,200
Reynolds & Reynolds Co. (The) (Class A) 3,800 83,125
----------
229,100
----------
Oil & Gas (3.88%)
Anadarko Petroleum Corp. 1,600 54,400
Atlantic Richfield Co. 1,500 131,906
Conoco, Inc. (Class A) 5,900 157,825
El Paso Energy Corp. 2,100 76,781
----------
420,912
----------
Paper & Paper Products (0.53%)
Smurfit-Stone Container Corp.* 2,700 57,206
----------
Pollution Control (0.53%)
Allied Waste Industries, Inc.* 4,500 57,375
----------
Retail (6.36%)
Brinker International, Inc. 2,800 67,200
Dayton Hudson Corp. 1,000 58,000
Kmart Corp.* 4,000 50,250
Lowe's Cos., Inc. 1,600 72,400
May Department Stores Co. (The) 2,400 93,750
Outback Steakhouse, Inc.* 1,400 41,475
Staples, Inc.* 3,900 84,825
SYSCO Corp. 1,200 39,150
Tandy Corp. 2,100 99,225
TJX Cos., Inc. 2,900 83,738
----------
690,013
----------
Soap & Cleaning Preparations (0.46%)
Clorox Co. (The) 1,100 49,775
----------
Telecommunications (3.98%)
ADC Telecommunication, Inc 1200 44,085
Corning, Inc. 1,000 66,500
Nortel Networks Corp. (Canada) 1,000 41,062
Sprint Corp. (PCS Group) 700 41,825
Tellabs, Inc.* 4,000 238,250
----------
431,722
----------
Textile (1.23%)
Tommy Hilfiger Corp.* 2,600 88,238
WestPoint Stevens, Inc. 1,900 45,600
----------
133,838
----------
Tobacco (1.02%)
Universal Corp. 2,000 56,750
UST, Inc. 1,700 53,869
----------
110,619
----------
Transportation (5.36%)
Alaska Air Group, Inc.* 1,100 47,575
Burlington Northern Santa Fe Corp. 1,800 52,200
Delta Air Lines, Inc. 1,600 81,300
FDX Corp. * 1,300 55,169
Kansas City Southern Industries, Inc. 2,200 101,887
Southwest Airlines Co. 5,000 83,437
UAL Corp.* 900 58,331
Union Pacific Corp. 2,100 102,244
----------
582,143
----------
Utilities (7.64%)
Ameren Corp. 2,000 80,125
CMS Energy Corp. 1,100 43,519
Dominion Resources, Inc. 1,500 69,375
Edison International 1,300 32,988
Florida Progress Corp. 1,700 79,688
FPL Group, Inc. 1,500 81,000
LG&E Energy Corp. 2,300 52,900
Montana Power Co. 2,600 80,438
PECO Energy Co. 1,900 77,188
Reliant Energy, Inc. 2,900 80,294
Sempra Energy 3,500 78,094
Southern Co. (The) 2,700 73,069
----------
828,678
----------
TOTAL COMMON STOCKS
(Cost $9,521,828) (99.27%) 10,771,827
----------
INTEREST PAR VALUE MARKET
RATE (000S OMITTED) VALUE
-------- ----------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.45%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $157 157,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 735
------------
TOTAL SHORT-TERM INVESTMENTS (1.45%) 157,735
------------
TOTAL INVESTMENTS (100.72%) 10,929,562
------------
OTHER ASSETS AND LIABILITIES, NET (0.72%) (77,863)
------------
TOTAL NET ASSETS (100.00%) $10,851,699
======== ============
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a
percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Independence Balanced Fund ("Independence Balanced Fund"), John
Hancock Independence Diversified Core Equity Fund II ("Independence
Diversified Core Equity Fund II") and John Hancock Independence Medium
Capitalization Fund ("Independence Medium Capitalization Fund") (each, a
"Fund" and collectively, the "Funds"), are separate portfolios of John
Hancock Institutional Series Trust (the "Trust"), an open-end management
investment company registered under the Investment Company Act of 1940. The
Trust, organized as a Massachusetts business trust in 1994, consists of
eleven series portfolios: the Funds, John Hancock Active Bond Fund, John
Hancock Small Capitalization Value Fund, John Hancock Dividend Performers
Fund, John Hancock Medium Capitalization Growth Fund, John Hancock Small
Capitalization Growth Fund, John Hancock International Equity Fund, John
Hancock Core Growth Fund and John Hancock Core Value Fund. The other eight
series of the Trust are reported in separate financial statements. Prior to
July 1, 1999, John Hancock Medium Capitalization Growth Fund was known as
John Hancock Multi-Sector Growth Fund, John Hancock Core Growth Fund was
known as John Hancock Independence Growth Fund and John Hancock Core Value
Fund was known as John Hancock Independence Value Fund. Effective October 1,
1999, the Board of Trustees authorized the existing shares of Independence
Diversified Core Equity Fund II to be designated Class I shares and the
issuance of Class P shares, which will become available for sale to
individual investors at a later time. The investment objective of
Independence Balanced Fund and Independence Diversified Core Equity Fund II
is to seek above average total return consisting of capital appreciation and
income. The investment objective of Independence Medium Capitalization Fund
is to seek above-average total return. Each Fund had one class of shares at
August 31, 1999, with equal rights as to voting, redemption, dividends and
liquidation within their respective Fund. The Trustees may authorize the
creation of additional portfolios from time to time to satisfy various
investment objectives.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolios are valued on
the basis of market quotations, valuations provided by independent pricing
services or at fair value as determined in good faith in accordance with
procedures approved by the Trustees. Short-term debt investments maturing
within 60 days are valued at amortized cost which approximates market value.
All portfolio transactions initially expressed in terms of foreign currencies
have been translated into U.S. dollars as described in "Foreign Currency
Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial
Group, Inc., may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Funds' custodian bank receives delivery
of the underlying securities for the joint account on the Funds' behalf. The
Adviser is responsible for ensuring that the agreement is fully
collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date
of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Funds' policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of their taxable income, including net
realized gain on investments, to their shareholders. Therefore, no federal
income tax provisions are required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 Funds identify the dividend.
Interest income on investment securities is recorded on the accrual basis.
Foreign income may be subject to foreign withholding taxes, which are accrued
as applicable.
The Funds record all dividends and distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles.
DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust are directly identifiable
to an individual fund. Expenses, which are not readily identifiable to a
specific fund, will be allocated in such a manner as deemed equitable, taking
into consideration, among other things, the nature and type of expense and
the relative size of the funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Funds have been capitalized and are being charged to the Funds'
operations ratably over a five-year period that began with the commencement
of the investment operations of the Funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amount of assets, liabilities,
revenues and expenses of the Funds. Actual results could differ from these
estimates.
BANK BORROWINGS The Funds are permitted to have bank borrowings for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. Effective
March 12, 1999, the Funds entered into a syndicated line of credit agreement
with various banks and the agreements previously in effect were terminated.
This agreement enables the Funds to participate with other funds managed by
the Adviser in an unsecured line of credit with banks which permit borrowings
up to $500 million, collectively. Interest is charged to each fund, based on
its borrowing. In addition, a commitment fee is charged based on the average
daily unused portion of the line of credit and is allocated among the
participating funds. Independence Balanced Fund and Independence Diversified
Core Equity Fund II had no borrowing activity for the period ended August 31,
1999. The maximum loan balance for Independence Medium Capitalization Fund
during the period amounted to $1,550,000. The annualized interest rate
charged during the period ranged from 5.3125% to 6.0%. At August 31, 1999,
there were no outstanding borrowings.
SECURITIES LENDING The Funds may lend their securities to certain qualified
brokers who pay the Funds negotiated lender fees. These fees are included in
interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Funds may bear
risk of delay of the loaned securities in recovery or even loss of rights in
the collateral should the borrower of the securities fail financially. The
Funds had no lending activity for the period ended August 31, 1999.
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 Funds. 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 Funds do not isolate those portions 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
Funds' books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains or losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Funds pay a monthly
management fee to the Adviser, for a continuous investment program
equivalent, on an annual basis as follows:
FUND RATE
- ---- ----
Independence 0.70% of average daily net assets up to $500 million
Balanced Fund 0.65% of such assets in excess of $500 million
Independence 0.50% of average daily net assets
Diversified Core
Equity Fund II
Independence Medium 0.80% of average daily net assets up to $500 million
Capitalization Fund 0.75% of such assets in excess of $500 million
Effective October 1, 1999, the advisory fee on Independence Diversified Core
Equity Fund II's average net assets in excess of $1 billion will be 0.45%.
The Adviser is responsible for managing the Funds' investment business
affairs and overseeing the investment activities of Independence Investment
Associates, Inc. (the "Sub-Adviser"). The Adviser has a sub-investment
management contract with the Sub-Adviser, under which the Sub-Adviser,
subject to the review of the Trustees and the overall supervision of the
Adviser, provides the Funds with investment services and advice with respect
to investment transactions. The Adviser pays the Sub-Adviser a portion of its
advisory fee quarterly from each Fund as follows:
FUND RATE
- ---- ----
Independence 60% of the advisory fee payable on the Fund's
Balanced Fund average daily net assets
Independence 80% of the advisory fee payable on the Fund's
Diversified average daily net assets
Core Equity Fund II
Independence Medium 55% of the advisory fee payable on the Fund's
Capitalization Fund average daily net assets
Effective July 1, 1995, the Sub-Adviser has waived its fees until
further notice on Independence Medium Capitalization Fund.
The Adviser has agreed to limit the Funds' expenses further for institutional
class shares to the extent required to prevent expenses from exceeding: 0.90%
of Independence Balanced Fund's average daily net assets, 0.70% of
Independence Diversified Core Equity Fund II's average daily net assets and
1.00% of Independence Medium Capitalization Fund's average daily net assets.
Accordingly, for the period ended August 31, 1999, the reduction in the
Funds' expenses collectively with any additional amounts not borne by the
Funds by virtue of the expense limit amounted to $11,837 for Independence
Balanced Fund, none for Independence Diversified Core Equity Fund II and
$23,645 for Independence Medium Capitalization Fund. The Adviser reserves the
right to terminate this limitation in the future.
The Funds have a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
August 31, 1999, all sales of shares of beneficial interest were sold at net
asset value. The Funds pay all expenses of printing prospectuses and other
sales literature, all fees and expenses in connection with qualification as a
dealer in various states, and all other expenses in connection with the sale
and offering for sale of the shares of the Funds which have not been herein
specifically allocated to the Trust.
The Funds have a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned subsidiary of
John Hancock Mutual Life Insurance Company. The Funds pay Signature Services
a monthly transfer agent fee equivalent, on an annual basis, to 0.05% of the
Funds' average daily net asset value, plus certain out-of-pocket expenses.
The Funds have an agreement with the Adviser to perform
necessary tax, accounting and legal services for the Funds. The
compensation for the period was at an annual rate of less than 0.02% of the
average net assets of the Funds.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione are directors and officers of the Adviser, and/or its
affiliates as well as Trustees of the Funds. The compensation of unaffiliated
Trustees is borne by the Funds. The unaffiliated Trustees may elect to defer,
for tax purposes, their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Funds make investments into
other John Hancock funds, as applicable, to cover their liabilities for the
deferred compensation. Investments to cover the Funds' deferred compensation
liability are recorded on the Funds' books as an other asset. The deferred
compensation liability and the related other asset are always equal and are
marked to market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses.
NOTE C -
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, excluding short term
obligations, for the period ended August 31, 1999 were as follows:
PURCHASES PROCEEDS
--------- --------
Independence Balanced Fund
U.S. Government Securities $62,956,869 $72,611,406
Other Investments 35,517,125 31,046,786
Independence Diversified Core
Equity Fund II 272,147,213 292,166,509
Independence Medium
Capitalization Fund 5,714,679 5,411,116
At August 31, 1999 the cost (excluding the corporate savings account and
cash) and gross unrealized appreciation and depreciation in value of
investments owned by the Funds, as computed on a federal income tax basis,
were as follows:
GROSS GROSS NET
AGGREGATE UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
---- ------------ ------------ ------------
Independence
Balanced
Fund $80,330,550 $11,494,393 ($2,644,485) $8,849,908
Independence
Diversified
Core Equity
Fund II 428,942,381 152,756,632 (22,916,909) 129,839,723
Independence
Medium
Capitalizationn
Fund 9,686,849 1,838,689 (596,711) 1,241,978
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Institutional Series Trust. It may be used as sales literature when preceded
or accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
KI0SA 8/99
10/99
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Core Growth Fund
(formerly Independence Growth Fund)
AUGUST 31, 1999
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
CHAIRMAN'S MESSAGE
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the
champagne corks just yet. Rather, we are staying on the course that we set
more than two years ago to ensure that the transition to a new millennium
is a smooth one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the
world with a challenge: making sure that older computers, and any
equipment powered by computer chips, can properly read and process the
date "00" as 2000, not 1900. Much has been written about how the world
will weather the change. Some view it as a non-event, while others see the
potential for disruptions. How much disruption, and for how long, depends
on whom you talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with
our business partners and continuing to participate in industry testing.
We have also established additional contingency plans beyond our regular
ones to prepare for any challenges that the Year 2000 might present. In
the end, John Hancock will spend approximately $90-$95 million to ensure
we make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly newsletters is featuring articles
with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives for another copy. For your own peace of mind, we
also recommend that you save your 1999 statements, especially those you
receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although
we cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY COREEN KRAYSLER FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3-1/2" x 2-1/2" photo at bottom right side of page of John Hancock Core
Growth Fund. Caption below reads "Fund management team members (l-r): "Paul
McManus, John Montgomery and Coreen Kraysler."]
John Hancock
Core Growth Fund
As stock market broadens, growth sector posts solid results
On July 1, 1999, John Hancock Independence Growth Fund was renamed John
Hancock Core Growth Fund. The Fund -- which had previously been sold only
to institutional investors -- also opened for sale to individual
investors.
Good economic news both at home and overseas provided a positive backdrop
for U.S. stocks during the spring and summer, although intermittent
inflation concerns caused some volatility. With growing confidence in the
economy and corporate earnings growth, investors began venturing into less
well-known growth names, economically sensitive value stocks and
small-company stocks. These overlooked areas made a nice comeback, but
growth stocks still came out ahead overall. From February 28, 1999,
through August 31, 1999, the Russell 1000 Growth Index returned 7.57%,
compared to a 6.16% return for the Russell 1000 Value Index and a 7.32%
return for the Standard & Poor's 500 Index.
"Good
economic
news both at
home and
overseas
provided a
positive
backdrop..."
Short-term stumble
John Hancock Core Growth Fund's Class I shares returned 4.97% at net asset
value during the six months ended August 31, 1999. By comparison, the
average growth fund returned 7.61% for the same period, according to
Lipper, Inc.1 The Fund's Class A, Class B and Class C shares, which were
introduced on July 1, 1999, returned -4.02%, -4.02% and -4.02%,
respectively, at net asset value, from inception through August 31, 1999.
Keep in mind that your net asset value return will differ from the Fund's
if you were not invested for the exact same periods and did not reinvest
all distributions. See pages six and seven for historical performance
information.
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Microsoft 5.8%, the second is Intel 4.9%, the third Cisco Systems
4.3%, the fourth Schering-Plough 4.2% and the fifth Time Warner 3.9%. A note
below the table reads "As a percentage of net assets on August 31, 1999."]
"We do
in-depth
research on
the more
than 500
companies
we follow..."
The Fund, which buys stocks with strong earnings growth prospects that are
selling for relatively cheap prices, lost ground early in the reporting
period when a few stocks sank in the face of unanticipated problems. In
addition, we had a sizable stake in health care, which was one of the
weaker sectors this period. Despite lagging performance early on, the Fund
managed to keep pace with the market throughout the rest of the period.
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Tandy
followed by an up arrow with the phrase "Cell phone sales growth at Radio
Shack." The second listing is MCI WorldCom followed by a sideways arrow with
the phrase "Investor concerns over acquisition strategy." The third listing
is Waste Management followed by a down arrow with the phrase " Accounting
irregularities." A note below the table reads "See 'Schedule of Investments.'
Investment holdings are subject to change."]
Buy and sell discipline
We do in-depth research on the more than 500 companies we follow to
evaluate prospective earnings growth. We then feed this information into
proprietary computer models that rank the stocks from best to worst. The
Fund's portfolio reflects the best stocks from this list, while mirroring
the risk characteristics and industry weightings of the Russell 1000
Growth Index. We automatically sell any stocks that fall into the bottom
20 percent of the list, as well as stocks that seem headed in that
direction. During the period, we sold Compaq Computer when a slowdown in
European PC sales, strong competition from Dell and problems integrating
its acquistion of DEC hurt the company's prospects. We also eliminated our
stake in J.D. Edwards, a software company that specializes in enterprise
resource planning, as demand remained weak. Another sale was Waste
Management, which took a nosedive as accounting irregularities emerged at
the company, forcing the board to bring in new management. Unfortunately,
all these stocks hindered performance.
Strength in telecom and technology
Despite these disappointments, many investments turned in stellar results.
In particular, telecommunications equipment stocks continued to soar,
thanks to the huge explosion in voice, data and Internet traffic. Among
the stocks we owned were Tellabs, a dominant equipment provider with a
huge client base; Tyco International, which lays underseas fiber-optic
cable and Lucent Technologies, the leading equipment vendor in the United
States. We also took profits in Nortel, known for its strength in fiber
optics.
Many of our technology names also did well. Intel's stock posted hefty
gains during the period, thanks to good margins on its new xeon chip,
improved demand and continued cost cutting. Cisco Systems, the global
leader in networking for the Internet, also took off, as it prepared to
launch a next generation of equipment. Finally, top-holding Microsoft
turned in solid results as investors anticipated new product introductions
later this year.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 1% with -5% at the bottom and 8% at the
top. The first bar represents the 4.97% total return for John Hancock Core
Growth Fund Class I. The second bar represents the -4.02%* total return for
John Hancock Core Growth Fund Class A. The third bar represents the -4.02%*
total return for John Hancock Core Growth Fund Class B. The fourth bar
represents the -4.02%* total return for John Hancock Core Growth Fund Class
C. The fifth bar represents the 7.61% total return for Average growth fund. A
note below the chart reads "Total returns for John Hancock Core Growth Fund
are at net asset value with all distributions reinvested. The average growth
fund is tracked by Lipper, Inc.1 See the following two pages for historical
performance information. * From inception July 1, 1999 through August 31,
1999."]
New names in health care and media
In the health-care sector, changes in Medicare reimbursement policies
devastated stocks like Omnicare, a drug distributor that sells to nursing
homes, and HEALTHSOUTH, a nationwide rehabilitation chain whose stock we
sold. Late in the period, we began shifting our focus toward names that
are less vulnerable to government intervention. In the biotech area, we
added to our stake in Amgen, a drug company that's seeing strong growth
from its kidney dialysis medicine. We also bought Biogen, which has a
strong drug pipeline, and P.E. Biosystems Group, which makes
gene-sequencing machines for drug development. Schering-Plough, maker of
the highly successful Claritin drug, was another new acquisition. In the
media sector, we added Time Warner, whose stock fell on weakness in its
music business. We expect this to have little impact on the company's
earnings growth, given the breadth of its media and entertainment
operation. We also purchased CBS and Clear Channel Communications, leading
broadcasters that should benefit from rising prices for radio advertising.
Finally, we made a significant investment in America Online, which has the
best content on the Internet, a rapidly growing subscriber base and
exploding ad revenues.
"As investor
interest
continues to
expand, we
believe it will
benefit diver-
sified funds
like ours."
Still optimistic
Although the Fund had a rough time early in the period, we remain
optimistic. The factors that have favored growth stocks in recent years
are still in place -- moderate economic growth with low inflation and
strong consumer spending. Plus, we expect investor and consumer confidence
to remain strong, given that interest-rate increases appear largely to be
behind us. As investor interest continues to expand, we believe it will
benefit diversified funds like ours. Going forward, we'll stick with the
same disciplined investment approach with the intent of maintaining the
Fund's consistent track record.
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of course,
the team's views are subject to change as market and other conditions
warrant
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT PERFORMANCE
The table on the right shows the cumulative total returns and the average
annual total returns for the John Hancock Core Growth Fund. Total return
measures the change in value of an investment from the beginning to the end
of a period, assuming all distributions were reinvested.
Sales charge is not applicable for Class I* shares. Class A, Class B and
Class C shares became effective July 1, 1999 and do not have cumulative
total returns or average annual total returns as of June 30, 1999.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
* For certain institutional investors.
CLASS I
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- -------
Cumulative Total Returns 20.69% 155.52%
Average Annual Total Returns(1) 20.69% 28.47%
Note to Performance
(1) The Adviser has agreed to limit the Fund's Class I expenses (excluding
transfer agent fees) to 0.90% of the average daily net assets for Class I
shares. Without the limitation of expenses, the average total return for
the one-year and since inception periods for Class I shares would have
been 19.76% and 21.48%, respectively.
WHAT HAPPENED TO AN INVESTMENT IN THE FUND...
The chart on the right shows how much a $250,000 investment in the John
Hancock Core Growth Fund Class I shares (for certain institutional
investors) would be worth, assuming all distributions were reinvested for
the period indicated. For comparison, we've shown the same $250,000
investment in the Russell 1000 Growth Index -- an unmanaged capitalization
weighted price-only index, which is comprised of 1,000 of the largest
capitalized U.S.-domiciled companies whose common stock is traded on the
New York Stock Exchange. The securities in this index have a
greater-than-average growth orientation.
[Line chart with the heading John Hancock Core Growth Fund Class I,
representing the growth of a hypothetical $250,000 investment over the life of
the fund. Within the chart are two lines. The first line represents the
Russell 1000 Growth Index and is equal to $633,097 as of August 31, 1999. The
second line represents the value of the hypothetical $250,000 investment made
in the John Hancock Core Growth Fund, before sales charge, on October 2,
1995, and is equal to $618,901 as of August 31, 1999.]
Assuming all distributions were reinvested between July 1, 1999 and August
31, 1999, the chart below shows the value of a $10,000 investment in the
Fund's Class A, Class B and Class C shares, respectively. Performance of
the classes will vary based on the difference in sales charges paid by
shareholders investing in the different classes and the fee structure of
those classes. Past performance is not indicative of future results.
Class A Class B Class C
- ----------------------------------------------------------------------------
Inception Date 7/1/99 7/1/99 7/1/99
- ----------------------------------------------------------------------------
Without Sales Charge $9,598 $9,598 $9,598
- ----------------------------------------------------------------------------
With Maximum Sales Charge $9,120 $9,118 $9,502
- ----------------------------------------------------------------------------
Russell 1000 Growth Index $9,840 $9,840 $9,840
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance
sheet and shows the value of what the Fund owns, is due and
owes as of August 31, 1999. You'll also find the net asset value
per share as of that date.
Statement of Assets and Liabilities
August 31, 1999 (Unaudited)
- ------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $10,127,251) $11,737,213
Joint repurchase agreement (cost -$1,677,000) 1,677,000
Corporate savings account 21
-----------
13,414,234
Receivable for investments sold 26,188
Receivable for shares sold 297,550
Dividends receivable 4,570
Interest receivable 261
Deferred organization expense - Note A 1,890
Other assets 148
-----------
Total Assets 13,744,841
- ------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,531,071
Payable for shares repurchased 99,887
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 3,597
Accounts payable and accrued expenses 17,104
-----------
Total Liabilities 1,651,659
- ------------------------------------------------------------
Net Assets:
Capital paid-in 10,318,375
Accumulated net realized gain on
investments 168,854
Net unrealized appreciation of
investments 1,609,962
Distributions in excess of net
investment income (4,009)
-----------
Net Assets $12,093,182
============================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A* - $1,687,616/96,942 $17.41
============================================================
Class B* - $2,714,971/155,961 $17.41
============================================================
Class C* - $20,506/1,178 $17.41
============================================================
Class I** - $7,670,089/440,565 $17.41
============================================================
Maximum Offering Price Per Share***
Class A - ($17.41 x 105.26%) $18.33
============================================================
* Class A, Class B and Class C shares commenced operations on
July 1, 1999.
** Effective July 1, 1999, existing shares of the Fund were
designated Class I shares.
*** On single retail sales of less than $50,000. On sales of
$50,000 or more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows
net gains for the period stated.
Statement of Operations
Six months ended August 31, 1999 (Unaudited)
- ------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign
withholding taxes of $20) $28,096
Interest 6,614
-----------
34,710
-----------
Expenses:
Investment management fee - Note B 31,693
Distribution and service fee - Note B
Class A 179
Class B 835
Class C 2
Registration and filing fees 11,006
Auditing fee 6,787
Custodian fee 6,551
Printing 4,121
Transfer agent fee - Note B 1,981
Organizational expense - Note A 881
Accounting and legal services fee -
Note B 671
Trustees' fees 405
Miscellaneous 313
Legal fees 86
-----------
Total Expenses 65,511
- ------------------------------------------------------------
Less Expense Reductions - Note B (26,830)
- ------------------------------------------------------------
Net Expenses 38,681
- ------------------------------------------------------------
Net Investment Loss (3,971)
- ------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 432,867
Change in net unrealized
appreciation/depreciation of
investments (47,568)
-----------
Net Realized and Unrealized Gain
on Investments 385,299
- ------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $381,328
============================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $3,645 ($3,971)
Net realized gain on investments
sold 295,853 432,867
Change in net unrealized
appreciation/depreciation of
investments 922,438 (47,568)
----------- -----------
Net Increase in Net Assets
Resulting from Operations 1,221,936 381,328
----------- -----------
Distributions to Shareholders:
Dividends from net investment income
Class I*** - ($0.0108 and none per share, respectively) (4,291) --
Distributions in excess of net investment income
Class I*** - ($0.0047 and none per share, respectively) (1,769) --
Distributions from net realized gain on investments sold
Class I*** - ($0.6213 and $1.1000 per share, respectively) (243,704) (442,320)
----------- -----------
Total Distributions to Shareholders (249,764) (442,320)
----------- -----------
From Fund Share Transactions -
Net:* 2,276,910 4,299,597
----------- -----------
Net Assets:
Beginning of period 4,605,495 7,854,577
----------- -----------
End of period (including
distributions in excess of net
investment income of $38 and
$4,009, respectively) $7,854,577 $12,093,182
=========== ===========
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 period. The
difference reflects earnings less expenses, any investment gains and
losses, distributions paid to shareholders and any increase or decrease in
money shareholders invested in the Fund. The footnote illustrates the
number of Fund shares sold, reinvested and repurchased during the last two
periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED)
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A**
Shares sold -- -- 97,167 $1,692,363
Less shares repurchased -- -- (225) (3,818)
----------- ----------- ----------- -----------
Net increase -- -- 96,942 $1,688,545
----------- ----------- ----------- -----------
CLASS B**
Shares sold -- -- 161,614 $2,828,832
Less shares repurchased -- -- (5,653) (100,236)
----------- ----------- ----------- -----------
Net increase -- -- 155,961 $2,728,596
----------- ----------- ----------- -----------
CLASS C**
Shares sold -- -- 1,178 $21,075
----------- ----------- ----------- -----------
Net increase -- -- 1,178 $21,075
=========== =========== =========== ===========
CLASS I
Shares sold 227,978 $3,737,661 85,687 $1,540,531
Shares issued to shareholders in
reinvestment of distributions 14,225 249,790 25,815 442,204
----------- ----------- ----------- -----------
242,203 3,987,451 111,502 1,982,735
Less shares repurchased (106,691) (1,710,541) (115,961) (2,121,354)
----------- ----------- ----------- -----------
Net increase (decrease) 135,512 $2,276,910 (4,459) ($138,619)
=========== =========== =========== ===========
** Class A, Class B and Class C shares commenced operations on July 1, 1999.
*** Effective July 1, 1999, existing shares of the Fund were renamed Class I shares.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
The following tables include selected data for a share outstanding throughout each period,
total investment return, key ratios and supplemental data are listed as follows:
- ------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1999
(UNAUDITED)
--------
<S> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.00)(8)
Net Realized and Unrealized Loss on
Investments (0.73)
--------
Total from Investment Operations (0.73)
--------
Net Asset Value, End of Period $17.41
========
Total Investment Return at Net Asset Value (6) (4.02%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (4.13%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,688
Ratio of Expenses to Average Net Assets 1.25%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 1.93%(1)
Ratio of Net Investment Loss to Average Net Assets (0.19%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (0.87%)(1)
Portfolio Turnover Rate 45%
Fee Reduction Per Share (3) $0.02
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income, gains
(losses), dividends and total investment return of the Fund. Additionally,
important relationships between some items presented in the financial
statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1999
(UNAUDITED)
--------
<S> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.11)
Net Realized and Unrealized Loss on
Investments (0.62)
--------
Total from Investment Operations (0.73)
--------
Net Asset Value, End of Period $17.41
========
Total Investment Return at Net Asset Value (6) (4.02%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (4.13%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,715
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 2.63%(1)
Ratio of Net Investment Loss to Average Net Assets (0.87%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (1.55%)(1)
Portfolio Turnover Rate 45%
Fee Reduction Per Share (3) $0.02
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.01)
Net Realized and Unrealized Loss on
Investments (0.72)
--------
Total from Investment Operations (0.73)
--------
Net Asset Value, End of Period $17.41
========
Total Investment Return at Net Asset Value (6) (4.02%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (4.13%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $21
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net Assets (4,5) 2.63%(1)
Ratio of Net Investment Loss to Average Net Assets (0.72%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (1.40%)(1)
Portfolio Turnover Rate 45%
Fee reduction Per Share (3) $0.02
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 2, 1995 YEAR ENDED FEBRUARY 28, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ---------------------------------------- AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS I (9)
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.29 $11.01 $14.88 $17.65
-------- -------- -------- -------- --------
Net Investment Income (Loss)(3) 0.03 0.05 0.04 0.01 (0.00)(8)
Net Realized and Unrealized Gain on
Investments 0.81 2.16 4.34 3.40 0.86
-------- -------- -------- -------- --------
Total from Investment Operations 0.84 2.21 4.38 3.41 0.86
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.03) (0.04) (0.03) (0.02) --
Distributions in Excess of Net Investment
Income -- -- -- (0.00)(8) --
Distributions from Net Realized Gain on
Investments (0.02) (0.45) (0.48) (0.62) (1.10)
-------- -------- -------- -------- --------
Total Distributions (0.05) (0.49) (0.51) (0.64) (1.10)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.29 $11.01 $14.88 $17.65 $17.41
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (6) 9.94%(2) 24.19% 40.52% 22.92% 4.97%(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (5.63%)(2) 17.40% 37.95% 21.89% 4.63%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $549 $883 $4,605 $7,855 $7,670
Ratio of Expenses to Average Net Assets 0.95%(1) 0.95% 0.95% 0.95% 0.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 38.57%(1) 7.74% 3.52% 1.98% 1.63%(1)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.91%(1) 0.49% 0.34% 0.06% (0.05%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (36.71%)(1) (6.30%) (2.23%) (0.97%) (0.73%)(1)
Portfolio Turnover Rate 21% 142% 91% 54% 45%
Fee Reduction Per Share (3) $1.36 $0.68 $0.33 $0.17 $0.06
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as a
percentage of average net assets is expected to increase as the net assets of the Fund grow.
(6) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(7) An estimated total return calculation that does not take into consideration fee reductions by the Adviser during
the periods shown.
(8) Less than $0.01 per share
(9) Effective July 1, 1999, existing shares of the Fund were designated Class I shares.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Core Growth Fund
on August 31, 1999. It's divided into two main categories: common stocks and short-term investments.
Common stocks are further broken down by industry groups. Short-term investments, which represent
the Fund's "cash" position, are listed last.
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
- ------------------------------- ---------- ---------
<S> <C> <C>
COMMON STOCKS
Advertising (0.50%)
Omnicom Group, Inc. 800 $60,300
-----------
Aerospace (3.37%)
General Dynamics Corp. 3,400 214,200
Goodrich (B.F.) Co. (The) 1,300 48,019
United Technologies Corp. 2,200 145,475
-----------
407,694
-----------
Automobile/Trucks (1.53%)
Lear Corp.* 4,600 184,862
-----------
Banks - United States (0.26%)
Comerica, Inc. 600 31,237
-----------
Building (2.06%)
Black & Decker Corp. (The) 1,000 52,625
Centex Corp. 1,300 36,562
Clayton Homes, Inc. 1,125 10,687
Danaher Corp. 1,700 99,875
Georgia-Pacific Corp. 1,200 49,650
-----------
249,399
-----------
Computers (19.69%)
America Online, Inc.* 3,800 346,988
Cadence Design Systems, Inc.* 3,800 51,775
Cisco Systems, Inc.* 7,600 515,375
Computer Associates International, Inc. 2,500 141,250
Dell Computer Corp.* 5,600 273,350
EMC Corp.* 1,600 96,000
Hewlett-Packard Co. 1,700 179,138
International Business Machines Corp. 200 24,913
Microsoft Corp.* 7,600 703,476
Oracle Corp.* 1,100 40,150
Unisys Corp.* 200 8,600
-----------
2,381,015
-----------
Cosmetics & Personal Care (1.28%)
Avon Products, Inc. 2,700 118,462
Dial Corp. (The) 1,300 36,075
-----------
154,537
-----------
Diversified Operations (5.10%)
AlliedSignal, Inc. 1,400 85,750
Monsanto Co. 4,300 176,569
Textron, Inc. 500 40,375
Tyco International Ltd. 3,100 314,069
-----------
616,763
-----------
Electronics (11.83%)
Analog Devices, Inc.* 1,500 77,250
General Electric Co. 3,200 359,400
Honeywell, Inc. 500 56,750
Intel Corp. 7,200 591,750
Linear Technology Corp. 800 50,350
PE Corp.-PE Biosystems Group 400 27,525
Teradyne, Inc.* 2,000 136,125
Texas Instruments, Inc. 1,600 131,300
-----------
1,430,450
-----------
Finance (2.58%)
Associates First Capital Corp.
(Class A) 1,100 37,744
Citigroup, Inc. 5,100 226,631
MBNA Corp. 900 22,219
Morgan Stanley Dean Witter & Co. 300 25,744
-----------
312,338
-----------
Food (0.47%)
Flowers Industries, Inc. 1,900 30,044
Quaker Oats Co. 400 26,725
-----------
56,769
-----------
Insurance (2.34%)
Equitable Companies, Inc. (The) 2,500 154,375
Hartford Life, Inc. (Class A) 700 30,406
Marsh & McLennan Cos., Inc. 1,100 80,094
PartnerRe Ltd. (Bermuda) 500 18,375
-----------
283,250
-----------
Leisure (0.60%)
Mattel, Inc. 3,400 72,462
-----------
Machinery (0.37%)
Ingersoll-Rand Co. 700 44,537
-----------
Media (6.52%)
CBS Corp.* 3,100 145,700
Clear Channel Communications, Inc.* 2,400 168,150
Time Warner, Inc. 8,000 474,500
-----------
788,350
-----------
Medical (16.64%)
Abbott Laboratories 2,300 99,763
Amgen Inc.* 2,700 224,606
Baxter International, Inc. 900 60,356
Biogen, Inc.* 800 61,400
Bristol-Myers Squibb Co. 2,700 190,013
Guidant Corp.* 300 17,606
Johnson & Johnson 1,200 122,700
Lilly (Eli) & Co. 900 67,163
Lincare Holdings, Inc.* 800 21,100
Merck & Co., Inc. 2,700 181,406
Omnicare, Inc. 2,700 25,988
Pfizer, Inc. 6,500 245,375
Schering-Plough Corp. 9,700 509,856
Warner-Lambert Co. 2,800 185,500
-----------
2,012,832
-----------
Mortgage Banking (0.97%)
Fannie Mae 1,900 118,037
-----------
Office (1.08%)
Pitney Bowes, Inc. 1,800 106,200
Reynolds & Reynolds Co. (The)
(Class A) 1,100 24,062
-----------
130,262
-----------
Pollution Control (0.17%)
Allied Waste Industries, Inc.* 1,600 20,400
-----------
Retail (6.06%)
Brinker International, Inc.* 2,500 60,000
Dayton Hudson Corp. 1,100 63,800
Home Depot, Inc. (The) 3,400 207,825
Lowe's Cos., Inc. 1,300 58,825
Outback Steakhouse, Inc.* 1,700 50,363
Staples, Inc.* 300 6,525
SYSCO Corp. 1,200 39,150
Tandy Corp. 2,100 99,225
TJX Cos., Inc. (The) 2,800 80,850
Wal-Mart Stores, Inc. 1,500 66,469
-----------
733,032
-----------
Soap & Cleaning Preparations (0.57%)
Procter & Gamble Co. (The) 700 69,475
-----------
Telecommunications (8.53%)
ADC Telecommunications, Inc.* 3,300 122,306
Lucent Technologies, Inc. 5,500 352,344
MCI WorldCom, Inc.* 5,300 401,475
Sprint PCS* 600 35,850
Tellabs, Inc.* 2,000 119,125
-----------
1,031,100
-----------
Textile (1.94%)
Tommy Hilfiger Corp.* 6,900 234,169
-----------
Tobacco (1.86%)
Philip Morris Cos., Inc. 3,900 146,006
UST, Inc. 2,500 79,219
-----------
225,225
-----------
Transport (0.58%)
Burlington Northern Santa Fe Corp. 100 2,900
Kansas City Southern Industries, Inc. 1,300 60,206
Southwest Airlines Co. 400 6,675
-----------
69,781
-----------
Utilities (0.16%)
Ameritech Corp. 300 18,937
-----------
TOTAL COMMON STOCKS
(Cost $10,127,251) (97.06%) 11,737,213
------- -----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000S OMITTED) VALUE
- -------------------------------------- -------- ------------ -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (13.86%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 08-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.44% $1,677 $1,677,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 21
-----------
TOTAL SHORT-TERM INVESTMENTS (13.86%) 1,677,021
------- -----------
TOTAL INVESTMENTS (110.92%) 13,414,234
------- -----------
OTHER ASSETS AND LIABILITIES, NET (10.92%) (1,321,052)
------- -----------
TOTAL NET ASSETS (100.00%) $12,093,182
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Institutional Series Trust (the "Trust") is an open-end
management investment company registered under the Investment Company Act
of 1940. The Trust, organized as a Massachusetts business trust in 1994,
consists of eleven series portfolios: John Hancock Core Growth Fund ("the
Fund"), John Hancock Active Bond Fund, John Hancock Dividend Performers
Fund, John Hancock Medium Capitalization Growth Fund, John Hancock Small
Capitalization Growth Fund, John Hancock Small Capitalization Value Fund,
John Hancock International Equity Fund, John Hancock Independence Balanced
Fund, John Hancock Core Value Fund, John Hancock Independence Diversified
Core Equity Fund II and John Hancock Independence Medium Capitalization
Fund. Prior to July 1, 1999, John Hancock Core Value Fund was known as
John Hancock Independence Value Fund, John Hancock Core Growth Fund was
known as John Hancock Independence Growth Fund and John Hancock Medium
Capitalization Growth Fund was known as John Hancock Multi-Sector Growth
Fund. The other ten series of the Trust are reported in separate financial
statements. The investment objective of the Fund is to seek above-average
total return.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B, Class C and Class I shares.
Effective July 1, 1999, the Fund, which had previously been sold only to
institutional investors, also became available for sale to individual
investors. Existing shares of the Fund were designated Class I shares and
the Fund issued Class A, Class B, and Class C shares. The shares of each
class represent an interest in the same portfolio of investments of the
Fund and have equal rights to voting, redemptions, dividends and
liquidation, except that certain expenses, subject to the approval of the
Trustees, may be applied differently to each class of shares in accordance
with current regulation of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class, which bears
distribution and service expenses under terms of a distribution plan, have
exclusive right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund portfolio are valued on
the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value. All portfolio transactions initially expressed
in terms of foreign currencies have been translated into U.S. dollars as
described in "Foreign Currency Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more
repurchase agreements, whose underlying securities are obligations of the
U.S. government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the Fund's
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales
of investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal income
tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ
from generally accepted accounting principles. Dividends paid by the Fund
with respect to each class of shares will be calculated in the same
manner, at the same time and will be in the same amount, except for the
effect of expenses that may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the Fund level and allocated daily to
each class of shares based on the appropriate net assets of the respective
classes. Distribution and service fees, if any, are calculated daily at
the class level based on the appropriate net assets of each class and the
specific expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust were directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund will be allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporated
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Fund. Actual results
could have differed from these estimates.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization
of the Fund have been capitalized and are being charged to the Fund's
operations ratably over a five-year period that began with the
commencement of the investment operations of the Fund.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might required the untimely disposition of
securities. Effective March 12, 1999, the Fund entered into a syndicated
line of credit agreement with various banks and the agreements previously
in effect were terminated. This agreement enables the Fund to participate
with other funds managed by the Adviser in an unsecured line of credit
with banks, which permit borrowings up to $500 million, collectively.
Interest is charged to each fund based on its borrowing. In addition, a
commitment fee is charged based on the average daily unused portion of the
line of credit and is allocated among the participating funds. The Fund
had no borrowing activity for the period ended August 31, 1999.
SECURITIES LENDING The Fund may lead its securities to certain qualified
brokers who pay the Fund negotiated lender fees. These fees are included
in interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Fund may bear
risk of delay of the loaned securities in recovery or even loss of rights
in the collateral should the borrower of the securities fail financially.
The Fund had no lending activity for the period ended August 31, 1999.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Fund. Transactions
affecting statement of operations accounts and net realized gain/(loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities other than investments
in securities, resulting from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.80% of the first
$500,000,000 of the Fund's average daily net asset value and (b) 0.75% of
the Fund's average daily net asset value in excess of $500,000,000.
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of Independence
Investment Associates, Inc. (the "Sub-Adviser"). The Adviser has a
sub-investment management contract with the Sub-Adviser, under which the
Sub-Adviser, subject to the review of the Trustees and the overall
supervision of the Adviser, provides the Fund with investment services and
advice with respect to investment transactions, for which the Adviser pays
the Sub-Adviser 55% of the advisory fee payable on the Fund's average
daily net assets. Effective July 1, 1995, the Sub-Adviser has waived its
fees until further notice.
The Adviser has agreed to limit the Fund's expenses further to the extent
required to prevent expenses (not including the 12b-1 fee and the transfer
agent fee) from exceeding 0.90% of the Fund's average daily net assets.
Accordingly, for the period ended August 31, 1999, the reduction in the
Fund's expenses with any additional amounts not borne by the Fund by
virtue of the expense limit amounted to $26,830. The Adviser reserves the
right to terminate this limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
August 31, 1999, net sales charges received with regard to sales of Class
A shares amounted to $12,137. Out of this amount, $1,110 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, $5,146 was paid as sales commissions to unrelated broker-dealers
and $5,881 was paid as sales commissions to sales personnel of Signator
Investors, Inc. ("Signator Investors"), a related broker-dealer. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company
("JHMLICo"), is the indirect sole shareholder of Signator Investors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Proceeds from the CDSC are paid to JH Funds and are used in whole or in
part to defray its expenses related to providing distribution related
services to the Fund in connection with the sale of Class B shares. For
the period ended August 31, 1999, contingent deferred sales charges
amounted to $4,994.
Class C shares which are redeemed within one year of purchase will be
subject to a CDSC at a rate of 1.00% of the lesser of the current market
value at the time of redemption or the original purchase cost of the
shares being redeemed. Proceeds from the CDSC are paid to JH Funds and
are used in whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of
Class C shares. For the period ended August 31, 1999, there were no
contingent deferred sales charges.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A, Class B and Class C shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. Accordingly, the Fund will make
payments to JH Funds for distribution and service expenses at an annual
rate not to exceed 0.30% of Class A average daily net assets and 1.00% of
Class B and Class C average daily net assets to reimburse JH Funds for its
distribution and service costs. Up to a maximum of 0.25% of such payments
may be service fees as defined by the amended Rules of Fair Practice of
the National Association of Securities Dealers. Under the amended Rules
of Fair Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned subsidiary
of John Hancock Mutual Life Insurance Company (JHMLICo.) The Fund pays
Signature Services a monthly transfer agent fee equivalent, on an annual
basis, to 0.05% of its average daily net assets, plus certain
out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net assets
of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione are directors and/or officers of the Adviser,
and/or its affiliates as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may
elect to defer, for tax purposes, their receipt of this compensation under
the John Hancock Group of Funds Deferred Compensation Plan. The Fund
makes investments into other John Hancock funds, as applicable, to cover
their liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability are recorded on the Fund's books as
an other asset. The deferred compensation liability and the related other
asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investment as well as any unrealized
gains or losses.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of
the U.S. government and its agencies and short-term securities, during
the period ended August 31, 1999, aggregated $7,365,976 and $3,649,829,
respectively.
The cost of investments owned at August 31, 1999 (excluding the corporate
savings account) for federal income tax purposes was $11,804,817. Gross
unrealized appreciation and depreciation of investments aggregated
$2,043,009 and $433,613, respectively, resulting in net unrealized
appreciation of $1,609,396.
SHAREHOLDER MEETING (UNAUDITED)
On June 16, 1999, a special meeting of John Hancock Core Growth Fund was
held. The shareholders voted against the following proposal (votes in
parentheses):
To adopt a distribution plan providing for payments to John Hancock Funds,
Inc. ("JH Funds") to provide certain services to the Fund's shareholders
and to reimburse JH Funds for its expenses in connection with the sale of
fund shares (87,720 FOR, 115,974 AGAINST and 0 ABSTAINING).
NOTES
[This page intentionally left blank.]
NOTES
[This page intentionally left blank.]
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Core 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.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
790SA 8/99
10/99
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Core Value
Fund
(formerly Independence Value Fund)
AUGUST 31, 1999
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr llp
60 State Street
Boston, MA 02109
CHAIRMAN'S MESSAGE
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the
champagne corks just yet. Rather, we are staying on the course that we set
more than two years ago to ensure that the transition to a new millennium is
a smooth one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the world
with a challenge: making sure that older computers, and any equipment
powered by computer chips, can properly read and process the date "00" as
2000, not 1900. Much has been written about how the world will weather the
change. Some view it as a non-event, while others see the potential for
disruptions. How much disruption, and for how long, depends on whom you talk
to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer applications
and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with our
business partners and continuing to participate in industry testing. We
have also established additional contingency plans beyond our regular ones
to prepare for any challenges that the Year 2000 might present. In the end,
John Hancock will spend approximately $90-$95 million to ensure we make a
successful transition to the Year 2000.
Throughout 1999, each of our quarterly newsletters is featuring articles
with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives for another copy. For your own peace of mind, we
also recommend that you save your 1999 statements, especially those you
receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible.
Once that occurs, we will happily raise our glasses to toast the New Year,
future prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/S/EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN FORELLI FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3-1/2" x 2-1/2" photo at bottom right side of page of John Hancock Core
Value Fund. Caption below reads "Fund management team members (l-r): "Paul
McManus, John Forelli and John Montgomery."]
John Hancock
Core Value Fund
Value stocks briefly rebound, as corporate
earnings outlook improves
On July 1, 1999, John Hancock Independence Value Fund was renamed John
Hancock Core Value Fund. The Fund -- which had previously been sold only
to institutional investors -- also opened for sale to individual
investors.
Value stocks moved back into favor this past spring. Healthy U.S. economic
growth and a pick-up in demand overseas pointed toward strong corporate
earnings growth ahead. This gave investors the confidence to expand beyond a
select group of blue-chip growth names. Value stocks, which are often
economically sensitive, took off and briefly led the market. Throughout the
spring and summer, concerns about rising interest rates caused some
volatility, but the momentum continued. From February 28, 1999, through
August 31, 1999, the Russell 1000 Value Index returned 6.16%, falling just
short of the 7.32% return of the Standard & Poor's 500 index.
"The Fund
maintains a
balanced
approach
to value
investing..."
Fund performance
John Hancock Core Value Fund's Class A shares returned 4.35% at net asset
value during the same six-month period. By comparison, the average growth
and income fund returned 7.09%, according to Lipper, Inc.1 As of August 31,
1999, the Fund's Class B, Class C and Class I shares, which were introduced
on July 1, 1999, had returned -7.79%, -7.79%, and -7.72%, respectively, at
net asset value. Keep in mind that your net asset value return will differ
from these results if you were not invested for the exact same periods and
did not reinvest all distributions. For historical performance information,
please see pages six and seven.
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Citigroup 4.1%, the second is IBM 2.7%, the third Texaco 2.5%, the
fourth Time Warner 2.4% and the fifth Ford Motor Co. 2.3%. A note below the
table reads "As a percentage of net assets on August 31, 1999."]
"We cut back
on our
investments
in insurance,
health
services and
telephone
utilities..."
Strategy review
The Fund maintains a balanced approach to value investing, buying stocks
with both cheap prices and improving earnings prospects. This approach
caused the Fund to lag during a period when the market's abrupt shift from
growth to value gave the biggest boost short term to deep value stocks --
those that are the cheapest. Longer term, we believe value stocks with
improved earnings outlooks are more likely to retain their gains and
continue climbing. Our lower-than-average stakes in top-performing sectors
like energy, chemicals and metals also hindered performance, as did our
investments in weaker sectors like finance, utilities, health care and
transportation.
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Honeywell
followed by an up arrow with the phrase "Takeover by AlliedSignal." The
second listing is MCI WorldCom followed by a sideways arrow with the phrase
"Short-term concerns over acquisition strategy." The third listing is
Hartford Financial Services Group followed by a down arrow with the phrase
"Concerns about rising interest rates." A note below the table reads "See
'Schedule of Investments.' Investment holdings are subject to change."]
Stock-selection process explained
The Fund's in-depth stock selection process takes our analysts' estimates
for earnings growth and feeds them into a proprietary data base with models
that rank stocks from most to least attractive. Our aim is to choose the
best stocks from this list, while matching the Fund's risk characteristics
and industry weightings to those of the Russell 1000 Value Index.
Strong performers
Among our top performers recently were stocks that other companies
recognized as undervalued and agreed to buy. Both Honeywell, which will
merge with AlliedSignal, and Sundstrand, an aerospace company taken over by
United Technologies, posted gains in excess of 50% for the period. In
addition, our select energy investments -- including BP Amoco and Texaco --
rebounded as oil prices recovered. Several of our capital goods and retail
names also did exceptionally well. In particular, Ingersoll-Rand, an
industrial conglomerate, benefited from divesting itself of underperforming
assets and focusing on its better-return businesses. Tandy's stock price
rose as the company's Radio Shack stores expanded sales of cell phones and
Internet services. Our two largest investments -- Citigroup and IBM -- also
had great runs for the period, thanks to solid earnings outlooks at both
companies.
Weakness in finance and health
The Fund's stake in finance -- roughly 30% of net assets -- hurt performance
as investors overreacted to interest-rate concerns. Stocks like Bank of
America, Comerica, Hartford Financial Services Group and Equitable Cos. all
made little headway for the period. Health-services stocks also
disappointed, as investors worried that changes in Medicare reimbursement
policies would make the companies less profitable. This hurt firms like
HEALTHSOUTH, a nationwide rehabilitation chain; Lincare Holdings, a home
oxygen provider, and Omnicare, a drug distributor that sells to nursing
homes. In addition, telecommunications services stocks were weak. Our
largest holding in this area was MCI WorldCom, whose stock stalled as
investors second-guessed the company's acquisition plans. We remained
confident in the company's long-term strategy and added to our stake. Other
large investments that fell on hard times included General Dynamics, whose
stock price remained flat following a recent acquisition, and Ford Motor
Company, which was hit by interest-rate concerns.
[Bar chart at top of left hand column with heading "Fund Performance". Under
the heading is a note that reads "For the six months ended August 31, 1999."
The chart is scaled in increments of 2% with -8% at the bottom and 8% at the
top. The first bar represents the 4.35% total return for John Hancock Core
Value Fund Class A. The second bar represents the -7.79%* total return for
John Hancock Core Value Fund Class B. The third bar represents the -7.79%*
total return for John Hancock Core Value Fund Class C. The fourth bar
represents the -7.72%* total return for John Hancock Core Value Fund Class I.
The fifth bar represents the 7.09% total return for Average growth and income
fund. A note below the chart reads "Total returns for John Hancock Core Value
Fund are at net asset value with all distributions reinvested. The average
growth and income fund is tracked by Lipper, Inc.1 See the following two
pages for historical performance information. * From inception July 1, 1999
through August 31, 1999."]
Buying opportunities
We cut back on our investments in insurance, health services and telephone
utilities and added to more promising sectors. We bought Monsanto after its
merger with American Home Products fell through and environmental concerns
emerged about its new weed-killing technology. We believe the stock's
downturn is temporary, given strong reception for both the company's new
anti-arthritis drug and weed-killing product. We also bought Dow Chemical
and W.R. Grace, whose businesses should benefit as economies worldwide
improve. In the media area, we added Time Warner, which owns valuable cable
assets along with a worldwide media franchise, and CBS, whose radio and
billboard businesses should benefit from rising advertising prices. With the
improving outlook for energy prices, we also bought stock in oil companies
like Chevron, Exxon and Mobil.
"...focus on
large-
company
stocks that
are cheap
with improv-
ing earnings
prospects..."
Positive outlook
Accelerating global economic growth bodes well for economically sensitive
companies with business outside the United States. At home, we expect
healthy, but more moderate, U.S. economic growth to keep the lid on
inflation and interest rates -- a plus for stocks. Once it becomes apparent to
investors that the Federal Reserve has stopped raising interest rates, value
stocks could well resume leading the market. Over time, we believe our focus
on large-company stocks that are cheap with improving earnings prospects
will reward shareholders.
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. Of course, the team's
views are subject to change as market and other conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
A LOOK AT PERFORMANCE
The table on the right shows the cumulative total returns and the average
annual total returns for the John Hancock Core Value Fund. Total return
measures the change in value of an investment from the beginning to the end
of a period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Effective July 1, 1999, existing shares of the Fund were
designated as Class A shares and became available to individual investors.
Class B, Class C and Class I* shares became effective July 1, 1999 and do
not have cumulative total returns or average annual total returns as of June
30, 1999.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Please read your prospectus carefully before you invest or send money.
* For certain institutional investors.
CLASS A
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- -------
Cumulative Total Returns 7.53% 112.32%
Average Annual Total Returns(1) 7.53% 22.27%
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses (excluding 12b-1
and transfer agent fees) to 0.90% (until July 1, 2000) of the Fund's
average daily net assets. In addition, the Distributor will not impose
the Class A 12b-1 fee until July 1, 2000. Without the limitation of
expenses and the non-imposition of the 12b-1 fee, the average annual
total return for the one-year and since inception period for Class A
shares would have been 6.62% and 16.59%, respectively.
WHAT HAPPENED TO AN INVESTMENT IN THE FUND...
The chart on the right shows how much a $10,000 investment in the John
Hancock Core Value Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Russell 1000 Value Index -- an unmanaged
capitalization weighted price-only index, which is comprised of 1,000 of the
largest capitalized U.S.-domiciled companies whose common stock is traded on
the New York Stock Exchange. The securities in this index have a less than
average growth orientation.
[Line chart with the heading John Hancock Core Value 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
Russell 1000 Value Index and is equal to $21,391 as of August 31, 1999. The
second line represents the value of the hypothetical $10,000 investment made
in the John Hancock Core Value Fund on October 2, 1995, before sales charge,
and is equal to $20,819 as of August 31, 1999. The third line represents the
value of the same hypothetical investment made in the John Hancock Core Value
Fund, after sales charge, and is equal to $19,772 as of August 31, 1999.]
Assuming all distributions were reinvested between July 1, 1999 and August
31, 1999, the chart below shows the value of a $10,000 investment in the Fund's
Class B and Class C shares, and the value of a $250,000 investment in the
Fund's Class I shares. Performance of the classes will vary based on the
difference in sales charges paid by shareholders investing in the different
classes and the fee structure of those classes. Past performance is not
indicative of future results.
Class B Class C Class I
at $10,000 at $10,000 at $250,000
- ----------------------------------------------------------------
Inception Date 7/1/99 7/1/99 7/1/99
- ----------------------------------------------------------------
Without Sales Charge $9,221 $9,221 $232,804
- ----------------------------------------------------------------
With Maximum Sales Charge $8,760 $9,129 --
- ----------------------------------------------------------------
Russell 1000 Value Index $9,347 $9,347 $233,674
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes as of August 31,
1999. You'll also find the net asset value per share as of that date.
Statement of Assets and Liabilities
August 31, 1999 (Unaudited)
- ------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $9,468,279) $10,226,816
Joint repurchase agreement
(cost - $898,000) 898,000
Corporate savings account 903
-----------
11,125,719
Receivable for investments sold 38,518
Receivable for shares sold 133,169
Dividends receivable 14,147
Dividend reclaim receivable 8
Interest receivable 138
Deferred organization
expense - Note A 1,890
Other assets 273
-----------
Total Assets 11,313,862
- ------------------------------------------------------------
Liabilities:
Payable for investments purchased 788,657
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 2,565
Accounts payable and accrued expenses 19,253
-----------
Total Liabilities 810,475
- ------------------------------------------------------------
Net Assets:
Capital paid-in 9,570,468
Accumulated net realized
gain on investments 127,541
Net unrealized appreciation
of investments 758,537
Undistributed net investment income 46,841
-----------
Net Assets $10,503,387
============================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding -
unlimited number of shares authorized with
no par value)
Class A* - $8,131,423/660,277 $12.32
============================================================
Class B* - $1,797,485/145,993 $12.31
============================================================
Class C* - $37,180/3,020 $12.31
============================================================
Class I* - $537,299/43,628 $12.32
============================================================
Maximum Offering Price Per Share**
Class A - ($12.32 x 105.26%) $12.97
============================================================
* Effective July 1, 1999, existing shares of the Fund were designated Class A
shares and Class B, Class C and Class I shares commenced operations.
** On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned
and expenses incurred in operating the Fund. It also shows net gains for the
period stated.
Statement of Operations
Six months ended August 31, 1999 (Unaudited)
- ------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign
withholding taxes of $254) $67,841
Interest 4,901
-----------
72,742
-----------
Expenses:
Investment management fee -
Note B 30,885
Distribution and service fee - Note B
Class A 3,730
Class B 713
Class C 8
Registration and filing fees 10,063
Auditing fee 7,541
Custodian fee 7,199
Printing 3,960
Transfer agent fee - Note B 1,907
Organization expense - Note A 881
Accounting and legal
services fee - Note B 654
Trustees' fees 363
Miscellaneous 319
Legal fees 120
-----------
Total Expenses 68,343
- ------------------------------------------------------------
Less Expense Reductions - Note B (27,186)
- ------------------------------------------------------------
Less Class A Distribution
and Service Fee Reduction - Note B (3,730)
- ------------------------------------------------------------
Net Expenses 37,427
- ------------------------------------------------------------
Net Investment Income 35,315
- ------------------------------------------------------------
Realized and Unrealized Gain
on Investments:
Net realized gain on
investments sold 444,874
Change in net unrealized appreciation/
depreciation of investments (275,973)
-----------
Net Realized and Unrealized
Gain on Investments 168,901
- ------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $204,216
============================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED)
----------------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $69,714 $35,315
Net realized gain on investments sold 834,769 444,874
Change in net unrealized appreciation/
depreciation of investments (193,421) (275,973)
---------- ----------
Net Increase in Net Assets Resulting
from Operations 711,062 204,216
---------- ----------
Distributions to Shareholders:
Dividends from net investment income
Class A** - ($0.1785 and none
per share, respectively) (79,584) --
Distributions from net realized gain
on investments sold
Class A** - ($2.7712 and
$0.4400 per share, respectively) (1,235,864) (340,207)
---------- ----------
Total Distributions to Shareholders (1,315,448) (340,207)
---------- ----------
From Fund Share Transactions - Net:* (458,243) 3,954,647
---------- ----------
Net Assets:
Beginning of period 7,747,360 6,684,731
---------- ----------
End of period (including undistributed
net investment income of $11,526 and
$46,841, respectively) $6,684,731 $10,503,387
========== ==========
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 period. The difference
reflects net investment income, any investment gains and losses,
distributions paid to shareholders and any increase or decrease in money
shareholders invested in the Fund. The footnotes illustrate the number of
Fund shares sold, reinvested and repurchased during the period, along with
the per share amount of distributions made to shareholders of the Fund for
the period indicated.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 1999
FEBRUARY 28, 1999 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CLASS A*
Shares sold 106,470 $1,518,766 173,733 $2,226,936
Shares issued to shareholders
in reinvestment of distributions 106,255 1,315,448 26,595 340,151
---------- ---------- ---------- ----------
212,725 2,834,214 200,328 2,567,087
Less shares repurchased (228,113) (3,292,457) (80,808) (1,071,412)
---------- ---------- ---------- ----------
Net increase (decrease) (15,388) ($458,243) 119,520 $1,495,675
========== ========== ========== ==========
CLASS B*
Shares sold -- -- 145,993 $1,839,574
---------- ---------- ---------- ----------
Net increase -- -- 145,993 $1,839,574
========== ========== ========== ==========
CLASS C*
Shares sold -- -- 3,020 $38,225
---------- ---------- ---------- ----------
Net increase -- -- 3,020 $38,225
========== ========== ========== ==========
CLASS I*
Shares sold -- -- 43,628 $581,173
---------- ---------- ---------- ----------
Net increase -- -- 43,628 $581,173
========== ========== ========== ==========
* Effective July 1, 1999, existing shares of the Fund were designated Class A shares and Class B,
Class C and Class I shares commenced operations.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout each period, total investment return, key ratios
and supplemental data are listed as follows:
PERIOD FROM OCTOBER 2, 1995 SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) YEAR ENDED FEBRUARY 28, AUGUST 31, 1999
TO FEBRUARY 29, 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A(8)
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.47 $10.88 $13.93 $12.36
-------- -------- -------- -------- --------
Net Investment Income (3) 0.10 0.23 0.21 0.15 0.06
Net Realized and Unrealized
Gain on Investments 0.96 1.77 3.33 1.23 0.34
-------- -------- -------- -------- --------
Total from Investment Operations 1.06 2.00 3.54 1.38 0.40
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.09) (0.19) (0.13) (0.18) --
Distributions from Net Realized
Gain on Investments Sold -- (0.40) (0.36) (2.77) (0.44)
-------- -------- -------- -------- --------
Total Distributions (0.09) (0.59) (0.49) (2.95) (0.44)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.47 $10.88 $13.93 $12.36 $12.32
======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value (6) 12.52%(2) 21.36% 32.97% 9.87% 4.35%(2)
Total Adjusted Investment
Return at Net Asset Value (6,7) (1.18%)(2) 15.92% 32.02% 8.94% 3.95%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $682 $1,323 $7,747 $6,685 $8,131
Ratio of Expenses to Average
Net Assets 0.95%(1) 0.95% 0.95% 0.95% 0.95%(1)
Ratio of Adjusted Expenses to
Average Net Assets (4,5) 34.06%(1) 6.39% 1.90% 1.88% 1.75%(1)
Ratio of Net Investment Income
to Average Net Assets 2.81%(1) 2.26% 1.60% 1.03% 0.93%(1)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (4,5) (30.30%)(1) (3.18%) 0.65% 0.10% 0.13%(1)
Portfolio Turnover Rate 12% 66% 119% 61% 44%
Fee Reduction Per Share (3) $1.22 $0.55 $0.12 $0.13 $0.05
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated: net
investment income, gains (losses), dividends and total investment return of the Fund. It shows how the Fund's net asset value
for a share has changed since the end of the previous period. Additionally, important relationships between some items presented
in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1999
(UNAUDITED)
--------
<S> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.00(9)
Net Realized and Unrealized
Loss on Investments (1.04)
--------
Total from Investment Operations (1.04)
--------
Net Asset Value, End of Period $12.31
========
Total Investment Return at Net
Asset Value (6) (7.79%)(2)
Total Adjusted Investment
Return at Net Asset Value (6,7) (7.91%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,797
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to
Average Net Assets (4,5) 2.65%(1)
Ratio of Net Investment Income
to Average Net Assets 0.33%(1)
Ratio of Adjusted Net
Investment Loss to Average Net Assets (4,5) (0.37%)(1)
Portfolio Turnover Rate 44%
Fee Reduction Per Share (3) $0.01
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.00(9)
Net Realized and Unrealized
Loss on Investments (1.04)
--------
Total from Investment Operations (1.04)
--------
Net Asset Value, End of Period $12.31
========
Total Investment Return at Net
Asset Value (6) (7.79%)(2)
Total Adjusted Investment
Return at Net Asset Value (6,7) (7.91%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $37
Ratio of Expenses to Average
Net Assets 1.95%(1)
Ratio of Adjusted Expenses to
Average Net Assets (4,5) 2.65%(1)
Ratio of Net Investment Income
to Average Net Assets 0.46%(1)
Ratio of Adjusted Net
Investment Loss to Average Net Assets (4,5) (0.24%)(1)
Portfolio Turnover Rate 44%
Fee Reduction Per Share (3) $0.01
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1999
(UNAUDITED)
--------
<S> <C>
CLASS I
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.03
Net Realized and Unrealized
Loss on Investments (1.06)
--------
Total from Investment Operations (1.03)
--------
Net Asset Value, End of Period $12.32
========
Total Investment Return at Net
Asset Value (6) (7.72%)(2)
Total Adjusted Investment
Return at Net Asset Value (6,7) (7.84%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $537
Ratio of Expenses to Average Net Assets 0.95%(1)
Ratio of Adjusted Expenses to
Average Net Assets (4,5) 1.65%(1)
Ratio of Net Investment Income
to Average Net Assets 0.84%(1)
Ratio of Adjusted Net
Investment Income to Average Net Assets (4,5) 0.14%(1)
Portfolio Turnover Rate 44%
Fee Reduction Per Share (3) $0.01
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted
net investment income as a percentage of average net assets is expected to increase as the net
assets of the Fund grow.
(6) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(7) An estimated total return calculation that does not take into consideration fee reductions
by the Adviser during the periods shown.
(8) Effective July 1, 1999, existing shares of the Fund were designated Class A shares. The Fund
which had previously only been sold to institutional investors, also became available for sale to
individual investors.
(9) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Core Value Fund on
August 31, 1999. It's divided into two main categories: common stocks and short-term investments.
Common stocks are further broken down by industry group. Short-term investments, which represent
the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- --------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS
Aerospace (4.31%)
General Dynamics Corp. 3,300 $207,900
Goodrich (B.F.) Co. (The) 2,000 73,875
United Technologies Corp. 2,579 170,536
-----------
452,311
-----------
Automobile/Trucks (3.45%)
Borg-Warner Automotive, Inc. 400 18,950
Dana Corp. 500 21,781
Ford Motor Co. 4,700 244,987
Lear Corp.* 1,100 44,206
Meritor Automotive, Inc. 1,500 32,719
-----------
362,643
-----------
Banks - United States (15.09%)
AmSouth Bancorp. 7,900 172,812
Bank of America Corp. 3,800 229,900
Bank of New York Co., Inc. 1,400 50,050
Chase Manhattan Corp. 2,200 184,112
Citigroup, Inc. 9,600 426,600
Comerica, Inc. 1,600 83,300
First Tennessee National Corp. 600 19,200
First Union Corp. 1,100 45,650
Fleet Financial Group, Inc. 1,500 59,719
KeyCorp. 3,900 113,100
Mellon Bank Corp. 1,600 53,400
Wells Fargo Co. 3,700 147,306
-----------
1,585,149
-----------
Beverages (0.29%)
Anheuser-Busch Cos., Inc. 400 30,800
-----------
Broker Services (0.21%)
Merrill Lynch & Co., Inc. 300 22,388
-----------
Building (3.22%)
Black & Decker Corp. (The) 1,800 94,725
Centex Corp. 600 16,875
Danaher Corp. 900 52,875
Fleetwood Enterprises, Inc. 800 16,300
Georgia-Pacific Group 1,300 53,788
Masco Corp. 1,200 33,975
Ryland Group, Inc. 1,000 24,063
Webb (Del E.) Corp. 1,200 26,100
Willamette Industries, Inc. 500 19,813
-----------
338,514
-----------
Chemicals (1.28%)
Dow Chemical Co. (The) 700 79,537
Grace (W. R.) & Co.* 1,200 22,950
Solutia, Inc. 1,600 32,000
-----------
134,487
-----------
Computers (4.14%)
Cadence Design Systems, Inc.* 1,800 24,525
Computer Associates International, Inc. 700 39,550
Hewlett-Packard Co. 800 84,300
International Business Machines
Corp. 2,300 286,494
-----------
434,869
-----------
Consumer Products Miscellaneous (0.40%)
American Greetings Corp. (Class A) 1,500 41,531
-----------
Diversified Operations (5.22%)
Johnson Controls, Inc. 300 20,513
Monsanto Co. 4,200 172,462
National Service Industries, Inc. 900 28,800
Ogden Corp. 1,300 29,575
Textron, Inc. 1,800 145,350
Tyco International Ltd. 1,500 151,969
-----------
548,669
-----------
Electronics (2.05%)
Honeywell, Inc. 1,200 136,200
Teradyne, Inc.* 900 61,256
Thomas & Betts Corp. 400 18,000
-----------
215,456
-----------
Finance (3.74%)
Associates First Capital Corp.
(Class A) 1,800 $61,763
Charter One Financial, Inc. 3,100 72,560
Fannie Mae 1,500 93,187
Golden West Financial Corp. 600 54,488
Household International, Inc. 900 33,975
Morgan Stanley Dean Witter & Co. 900 77,231
-----------
393,204
-----------
Food (0.69%)
Flowers Industries, Inc. 1,200 18,975
Quaker Oats Co. 800 53,450
-----------
72,425
-----------
Household (0.35%)
Premark International, Inc. 1,100 36,575
-----------
Insurance (9.10%)
Allstate Corp. (The) 300 9,844
American General Corp. 1,700 120,700
American International Group, Inc. 1,125 104,273
Aon Corp. 1,200 40,050
Equitable Cos., Inc. (The) 2,600 160,550
Hartford Financial Services Group, Inc. (The) 2,400 109,050
Hartford Life, Inc. (Class A) 600 26,063
Lincoln National Corp. 1,000 46,875
Marsh & McLennan Cos., Inc. 1,550 112,859
PartnerRe Ltd. (Bermuda) 400 14,700
Travelers Property Casualty Corp.
(Class A) 1,400 49,700
XL Capital, Ltd. (Class A) 3,200 161,000
-----------
955,664
-----------
Leisure (0.63%)
Mattel, Inc. 3,100 66,069
-----------
Machinery (1.27%)
Ingersoll-Rand Co. 2,100 133,612
-----------
Media (4.70%)
CBS Corp. * 4,000 188,000
Clear Channel Communications, Inc.* 800 56,050
Time Warner, Inc. 4,200 249,112
-----------
493,162
-----------
Medical (1.89%)
Baxter International, Inc. 1,500 100,594
Cardinal Health, Inc. 1,200 76,500
Lincare Holdings, Inc.* 800 21,100
-----------
198,194
-----------
Metal (0.33%)
Ryerson Tull, Inc. 1,800 34,088
-----------
Office (0.97%)
Avery Dennison Corp. 600 32,925
Pitney Bowes, Inc. 900 53,100
Reynolds & Reynolds Co. (The)
(Class A) 700 15,313
-----------
101,338
-----------
Oil & Gas (10.14%)
Atlantic Richfield Co. 2,400 211,050
BP Amoco Plc, American Depositary
Receipts (ADR) (United Kingdom) 600 67,275
Chevron Corp. 1,600 147,600
El Paso Energy Corp. 1,000 36,563
Exxon Corp. 1,800 141,975
Mobil Corp. 700 71,662
Royal Dutch Petroleum Co.
(Netherlands) 1,400 86,625
Sunoco, Inc. 1,300 42,331
Texaco, Inc. 4,100 260,350
-----------
1,065,431
-----------
Paper & Paper Products (1.11%)
Kimberly-Clark Corp. 1,600 91,100
Smurfit-Stone Container Corp.* 1,200 25,425
-----------
116,525
-----------
Pollution Control (0.11%)
Allied Waste Industries, Inc.* 900 11,475
-----------
Retail (1.44%)
Brinker International, Inc. * 2,600 62,400
May Department Stores Co. (The) 600 23,438
Outback Steakhouse, Inc.* 600 17,775
Tandy Corp. 400 18,900
TJX Cos., Inc. 1,000 28,875
-----------
151,388
-----------
Telecommunications (5.91%)
AT&T Corp. 3,100 139,500
Bell Atlantic Corp. 1,600 98,000
MCI WorldCom, Inc.* 2,800 212,100
Nortel Networks Corp. (Canada) 800 32,850
Sprint Corp. (FON Group) 1,200 53,250
Sprint Corp. (PCS Group) 900 53,775
US WEST, Inc. 600 31,350
-----------
620,825
-----------
Textile (0.85%)
Tommy Hilfiger Corp.* 2,000 67,875
WestPoint Stevens, Inc. 900 21,600
-----------
89,475
-----------
Tobacco (1.99%)
Philip Morris Cos., Inc. 3,100 116,056
Universal Corp. 600 17,025
UST, Inc. 2,400 76,050
-----------
209,131
-----------
Transportation (3.13%)
Airborne Freight Corp. 600 15,113
Alaska Air Group, Inc.* 400 17,300
Burlington Northern Santa Fe Corp. 1,900 55,100
Delta Air Lines, Inc. 900 45,731
Kansas City Southern Industries, Inc. 1,200 55,575
Northwest Airlines Corp. * 600 17,700
Southwest Airlines Co. 1,500 25,031
UAL Corp.* 900 58,331
Union Pacific Corp. 800 38,950
-----------
328,831
-----------
Utilities (9.36%)
Ameren Corp. 1,900 76,119
Ameritech Corp. 1,900 119,937
BellSouth Corp. 2,900 131,225
DQE, Inc. 800 30,950
Florida Progress Corp. 1,900 89,062
FPL Group, Inc. 1,200 64,800
GTE Corp. 1,600 109,800
Montana Power Co. 600 18,563
NiSource, Inc. 1,000 23,750
OGE Energy Corp. 900 21,150
PECO Energy Co. 1,200 48,750
Reliant Energy, Inc. 3,700 102,444
SBC Communications, Inc. 900 43,200
Southern Co. (The) 3,800 102,837
-----------
982,587
-----------
TOTAL COMMON STOCKS
(Cost $9,468,279) (97.37%) 10,226,816
----------- -----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ---------------------------------- -------- ------------ -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (8.55%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 08-31-99,
due 09-01-99 (Secured by U.S.
Treasury Bonds, 5.250% thru
9.125%, due 05-15-18 thru
11-15-28 and U.S. Treasury
Notes, 4.500% thru 7.750%,
due 09-30-00 thru 02-15-05)
- - Note A 5.440% $898 $898,000
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.15% 903
TOTAL SHORT-TERM INVESTMENTS (8.56%) 898,903
-------------- --------------
TOTAL INVESTMENTS (105.93%) 11,125,719
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (5.93%) (622,332)
-------------- --------------
TOTAL NET ASSETS (100.00%) $10,503,387
============== ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Institutional Series Trust (the "Trust") is an open-end
management investment company registered under the Investment Company Act of
1940. The Trust, organized as a Massachusetts business trust in 1994,
consists of eleven series portfolios: John Hancock Core Value Fund ("the
Fund"), John Hancock Active Bond Fund, John Hancock Dividend Performers
Fund, John Hancock Medium Capitalization Growth Fund, John Hancock Small
Capitalization Growth Fund, John Hancock Small Capitalization Value Fund,
John Hancock International Equity Fund, John Hancock Independence Balanced
Fund, John Hancock Core Growth Fund, John Hancock Independence Diversified
Core Equity Fund II and John Hancock Independence Medium Capitalization
Fund. Prior to July 1, 1999, John Hancock Core Value Fund was known as John
Hancock Independence Value Fund, John Hancock Core Growth Fund was known as
John Hancock Independence Growth Fund and John Hancock Medium Capitalization
Growth Fund was known as John Hancock Multi-Sector Growth Fund. The other
ten series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to seek above-average total return.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B, Class C and Class I shares.
Effective July 1, 1999, the Fund, which had previously only been sold to
institutional investors, also became available for sale to individual
investors. Existing shares of the Fund were designated Class A shares and
Class B, Class C, and Class I shares commenced operations. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights to voting, redemptions, dividends and
liquidation, except that certain expenses, subject to the approval of the
Trustees, may be applied differently to each class of shares in accordance
with current regulation of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class, which bears distribution
and service expenses under terms of a distribution plan, have exclusive
right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund portfolio are valued on the
basis of market quotations, valuations provided by independent pricing
services or at fair value as determined in good faith in accordance with
procedures approved by the Trustees. Short-term debt investments maturing
within 60 days are valued at amortized cost, which approximates market
value. All portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in "Foreign
Currency Translation".
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives delivery
of the underlying securities for the joint account on the Fund's behalf. The
Adviser is responsible for ensuring that the agreement is fully
collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date
of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company"
by complying with the applicable provisions of the Internal Revenue Code and
will not be subject to federal income tax on taxable income which is
distributed to shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at
the same time and will be in the same amount except for the effect of
expenses that may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class
of shares based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust were directly
identifiable to an individual fund. Expenses, which are not readily
identifiable to a specific fund, will be allocated in such a manner as
deemed equitable, taking into consideration, among other things, the nature
and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporated estimates made by
management in determining the reported amounts of assets, liabilities,
revenues and expenses of the Fund. Actual results could have differed from
these estimates.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization
of the Fund have been capitalized and are being charged to the Fund's
operations ratably over a five-year period that began with the commencement
of the investment operations of the Fund.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might required the untimely disposition of securities. Effective
March 12, 1999, the Fund entered into a syndicated line of credit agreement
with various banks and the agreements previously in effect were terminated.
This agreement enables the Fund to participate with other funds managed by
the Adviser in an unsecured line of credit with banks, which permit
borrowings up to $500 million, collectively. Interest is charged to each
fund based on its borrowing. In addition, a commitment fee is charged based
on the average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity for the
period ended August 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain qualified
brokers who pay the Fund negotiated lender fees. These fees are included in
interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Fund may bear
risk of delay of the loaned securities in recovery or even loss of rights in
the collateral should the borrower of the securities fail financially. The
Fund had no lending activity for the period ended August 31, 1999.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Fund. Transactions
affecting statement of operations accounts and net realized gain/(loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities,
resulting from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.80% of the first
$500,000,000 of the Fund's average daily net asset value and (b) 0.75% of
the Fund's average daily net asset value in excess of $500,000,000.
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of Independence Investment
Associates, Inc. (the "Sub-Adviser"). The Adviser has a sub-investment
management contract with the Sub-Adviser, under which the Sub-Adviser,
subject to the review of the Trustees and the overall supervision of the
Adviser, provides the Fund with investment services and advice with respect
to investment transactions, for which the Adviser pays the Sub-Adviser 55%
of the advisory fee payable on the Fund's average daily net assets.
Effective July 1, 1995, the Sub-Adviser has waived its fees until further
notice.
The Adviser has agreed to limit the Fund's expenses further to the extent
required to prevent expenses (not including the 12b-1 fee and the transfer
agent fee) from exceeding 0.90% of the Funds average daily net assets.
Accordingly, for the period ended August 31, 1999, the reduction in the
Fund's expenses with any additional amounts not borne by the Fund by virtue
of the expense limit amounted to $27,186. The Adviser reserves the right to
terminate this limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
August 31, 1999, net sales charges received with regard to sales of Class A
shares amounted to $14,016. Out of this amount, $1,252 was retained and used
for printing prospectuses, advertising, sales literature and other
purposes, $2,333 was paid as sales commissions to unrelated broker-dealers
and $10,431 was paid as sales commissions to sales personnel of Signator
Investors, Inc. ("Signator Investors"), a related broker-dealer. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company
("JHMLICo"), is the indirect sole shareholder of Signator Investors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Proceeds from the CDSC are paid to JH Funds and are used in whole or in part
to defray its expenses related to providing distribution related services to
the Fund in connection with the sale of Class B shares. For the period ended
August 31, 1999, there were no contingent deferred sales charges.
Class C shares which are redeemed within one year of purchase will be
subject to a CDSC at a rate of 1.00% of the lesser of the current market
value at the time of redemption or the original purchase cost of the shares
being redeemed. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses related to providing distribution
related services to the Fund in connection with the sale of Class C shares.
For the period ended August 31, 1999, there were no contingent deferred
sales charges.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A, Class B and Class C shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. Accordingly, the Fund will make
payments to JH Funds for distribution and service expenses at an annual rate
not to exceed 0.30% of Class A average daily net assets and 1.00% of Class B
and Class C average daily net assets to reimburse JH Funds for its
distribution and service costs. The Distributor has waived the Fund's Class
A 12b-1 payments until July 1, 2000, which as of August 31, 1999 amounted to
$3,730. Up to a maximum of 0.25% of such payments may be service fees as
defined by the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice, curtailment of
a portion of the Fund's 12b-1 payments could occur under certain
circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned subsidiary
of John Hancock Mutual Life Insurance Company (JHMLICo.) The Fund pays
Signature Services a monthly transfer agent fee equivalent, on an annual
basis, to 0.05% of its average daily net assets, plus certain out-of-pocket
expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the period
was at an annual rate of less than 0.02% of the average net assets of the
Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione are directors and/or officers of the Adviser, and/or
its affiliates as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may
elect to defer, for tax purposes, their receipt of this compensation under
the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover their
liability for the deferred compensation. Investments to cover the Fund's
deferred compensation liability are recorded on the Fund's books as an other
asset. The deferred compensation liability and the related other asset are
always equal and are marked to market on a periodic basis to reflect any
income earned by the investment as well as any unrealized gains or losses.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of
the U.S. government and its agencies and short-term securities, during the
period ended August 31, 1999, aggregated $6,813,500 and $3,334,417,
respectively.
The cost of investments owned at August 31, 1999 (excluding the corporate
savings account) for federal income tax purposes was $10,366,279. Gross
unrealized appreciation and depreciation of investments aggregated
$1,132,128 and $373,591, respectively, resulting in net unrealized
appreciation of $758,537.
SHAREHOLDER MEETING (UNAUDITED)
On June 16, 1999, a special meeting of John Hancock Core Value Fund was
held. The shareholders approved the following proposal (votes in
parentheses):
To adopt a distribution plan providing for payments to John Hancock Funds,
Inc. ("JH Funds") to provide certain services to the Fund's shareholders and
to reimburse JH Funds for its expenses in connection with the sale of fund
shares (401,584 FOR, 87,668 AGAINST and 18,165 ABSTAINING).
NOTES
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NOTES
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NOTES
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[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Core Value Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
880SA 8/99
10/99
