The latest report from your
Fund's management team
SEMIANNUAL REPORT
Institutional
Series Trust
Active Bond Fund
Dividend Performers Fund
Medium Capitalization Growth Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
International Equity Fund
AUGUST 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
TABLE OF CONTENTS
Page
1) CEO Corner 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 62
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President
and Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
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
Indocam International Investment Services
90 Boulevard Pasteur
Paris, France 75015
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Volatility ruled during the spring, as rising interest rates and
prospects of a slowing economy finally caught up to pricey growth
stocks. As a result, the tech-heavy NASDAQ Composite Index advanced by
only 3.37% through the end of August, while the Dow Jones Industrial
Average lost 1.46% and the Standard & Poor's 500 Index was up 4.12%.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including both blue chip and
old economy stocks in sectors like financials, health care and energy,
that combined both strong fundamentals and less frothy valuation levels.
As for bonds, rising interest rates have kept the broader bond market in
flux, but pockets of strength have emerged there, as well, including
municipal bonds and longer-maturity Treasury bonds. The 30-year bond,
for instance, has returned 14.28% since January.
Between now and year end, we expect the market's focus to be on
Washington, as it usually is in an election year. While the presidential
election is important, what warrants more attention is the Federal
Reserve Board. The November election will generate more ink, but won't
have anywhere near the impact on financial markets that further Fed
action could. So we'll be watching the economic data to see whether the
Fed has truly wound down its string of interest-rate hikes.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND BENJAMIN A. MATTHEWS, PORTFOLIO MANAGER
[A 2" x 3" photo at bottom middle of page of John Hancock Active Bond
Fund. Caption below reads "Fund management team leader Jim Ho."]
John Hancock
Active Bond Fund
Bond prices experience summertime uptick
The past six months proved to be a more benign investment environment
for bonds, particularly from mid-May through period's end. To varying
degrees, most fixed-income sectors experienced improvement. With
concrete signs that the economy is cooling without signs of inflation or
the likelihood of a recession, investors have become optimistic about a
"soft landing." The stock market's volatility and ensuing dissipation of
the wealth effect lent further support to bonds. Almost across the
board, the difference in yield between bonds of different credit quality
narrowed.
"We also
emphasized
bonds
that are
somewhat
insulated
from a
slowing
economy..."
Fund produces solid performance
John Hancock Active Bond Fund produced a total return of 5.51% at net
asset value for the six months ended August 31, 2000, outperforming the
4.44% 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 5.48% in the same period.
Historical performance information can be found on page six.
Fed's actions positive and negative
The Federal Reserve Board's yearlong commitment to tighter monetary
policy has produced what appears to be the desired slowdown in economic
growth. Though the process at times has been somewhat painful for
fixed-income securities, the Fed's success in keeping inflation at bay
thus far created a more favorable interest-rate outlook by period's end.
It has also been positive for the Treasury yield curve, which has begun
to revert to a more normal posture, as intermediate-term securities'
interest rates declined further than those of the long bond. With the
question of recession out of the way, if at least for the time being,
the market has become more conducive to new issuance in the corporate
arena, both investment-grade and high-yield. Broadly speaking, credit
quality concerns have diminished as well.
[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, 2000." The chart is scaled in increments of 3% with 0% at the bottom
and 6% at the top. The first bar represents the 5.51% total return for
John Hancock Active Bond Fund. The second bar represents the 4.44% total
return for Average corporate debt A-rated fund. The third bar represents
the 5.48% 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."]
But with every silver lining there is a bit of a cloud. In the current
slower-growth environment, this means that, on an individual basis,
lower-grade corporate bonds may be on somewhat shakier ground. Corporate
issuers that need the higher economic growth rates to sustain their own
internal growth may come under increasing pressure, such as many
mid-tier retailers or finance companies that lend to borrowers whose
creditworthiness is questionable. We have already witnessed several
instances of this. Dillard's Inc., Conseco, Inc. and FINOVA Corp. --
three former Fund holdings -- experienced considerable price declines.
Through constant credit monitoring, we were able to discern early on
that these holdings would become problem credits and sold them prior to
the worst of their declines.
Corporate sector strategies
For much of the period, we upgraded the portfolio by trimming back
positions in the high-yield arena and emphasizing the shorter-term debt
of companies in which we already owned 30-year issues, reducing these in
the process. Late in the period, however, we began to move back into
longer-term issues. The portfolio benefited from this as long-term rates
and yield spreads declined and prices rose. We also emphasized bonds
that are somewhat insulated from a slowing economy, such as utilities.
Industry consolidation and favorable legislation, as in the case of
Cleveland Electric Illuminating Co. and Beaver Valley Funding Corp.
(Ohio Edison), are further bolstering the sector's attractiveness.
Mergers and credit upgrades have helped drive the performance of many of
the Fund's telecommunication, wireless and media holdings, including
Verio, Clearnet Communications, Metromedia Fiber Network, Nextel
Communications, Global Crossing and Continental Cablevision. However, an
anticipated fourth-quarter global glut of supply in the telecom arena
recently created a choppy outlook for high-grade telecom names.
"Market
uncertainty
is likely in
the near
term..."
Diligence required
Market uncertainty is likely in the near term, therefore diligence is a
must in monitoring individual bond performance. While we believe the Fed
will be on hold through the presidential election, we cannot rule out
the possibility of further rate hikes after that, should the economy
prove more robust than indicators suggest. Heavy corporate new issuance
supply will pose certain challenges as well. However, we believe
corporate bond spreads remain attractive and we will look to add to the
Fund's exposure should appropriate opportunities arise. We expect to
keep the portfolio's average duration and yield curve positioning
relatively neutral.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/30/95)
----- ----- ---------
Cumulative Total Returns 4.68% 40.14% 41.97%
Average Annual Total Returns(1) 4.68% 6.98% 6.90%
YIELD
As of August 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock Active Bond Fund(1) 6.84%
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.
Note 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, five-year and since
inception periods would have been 2.63%, 3.78% and 3.42%,
respectively,and the yield would have been 5.42%.
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. It is not
possible to invest in an index. 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 $366,808
as of August 31, 2000. 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 $364,284 as of August 31, 2000.]
BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER AND
PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGER
[A 2" x 3" photo at bottom middle of page of John Hancock Dividend
Performers Fund. Caption below reads "Fund management team leader John
Snyder."]
John Hancock
Dividend Performers Fund
Stock market broadens beyond technology in last six months
In the last six months, the stock market made a major shift amid
increasing volatility. Technology stocks, which had dominated the
market's performance last year and early this year, suffered through a
sharp correction between March and May. With tech-stock valuations
unreasonably high, investors finally realized that these companies were
not invulnerable to the potential impact of rising rates on corporate
profits. As volatility grew, the market broadened and investors began
gravitating to more stable companies with more reasonable valuations.
Blue chip and old economy companies -- whose businesses had been strong,
but whose stocks had languished -- came back into favor. For the
six-month period ending August 31, 2000, the Standard & Poor's 500 Index
advanced by 11.72% in the period, while the tech-heavy NASDAQ Composite
Index lost ground, even with a summer rebound, returning -10.44%.
"...old
economy,
more value-
oriented
stocks
rebounded..."
Fund performance
For the six months ended August 31, 2000, John Hancock Dividend
Performers Fund posted a total return of 15.77% at net asset value,
compared with the 13.35% return of the average large-cap value fund,
according to Lipper, Inc. Historical performance information can be
found on page nine.
Even though technology ran into stiff headwinds during the period, our
ability to invest in this mostly non-dividend-paying sector still gave
us an edge over our more value-oriented peers. That said, our focus does
remain primarily on "dividend performer" companies that have a 10-year
history of rising dividends.
Technology: challenging, but still rewarding
With the backdrop for technology growing more challenging, the sector
provided us with some of our best, and worst, performance. We were well
served by our focus on companies whose earnings and fundamentals
remained strong and who are dominant players in their categories -- the
same characteristics we look for in our dividend performer companies.
During this period, the winners included EMC and Sun Microsystems, two
of our biggest holdings. By contrast, companies with lofty valuations
that produced earnings shortfalls were hit hard, including Computer
Associates and Lucent Technologies, both of which we sold. Owning
Microsoft as it lost its antitrust case didn't help, although the effect
was tempered by our under-market weighting.
[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, 2000." The chart is scaled in increments of 5% with 0% at the bottom
and 20% at the top. The first bar represents the 15.77% total return for
John Hancock Dividend Performers Fund. The second bar represents the
13.35% total return for Average large-cap value fund. The third bar
represents the 11.72% 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
large-cap value fund is tracked by Lipper, Inc. See the following page
for historical performance information."]
"...we
believe the
market will
continue to
broaden
out."
Consumer staples, health care
As the old economy, more value-oriented stocks rebounded, so did many of
the stocks in our investment universe, including steady consumer staple
stocks like PepsiCo. Two food companies that we have owned for a while,
Bestfoods and Nabisco, saw their stock prices rise between 75% and 80%
during the period on merger rumors and then actual takeover
announcements. We have since sold them as they got close to their
takeover prices. Health-care stocks such as Baxter International and
Johnson & Johnson also benefited from the rotation away from technology
into perceived "safe haven" sectors.
Financials rebound
Financial stocks, which had been battered in the rising interest-rate
environment, began to rebound later in the period as the perception grew
that the Fed was close to ending its tightening cycle. With that
prospect growing more real, and with valuations still very attractive,
we increased our stake in financials by adding such stalwarts as Wells
Fargo, FleetBoston Financial and Merrill Lynch.
A look ahead
We're optimistic about the market's prospects for the rest of the year.
We've started to see economic growth taper off from its extremely high
levels, and inflation remains relatively benign. Given that, we're
anticipating more modest rate increases, if any, over the next several
months. While investors will continue to buy technology stocks, they
have also begun to focus more on fundamentals, so we believe the market
will continue to broaden out. As it does, stock selection will become
even more critical. It will be important to own those companies with
solid earnings and reasonable valuations -- trademarks of our dividend
performers. In our opinion, these are the companies with the strongest
upside potential.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/30/95)
----- ----- ---------
Cumulative Total Returns 6.36% 142.74% 151.79%
Average Annual Total Returns(1) 6.36% 19.41% 19.22%
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.
Note 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, five-year and since
inception periods would have been 6.02%, 18.52% and 18.23%, 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 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index. 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 Index and is equal to $832,438 as
of August 31, 2000. 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 $656,904 as of August
31, 2000.]
BY BARBARA FRIEDMAN, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 2" x 3" photo at bottom middle of page of John Hancock Medium
Capitalization Growth Fund. Caption below reads "Fund management team
leader Barbara Friedman."]
John Hancock
Medium Capitalization
Growth Fund
Tech-stock setback holds back mid-cap growth stocks
Mid-cap growth stocks suffered a setback over the last six months after
a dazzling performance last year. As the six-month period opened in
March, mid-sized technology and telecommunications company stocks --
whose valuations had surged to unrealistic levels by year end -- began a
sharp decline. Concerns that further interest-rate hikes would hurt
earnings growth or send the economy into recession caused investors to
focus on fundamentals and move to less expensive and more defensive
market sectors. The overall result was a fairly flat performance for the
Russell Midcap Growth Index, which returned -0.09% for the six months
ended August 31, 2000.
"...Fund felt
the effects
of the
tech-sector
downturn."
Performance review
With our emphasis on technology, including telecommunications, John
Hancock Medium Capitalization Growth Fund felt the effects of the
tech-sector downturn. For the six months ended August 31, 2000, the Fund
returned -3.22% at net asset value. That compared with the -4.59%
return of the average mid-cap growth fund, according to Lipper, Inc.
Historical performance information can be found on page 12.
Tech stocks hurt; some rebound
As the tech sector began its descent, we had already started to pare our
tech holdings on the belief that the sector was too richly valued. In
particular, we cut our Internet stake from 12% to 2% of the Fund's
assets, and eliminated a number of recent initial public offerings. By
the end of the period, our broad technology stake was back to a market
weighting, but we held on to companies where we believed the
fundamentals were strong and the growth prospects good. By May, our
research led us to conclude that some telecom names, including
McLeodUSA and NEXTLINK Communications, as well as some of our
semiconductor holdings, had overcorrected. So we added to some of our
positions and benefited when the sector rebounded in June and July.
Winners included semiconductor company Altera; Amphenol, which makes
components for the cable and wireless industry; and Atmel, a leader in
flash technology used primarily in wireless handsets.
[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, 2000." The chart is scaled in increments of 3% with -6% at the
bottom and 0% at the top. The first bar represents the -3.22% total
return for John Hancock Medium Capitalization Growth Fund. The second
bar represents the -4.59% total return for Average mid-cap growth fund.
The third bar represents the -0.09% 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 growth fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Energy, financials overweight
We redeployed the assets from our technology sales to increase our
overweightings in the energy and financial sectors and to bring our
health-care stake up to a market weight, if not slightly higher. These
sector weightings gave us a slight performance edge over our peers.
Expecting exploration and production spending to pick up, we began
adding to our investment in rig equipment and service companies like
Cooper Cameron, BJ Services and Baker Hughes, as well as drillers like
Transocean Sedco Forex and R&B Falcon, which was boosted by news of a
takeover. We also added El Paso Energy, a gas pipeline company, and
Calpine and Dynegy, both utility companies well positioned to benefit
from tighter supplies and increased demand for electricity.
Within the financial sector, we added mainly insurance stocks like AFLAC
and AXA Corp. and service companies like credit card issuer Capital One
Financial Corp., and municipal securities insurer Ambac Financial Group.
Their stocks had fallen to very attractive levels with the string of Fed
interest-rate hikes, but their fundamentals remained solid and the end
of rate hikes appears in sight.
"...we
continue to
believe
technology
will remain
the fastest-
growing part
of the
economy."
Biotech bounce
Our health-care additions were mainly within the biotechnology sector,
which served us well. We focused on companies like QLT PhotoTherapeutics
that have products in test; companies like Millennium Pharmaceuticals
that provide genetic information to pharmaceutical companies; and firms
like Affymetrix, PE Corp. and Waters Corp. that design and produce
equipment used by biotech companies. Waters Corp. was our top holding
and biggest contributor to performance during the period.
Positive outlook
We continue to see evidence that U.S. economic growth is slowing, and
that by and large inflation remains under control. But as long as there
is a concern that interest rates will rise further, the stock market
will remain volatile. As we have done in recent months, we will continue
to use the market weakness to add to our core investments. In
particular, we continue to believe technology will remain the fastest-
growing part of the economy. Technology spending will remain strong,
even if scaled back some, and that should result in healthy earnings
growth.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (4/11/95)
----- ----- ---------
Cumulative Total Returns 50.46%(2) 198.81% 201.27%
Average Annual Total Returns(1) 50.46%(2) 24.47% 23.53%
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, five-year and since
inception periods would have been 50.19%, 23.85% and 22.79%, respectively.
(2) The Fund's recent returns occurred during an unusual period of
performance in certain areas of the market in which the Fund invests.
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. It is not
possible to invest in an index. 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 $938,017 as
of August 31, 2000. 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 $798,533 as
of August 31, 2000.]
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND ANURAG PANDIT, CFA, PORTFOLIO MANAGER
[A 2" x 3" photo at bottom middle of page of John Hancock Small
Capitalization Growth Fund. Caption below reads "Fund management team
leader Bernice Behar."]
John Hancock
Small Capitalization
Growth Fund
Fears of earnings slowdowns hit small-cap growth stocks
Small-cap growth stocks re-entered the atmosphere over the last six
months as investors turned their attentions toward more value-oriented
stocks. With valuations stretched, the tech-heavy NASDAQ Composite Index
grew increasingly volatile starting in March as signs of slower economic
growth increased the risk of future earnings disappointments. The Index
plunged by almost 40% from its peak in March to its trough in May. It
then rebounded and ended the six-month period with a -10.44% return.
Small-cap tech companies whose stocks had risen the most last year,
including many Internet-related companies, came down the hardest. As a
result, the Fund's benchmark index, the Russell 2000 Growth Index, also
lost ground, returning -16.24% for the six months ended August 31,
2000.
Fund performance
After posting returns of more than 130% for the fiscal year ended
February 29, 2000, John Hancock Small Capitalization Growth Fund felt
the effects of the market's recent shift. For the six months ended
August 31, 2000, the Fund returned -10.65% at net asset value, compared
with the -10.00% return of the average small-cap growth fund, according
to Lipper, Inc. Historical performance information can be found on page
15.
"Customer-
related
Internet
software
application
companies
...were
especially
hard-hit..."
Biotech, semiconductors hold up best
We had some standout performances among our biotech, semiconductor and
energy names, although these results were not enough to offset other
losses. The biotech sector took us through several peaks and valleys
over the last six months, but on balance served us well, particularly
our holdings in COR Therapeutics and CV Therapeutics. Semiconductor
companies focused on the telecommunications industry, like Exar, Semtech
and PLX Technology, continued to benefit from the ongoing build-out of
the broadband network. Finally, as the price of oil climbed and
exploration ramped up, companies like Maverick Tube and Lone Star
Technologies did well.
[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, 2000." The chart is scaled in increments of 5% with -25% at the
bottom and 0% at the top. The first bar represents the -10.65% total
return for John Hancock Small Capitalization Growth Fund. The second bar
represents the -10.00% total return for Average small-cap growth fund.
The third bar represents the -16.24% 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 growth fund is tracked
by Lipper, Inc. See the following page for historical performance
information."]
"...the Fund
will keep
its narrower
focus,
owning
fewer
stocks
and larger
individual
positions."
Internet, radio weakest links
Customer-related Internet software application companies like BeFree and
Mediaplex, which rose to lofty levels last year, were especially
hard-hit in the correction and have not yet rebounded, due to skepticism
about the current Internet advertising models. Radio stocks like Radio
One also fell out of favor this period as radio advertising by Internet
start-ups began to slow in the more challenging environment.
Fund restructuring
On June 1, the Fund began a restructuring of the portfolio to adopt a
more concentrated, focused approach. We reduced the number of Fund
holdings from 180 to around 60, redeploying the assets from stocks we
sold into the remaining high-quality companies, which we believe have
the best potential for success in the current environment.
Our criteria for choosing individual stocks remain the same -- rapidly
growing small-cap companies with a dominant or growing market share and
a visionary management team. But under the new format we are now also
freer to make active sector choices. For example, in this restructuring,
we bolstered the percent of the Fund's net assets held in the
health-care, energy and semiconductor areas. We also eliminated most of
our positions in the lagging Internet software sector. Our health-care
stake is focused on biotechnology, where a string of good news -- from
the completion of the Human Genome Project, to a flood of new products,
increased spending and a favorable capital markets environment -- bodes
well for the group.
Currently, we have a dual focus on companies with products in late
stages of development and equipment companies such as Varian and
Invitrogen that service the biotech and pharmaceutical industries.
A look ahead
Going forward, the Fund will keep its narrower focus, owning fewer
stocks and larger individual positions. This approach provides us with
the opportunity to act in a more aggressive manner than we have in the
past on our convictions about both individual companies and sectors.
While this could create the potential for more volatility in the short
term, our goal is to continue to generate very competitive results over
the longer term.
-----------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (5/2/96)
----- ---------
Cumulative Total Returns 62.35%(2) 188.80%
Average Annual Total Returns(1) 62.35%(2) 29.03%
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 60.33% and 23.74%, respectively.
(2) The Fund's recent returns occurred during an unusual period of
performance in certain areas of the market in which the Fund invests.
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. It is not possible to invest in
an index. 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 $764,028 as of August 31, 2000. The second line represents the
Russell 2000 Growth Index and is equal to $408,802 as of August 31,
2000. The third line represents the Russell 2000 Index and is equal to
$408,209 as of August 31, 2000.]
BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 2" x 3" photo at bottom middle of page of John Hancock Small
Capitalization Value Fund. Caption below reads "Fund management team
leader Tim Quinlisk."]
John Hancock Small
Capitalization Value Fund
Value stocks take the lead in small-cap sector
Small-capitalization stocks shifted direction last March as investors
migrated back to valuation and fundamentals. This marked an abrupt
change from last year, when many investors willingly paid high prices
for technology and telecommunications stocks while ignoring value names.
These growth sectors fell from investors' favor last March, as higher
interest rates eroded future earnings outlooks, capital markets shut
down and the U.S. economy showed signs of slowing. Investors moved to
safer-haven value stocks, especially in the finance, health-care and
energy sectors. Small-cap value stocks posted strong positive gains for
the six months ending August 31, 2000, but not enough to offset the
steep decline in small-cap growth names. The Russell 2000 Index closed
the period with a -6.38% return.
"The Fund's
stake in
telecommu-
nications
stocks
hindered
short-term
perfor-
mance..."
Fund strategy and performance
John Hancock Small Capitalization Value Fund benefited from its
value-based strategy, investing in great businesses whose stocks are
selling at a discount compared to the company's true value. Our
continued search for catalysts with the potential to unlock a company's
intrinsic value also worked well. The Fund returned 3.87% at net asset
value for the six months ended August 31, 2000. By comparison, the
average small-cap core fund returned 1.50% during the same period,
according to Lipper, Inc. Historical performance information can be
found on page 18.
Leading performers
Strong stock selection across a variety of sectors helped performance.
In the education arena, we invested in companies like Corinthian
Colleges and Career Education that own and operate for-profit colleges.
Both enjoy strong revenues, earnings and cash flows, thanks to growing
enrollment trends. In the electronics sector, the Fund benefited from
owning Vicor and Amphenol, both of which prospered from strong and
growing demand for their products. We also owned stocks that were bought
out at a premium, including Financial Security Assurance Holdings, a
global municipal bond insurer, and Metamor Worldwide, an information
technology consulting firm. Heidrick & Struggles International, a
leading executive search firm, was another top performer, which we sold
when it reached our price target. Finally, our media investments,
including Pegasus Communications, a direct broadcast satellite company
focused on rural markets, also contributed positively to performance.
[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, 2000." The chart is scaled in increments of 5% with -10% at the
bottom and 5% at the top. The first bar represents the 3.87% total
return for John Hancock Small Capitalization Value Fund. The second bar
represents the 1.50% total return for Average small-cap core fund. The
third bar represents the -6.38% 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 core fund is tracked by Lipper, Inc.
See the following page for historical performance information."]
Disappointing stock selections
Not all our investments worked as hoped. We pared back on Danka Business
Systems, a company that distributes and services office equipment, as
the company's promised turnaround failed to materialize and industry
competition stiffened. We also sold our stake in Independent Energy, a
wholesale power supplier in the United Kingdom whose stock price sank as
the company confronted internal billing issues. We held on, however, to
Sensormatic Electronics, a leading supplier of electronic tags that
prevent shoplifting. Although the stock faltered during the period, we
believe its prospects remain strong as the retail industry continues to
expand its use of source tagging.
Opportunities in telecom
The Fund's stake in telecommunications stocks hindered short-term
performance, as many telecom companies suffered from earnings
disappointments and as capital markets denied them access. This hurt all
telecom stocks, regardless of their prospects. We held on to companies
like CTC Communications Group, Intermedia Communications, Alaska
Communications Systems Holdings and CFW Communications, taking advantage
of low stock prices when appropriate to boost our positions. We believe
these are great companies with good franchises, very little financial
risk and strong long-term potential.
"Our
immediate
plan is
to weed
through the
wreckage in
technology..."
Cautious optimism ahead
Our outlook is one of caution as we expect a slowing economic
environment to create more potential for negative earnings surprises and
continued market volatility. At the same time, we're optimistic because
volatility gives us the opportunity to buy shares of great companies
that have been unfairly tossed out with weak ones. Our immediate plan is
to weed through the wreckage in technology and telecommunications in
search of companies like Aspen Technology, a software developer with an
improving outlook and strong earnings growth potential. We believe our
stock selection process will help us find good values in other sectors
as well. Our newest additions include stakes in Hain Celestial, a leader
in natural foods, and Covance, a diversified contract research
organization servicing the pharmaceutical industry.
-----------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (4/19/95)
----- ----- ---------
Cumulative Total Returns 68.72%(2) 251.98% 257.69%
Average Annual Total Returns(1) 68.72%(2) 28.62% 27.79%
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, five-year and since
inception periods would have been 68.26%, 27.52% and 26.53%,
respectively.
(2) The Fund's recent returns occurred during an unusual period of
performance in certain areas of the market in which the Fund invests.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in the 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. It is not
possible to invest in an index. 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 $924,323 as of August 31, 2000. The second line represents the
Russell 2000 Index and is equal to $554,950 as of August 31, 2000.]
BY MIREN ETCHEVERRY FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
International Equity Fund
Overseas markets stumble in last six months
after a strong 1999
International markets posted disappointing results in the last six
months, due in part to the reversal in fortune of the "TMT" sectors --
technology, media and telecommunications. After dominating the global
markets' performance last year, TMT stocks around the world plunged
dramatically between March and May before rebounding in June. As TMT
stocks fell out of favor, the more cyclical, old-economy stocks made a
comeback.
In addition to this broad trend in foreign markets, specific regions and
countries had their own issues. Japan's market was hurt by a reshuffling
of the Nikkei Index that resulted in a heavier weighting in technology
stocks and by a hike in interest rates in August that ended Japan's
zero-rate policy. Emerging markets in Asia and Latin America fell as
concerns grew about the U.S. economic and monetary outlook. This was
compounded by declines in many of emerging Asia's currencies to 1998
levels. Currency was the issue in Europe, too, where economic recovery
continued, with the exception of the U.K., but the persistent fall of
the euro took away any gains for U.S. investors. One standout market was
Canada, which topped the world's performance, advancing 29% in the last
six months. Overall, overseas markets, as measured by the Fund's
benchmark, the MSCI All Country World Free Ex-U.S. Index, lost ground,
returning -3.95% for the six months ending August 31, 2000.
"Our relative
underper-
formance
came
mainly from
our timing
in the
volatile TMT
sectors."
Fund performance
For the six months ended August 31, 2000, John Hancock International
Equity Fund returned -14.33% at net asset value. That compared with the
-6.41% return of the average international fund, according to Lipper,
Inc. See page 21 for historical performance information.
Our relative underperformance came mainly from our timing in the
volatile TMT sectors. Although overweight versus the MSCI index, we had
a lighter weighting than our peers when the tech group skyrocketed in
early 2000. We also maintained a higher tech weighting as these stocks
came back to earth, and then missed out on some of the June rally
because we had trimmed our stake by then. We still remain overweighted
in the broad technology category, but by lightening up slightly we were
able to establish heavier weightings -- albeit belatedly -- in energy
and cyclical groups, including financial, industrial and consumer
discretionary names.
[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, 2000." The chart is scaled in increments of 5% with -15% at the
bottom and 0% at the top. The first bar represents the -14.33% total
return for John Hancock International Equity Fund. The second bar
represents the -6.41% total return for Average international fund. The
third bar represents the -3.95% 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."]
"We are
bullish
on the
markets of
continental
Europe..."
Our Canadian holdings, including Nortel Networks, Bombardier and Suncor
Energy, provided us with some of our best results and became some of our
top holdings. What hurt us most were our telecom and technology stock
selections, including NTT Mobile Communication Network, Sony and Hikari
Tsushin in Japan, all of which we sold; Finland's Nokia and Sweden's
Ericsson. In the U.K., Vodafone was hit hard after its purchase of
Germany's Mannesman, although it has rebounded, and British
Telecommunications struggled with weak management and disappointing
earnings results.
Japan, Europe still focus
During the period, we cut our stake in Japan to a neutral 17% weighting
by the end of August. After Japan's central bank raised interest rates,
we became more concerned about the potential in the short term for an
increase in bankruptcies. In the medium-to-longer term, however, we
still believe Japan's economic picture is improving. We also see real
opportunity in the corporate restructurings that are continuing to take
place there.
Having reduced our stake in Japan temporarily, we redeployed those
assets to Europe, bringing us up to a slightly overweight position of
60% of assets from a neutral one. We continue to prefer countries in
continental Europe to the U.K., where the outlook for earnings is less
certain.
Going forward
We are bullish on the markets of continental Europe, which are being
buoyed by strong earnings growth momentum and stand to benefit from the
U.S. economy's soft landing. Our overweight in cyclical companies there
should serve us well, as consumer confidence in Europe is high and
spending is on the rise. We are keeping a wait-and-see position on
Japan, and remain ready to increase our stake once short-term fears
subside. Although we added some emerging-market names in Eastern Europe,
South Africa and Latin America, we are keeping a neutral stance on these
riskier markets in the face of a gradual slowing of global economies.
-----------------------------------------------------------------
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, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/30/95)
----- ----- ---------
Cumulative Total Returns 19.09% 49.83% 52.30%
Average Annual Total Returns(1) 19.09% 8.42% 8.34%
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.
Note 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, five-year and since
inception periods would have been 17.30%, 5.97% and 5.66%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in the 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. It is not possible
to invest in an index. 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
$420,104 as of August 31, 2000. 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 $369,741 as
of August 31, 2000.]
FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
August 31, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at value -- Note C:
Bonds (cost -- $5,394,665, none and
none, respectively) $5,378,219 -- --
Common stocks (cost -- none, $8,509,525
and $18,670,359, respectively) -- $11,538,880 $27,531,505
Warrants (cost -- $103, none and none,
respectively) 1,200 -- --
Short-term investments (cost --
$297,000, $88,000 and $1,834,000,
respectively) 297,000 88,000 1,834,000
Corporate savings account 838 622 308
----------------- ----------------- -----------------
5,677,257 11,627,502 29,365,813
Receivable for investments sold 50,829 74,291 341,799
Receivable for shares sold 12 -- --
Interest receivable 70,173 18 339
Dividends receivable -- 19,831 3,868
Receivable from John Hancock Advisers,
Inc. and affiliates -- Note B 502 -- --
Other assets 414 1,443 3,847
----------------- ----------------- -----------------
Total Assets 5,799,187 11,723,085 29,715,666
----------------- ----------------- -----------------
Liabilities:
Payable for investments purchased 24,213 1,179 922,101
Payable for shares repurchased -- -- 4,257
Dividend payable 1,081 -- --
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B -- 3,068 13,462
Accounts payable and accrued expenses 29,136 25,723 30,342
----------------- ----------------- -----------------
Total Liabilities 54,430 29,970 970,162
----------------- ----------------- -----------------
Net Assets:
Capital paid-in 5,969,985 6,526,661 14,902,899
Accumulated net realized gain (loss) on
investments, financial futures
contracts and foreign currency
transactions (208,604) 2,124,827 5,046,016
Net unrealized appreciation
(depreciation) of investments (15,349) 3,029,355 8,861,146
Undistributed net investment income
(distributions in excess of net
investment income) (1,275) 12,272 (64,557)
----------------- ----------------- -----------------
Net Assets $5,744,757 $11,693,115 $28,745,504
================= ================= =================
Net Asset Value Per Share:
(Based on 692,449, 750,754 and
1,407,970 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $8.30 $15.58 $20.42
==========================================================================================================
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,
2000. 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, 2000 (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, units and
warrants (cost -- $6,797,769,
$23,574,614 and $9,144,785,
respectively) $9,775,970 $28,110,576 $10,272,378
Preferred stocks (cost -- none,
$277,500 and $29,086, respectively) -- 188,700 35,013
Bonds (cost -- none, $462,125 and none,
respectively) -- 517,750 --
Short-term investments (cost --
$73,000, $184,000 and $945,764,
respectively) -- Note A 73,000 184,000 945,764
Corporate savings account 173 117 --
----------------- ----------------- -----------------
9,849,143 29,001,143 11,253,155
Cash -- -- 786
Foreign currency, at value (cost --
none, none and $3,484, respectively) -- -- 3,486
Receivable for investments sold 346,471 637,174 543,337
Interest receivable 15 35 16
Dividends receivable -- 7,677 17,153
Foreign tax reclaim receivable -- -- 4,760
Deferred organization expenses --
Note A 2,730 -- --
Other assets 1,477 757 1,203
----------------- ----------------- -----------------
Total Assets 10,199,836 29,646,786 11,823,896
----------------- ----------------- -----------------
Liabilities:
Payable for open forward foreign
currency exchange contracts purchased
-- Note A -- -- 2,236
Payable for open forward foreign
currency exchange contracts sold --
Note A -- -- 127
Payable for investments purchased 304,629 623,901 481,666
Payable upon return of securities on
loan -- Note A -- -- 858,764
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 4,218 12,234 33,275
Accounts payable and accrued expenses 27,882 31,319 3,932
----------------- ----------------- -----------------
Total Liabilities 336,729 667,454 1,380,000
----------------- ----------------- -----------------
Net Assets:
Capital paid-in 6,484,737 19,255,475 9,283,043
Accumulated net realized gain on
investments, financial futures
contracts and foreign currency
transactions 426,294 5,170,757 67,983
Net unrealized appreciation of
investments and foreign currency
transactions 2,978,201 4,502,787 1,130,440
Undistributed net investment income
(distributions in excess of net
investment income) (26,125) 50,313 (37,570)
----------------- ----------------- -----------------
Net Assets $9,863,107 $28,979,332 $10,443,896
================= ================= =================
Net Asset Value Per Share:
(Based on 452,096, 1,542,160 and
914,356 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $21.82 $18.79 $11.42
==========================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Six months ended August 31, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest (including income from
securities loaned of none, none and
$8,597, respectively) $196,202 $31,818 $64,403
Dividends (net of foreign withholding
tax of none, $593 and $301,
respectively) -- 83,346 29,186
----------------- ----------------- -----------------
196,202 115,164 93,589
----------------- ----------------- -----------------
Expenses:
Investment management fee -- Note B 13,232 47,373 138,910
Custodian fee 14,237 6,417 17,914
Registration and filing fees 11,319 13,587 11,595
Auditing fee 8,986 8,066 8,633
Printing 3,538 2,758 3,773
Transfer agent fee -- Note B 1,323 3,948 8,682
Accounting and legal services fee --
Note B 492 1,491 3,214
Miscellaneous 175 358 903
Organization expense -- Note A 131 132 230
Trustees' fees 123 -- 831
Legal fees 31 71 198
Interest expense -- Note A -- 1,179 1,365
----------------- ----------------- -----------------
Total Expenses 53,587 85,380 196,248
----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (37,658) (29,877) (39,766)
----------------------------------------------------------------------------------------------------------
Net Expenses 15,929 55,503 156,482
----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 180,273 59,661 (62,893)
----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures Contracts
and Foreign Currency Transactions:
Net realized gain (loss) on investments
sold (24,346) 1,389,155 2,154,684
Net realized loss on financial futures
contracts -- (12,731) --
Net realized gain (loss) on foreign
currency transactions 317 -- --
Change in net unrealized
appreciation/depreciation of
investments 119,430 590,007 (4,314,967)
Change in net unrealized
appreciation/depreciation of financial
futures contracts -- 59,771 --
Change in net unrealized
appreciation/depreciation of foreign
currency transactions (323) -- --
----------------- ----------------- -----------------
Net Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency
Transactions 95,078 2,026,202 (2,160,283)
----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $275,351 $2,085,863 ($2,223,176)
==========================================================================================================
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, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
SMALL SMALL INTERNATIONAL
CAPITALIZATION CAPITALIZATION EQUITY
GROWTH FUND VALUE FUND FUND
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest (including income from
securities loaned of $1,880, $5,909
and $3,379, respectively) $12,260 $57,615 $13,159
Dividends (net of foreign withholding
tax of none, none and $14,858,
respectively) 806 48,643 88,748
----------------- ----------------- -----------------
13,066 106,258 101,907
----------------- ----------------- -----------------
Expenses:
Investment management fee -- Note B 34,748 91,407 54,455
Custodian fee 31,655 12,666 101,856
Registration and filing fees 11,070 13,649 10,640
Auditing fee 7,574 8,028 8,497
Organization expense -- Note A 2,063 219 130
Printing 2,022 2,211 3,828
Miscellaneous 302 759 378
Transfer agent fee -- Note B 2,172 6,529 3,025
Accounting and legal services fee --
Note B 806 2,425 1,120
Trustees' fees 151 222 292
Legal fees 74 109 --
Interest expense 408 2,261 298
----------------- ----------------- -----------------
Total Expenses 93,045 140,485 184,519
----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (53,913) (35,889) (123,929)
----------------------------------------------------------------------------------------------------------
Net Expenses 39,132 104,596 60,590
----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (26,066) 1,662 41,317
----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures Contracts
and Foreign Currency Transactions:
Net realized gain (loss) on investments
sold (335,338) 3,768,581 (80,546)
Net realized loss on foreign currency
transactions -- 20 (221,456)
Net realized gain on financial futures
contracts -- (132,846) --
Change in net unrealized
appreciation/depreciation of
investments (605,364) (2,548,945) (1,701,044)
Change in net unrealized
appreciation/depreciation of foreign
currency transactions -- -- (2,013)
----------------- ----------------- -----------------
Net Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency
Transactions (940,702) 1,086,810 (2,005,059)
----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($966,768) $1,088,472 ($1,963,742)
==========================================================================================================
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, 2000 YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED) FEBRUARY 29, 2000 (UNAUDITED)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Increase in Net Assets:
From Operations:
Net investment income $342,798 $180,273 $120,862 $59,661
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions (167,990) (24,029) 1,960,778 1,376,424
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions (88,968) 119,107 (1,240,327) 649,778
----------------- ----------------- ----------------- -----------------
Net Increase in Net Assets
Resulting from Operations 85,840 275,351 841,313 2,085,863
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment
income (342,798) (180,335) (125,515) (63,873)
Distributions in excess of net
investment income (47) -- -- --
Distributions from net realized
gain on investments sold (11,387) -- (1,568,997) --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (354,232) (180,335) (1,694,512) (63,873)
----------------- ----------------- ----------------- -----------------
From Fund Share Transactions: **
Shares sold 3,005,999 2,777,443 5,626,668 3,956,390
Shares issued to shareholders in
reinvestment of distributions 351,436 178,960 1,694,964 64,132
----------------- ----------------- ----------------- -----------------
3,357,435 2,956,403 7,321,632 4,020,522
Less shares repurchased (4,552,479) (1,528,839) (9,348,646) (9,212,028)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,195,044) 1,427,564 (2,027,014) (5,191,506)
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 5,685,613 4,222,177 17,742,844 14,862,631
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($1,213), ($1,275), $16,484 and
$12,272, respectively) $4,222,177 $5,744,757 $14,862,631 $11,693,115
----------------- ----------------- ----------------- -----------------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.5791 $0.0499 $0.1106 $0.0577
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net investment income $0.0001 -- -- --
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $0.0206 -- $1.5543 --
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio
Share Transactions:
Shares sold 358,987 339,479 375,404 268,907
Shares issued to shareholders in
reinvestment of distributions 42,197 21,913 116,345 4,317
----------------- ----------------- ----------------- -----------------
401,184 361,392 491,749 273,224
Less shares repurchased (544,753) (187,631) (618,694) (622,576)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 143,569 173,761 (126,945) (349,352)
================= ================= ================= =================
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 and foreign currency
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, 2000 YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED) FEBRUARY 29, 2000 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($76,769) ($62,893) ($23,200) ($26,066)
Net realized gain (loss) on
investments sold 4,019,150 2,154,684 1,195,121 (335,338)
Change in net unrealized
appreciation/depreciation of
investments 12,122,951 (4,314,967) 3,128,562 (605,364)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 16,065,332 (2,223,176) 4,300,483 (966,768)
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Distributions from net realized
gain on investments sold (808,355) -- (579,250) --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (808,355) -- (579,250) --
----------------- ----------------- ----------------- -----------------
From Fund Share Transactions: **
Shares sold 13,799,897 18,175,708 9,505,733 5,765,471
Shares issued to shareholders in
reinvestment of distributions 802,909 1,821 579,258 --
----------------- ----------------- ----------------- -----------------
14,602,806 18,177,529 10,084,991 5,765,471
Less shares repurchased (9,653,548) (24,101,669) (7,350,836) (3,843,775)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,949,258 (5,924,140) 2,734,155 1,921,696
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 16,686,585 36,892,820 2,452,791 8,908,179
----------------- ----------------- ----------------- -----------------
End of period (including
distributions in excess of net
investment income of $1,664,
$64,557, $59 and $26,125,
respectively) $36,892,820 $28,745,504 $8,908,179 $9,863,107
----------------- ----------------- ----------------- -----------------
* Distributions to Shareholders:
Per share distributions from net
realized gain on investments sold $0.5502 -- $2.2594 --
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio
Share Transactions:
Shares sold 887,756 918,017 558,531 281,977
Shares issued to shareholders in
reinvestment of distributions 46,642 105 32,488 --
----------------- ----------------- ----------------- -----------------
934,398 918,122 591,019 281,977
Less shares repurchased (703,733) (1,258,487) (436,856) (194,555)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 230,665 (340,365) 154,163 87,422
================= ================= ================= =================
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, 2000 YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED) FEBRUARY 29, 2000 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $45,648 $1,662 $50,863 $41,317
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions 3,502,891 3,635,755 855,747 (302,002)
Change in net unrealized
appreciation/depreciation of
investments and foreign currency
transactions 6,887,323 (2,548,945) 2,049,079 (1,703,057)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 10,435,862 1,088,472 2,955,689 (1,963,742)
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment
income (52,590) -- (50,863) --
Distributions in excess of net
investment income -- -- (28,356) --
Distributions from net realized
gain on investments sold (1,849,452) -- (475,044) --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (1,902,042) -- (554,263) --
----------------- ----------------- ----------------- -----------------
From Fund Share Transactions: **
Shares sold 12,736,754 8,231,139 5,684,244 4,492,657
Shares issued to shareholders in
reinvestment of distributions 1,902,123 -- 554,265 --
----------------- ----------------- ----------------- -----------------
14,638,877 8,231,139 6,238,509 4,492,657
Less shares repurchased (6,332,233) (4,598,865) (3,596,999) (4,933,042)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,306,644 3,632,274 2,641,510 (440,385)
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 7,418,122 24,258,586 7,805,087 12,848,023
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
$48,651, $50,313, ($78,887) and
($37,570), respectively) $24,258,586 $28,979,332 $12,848,023 $10,443,896
----------------- ----------------- ----------------- -----------------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0575 -- $0.0688 --
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net investment income -- -- $0.0383 --
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $2.0232 -- $0.6428 --
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio
Share Transactions:
Shares sold 857,366 464,669 464,681 349,019
Shares issued to shareholders in
reinvestment of distributions 124,240 -- 44,555 --
----------------- ----------------- ----------------- -----------------
981,606 464,669 509,236 349,019
Less shares repurchased (449,846) (263,722) (312,613) (398,146)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 531,760 200,947 196,623 (49,127)
================= ================= ================= =================
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $8.14
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.51 0.60 0.59 0.56 0.58 0.28
Net Realized and Unrealized
Gain (Loss) on Investments 0.16 (0.09) 0.34 (0.02) (0.43) 0.16
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.67 0.51 0.93 0.54 0.15 0.44
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.51) (0.60) (0.59) (0.56) (0.58) (0.28)
Distributions in Excess of
Net Investment Income -- -- --(3) --(3) --(3) --
Distributions from Net
Realized Gain on
Investments Sold (0.02) (0.01) (0.05) (0.22) (0.02) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.53) (0.61) (0.64) (0.78) (0.60) (0.28)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $8.64 $8.54 $8.83 $8.59 $8.14 $8.30
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(4) 7.76%(5) 6.17% 11.25% 6.24% 1.83% 5.51%(5)
Total Adjusted Investment
Return at Net Asset Value(4,6) (0.46%)(5) 2.72% 9.21% 4.51% (0.50%) 4.79%(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,171 $2,191 $5,158 $5,686 $4,222 $5,745
Ratio of Expenses to Average
Net Assets 0.65%(7) 0.60% 0.60% 0.60% 0.60% 0.60%(7)
Ratio of Adjusted Expenses
to Average Net Assets(8,9) 9.60%(7) 4.05% 2.64% 2.33% 2.93% 2.02%(7)
Ratio of Net Investment
Income to Average Net
Assets 6.53%(7) 7.10% 6.78% 6.36% 6.88% 6.81%(7)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(8,9) (2.42%)(7) 3.65% 4.74% 4.63% 4.55% 5.39%(7)
Portfolio Turnover Rate 71% 136% 230% 356% 301% 184%
Fee Reduction Per Share(2) $0.75 $0.30 $0.18 $0.15 $0.19 $0.06
(1) The Fund commenced operations on March 30, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Not annualized.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) 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.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indi cated: 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 rela tionships
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $13.51
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.23 0.21 0.18 0.15 0.11 0.06
Net Realized and Unrealized
Gain on Investments 1.68 1.92 3.92 1.04 0.60 2.07
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 1.91 2.13 4.10 1.19 0.71 2.13
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.19) (0.18) (0.17) (0.15) (0.11) (0.06)
Distributions from Net
Realized Gain on
Investments Sold (0.07) (0.19) (0.92) (1.50) (1.55) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.26) (0.37) (1.09) (1.65) (1.66) (0.06)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.15 $11.91 $14.92 $14.46 $13.51 $15.58
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 22.79%(4) 21.26% 35.55% 7.97% 4.17% 15.77%(4)
Total Adjusted Investment
Return at Net Asset Value(3,5) 19.79%(4) 20.07% 35.23% 7.72% 3.82% 15.41%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $3,319 $8,668 $20,884 $17,743 $14,863 $11,693
Ratio of Expenses to Average
Net Assets 0.75%(6) 0.70% 0.70% 0.70% 0.70% 0.70%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 4.02%(6) 1.89% 1.02% 0.95% 1.05% 1.08%(6)
Ratio of Net Investment
Income to Average Net
Assets 2.51%(6) 1.94% 1.31% 0.95% 0.71% 0.76%(6)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(7,8) (0.76%)(6) 0.75% 0.99% 0.70% 0.36% 0.38%(6)
Portfolio Turnover Rate 70% 37% 77% 64% 46% 38%
Fee Reduction Per Share(2) $0.30 $0.13 $0.04 $0.04 $0.05 $0.03
(1) The Fund commenced operations on March 30, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $21.10
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)(2) (0.01) 0.01 -- (3) (0.02) (0.05) (0.04)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 2.22 2.02 2.06 (0.68) 10.71 (0.64)
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 2.21 2.03 2.06 (0.70) 10.66 (0.68)
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) -- --(3) -- -- --
Distributions from Net
Realized Gain on
Investments Sold -- (0.05) (1.22) (1.72) (0.55) --
Distributions in Excess of
Net Realized Gain on
Investments Sold -- -- -- (0.10) -- --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.02) (0.05) (1.22) (1.82) (0.55) --
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.69 $12.67 $13.51 $10.99 $21.10 $20.42
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(4) 25.98%(5) 19.00% 17.39% (5.34%) 98.13% (3.22%)(5)
Total Adjusted Investment
Return at Net Asset Value(4,6) 23.70%(5) 18.48% 17.19% (5.55%) 97.75% (3.34%)(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $8,399 $29,085 $40,302 $16,687 $36,893 $28,745
Ratio of Expenses to Average
Net Assets 0.93%(7) 0.90% 0.90% 0.90% 0.90%(8) 0.90%(7)
Ratio of Adjusted Expenses
to Average Net Assets(9,10) 3.51%(7) 1.42% 1.10% 1.11% 1.28% 1.13%(7)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.10%)(7) 0.06% 0.03% (0.13%) (0.37%) (0.36%)(7)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(9,10) (2.68%)(7) (0.46%) (0.17%) (0.34%) (0.75%) (0.59%)(7)
Portfolio Turnover Rate 189% 281% 341% 116% 153% 85%
Fee Reduction Per Share(2) $0.23 $0.06 $0.03 $0.03 $0.05 $0.02
(1) The Fund commenced operations on April 11, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Not annualized.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Expense ratio does not include interest expense due to bank loans,
which amounted to 0.01% for the year ended February 29, 2000.
(9) Unreimbursed, without fee reduction.
(10) 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.
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 28, ------------------------------- FEBRUARY 29, AUGUST 31, 2000
1997(1) 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.24 $11.74 $11.65 $24.43
------------- ------------- ------------- ------------- -------------
Net Investment Income (Loss)(2) 0.03 (0.03) (0.07) (0.09) (0.06)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 0.73 2.53 0.61 15.13 (2.55)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.76 2.50 0.54 15.04 (2.61)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) --(3) -- -- --
Distributions from Net
Realized Gain on
Investments Sold -- -- (0.63) (2.26) --
------------- ------------- ------------- ------------- -------------
Total Distributions (0.02) --(3) (0.63) (2.26) --
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.24 $11.74 $11.65 $24.43 $21.82
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(4) 8.89%(5) 27.07% 4.67% 136.18% (10.65%)(5)
Total Adjusted Investment
Return at Net Asset Value(4,6) (3.84%)(5) 23.92% 1.45% 133.89% (11.28%)(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $999 $3,102 $2,453 $8,908 $9,863
Ratio of Expenses to Average
Net Assets 0.90%(7) 0.90% 0.90% 0.90% 0.90%(7)
Ratio of Adjusted Expenses
to Average Net Assets(8,9) 16.24%(7) 4.05% 4.12% 3.19% 2.14%(7)
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.35%(7) (0.25%) (0.60%) (0.57%) (0.60%)(7)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(8,9) (14.99%)(7) (3.40%) (3.82%) (2.86%) (1.84%)(7)
Portfolio Turnover Rate 92% 117% 125% 238% 134%
Fee Reduction Per Share(2) $1.22 $0.34 $0.35 $0.36 $0.01
(1) The Fund commenced operations on May 2, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Not annualized.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) 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.
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $18.09
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.17 0.14 0.07 0.05 0.05 --(3)
Net Realized and Unrealized
Gain (Loss) on Investments 0.56 1.08 3.65 (1.23) 10.96 0.70
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.73 1.22 3.72 (1.18) 11.01 0.70
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.14) (0.12) (0.10) (0.04) (0.06) --
Distributions from Net
Realized Gain on
Investments Sold -- (0.81) (1.26) (1.20) (2.02) --
Distributions in Excess of
Net Realized Gain on
Investments Sold -- -- -- (0.16) -- --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.14) (0.93) (1.36) (1.40) (2.08) --
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.09 $9.38 $11.74 $9.16 $18.09 $18.79
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(4) 8.61%(5) 13.78% 41.81% (9.46%) 124.33% 3.87%(5)
Total Adjusted Investment
Return at Net Asset Value(4,6) 5.40%(5) 12.75% 41.19% (10.12%) 123.65% 3.73%(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $5,293 $6,011 $9,549 $7,418 $24,259 $28,979
Ratio of Expenses to Average
Net Assets 0.83%(7) 0.80% 0.80% 0.80% 0.80% 0.80%(7)
Ratio of Adjusted Expenses
to Average Net Assets(8,9) 4.55%(7) 1.83% 1.42% 1.46% 1.48% 1.07%(7)
Ratio of Net Investment
Income to Average Net
Assets 2.04%(7) 1.46% 0.62% 0.45% 0.37% 0.10%(7)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(8,9) (1.68%)(7) 0.43% 0.00% (0.21%) (0.31%) (0.17%)(7)
Portfolio Turnover Rate 0% 96% 216% 126% 104% 53%
Fee Reduction Per Share(2) $0.30 $0.10 $0.07 $0.07 $0.09 $0.02
(1) The Fund commenced operations on April 19, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Not annualized.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) 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.
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $13.33
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.15 0.12 0.06 0.07 0.07 0.04
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 0.68 0.14 0.23 0.59 3.83 (1.95)
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.83 0.26 0.29 0.66 3.90 (1.91)
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.08) (0.10) (0.01) (0.07) (0.07) --
Distributions in Excess of
Net Investment Income -- -- -- (0.04) (0.04) --
Distributions from Net
Realized Gain on
Investments Sold (0.01) (0.05) -- -- (0.64) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.09) (0.15) (0.01) (0.11) (0.75) --
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.24 $9.35 $9.63 $10.18 $13.33 $11.42
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 9.81%(4) 2.79% 3.07% 6.88% 38.84% (14.33%)(4)
Total Adjusted Investment
Return at Net Asset Value(3,5) 3.26%(4) 0.47% 2.05% 5.15% 36.98% (15.36%)(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,897 $4,204 $7,983 $7,805 $12,848 $10,444
Ratio of Expenses to Average
Net Assets 1.05%(6) 1.00% 1.00% 1.00% 1.00% 1.00%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 8.19%(6) 3.32% 2.02% 2.73% 2.86% 3.05%(6)
Ratio of Net Investment
Income to Average Net
Assets 1.75%(6) 1.26% 0.60% 0.69% 0.59% 0.68%(6)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(7,8) (5.39%)(6) (1.06%) (0.42%) (1.04%) (1.27%) (1.37%)(6)
Portfolio Turnover Rate 59% 68% 125% 83% 139% 338%
Fee Reduction Per Share(2) $0.60 $0.22 $0.10 $0.17 $0.21 $0.03
(1) The Fund commenced operations on March 30, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Active Bond Fund
Schedule of Investments
August 31, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Active Bond Fund on August 31, 2000. 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> <C> <C> <C> <C>
BONDS
Aerospace (0.44%)
Lockheed Martin Corp.,
Note 12-01-05 7.950% BBB- $10 $10,150
Raytheon Co.,
Note 03-01-03 (R) 7.900 BBB- 15 15,071
-------------
25,221
-------------
Automobile/Trucks (0.93%)
Chrysler Corp.,
Deb 03-01-27 7.450 A+ 10 9,625
DaimlerChrysler North America Holding Corp.,
Note 01-20-05 7.400 A+ 15 15,040
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 21 19,922
General Motors Corp.,
Deb 05-01-28 6.750 A 10 8,765
-------------
53,352
-------------
Banks -- Foreign (1.19%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04 8.200 AA- 20 20,652
Royal Bank of Scotland Plc,
Bond (United Kingdom) 03-31-05 8.817 A- 10 10,391
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom) 11-01-06 (R) 8.850 A 35 37,436
-------------
68,479
-------------
Banks -- United States (2.91%)
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 25 23,642
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 25 26,343
First Union National Bank,
Sub Note 08-18-10 7.800 A 20 19,991
FleetBoston Financial Corp.,
Sub Note 12-01-05 6.625 A- 15 14,460
National Westminster Bank Plc -- New York Branch,
Sub Note 05-01-01 9.450 A+ 15 15,222
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 10 9,645
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 30 32,369
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 25 25,432
-------------
167,104
-------------
Beverages (0.26%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 15 14,850
-------------
Broker Services (0.18%)
Bear Stearns Co., Inc.,
Sr Note 02-01-05 7.625 A 10 10,023
-------------
Chemicals (0.51%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A- 15 14,434
Equistar Chemicals L.P./Equistar Funding Corp.,
Note 02-15-04 8.500 BBB- 15 14,700
-------------
29,134
-------------
Energy (0.78%)
CalEnergy Co., Inc.,
Sr Note 09-15-05 7.230 BBB- 10 9,895
Enron Corp.,
Note 08-15-05 (R) 8.000 BBB+ 10 10,068
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 15 14,438
Teton Acquisition Corp.,
Sr Bond 09-15-28 8.480 BBB- 10 10,432
-------------
44,833
-------------
Finance (2.49%)
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 A- 20 19,662
EES Coke Battery Co., Inc.,
Sr Sec Note Ser A 04-15-02 (R) 7.125 BBB 4 4,151
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 9.875 A 35 36,249
Ford Motor Credit Co.,
Note 04-28-03 6.125 A 20 19,447
Household Finance Corp.,
Note 11-01-02 5.875 A 25 24,290
Note 02-01-09 5.875 A 10 8,865
Marlin Water Trust & Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 BBB 15 15,062
Spear Leeds & Kellogg LP,
Note 08-15-05 (R) 8.250 BBB+ 15 15,090
-------------
142,816
-------------
Food (0.26%)
Earthgrains Co. (The),
Note 08-01-03 8.375 BBB 15 15,075
-------------
Government -- Foreign (0.28%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19 8.250 A- 15 16,155
-------------
Government -- U.S. (24.50%)
United States Treasury,
Bond 08-15-17 8.875 Aaa 97 126,888
Bond 02-15-23 7.125 Aaa 524 601,452
Note 05-15-02 7.500 Aaa 60 61,210
Note 08-15-03 5.750 Aaa 87 86,184
Note 02-15-05 7.500 Aaa 59 62,319
Note 07-15-06 7.000 Aaa 144 150,885
Note 05-15-08 5.625 Aaa 325 318,601
-------------
1,407,539
-------------
Government -- U.S. Agencies (20.27%)
Fannie Mae,
15-Yr Pass Thru Ctf 07-01-15 7.000 Aaa 20 19,665
30-Yr Pass Thru Ctf 06-01-29 6.000 Aaa 19 17,774
Bond 02-15-05 7.125 Aaa 65 65,863
Note 09-15-09 6.625 Aaa 70 68,709
Note 01-15-30 7.125 Aaa 45 46,568
Government National Mortgage Assn.,
30-Yr Pass Thru Ctf 04-15-28 to 08-15-29 6.500 Aaa 521 499,294
30-Yr SF Pass Thru Ctf 06-15-28 to 07-15-29 7.000 Aaa 387 380,445
30-Yr SF Pass Thru Ctf 10-15-29 7.500 Aaa 20 19,908
30-Yr SF Pass Thru Ctf 11-15-24 to 07-15-30 8.000 Aaa 45 46,256
-------------
1,164,482
-------------
Insurance (1.15%)
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R) 6.950 A+ 10 9,611
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 15 14,276
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 15 13,089
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 18,900
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 10 10,049
-------------
65,925
-------------
Leasing Companies (0.08%)
United Rentals, Inc.,
Sr Sub Note Ser B 04-01-09 9.000 BB- 5 4,625
-------------
Leisure (0.25%)
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 7.875 BB 10 9,500
Waterford Gaming LLC/Waterford Gaming Finance Corp.,
Sr Note 03-15-10 (R) 9.500 B+ 5 4,925
-------------
14,425
-------------
Media (3.98%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 15 14,812
Sr Note Ser B 07-15-03 8.125 B+ 8 7,480
AMFM, Inc.,
Sr Sub Note 10-01-08 9.000 BB+ 10 10,500
Clear Channel Communications, Inc.,
Note 06-15-05 7.875 BBB- 15 15,112
Comcast Cable Communications, Inc.,
Note 11-15-08 6.200 BBB 10 9,230
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 AA- 15 15,427
CSC Holdings, Inc.,
Sr Sub Deb 05-15-16 10.500 BB- 10 10,725
EchoStar DBS Corp.,
Sr Note 02-01-09 9.375 B 10 9,875
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 10 9,050
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BBB 20 19,868
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 10 9,350
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 5 4,950
Seagram (Joseph E.) & Sons, Inc.,
Sr Deb 12-15-18 7.500 BBB- 10 9,941
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 20 19,437
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 21 23,337
TV Guide, Inc.,
Sr Sub Note Ser B 03-01-09 8.125 BB- 10 10,088
United Pan-Europe Communications N.V.,
Sr Note (Netherlands) 11-01-09 11.250 B 5 4,350
Viacom, Inc.,
Sr Deb 07-30-30 7.875 BBB+ 10 10,134
Sr Note 07-30-10 7.700 BBB+ 15 15,206
-------------
228,872
-------------
Medical (1.10%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 10.750 B+ 13 12,350
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 7.875 B+ 15 14,025
HCA-The Healthcare Co.,
Note 09-01-10 8.750 BB+ 5 4,987
IASIS Healthcare Corp.,
Sr Sub Note 10-15-09 13.000 B- 10 10,250
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 11 11,660
Tenet Healthcare Corp.,
Sr Note 01-15-05 8.000 BB+ 10 9,800
-------------
63,072
-------------
Metal (1.21%)
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 10 10,100
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03 6.500 A 55 53,451
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) 8.400 BBB- 7 6,042
-------------
69,593
-------------
Mortgage Banking (8.16%)
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 6.790 Aaa 28 27,586
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29 6.570 Aaa 40 38,252
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2 09-15-06 6.853 Aaa 20 19,737
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 6.566 Aaa 60 57,225
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25 6.600 Aaa 20 19,362
LB Commercial Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07 6.410 Aaa 14 13,911
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38 6.485 Aaa 24 23,317
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1 10-15-06 (R) 6.830 Aaa 124 123,000
Pass Thru Ctf Ser 1999-CAM1 Class A-3 11-15-08 6.920 Aaa 50 49,250
Salomon Brothers Mortgage Securities VII, Inc.,
Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 6.750 N/R 11 10,919
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2 06-25-15 7.965 Aaa 30 30,168
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28 7.220 Aaa 28 27,572
Pass Thru Ctf Ser 1997-B Class A-6 10-15-28 6.900 Aaa 29 28,534
-------------
468,833
-------------
Oil & Gas (2.43%)
Amerada Hess Corp.,
Bond 10-01-29 7.875 BBB 20 19,923
Apache Finance Canada Corp.,
Note (Canada) 12-15-29 7.750 BBB+ 10 9,955
Coastal Corp. (The),
Note 06-15-10 7.750 BBB 10 10,113
Occidental Petroleum Corp.,
Sr Note 02-15-29 8.450 BBB- 20 20,914
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07 8.875 BB- 5 5,100
Panhandle Eastern Pipe Line Co.,
Sr Note 04-01-10 (R) 8.250 BBB- 10 10,106
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 6.625 BBB 20 18,525
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 8.750 BBB+ 10 10,050
Tosco Corp.,
Note 02-15-30 8.125 BBB 20 20,191
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 BB- 15 14,888
-------------
139,765
-------------
Paper & Paper Products (0.70%)
Abitibi-Consolidated, Inc.,
Note (Canada) 08-01-30 8.550 BBB- 15 15,094
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB 10 9,825
International Paper Co.,
Note 07-08-05 (R) 8.125 BBB+ 15 15,391
-------------
40,310
-------------
Real Estate Investment Trust (1.09%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 10 9,150
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 15 14,555
Camden Property Trust,
Note 04-15-04 7.000 BBB 10 9,623
Liberty Property L.P.,
Med Term Note 06-05-02 6.600 BBB- 10 9,891
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 10 9,644
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BB 10 9,827
-------------
62,690
-------------
Telecommunications (5.65%)
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%, 05-01-04)
(Canada) 05-01-09 (A) Zero B3 10 7,600
Sr Disc Note, Step Coupon (14.75%, 12-15-00)
(Canada) 12-15-05 (A) Zero B3 5 5,250
Crown Castle International Corp.,
Sr Note 05-15-11 9.000 B 10 9,600
Deutsche Telekom International Finance B.V.,
Gtd Note (Netherlands) 06-15-30 8.250 AA- 25 25,635
Dominion Resources, Inc.,
Sr Note Ser A 06-15-10 8.125 BBB+ 20 20,280
Exodus Communications, Inc.,
Sr Note 12-15-09 10.750 B 10 9,850
Focal Communications Corp.,
Sr Note 01-15-10 11.875 B- 10 9,100
Global Crossing Holdings Ltd.,
Sr Note (Bermuda) 11-15-09 9.500 BB 10 10,000
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 A+ 15 13,299
LCI International, Inc.,
Sr Note 06-15-07 7.250 BBB+ 15 14,627
Level 3 Communications, Inc.,
Sr Note 03-15-08 11.000 B 10 9,900
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 10 9,750
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B+ 15 14,775
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 12.000 BBB 10 11,200
Nextel Communications, Inc.,
Sr Note 11-15-09 9.375 B 15 14,644
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 10 9,725
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B 10 10,150
Quest Capital Funding, Inc.,
Deb 07-15-28 6.875 BBB+ 20 17,312
Sprint Capital Corp.,
Note 05-01-19 6.900 BBB+ 15 13,231
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon (11.625%, 04-15-04)
04-15-09 (A) Zero B3 10 6,950
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 15 16,388
Vodafone AirTouch Plc,
Note (United Kingdom) 02-15-10 (R) 7.750 A 20 20,058
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 CCC+ 5 5,587
Sr Note 11-15-09 10.375 B- 10 10,800
Williams Communications Group, Inc.,
Sr Note 10-01-09 10.875 B+ 5 4,825
WorldCom, Inc.,
Note 05-15-06 8.000 A- 15 15,381
Note 08-15-28 6.950 A- 10 8,896
-------------
324,813
-------------
Transportation (2.63%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08 6.930 A- 3 3,179
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 AA+ 19 17,753
Pass Thru Ctf Ser 1997-2C 06-30-04 7.206 BBB 19 18,398
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 CC 16 7,910
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 5 4,491
Northwest Airlines, Inc.,
Note 03-15-04 8.375 BB 10 9,532
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 33 35,138
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB- 18 17,548
United Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-1 01-01-14 7.783 Aaa 30 30,795
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 7 6,370
-------------
151,114
-------------
Utilities (10.19%)
AES Corp.,
Sr Note 06-01-09 9.500 BB 5 5,075
Sr Sub Note 07-15-06 10.250 B+ 17 17,212
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 BBB- 15 14,371
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) 6.730 BBB+ 10 9,808
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BB- 9 9,427
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 7 7,350
Calpine Corp.,
Sr Note 08-15-05 8.250 BB+ 25 24,962
Sr Note 04-01-08 7.875 BB+ 5 4,750
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 35 36,050
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 18,737
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 15 14,869
Sr Note Ser B 01-15-04 6.750 BB 15 13,950
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02 7.750 BBB- 15 15,106
East Coast Power LLC,
Sec Note 03-31-12 7.066 BBB- 10 9,212
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 23 25,434
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 12 11,831
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 9.400 A+ 15 17,906
Gtd Bond (Canada) 01-15-22 8.400 Aaa 10 11,025
Gtd Deb (Canada) 02-01-03 7.375 A+ 25 25,150
Iberdrola International B.V.,
Note (Spain) 10-01-02 7.500 AA- 25 25,271
Note (Spain) 06-01-03 (R) 7.125 AA- 25 25,131
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 20 19,400
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 11 11,604
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB+ 20 21,911
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 25 26,151
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB+ 6 6,028
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB+ 4 3,588
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 6.050 Aaa 15 14,182
Pass Thru Ctf Ser 2000-A Class A3 03-01-10 7.625 Aaa 50 51,204
Pinnacle One Partners,
Sr Note 08-15-04 (R) 8.830 BBB- 10 10,144
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 15 15,545
Sierra Pacific Resources,
Note 05-15-05 8.750 BBB 20 20,359
System Energy Resources, Inc.,
1st Mtg 08-01-01 7.710 BBB- 5 4,986
TU Electric Capital V,
Note 01-30-37 8.175 BBB- 10 9,984
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 27 27,406
-------------
585,119
-------------
TOTAL BONDS
(Cost $5,394,665) (93.62%) 5,378,219
-------- -------------
NUMBER OF
WARRANTS
--------
WARRANTS
MetroNet Communications Corp. (Canada) (R)** 10 1,200
-------------
TOTAL WARRANTS
(Cost $103) (0.02%) 1,200
-------- -------------
PAR VALUE
(000s OMITTED)
--------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.17%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%, due 02-15-16
thru 02-15-19) -- Note A 6.610 297 297,000
-------------
Corporate Savings Account (0.02%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 838
-------------
TOTAL SHORT-TERM INVESTMENTS (5.19%) 297,838
--------- -------------
TOTAL INVESTMENTS (99.83%) 5,677,257
--------- -------------
OTHER ASSETS AND LIABILITIES, NET (1.17%) 67,500
--------- -------------
TOTAL NET ASSETS (100.00%) $5,744,757
========= =============
NOTES TO THE SCHEDULE OF INVESTMENTS
* 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.
(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 $466,268 or 8.12% of net
assets as of August 31, 2000.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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 -- Dividend Performers Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Dividend Performers Fund on August 31, 2000. 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 (2.06%)
Interpublic Group of Cos., Inc. (The) 6,300 $240,975
------------
Banks -- United States (4.13%)
FleetBoston Financial Corp. 3,290 140,442
State Street Corp. 1,330 156,608
Wells Fargo Co. 4,300 185,706
------------
482,756
------------
Beverages (5.25%)
Anheuser-Busch Cos., Inc. 1,960 154,473
Coca-Cola Co. (The) 3,640 191,555
PepsiCo, Inc. 6,300 268,538
------------
614,566
------------
Broker Services (1.56%)
Merrill Lynch & Co., Inc. 1,260 182,700
------------
Building (1.15%)
Black & Decker Corp. (The) 3,360 134,610
------------
Computers (16.78%)
Cisco Systems, Inc.* 3,780 259,403
Compaq Computer Corp. 6,440 219,363
Dell Computer Corp.* 3,500 152,688
EMC Corp.* 4,060 397,880
Hewlett-Packard Co. 910 109,883
International Business Machines Corp. 1,540 203,280
Microsoft Corp.* 3,150 219,909
Sun Microsystems, Inc.* 3,150 399,853
------------
1,962,259
------------
Diversified Operations (3.77%)
Du Pont (E.I.) De Nemours & Co. 1,960 87,955
Honeywell International, Inc. 2,362 91,085
Minnesota Mining & Manufacturing Co. 1,750 162,750
Tyco International Ltd. 1,750 99,750
------------
441,540
------------
Electronics (9.58%)
Emerson Electric Co. 3,150 208,491
General Electric Co. 6,350 372,666
Intel Corp. 4,900 366,888
Motorola, Inc. 4,760 171,658
------------
1,119,703
------------
Finance (5.81%)
American Express Co. 2,310 136,579
Citigroup, Inc. 4,666 272,378
Household International, Inc. 2,800 134,400
Morgan Stanley Dean Witter & Co. 1,260 135,529
------------
678,886
------------
Insurance (3.85%)
AFLAC, Inc. 2,800 151,200
American General Corp. 2,240 163,100
American International Group, Inc. 1,520 135,469
------------
449,769
------------
Leisure (0.82%)
Disney (Walt) Co. (The) 2,450 95,397
------------
Machinery (1.26%)
Dover Corp. 3,010 147,114
------------
Media (2.22%)
McGraw-Hill Cos., Inc. (The) 4,200 260,138
------------
Medical (11.16%)
Abbott Laboratories 4,200 183,750
American Home Products Corp. 3,290 178,277
Bard (C.R.), Inc. 2,590 126,424
Baxter International, Inc. 3,850 320,511
Johnson & Johnson 2,100 193,069
Medtronic, Inc. 2,380 121,975
Merck & Co., Inc. 2,590 180,976
------------
1,304,982
------------
Mortgage Banking (1.88%)
Fannie Mae 2,450 131,688
Freddie Mac 2,100 88,463
------------
220,151
------------
Office (2.28%)
Avery Dennison Corp. 1,750 94,609
Pitney Bowes, Inc. 4,690 171,478
------------
266,087
------------
Oil & Gas (6.96%)
Chevron Corp. 1,540 130,130
Conoco Inc. (Class A)* 5,040 126,945
Exxon Mobil Corp. 3,696 301,684
Halliburton Co. 2,800 148,400
Royal Dutch Petroleum Co., American Depositary
Receipts (ADR) (Netherlands) 1,750 107,078
------------
814,237
------------
Paper & Paper Products (1.51%)
Kimberly-Clark Corp. 3,010 176,085
------------
Retail (4.77%)
CVS Corp. 2,800 103,950
Home Depot, Inc. (The) 3,150 151,397
Lowe's Cos., Inc. 4,200 188,213
Target Corp. 4,900 113,925
------------
557,485
------------
Soap & Cleaning Preparations (1.12%)
Ecolab, Inc. 3,360 130,830
------------
Telecommunications (6.34%)
CenturyTel, Inc. 3,010 86,724
Nokia Corp. (ADR) (Finland) 3,360 150,990
Nortel Networks Corp. 2,940 239,792
Verizon Communications 2,240 97,720
WorldCom, Inc.* 4,550 166,075
------------
741,301
------------
Utilities (4.42%)
ALLTEL Corp. 2,100 106,181
Duke Energy Corp. 2,800 209,475
SBC Communications, Inc. 4,830 201,653
------------
517,309
------------
TOTAL COMMON STOCKS
(Cost $8,509,525) (98.68%) 11,538,880
-------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.75%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%, due 02-15-16
thru 02-15-19) -- Note A 6.61% $88 88,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 622
------------
TOTAL SHORT-TERM INVESTMENTS (0.76%) 88,622
--------- ------------
TOTAL INVESTMENTS (99.44%) 11,627,502
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.56%) 65,613
--------- ------------
TOTAL NET ASSETS (100.00%) $11,693,115
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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 -- Medium Capitalization Growth Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Medium Capitalization Growth Fund on August 31, 2000. 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
Banks -- United States (2.10%)
Fifth Third Bancorp 2,950 $136,253
Mellon Financial Corp. 3,249 147,017
Northern Trust Corp. 3,800 320,387
------------
603,657
------------
Computers (16.36%)
America Online Latin America, Inc. (Class A)* 10,000 78,125
Ariba, Inc.* 1,300 204,587
Art Technology Group, Inc.* 2,600 265,037
Brocade Communications Systems, Inc.* 1,900 429,044
DST Systems, Inc.* 1,394 131,036
EMC Corp.* 1,600 156,800
Exodus Communications, Inc.* 3,220 220,369
Fiserv, Inc.* 2,200 119,213
i2 Technologies, Inc.* 2,200 372,212
Lexmark International Group, Inc. (Class A)* 2,301 156,037
McDATA Corp. (Class B)* 50 5,378
Mercury Interactive Corp.* 2,250 274,922
Network Appliance, Inc.* 3,070 359,190
NorthPoint Communications Group, Inc.* 20,150 230,466
Palm, Inc.* 6,850 301,400
Parametric Technology Corp.* 16,000 214,000
Phone.com, Inc.* 1,420 131,261
Rational Software Corp.* 1,700 218,769
RealNetworks, Inc.* 2,400 116,850
Redback Networks, Inc.* 2,500 373,437
Siebel Systems, Inc.* 1,200 237,375
StorageNetworks, Inc.* 50 5,075
VERITAS Software Corp.* 837 100,911
------------
4,701,494
------------
Cosmetics & Personal Care (0.55%)
Estee Lauder Cos., Inc. (The) (Class A) 3,859 157,978
------------
Diversified Operations (0.55%)
Mitsubishi Corp., American Depositary Receipts
(ADR) (Japan) 10,789 157,834
------------
Electronics (26.11%)
Aeroflex, Inc.* 7,712 283,416
Altera Corp.* 5,680 368,135
Amphenol Corp. (Class A)* 6,237 399,168
Analog Devices, Inc.* 2,823 283,711
Applied Micro Circuits Corp.* 2,260 458,639
ASM Lithography Holding NV* (Netherlands) 6,500 247,813
Atmel Corp.* 11,720 234,400
Flextronics International Ltd.* (Singapore) 4,600 383,238
Jabil Circuit, Inc.* 5,550 354,159
KLA-Tencor Corp.* 4,270 280,219
Lam Research Corp.* 7,850 236,481
Linear Technology Corp. 3,680 264,730
Maxim Integrated Products, Inc.* 1,850 162,222
Molex, Inc. 4,810 254,028
Novellus Systems, Inc.* 1,300 80,031
PE Corp.-PE Biosystems Group 4,503 442,983
QLogic Corp.* 2,650 300,775
Sanmina Corp.* 2,540 299,720
SCI Systems, Inc.* 7,204 444,847
Tektronix, Inc.* 4,324 329,435
Teradyne, Inc.* 1,421 92,099
Vishay Intertechnology, Inc.* 4,306 173,586
Vitesse Semiconductor Corp.* 3,450 306,403
Waters Corp.* 7,018 558,370
Xilinx, Inc.* 3,010 267,514
------------
7,506,122
------------
Energy (10.62%)
Baker Hughes, Inc. 11,543 422,041
BJ Services Co.* 4,810 322,270
Calpine Corp.* 2,655 262,845
Coflexip SA (ADR) (France) 1,412 83,882
Cooper Cameron Corp.* 2,902 225,812
Diamond Offshore Drilling, Inc. 5,932 265,828
Dynegy, Inc. (Class A) 4,174 187,830
El Paso Energy Corp. 3,851 224,321
Grant Prideco, Inc.* 4,538 106,643
R&B Falcon Corp.* 15,331 436,933
Transocean Sedco Forex, Inc. 5,026 300,304
Weatherford International, Inc.* 4,538 213,002
------------
3,051,711
------------
Fiber Optics (0.04%)
Corvis Corp.* 100 10,381
------------
Finance (3.35%)
Associates First Capital Corp. (Class A) 4,635 130,359
Capital One Financial Corp. 4,439 267,727
Concord EFS, Inc.* 13,572 436,001
Golden West Financial Corp. 2,723 129,683
------------
963,770
------------
Insurance (1.77%)
AFLAC, Inc. 4,733 255,582
Ambac Financial Group, Inc. 1,985 128,281
AXA Corp. (ADR) (France) 1,781 125,227
------------
509,090
------------
Media (6.70%)
Clear Channel Communications, Inc.* 5,059 366,145
Entercom Communications Corp.* 3,216 132,861
Entravision Communications Corp. (Class A)* 8,840 175,143
Hispanic Broadcasting Corp.* 6,325 162,473
Houghton Mifflin Co. 4,103 201,816
New York Times Co. (The) (Class A) 2,644 103,612
PrimaCom AG* (ADR) (Germany) 5,121 87,377
Radio One, Inc. (Class D)* 17,910 314,544
Reader's Digest Association, Inc. (Class A) 4,007 154,269
Scripps (E.W.) Co. (The) (Class A) 2,550 129,253
Telewest Communications Plc* (ADR) (United
Kingdom) 4,088 99,645
------------
1,927,138
------------
Medical (11.67%)
Affymetrix, Inc.* 3,190 252,010
Alkermes, Inc.* 5,700 263,625
Allergan, Inc. 3,445 251,916
Alpharma, Inc. (Class A) 3,990 225,934
ALZA Corp.* 1,952 147,620
Biogen, Inc.* 3,200 221,200
Community Health Care* 6,254 148,532
Forest Laboratories, Inc.* 1,215 118,918
Health Management Associates, Inc. (Class A)* 6,614 107,891
Human Genome Sciences, Inc.* 900 150,244
Immunex Corp.* 4,350 218,587
MedImmune, Inc.* 3,650 307,056
Millennium Pharmaceuticals, Inc.* 2,450 350,656
QLT PhotoTherapeutics, Inc.* (Canada) 4,050 299,953
Stryker Corp. 6,504 291,461
------------
3,355,603
------------
Office (0.85%)
Avery Dennison Corp. 4,503 243,443
------------
Retail (0.59%)
Kroger Co. 7,433 168,636
------------
Telecommunications (14.52%)
Allegiance Telecom, Inc.* 7,350 366,122
American Tower Corp. (Class A)* 6,418 233,054
COLT Telecom Group Plc* (ADR) (United Kingdom) 693 93,901
Comverse Technology, Inc.* 3,920 360,395
Crown Castle International Corp.* 4,800 166,500
Dobson Communications Corp. (Class A)* 17,300 373,031
Global Crossing Ltd.* (Bermuda) 11,322 340,368
Intermedia Communications, Inc.* 13,600 282,200
McLeodUSA, Inc. (Class A)* 19,215 303,837
Metromedia Fiber Network, Inc. (Class A)* 5,200 207,675
NEXTLINK Communications, Inc. (Class A)* 6,550 229,659
NTL, Inc.* 2,137 93,627
Scientific-Atlanta, Inc. 4,282 333,728
Time Warner Telecom, Inc. (Class A)* 1,700 110,394
UnitedGlobalCom, Inc. (Class A)* 4,200 160,913
Versatel Telecom International NV* (ADR)
(Netherlands) 2,359 67,379
VoiceStream Wireless Corp.* 835 93,990
Western Wireless Corp. (Class A)* 7,000 357,875
------------
4,174,648
------------
TOTAL COMMON STOCKS
(Cost $18,670,359) (95.78%) 27,531,505
-------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.38%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%, due 02-15-16
thru 02-15-19) -- Note A 6.61% $1,834 1,834,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 308
------------
TOTAL SHORT-TERM INVESTMENTS (6.38%) 1,834,308
--------- ------------
TOTAL INVESTMENTS (102.16%) 29,365,813
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (2.16%) (620,309)
--------- ------------
TOTAL NET ASSETS (100.00%) $28,745,504
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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>
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, 2000, assigned to country categories.
MARKET VALUE AS A
PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
------------------------ ------------------
Bermuda 1.18%
Canada 1.04
France 0.73
Germany 0.30
Japan 0.55
Netherlands 1.10
Singapore 1.33
United Kingdom 0.67
United States 95.26
-------
TOTAL INVESTMENTS 102.16%
=======
See notes to financial statements.
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Growth Fund on August 31, 2000. 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 (2.05%)
Getty Images, Inc.* 4,820 $202,440
------------
Business Services -- Misc. (5.34%)
Forrester Research, Inc.* 2,100 128,363
Heidrick & Struggles International, Inc.* 2,600 151,125
Management Network Group, Inc. (The)* 7,350 147,459
Viant Corp.* 7,200 99,900
------------
526,847
------------
Computer Software (12.28%)
Advent Software, Inc.* 4,290 264,371
Interwoven, Inc.* 3,600 345,600
Manugistics Group, Inc.* 2,000 175,500
Micromuse, Inc.* 1,000 151,875
M-Systems Flash Disk Pioneers Ltd.* (Israel) 3,500 273,875
------------
1,211,221
------------
Electronics (20.12%)
Credence Systems Corp.* 1,660 97,214
DuPont Photomasks, Inc.* 1,550 117,606
Elantec Semiconductor, Inc.* 1,900 168,150
Electro Scientific Industries, Inc.* 2,550 105,028
Exar Corp.* 2,260 272,613
Integrated Silicon Solution, Inc. * 6,600 193,875
Micrel, Inc.* 3,240 247,657
Plexus Corp.* 1,150 177,962
PLX Technology, Inc.* 5,840 182,865
PRI Automation, Inc.* 3,590 185,334
Semtech Corp.* 1,990 235,691
------------
1,983,995
------------
Fiber Optics (1.60%)
Stratos Lightwave, Inc.* 3,350 157,450
------------
Finance (3.63%)
Actrade Financial Technologies, Ltd.* 4,400 151,250
Affiliated Managers Group, Inc.* 3,700 206,275
------------
357,525
------------
Instruments -- Scientific (1.38%)
Varian, Inc.* 2,800 136,500
------------
Media (0.58%)
Radio One, Inc. (Class A)* 1,080 22,748
Radio One, Inc. (Class D)* 1,960 34,423
------------
57,171
------------
Medical (21.97%)
Alexion Pharmaceuticals, Inc.* 2,000 210,000
Alkermes, Inc.* 4,080 188,700
Cell Therapeutics, Inc.* 250 11,625
COR Therapeutics, Inc.* 4,400 247,500
Corvas International, Inc.* 450 7,172
CV Therapeutics, Inc.* 3,490 261,750
Exelixis, Inc.* 3,000 135,000
Human Genome Sciences, Inc.* 800 133,550
Inhale Therapeutic Systems, Inc.* 3,960 199,980
Invitrogen Corp.* 2,300 145,188
NPS Pharmaceuticals, Inc.* 3,200 141,600
Physiometrix, Inc.* 6,600 152,625
Priority Healthcare Corp.* 2,300 132,825
Province Healthcare Co.* 4,030 180,846
Vascular Solutions, Inc.* 1,000 18,375
------------
2,166,736
------------
Metal (1.30%)
Maverick Tube Corp.* 4,580 128,526
------------
Oil & Gas (7.97%)
Dril-Quip, Inc.* 3,690 167,664
Hanover Compressor Co.* 1,527 48,482
Marine Drilling Cos., Inc.* 5,000 135,938
Newfield Exploration Co.* 4,050 175,162
Pride International, Inc.* 4,100 100,963
Universal Compression Holdings, Inc.* 4,800 157,800
------------
786,009
------------
Retail (5.84%)
Insight Enterprises, Inc.* 2,140 $107,535
99 Cents Only Stores* 4,331 194,624
Tech Data Corp.* 5,300 273,612
------------
575,771
------------
Steel (1.35%)
Lone Star Technologies, Inc.* 2,650 133,163
------------
Telecommunications (13.71%)
AirGate PCS, Inc.* 2,950 200,784
California Amplifier, Inc.* 3,300 137,775
Intermedia Communications, Inc.* 8,000 166,000
Powertel, Inc.* 2,080 162,240
Powerwave Technologies, Inc.* 3,700 178,062
Repeater Technologies, Inc.* 10,700 185,244
SBA Communications Corp.* 3,730 166,451
Tollgrade Communications, Inc.* 900 100,069
WJ Communications, Inc.* 950 55,991
------------
1,352,616
------------
TOTAL COMMON STOCKS
(Cost $6,797,769) (99.12%) 9,775,970
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.74%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%, due 02-15-16
thru 02-15-19) -- Note A 6.61% $73 73,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 173
------------
TOTAL SHORT-TERM INVESTMENTS (0.74%) 73,173
--------- ------------
TOTAL INVESTMENTS (99.86%) 9,849,143
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.14%) 13,964
--------- ------------
TOTAL NET ASSETS (100.00%) $9,863,107
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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 -- Small Capitalization Value Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Value Fund on August 31, 2000. It's divided
into four main categories: common stocks, preferred stock, bonds and
short-term investments. Common and preferred stocks and 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
Advertising (1.08%)
Penton Media, Inc. 10,000 $313,125
------------
Aerospace (0.50%)
Innovative Solutions & Support, Inc.* 10,050 144,469
------------
Automobile/Trucks (0.73%)
Tenneco Automotive, Inc. 29,650 211,256
------------
Broker Services (1.27%)
Jefferies Group, Inc. 12,100 368,294
------------
Business Services -- Misc. (9.80%)
ACNielsen Corp.* 50,800 1,222,375
Iron Mountain, Inc.* 14,600 498,225
Sensormatic Electronics Corp.* 48,050 798,831
Xpedior, Inc.* 30,000 322,500
------------
2,841,931
------------
Chemicals (0.41%)
Genzyme Surgical Products* 11,500 117,875
------------
Computers (22.44%)
Aspen Technology, Inc.* 10,150 466,266
AXENT Technologies, Inc.* 42,200 1,002,250
Bell & Howell Co.* 25,000 556,250
Diversinet Corp.* (Canada) 35,100 318,094
Electronics for Imaging, Inc.* 21,300 553,800
Hyperion Solutions Corp.* 8,250 260,906
Integral Systems, Inc.* 10,000 151,250
NetCreations, Inc.* 4,700 99,287
NetRatings, Inc.* 10,050 173,991
NorthPoint Communications Group, Inc.* 18,000 205,875
Parametric Technology Corp.* 23,200 310,300
PSINet, Inc.* 27,765 487,623
Student Advantage, Inc.* 54,950 515,156
UNOVA, Inc.* 56,250 421,875
Viant Corp.* 33,900 470,363
Wind River Systems, Inc.* 12,500 509,375
------------
6,502,661
------------
Containers (2.28%)
Pactiv Corp.* 60,000 660,000
------------
Diversified Operations (1.29%)
ESCO Electronics Corp.* 20,250 373,359
------------
Electronics (12.79%)
Alpha Industries, Inc. 7,950 400,978
Amphenol Corp. (Class A)* 9,750 624,000
Micro Component Technology* 25,000 228,125
Repeater Technologies, Inc.* 12,150 210,347
SBS Technologies, Inc.* 7,000 360,938
Vicor Corp.* 43,150 1,882,419
------------
3,706,807
------------
Food (2.67%)
Hain Celestial Group, Inc.* 24,800 775,000
------------
Insurance (1.34%)
StanCorp Financial Group, Inc. 9,700 388,000
------------
Leisure (1.76%)
Six Flags, Inc. 34,100 509,369
------------
Machinery (3.06%)
Applied Science & Technology, Inc.* 30,650 473,159
Zebra Technologies Corp. (Class A)* 7,650 413,100
------------
886,259
------------
Media (5.59%)
Pegasus Communications Corp.* 21,950 1,092,013
Regent Communications, Inc.* 46,500 406,875
Sinclair Broadcast Group, Inc. (Class A)* 10,000 120,625
------------
1,619,513
------------
Medical (4.44%)
Covance Inc.* 65,600 680,600
DENTSPLY International, Inc. 11,500 383,812
I-STAT Corp.* 1,650 30,628
Shire Pharmaceuticals Group Plc* (United
Kingdom) 10,000 190,460
------------
1,285,500
------------
Office (0.18%)
Danka Business Systems Plc, American Depositary
Receipts (ADR) (United Kingdom) 32,699 53,136
------------
Oil & Gas (3.79%)
Basin Exploration, Inc.* 6,800 136,000
Grey Wolf, Inc.* 64,350 353,925
Tidewater, Inc. 7,000 282,625
Veritas DGC, Inc.* 12,200 325,588
------------
1,098,138
------------
Retail (1.58%)
Ruddick Corp. 9,100 111,475
Whole Foods Market, Inc.* 6,850 345,925
------------
457,400
------------
Schools/Education (6.11%)
Career Education Corp.* 17,200 686,925
Corinthian Colleges, Inc.* 20,100 1,085,400
------------
1,772,325
------------
Telecommunications (12.88%)
Alaska Communications Systems Holdings, Inc.* 41,700 337,511
ANTEC Corp.* 15,750 567,984
CFW Communications Co. 18,000 612,000
Commonwealth Telephone Enterprises, Inc. 7,500 289,687
CT Communications, Inc. 12,000 291,000
CTC Communications Group, Inc.* 47,150 1,161,069
Global Light Telecommunications, Inc.* 12,450 123,877
Intermedia Communications, Inc.* 16,850 349,637
------------
3,732,765
------------
Waste Disposal Service & Equip (1.01%)
Casella Waste Systems, Inc. (Class A)* 29,900 293,394
------------
TOTAL COMMON STOCKS
(Cost $23,574,614) (97.00%) 28,110,576
-------- ------------
PREFERRED STOCKS
Real Estate Investment Trust (0.65%)
Anthracite Capital, Inc., Ser B, 10.00% 11,100 188,700
------------
TOTAL PREFERRED STOCKS
(Cost $277,500) (0.65%) 188,700
-------- ------------
INTEREST CREDIT PAR VALUE
RATE RATING (000s OMITTED)
-------- ------ ------------
BONDS
Retail (1.79%)
Brightpoint, Inc., Liquid Yield Option
Notes (LYONS) Zero-Coupon
Convertible 03-11-18 Zero B $1,900 517,750
------------
TOTAL BONDS
(Cost $462,125) (1.79%) 517,750
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.64%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%, due
02-15-16 thru 02-15-19) -- Note A 6.61% 184 184,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 117
------------
TOTAL SHORT-TERM INVESTMENTS (0.64%) 184,117
--------- ------------
TOTAL INVESTMENTS (100.08%) 29,001,143
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.08%) (21,811)
--------- ------------
TOTAL NET ASSETS (100.00%) $28,979,332
========= ============
* Non-income producing security
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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 -- International Equity Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the International Equity Fund on August 31, 2000. It's divided into
six main categories: common stocks, rights, units, warrants, preferred
stocks and short-term investments. Common stocks, rights, units,
warrants and preferred stocks 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
Argentina (0.15%)
Perez Companc SA (Finance) 9,000 $15,033
------------
Australia (0.88%)
AMP Ltd. (Insurance) 992 10,194
Broken Hill Proprietary Co., Ltd. (Diversified
Operations) 500 5,469
Lend Lease Corp. Ltd. (Real Estate Operations) 847 9,989
National Australia Bank Ltd. (Banks -- Foreign) 811 11,879
News Corp. Ltd. (The) (Media) 1,160 15,134
Publishing & Broadcasting Ltd. (Media) 1,266 10,581
Qantas Airways Ltd. (Transport) 1,562 3,549
ResMed, Inc.* (Medical) 1,200 4,186
Telstra Corp. Ltd. (Telecommunications) 2,425 8,824
Westpac Banking Corp. Ltd. (Banks -- Foreign) 929 6,776
Woodside Petroleum Ltd. (Oil & Gas) 652 5,376
------------
91,957
------------
Belgium (0.74%)
Fortis (B) (Insurance) 1,500 45,555
Fortis (B)* (Insurance) 567 5
UCB SA (Medical) 840 31,976
------------
77,536
------------
Brazil (1.31%)
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar, American Depositary Receipts (ADR)
(Retail) 1,050 39,178
Companhia Paranaense de Energia-Copel (ADR)
(Utilities) 2,910 28,191
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) 450 41,287
Uniao de Bancos Brasileiros SA, Global
Depositary Receipts (GDR) (Finance) 840 28,560
------------
137,216
------------
Canada (7.96%)
Bombardier, Inc. (Diversified Operations) 20,310 335,281
Nortel Networks Corp. (Telecommunications) 4,210 343,922
Suncor Energy, Inc. (Oil & Gas) 6,750 152,471
------------
831,674
------------
Chile (0.30%)
Empresa Nacional de Electricidad SA* (ADR)
(Utilities) 2,950 31,528
------------
China (0.27%)
China Shipping Development Co. Ltd.* (Transport) 38,000 7,455
Shandong International Power Development Co.
Ltd. (Utilities) 84,000 16,156
Sinopec Zhenhai Refining and Chemical Co., Ltd.
(Oil & Gas) 24,000 4,401
------------
28,012
------------
Finland (1.30%)
Nokia Oyj (Telecommunications) 3,109 136,262
------------
France (12.37%)
Accor SA (Leisure) 715 30,785
Alcatel SA (Telecommunications) 1,434 117,183
BNP Paribas SA (Banks -- Foreign) 500 45,941
Bouygues SA (Building) 1,229 77,191
Cap Gemini SA (Computers) 331 69,054
Carrefour SA (Retail) 1,697 123,685
Credit Lyonnais SA (Banks -- Foreign) 1,658 66,971
Dassault Systemes SA (Computers) 400 34,374
Etablissements Economiques du Casino
Guichard-Perrachon SA (Retail) 400 39,949
France Telecom SA (Telecommunications) 885 100,957
Lafarge SA (Building) 300 22,212
Pinault-Printemps-Redoute SA (Retail) 353 66,718
PSA Peugeot Citroen SA (Automobile/Trucks) 154 28,423
Renault SA (Automobile/Trucks) 670 29,121
Sagem SA (Electronics) 124 34,136
Schneider Electric SA (Machinery) 224 16,505
Sodexho Alliance SA (Business Services -- Misc.) 204 31,946
STMicroelectronics NV (Electronics) 1,326 81,224
Total Fina SA (Oil & Gas) 1,192 176,825
Vivendi SA (Diversified Operations) 968 79,059
Wanadoo SA* (Computers) 1,032 19,010
------------
1,291,269
------------
Germany (5.05%)
Allianz AG (Insurance) 321 108,145
BASF AG (Chemicals) 800 29,665
Bayerische Motoren Werke AG (Automobile/Trucks) 1 32
Deutsche Bank AG (Banks -- Foreign) 527 45,849
Deutsche Telekom AG (Telecommunications) 952 36,552
Dresdner Bank AG (Banks -- Foreign) 600 26,867
Metro AG (Retail) 700 26,653
SAP AG (Computers) 460 89,840
Siemens AG (Diversified Operations) 600 96,143
Volkswagen AG (Automobile/Trucks) 1,534 67,055
------------
526,801
------------
Greece (0.37%)
Alpha Credit Bank SA (Banks -- Foreign) 430 13,116
Hellenic Telecommunications Organization SA
(ADR) (Telecommunications) 1,570 14,522
STET Hellas Telecommunications SA* (ADR)
(Telecommunications) 630 11,025
------------
38,663
------------
Hong Kong (2.95%)
Aeon Credit Service Co. Ltd. (Finance) 17,600 6,093
ASM Pacific Technology Ltd. (Electronics) 3,500 11,130
Cathay Pacific Airways Ltd. (Transport) 3,000 5,828
Cheung Kong Holdings Ltd. (Real Estate
Operations) 4,000 52,314
China Unicom Ltd.* (Telecommunications) 2,000 4,642
Citic Pacific Ltd. (Diversified Operations) 1,000 4,770
Dah Sing Financial Group (Finance) 5,200 24,270
Giordano International Ltd. (Retail) 4,000 2,244
Guoco Group Ltd. (Finance) 3,000 7,693
Hang Seng Bank Ltd. (Banks -- Foreign) 1,100 11,812
Hongkong Electric Holdings Ltd. (Utilities) 1,500 4,751
Hongkong Land Holdings Ltd. (Real Estate
Operations) 4,000 8,000
HSBC Holdings Plc (Banks -- Foreign) 3,005 42,769
Hutchison Whampoa Ltd. (Diversified Operations) 3,400 47,955
Legend Holdings Ltd. (Computers) 6,000 6,385
Li & Fung Ltd. (Business Services -- Misc.) 4,000 17,438
Pacific Century CyberWorks Ltd.* (Computers) 10,789 20,059
Sun Hung Kai Properties, Ltd. (Real Estate
Operations) 1,000 9,424
Swire Pacific Ltd. (Diversified Operations) 2,500 17,150
Tan Chong International Ltd. (Diversified
Operations) 21,000 3,366
------------
308,093
------------
Hungary (0.10%)
Magyar Tavkozlesi Rt (Telecommunications) 1,900 10,491
------------
Ireland (0.61%)
CRH Plc (Building) 3,829 63,973
------------
Israel (0.40%)
Bank Leumi Le-Israel Ltd. (Banks -- Foreign) 11,000 25,338
Partner Communications Co. Ltd.* (ADR)
(Telecommunications) 1,700 16,150
------------
41,488
------------
Italy (4.56%)
Assicurazioni Generali SpA (Insurance) 2,915 89,667
Banca Intesa SpA (Banks -- Foreign) 8,764 37,501
Eni SpA (Oil & Gas) 6,760 39,428
Gruppo Editoriale L'Espresso SpA (Media) 2,245 32,287
Riunione Adriatica di Sicurta SpA (Insurance) 4,370 51,093
San Paolo-IMI SpA* (Banks -- Foreign) 2,735 48,511
Telecom Italia Mobile SpA (Telecommunications) 8,115 70,312
Telecom Italia SpA (Telecommunications) 5,002 61,457
UniCredito Italiano SpA (Banks -- Foreign) 8,897 45,968
------------
476,224
------------
Japan (17.47%)
Aiful Corp. (Finance) 500 43,132
Amano Corp. (Manufacturing) 4,000 41,444
Asahi Denka Kogyo K.K. (Chemicals) 4,000 31,467
Asahi Glass Co., Ltd. (Glass Products) 3,000 28,045
Azel Corp. (Real Estate Operations) 10,000 29,161
Chubu Electric Power Co., Inc. (Utilities) 4,000 67,886
Chugai Pharmaceutical Co., Ltd. (Medical) 2,000 35,631
Daibiru Corp. (Real Estate Operations) 5,000 41,678
Daio Paper Corp. (Paper & Paper Products) 4,000 40,356
Daito Trust Construction Co., Ltd. (Real Estate
Operations) 3,000 50,352
Futaba Industrial Co., Ltd. (Automobile/Trucks) 3,000 38,368
Inax Corp. (Building) 5,000 27,051
Japan Airlines Co., Ltd. (Transport) 11,000 39,503
Katokichi Co., Ltd. (Food) 2,000 49,695
Kirin Brewery Co., Ltd. (Beverages) 6,000 65,823
Koito Manufacturing Co., Ltd.
(Automobile/Trucks) 3,000 14,599
Kurita Water Industries Ltd. (Pollution Control) 1,000 20,816
Maeda Corp. (Building) 20,000 76,324
Marui Co., Ltd. (Retail) 1,000 15,762
Max Co., Ltd. (Machinery) 4,000 45,945
Meiwa Estate Co., Ltd. (Real Estate Operations) 2,000 44,726
Melco, Inc. (Computers) 1,000 47,351
Mitsui Fudosan Co., Ltd. (Real Estate
Operations) 7,000 75,809
Mizuno Corp. (Retail) 12,000 36,906
Murata Manufacturing Co., Ltd. (Electronics) 100 15,312
Nikko Securities Co., Ltd. (The) (Broker
Services) 3,000 28,945
Nippon Meat Packers, Inc. (Food) 4,000 50,933
Nissin Food Products Co., Ltd. (Food) 2,000 52,133
Nitto Denko Corp. (Electronics) 1,000 40,506
Orix Corp. (Leasing Companies) 100 13,315
Q.P. Corp. (Food) 12,000 101,266
Rohm Co., Ltd. (Electronics) 100 28,458
Santen Pharmaceutical Co., Ltd. (Medical) 1,000 22,504
Sekisui House, Ltd. (Building) 11,000 111,599
Shiseido Co., Ltd. (Cosmetics & Personal Care) 3,000 35,443
Stanley Electric Co., Ltd. (Electronics) 3,000 36,287
Sumitomo Bakelite Co., Ltd. (Chemicals) 2,000 26,442
Sumitomo Metal Mining Co., Ltd. (Metal) 6,000 32,911
Taisho Pharmaceutical Co., Ltd. (Medical) 1,000 30,286
Takefuji Corp. (Finance) 300 29,508
Terumo Corp. (Medical) 1,000 27,661
Toho Gas Co., Ltd. (Oil & Gas) 19,000 36,699
Tokuyama Corp. (Chemicals) 11,000 65,495
Tokyu Corp. (Transport) 6,000 31,336
------------
1,824,869
------------
Malaysia (0.53%)
AMMB Holdings Berhad (Banks -- Foreign) 3,200 10,526
British American Tobacco Berhad (Tobacco) 400 3,737
Malayan Banking Berhad (Banks -- Foreign) 2,000 7,684
Malaysian Pacific Industries Berhad
(Electronics) 1,000 8,684
Mesiniaga Berhad (Computers) 2,000 5,000
Resorts World Berhad (Leisure) 5,000 10,329
Tanjong Plc (Leisure) 2,000 4,342
Technology Resources Industries Berhad*
(Telecommunications) 4,000 4,800
------------
55,102
------------
Mexico (0.68%)
Grupo Financiero BBVA Bancomer, SA de CV*
(Finance) 60,000 35,996
Telefonos de Mexico SA (ADR)
(Telecommunications) 650 35,384
------------
71,380
------------
Netherlands (7.33%)
Aegon NV (Insurance) 1,591 62,005
Akzo Nobel NV (Chemicals) 1,445 63,896
Fortis (NL) NV (Insurance) 1,376 42,351
ING Groep NV (Banks -- Foreign) 1,127 75,437
Koninklijke (Royal) Philips Electronics NV
(Electronics) 1,198 58,281
Koninklijke Ahold NV (Retail) 3,208 90,620
Koninklijke Numico NV (Food) 1,315 66,425
Royal Dutch Petroleum Co. (Oil & Gas) 3,341 203,169
TNT Post Group NV (Transport) 1,188 27,748
VNU NV (Media) 700 37,285
Wolters Kluwer NV (Media) 1,894 38,336
------------
765,553
------------
New Zealand (0.11%)
Auckland International Airport Ltd. (Transport) 4,700 5,947
Telecom Corp of New Zealand Ltd.
(Telecommunications) 2,000 5,565
------------
11,512
------------
Norway (0.54%)
Tomra Systems ASA (Machinery) 1,900 56,469
------------
Philippine Islands (0.01%)
Manila Electric Co. (Utilities) 700 1,017
------------
Poland (0.15%)
Polski Koncern Naftowy Orlen SA (Oil & Gas) 3,400 15,745
------------
Portugal (0.23%)
Portugal Telecom SA (Telecommunications) 2,000 20,809
PT Multimedia.com Servicos de Acesso a Internet
SGPS SA* (Computers) 500 3,054
------------
23,863
------------
Singapore (1.18%)
DBS Group Holdings Ltd. (Banks -- Foreign) 1,000 12,085
DBS Land Ltd. (Real Estate Operations) 3,000 4,846
Flextech Holdings Ltd. (Electronics) 9,000 6,275
Keppel Land Ltd. (Real Estate Operations) 4,000 6,205
Keppel TatLee Bank Ltd. (Banks -- Foreign) 2,000 3,672
Neptune Orient Lines Ltd.* (Transport) 8,000 8,739
Overseas Union Bank Ltd. (Banks -- Foreign) 2,000 10,110
Pacific Century Regional Developments Ltd.*
(Real Estate Operations) 1,000 13,538
Singapore Airlines Ltd. (Transport) 1,000 9,645
Singapore Technologies Engineering Ltd.
(Engineering/R&D Services) 12,000 16,176
United Overseas Bank Ltd. (Banks -- Foreign) 2,000 15,688
Venture Manufacturing Ltd. (Electronics) 1,000 12,783
Wing Tai Holdings Ltd. (Real Estate Operations) 4,000 3,533
------------
123,295
------------
South Africa (1.11%)
ABSA Group Ltd. (Banks -- Foreign) 10,500 43,363
Comparex Holdings Ltd.* (Computers) 14,000 21,681
DataTec Ltd.* (Computers) 2,500 22,513
Rembrandt Group Ltd. (Diversified Operations) 2,900 28,694
------------
116,251
------------
South Korea (1.13%)
LG Chemical Ltd. (Chemicals) 600 10,119
Pohang Iron & Steel Co. Ltd. (Steel) 300 22,187
Samsung Electro Mechanics Co.* (Electronics) 170 7,222
Samsung Electronics Co. (Electronics) 270 66,602
Shinhan Bank (Banks -- Foreign) 1,080 11,786
------------
117,916
------------
Spain (3.30%)
Amadeus Global Travel Distribution SA*
(Transport) 4,098 41,837
Banco Bilbao Vizcaya Argentaria SA (Banks --
Foreign) 5,689 84,392
Banco Santander Central Hispano SA (Banks --
Foreign) 6,426 69,027
Endesa SA (Utilities) 1,700 33,126
Telefonica Publicidad e Informacion, SA
(Advertising) 2,527 22,882
Telefonica SA* (Telecommunications) 4,855 93,097
------------
344,361
------------
Sweden (1.95%)
Ericsson (LM) Telefonaktiebolaget AB
(Telecommunications) 5,627 113,556
Nordic Baltic Holding AB (Banks -- Foreign) 4,939 34,024
Skandia Forsakrings AB (Insurance) 2,767 55,986
------------
203,566
------------
Switzerland (2.61%)
Adecco SA (Business Services -- Misc.) 50 38,318
Credit Suisse Group (Banks -- Foreign) 275 57,463
Novartis AG (Medical) 87 131,549
Roche Holding AG (Medical) 5 44,776
------------
272,106
------------
Taiwan (1.73%)
Advanced Semiconductor Engineering, Inc.* (GDR)
(Electronics) (R) 1,052 9,415
China Steel Corp. (GDR) (Steel) 1,509 19,617
Compal Electronics, Inc. (Computers) 12,000 23,003
Compeq Manufacturing Co., Ltd.* (Electronics) 3,000 17,300
D-Link Corp. (Computers) 3,450 7,502
Hon Hai Precision Industry Co., Ltd.
(Electronics) 1,300 9,926
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 11,640 50,437
United Microelectronics Corp.* (Electronics) 8,000 21,263
Winbond Electronics Corp.* (Electronics) 9,000 22,326
------------
180,789
------------
Thailand (0.26%)
BEC World Pcl (Media) 1,700 9,317
PTT Exploration & Production Pcl (Oil & Gas) 2,500 14,925
Shin Satellite Pcl* (Telecommunications) 3,900 3,292
------------
27,534
------------
Turkey (0.28%)
Dogan Yayin Holding AS* (Diversified Operations) 231,000 2,927
Turkcel Iletisim Hizmetleri AS* (ADR)
(Telecommunications) 534 7,176
Vestel Elektronik Sanayi ve Ticaret AS*
(Household) 45,000 8,588
Yapi ve Kredi Bankasi AS* (Banks -- Foreign) 1,223,600 10,274
------------
28,965
------------
United Kingdom (18.12%)
Barclays Plc (Banks -- Foreign) 1,799 44,901
BP Amoco Plc (Oil & Gas) 23,978 219,379
British Telecommunications Plc
(Telecommunications) 4,882 61,987
Cable & Wireless Plc (Telecommunications) 3,000 55,418
Carlton Communications Plc (Media) 5,975 65,027
Centrica Plc (Utilities) 17,995 58,753
CGNU Plc (Insurance) 2,100 32,301
CMG Plc (Computers) 2,000 40,162
COLT Telecom Group Plc* (Telecommunications) 1,027 34,575
Energis Plc* (Telecommunications) 3,376 30,814
Freeserve (Computers) 4,643 18,191
Glaxo Wellcome Plc (Medical) 4,752 136,602
HSBC Holdings Plc (Banks -- Foreign) 10,652 153,180
Invensys Plc (Diversified Operations) 12,040 46,998
Lloyds TSB Group Plc (Banks -- Foreign) 7,030 66,104
Logica Plc (Computers) 617 19,294
Marconi Plc (Telecommunications) 7,424 131,646
Pearson Plc (Media) 2,794 80,682
Sage Group Plc (Computers) 4,290 39,561
Scoot.com Plc* (Telecommunications) 14,530 26,830
SEMA Group Plc (Computers) 3,363 62,953
SmithKline Beecham Plc (Medical) 6,907 89,954
Telewest Communications Plc* (Media) 12,191 30,427
Vodafone AirTouch Plc (Telecommunications) 85,880 346,758
------------
1,892,497
------------
TOTAL COMMON STOCKS
(Cost $9,122,675) (98.04%) 10,239,010
--------- ------------
RIGHTS
United Kingdom (0.04%)
Pearson Plc* (Media) 299 3,736
------------
TOTAL RIGHTS
(Cost $0) (0.04%) 3,736
--------- ------------
UNITS
Mexico (0.28%)
Controladora Comercial Mexicana SA de CV
(Retail) 23,000 29,497
------------
TOTAL UNITS
(Cost $22,020) (0.28%) 29,497
--------- ------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-Gesellschaft AG*
(Insurance) 2 135
------------
TOTAL WARRANTS
(Cost $90) (0.00%) 135
--------- ------------
TOTAL COMMON STOCKS, RIGHTS, UNITS AND WARRANTS
(Cost $9,144,785) (98.36%) 10,272,378
--------- ------------
PREFERRED STOCKS
Germany (0.34%)
Fresenius AG (Medical) 145 35,013
------------
TOTAL PREFERRED STOCKS
(Cost $29,086) (0.34%) 35,013
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.83%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 6.00% and 8.75%, due 08-15-20
and 02-15-26) -- Note A 6.61% $87 87,000
------------
NUMBER OF SHARES
----------------
Cash Equivalents (8.22%)
Navigator Securities Lending Prime
Portfolio ** 858,764 858,764
------------
TOTAL SHORT-TERM INVESTMENTS (9.05%) 945,764
--------- ------------
TOTAL INVESTMENTS (107.75%) 11,253,155
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (7.75%) (809,259)
--------- ------------
TOTAL NET ASSETS (100.00%) $10,443,896
========= ============
* Non-income producing security.
** Represents investment of security lending collateral -- Note A.
(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 $9,415 as of August 31, 2000.
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>
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,
2000, assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
--------------------- -------------------
Advertising 0.22%
Automobile/Trucks 1.70
Banks -- Foreign 10.91
Beverages 0.63
Broker Services 0.28
Building 3.62
Business Services -- Misc. 0.84
Chemicals 2.17
Computers 5.26
Cosmetics & Personal Care 0.34
Diversified Operations 6.39
Electronics 5.15
Engineering/R&D Services 0.15
Finance 1.82
Food 3.07
Glass Products 0.27
Household 0.08
Insurance 4.76
Leasing Companies 0.13
Leisure 0.44
Machinery 1.14
Manufacturing 0.40
Media 3.09
Medical 5.65
Metal 0.31
Oil & Gas 8.31
Paper & Paper Products 0.39
Pollution Control 0.20
Real Estate Operations 3.35
Retail 4.51
Steel 0.40
Telecommunications 18.63
Tobacco 0.04
Transport 1.74
Utilities 2.31
Short-Term Investments 9.05
-------
TOTAL INVESTMENTS 107.75%
=======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
(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, organized as a
Massachusetts business trust in 1994. Each Fund's class of shares has
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, with income as a secondary objective. 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 Funds, no capital gain
distribution will be made.
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 individual Funds. 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. The Funds have entered into a syndicated line of credit
agreement with various banks. 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 to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The maximum loan balances for the
Dividend Performers Fund and Medium Capitalization Growth Fund during
the period were $5,391,000 and $7,011,000. The annualized interest rate
charged during the period for the Dividend Performers Fund and Medium
Capitalization Growth Fund was 7.00% and 7.125%, respectively. At August
31, 2000, there were no outstanding loan balances for the Dividend
Performers Fund and Medium Capitalization Growth Fund. There was no
borrowing activity under the line of credit for the period ended August
31, 2000 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, 2000, the International
Equity Fund loaned securities having a market value of $818,853
collateralized by cash in the amount of $858,764, which was invested in
a short-term instrument. There were no securities loaned at August 31,
2000 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' Statements 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, 2000 were as follows:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
-------- ------------------- ---------- --------------
INTERNATIONAL EQUITY
Buys
Euro Currency 175,892 September 2000 ($1,230)
Japanese Yen 71,112 September 2000 33
Pound Sterling 69,761 September 2000 (1,037)
Singapore Dollar 2,620 September 2000 (2)
-----------
($2,236)
===========
Sells
Argentine Peso 8,267 September 2000 ($5)
Japanese Yen 86,915 September 2000 (41)
Pound Sterling 28,506 September 2000 (81)
-----------
($127)
===========
FINANCIAL FUTURES CONTRACTS The Funds may buy and sell financial futures
contracts for hedging or other non-speculative purposes. 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 a 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 financial futures contracts for the Funds at August 31, 2000.
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
contracts' 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 Funds will continuously
monitor the creditworthiness of all their 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 Statements of Assets and Liabilities.
There were no written option transactions for the period ended August
31, 2000 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:
FUND RATE
---- ----
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
The Adviser has agreed to limit the Funds' expenses 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, 2000, the
reduction in the Funds' expenses with any additional amounts not borne
by the Funds by virtue of the expense limit amounted to $37,658 for the
Active Bond Fund, $29,877 for the Dividend Performers Fund, $39,766 for
the Medium Capitalization Growth Fund, $53,913 for the Small
Capitalization Growth Fund, $35,889 for the Small Capitalization Value
Fund and $123,929 for the International Equity Fund.
Indocam International Investments Services ("IIIS") serves as
subadvisor to International Equity Fund. Under the contract, IIIS
provides advice and recommendations regarding the International Equity
Fund's investments. The Adviser pays a portion of its advisory fee from
International Equity Fund to IIIS at the rate equal to 55% of the
advisory fee payable by the Fund. The Fund is not responsible for
payment of the 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, 2000, 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 Life Insurance Company. 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. Stephen L. Brown, Ms. Maureen R. Ford, 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 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 an other asset. The deferred compensation liability and
the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses. The Deferred Compensation Plan
investment has no impact on the operations 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, 2000, were as
follows:
PURCHASES SALES
------------- ------------
Active Bond Fund
U.S. Government
Securities $5,970,703 $4,775,817
Other Investments 4,152,592 4,040,494
Dividend Performers
Fund 5,414,497 9,409,388
Medium
Capitalization
Growth Fund 26,932,735 32,368,457
Small
Capitalization
Growth Fund 13,340,366 11,256,431
Small
Capitalization
Value Fund 20,687,058 13,140,107
International
Equity Fund 39,065,000 39,992,000
At August 31, 2000, the cost (excluding the corporate savings account)
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 UNREALIZED
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ---------------- ---------------- --------------
<S> <S> <S> <S> <S>
Active Bond
Fund $5,738,232 $54,480 $116,293 ($61,813)
Dividend
Performers
Fund 8,597,525 3,318,748 289,393 3,029,355
Medium
Capitalization
Growth Fund 20,505,634 9,867,878 1,008,007 8,859,871
Small
Capitalization
Growth Fund 6,873,855 3,159,483 184,368 2,975,115
Small
Capitalization
Value Fund 24,498,239 7,148,798 2,646,011 4,502,787
International
Equity
Fund 10,224,203 1,538,148 509,196 1,028,952
</TABLE>
NOTES
[This page intentionally left blank.]
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
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 8/00
10/00
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, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
TABLE OF CONTENTS
Page
1) CEO Corner 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 33
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Volatility ruled during the spring, as rising interest rates and
prospects of a slowing economy finally caught up to pricey growth
stocks. As a result, the tech-heavy NASDAQ Composite Index advanced by
only 3.37% through the end of August, while the Dow Jones Industrial
Average lost 1.46% and the Standard & Poor's 500 Index was up 4.12%.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including both blue chip and
old economy stocks in sectors like financials, health care and energy,
that combined both strong fundamentals and less frothy valuation levels.
As for bonds, rising interest rates have kept the broader bond market in
flux, but pockets of strength have emerged there, as well, including
municipal bonds and longer-maturity Treasury bonds. The 30-year bond,
for instance, has returned 14.28% since January.
Between now and year end, we expect the market's focus to be on
Washington, as it usually is in an election year. While the presidential
election is important, what warrants more attention is the Federal
Reserve Board. The November election will generate more ink, but won't
have anywhere near the impact on financial markets that further Fed
action could. So we'll be watching the economic data to see whether the
Fed has truly wound down its string of interest-rate hikes.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY JANE A. SHIGLEY AND JAY C. LEU,
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Balanced Fund
Bonds rally, stock market broadens in last six months
Amid increasing uncertainty and volatility, stocks turned in decent
gains during the past six months. Despite the fact that the Federal
Reserve continued to hike interest rates during the period, bonds
rallied as investors began to anticipate the end of the Fed's campaign
to slow the economy and stave off inflation by raising interest rates.
For the six-month period ended August 31, 2000, John Hancock
Independence Balanced Fund posted a total return of 12.21% at net asset
value, compared to the average balanced fund's 8.47% 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 8.72%. For historical performance information, see page six.
"The bulk
of the
Fund's out-
performance
can be
attributed to
our stock
selection."
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into three sections (from
top to left): U.S. Government & Agencies 22%, Corporate Bonds 17%
and Common Stock 61%. A note below the chart reads "As a
percentage of net assets on August 31, 2000."]
Performance review
The bulk of the Fund's outperformance can be attributed to our stock
selection. During the six-month period, we were rewarded for sticking to
our discipline of selecting stocks that combine cheapness and improving
fundamentals. Instead of confining their enthusiasm to rapidly growing
technology and telecommunications stocks as they had throughout most of
last year, investors became increasingly more rational, demanding that
companies have real earnings, solid cash flow and good balance sheets.
Our strategy proved especially helpful in an environment in which
investors increasingly punished stocks that disappointed with
worse-than-expected earnings results -- particularly those that had
reached incredible valuations. Our asset allocation remained neutral
throughout the period, with a relatively constant 60% stake in stocks
and 40% in bonds. We were somewhat disadvantaged by our overweight
position in agency, mortgage and corporate bonds.
Stocks: Leaders and laggards
The Fund had a relatively large stake in financial companies --
including Citigroup and AXA Financial -- which were some of the market's
best performers during the period. They benefited from investors'
growing preference for value and talk of mergers and acquisitions within
the sector. Additionally, we had a relatively light weighting in
technology stocks and those that we did own performed reasonably well.
Energy stocks -- such as El Paso Energy -- also were strong performers,
boosted mainly by the rising prices of natural gas and oil.
[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, 2000." The chart is scaled in increments
of 3% with 0% at the bottom and 15% at the top. The first bar
represents the 12.21% total return for John Hancock Independence
Balanced Fund. The second bar represents the 8.47% total return
for Average balanced fund. The third bar represents the 8.72%
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."]
On the flip side, the retail sector performed poorly in response to a
cyclical slowdown in sales. Disappointing retailers included Gap, which
suffered a series of missteps that resulted in declining same-store
sales. Home building and improvement stores Lowe's and Home Depot
struggled as housing activity slowed in response to rising interest
rates.
Bonds improve
Bond investors were cheered by economic data suggesting that the Federal
Reserve's yearlong campaign to slow the economy by raising interest
rates was working. Renewed enthusiasm for bonds also was fueled by
volatility in the stock market. But as we mentioned earlier, not all
bonds benefited equally. Thanks to the government's buyback, Treasuries
performed best. Agency, mortgage-backed and corporate securities had
gains, but they were smaller than their Treasury counterparts'.
During the period, we continued to maintain a relatively light stake in
Treasuries. Instead, we focused on higher-yielding alternatives,
including corporate and mortgage bonds, which we believe will outperform
as the Fed moves toward a more neutral interest-rate stance. Rather than
position the Fund to benefit in a rising or declining interest-rate
environment, we kept the Fund's duration -- a gauge of interest-rate
sensitivity -- in line with the bond market overall.
"From a
profitability
standpoint,
we believe
that the
companies
we hold are
in good
shape."
Outlook
We're upbeat about the performance of stocks over the next several
months. The global economy remains strong and inflation remains
moderate. We expect the U.S. economy will slow moderately in the second
half of 2000 with further slowing in 2001. Because oil and natural gas
prices remain high, we will closely monitor their impact on earnings and
consumer confidence. We don't believe that the Fed will raise interest
rates before the November presidential election, although we may see
another increase before year end. From a profitability standpoint, we
believe that the companies we hold are in good shape. As for the bond
market, we believe that, given their yield advantage, agency, corporate
and mortgage securities will outpace their Treasury counterparts in an
environment in which the Fed is less actively battling potential
inflation.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (7/6/95)
---------- ----------
Cumulative Total Returns 3.13% 86.43%
Average Annual Total Returns(1) 3.13% 13.31%
YIELD
As of August 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock Independence Balanced Fund(1) 2.43%
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 invest ments 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.
Note 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 returns for the one-year period and since inception
would have been 3.06% and 12.48%, respectively. Without the limitation
of expenses, the yield would have been 2.33%.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in 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 Aggregate 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 Aggregate Bond Index is an unmanaged
index that includes Treasury issues, agency issues, corporate bond
issues and mortgage-backed securities. It is not possible to invest in
an index.
[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 two
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 $520,746 as of August 31, 2000. The second
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 $488,658 as of August 31, 2000.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Diversified
Core Equity Fund II
Focus on earnings returns as stock market broadens
The past six months witnessed an important transition for the stock
market. The beginning of the period coincided with the tail end of a
speculative bubble that had been building for some time. Rising interest
rates had led many investors to favor stocks in the high-growth
technology, media and telecommunications sectors, while shares in most
other sectors languished. Internet stocks were particular favorites, and
by early March the prices of many Internet issues bore little
relationship to their earnings prospects.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings." The first listing is General Electric 4.6%, the second
is Intel 4.3%, the third Citigroup 4.3%, the fourth Cisco Systems
4.3% and the fifth Pfizer 3.8%. A note below the table reads "As
a percentage of net assets on August 31, 2000."]
During March -- around the time of yet another boost in short-term
interest rates by the Federal Reserve Board -- prices peaked. April saw
some particularly nasty declines in the major averages, including a
one-day loss of more than 5% in both the Standard & Poor's 500 Index and
the Dow Jones Industrial Average. However, when the dust finally
settled, most of the damage was confined to the technology-heavy NASDAQ
Composite Index, which shed 37.3% from its March peak to its May trough.
"Several
financial
stocks were
important
contributors
to the
Fund's per-
formance."
On May 16, the Fed increased rates once more -- this time by one-half a
percentage point, leaving many investors wondering if this would be the
final hike for the remainder of 2000. Responding to subsiding
interest-rate fears and the promise of strong second-quarter earnings
reports, the markets firmed over the summer. This time, however,
investors focused on stocks with proven earnings and solid prospects for
growth, leaving the speculative darlings of earlier in the year well off
their highs, while technology stalwarts like Intel and Cisco Systems
recovered nicely.
Performance summary
The "return to normalcy" that characterized the markets during the
spring and summer was beneficial to the Fund, which emphasizes a
disciplined adherence to undervalued stocks of companies with improving
fundamentals. For the six months that ended August 31, 2000, the John
Hancock Independence Diversified Core Equity Fund II returned 15.17%,
beating the 13.35% return of the average large-cap value fund, according
to Lipper, Inc. The Fund's performance versus the Standard & Poor's 500
Index was even better, as the latter returned 11.72% over the same
period. Historical performance can be found on page nine.
[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, 2000." The chart is scaled in increments
of 5% with 0% at the bottom and 20% at the top. The first bar
represents the 15.17% total return for John Hancock Independence
Diversified Core Equity Fund II. The second bar represents the
13.35% total return for Average large-cap value fund. The third
bar represents the 11.72% 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 large-cap value
fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
Several financial stocks were important contributors to the Fund's
performance. AXA Financial, a diversified financial services company,
was one beneficial holding. AXA saw its share price strengthen when the
company announced that it would sell Donaldson, Lufkin & Jenrette and on
the news that AXA subsidiary Alliance Capital Management would purchase
money-management firm Sanford Bernstein. Citigroup, another helpful
financial holding, continued to perform well based on the company's
excellent geographic and product diversity, global distribution network
and superb management team. Drug stock Warner- Lambert was a strong
performer in response to the company's acquisition by rival
pharmaceutical firm Pfizer. Nortel Networks benefited from continued
strong growth in the demand for switching devices and other equipment
used to build the infrastructure of the Internet and fiber-optic
telephone networks.
On the downside, Microsoft was the biggest detractor from performance.
On June 7, the judge presiding over the federal government's antitrust
suit against the company ruled that Microsoft must be broken into two
separate companies. Although this ruling is subject to appeal, investors
became more cautious about the stock. Two veteran contenders in the
telecommunications sector, AT&T Wireless and WorldCom, also turned in
disappointing performances. Increasingly stiff competition for
long-distance service was the primary cause in both cases. Finally,
clothing retailer Gap suffered from disappointing same-store sales
during the crucial back-to-school season, causing its stock to decline.
"...we
welcome the
return of a
more rational
market..."
Outlook
As long as investors remain sensitive to earnings and the economy
continues to grow at a reasonable rate without a resurgence of
inflation, the investment environment should be favorable for the Fund.
Our disciplined methodology imposes a structure on the evaluation of all
research ideas so that the emphasis is on whether the numbers work, not
on how effectively an analyst "sells" an idea to portfolio managers.
Therefore, we welcome the return of a more rational market in which a
stock's performance is closely linked to its fundamental prospects.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/10/95)
----- ----- ---------
Cumulative Total Returns 1.59% 159.13% 183.74%
Average Annual Total Returns(1) 1.59% 20.98% 21.70%
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.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.70% of the
Fund's average daily net assets. However, for the period ended August
31, 2000, the Fund's expense ratio was 0.66% of the Fund's average daily
net assets. Without the limitation of expenses, the average annual total
return since inception would have been 21.67%. Without the limitation of
expenses the effect on the five-year period would have been less than
0.01%.
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 Index,
an unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
[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 Index and is equal to $856,963 as of August 31, 2000. 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 $746,864 as of
August 31, 2000.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock Independence Medium Capitalization Fund
Mid-cap stocks outperform large-caps; earnings matter again
Stock market participants witnessed the bursting of a speculative bubble
and a return to more normal market conditions over the past six months.
Believing that companies in the high-growth technology, media and
telecommunications sectors would be less affected by rising interest
rates, investors had flocked to stocks of all capitalizations in those
sectors during the last quarter of 1999 and the first two months of
2000. Internet stocks were particular favorites, and by early March the
prices of many Internet issues bore little relationship to their
earnings prospects.
"The 'return
to normalcy'
that charac-
terized the
markets...
was bene-
ficial to
the Fund..."
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings." The first listing is Waters Corp. 2.0%, the second is
Intuit 2.0%, the third Jabil Circuit 1.8%, the fourth Atmel Corp.
1.8% and the fifth El Paso Energy 1.6%. A note below the table
reads "As a percentage of net assets on August 31, 2000."]
During March -- around the time of yet another boost in short-term
interest rates by the Federal Reserve Board -- prices peaked. April saw
some particularly nasty declines in the major averages, including a
one-day loss of more than 5% in both the S&P 500 and the Dow Jones
Industrial Average on April 14. However, when the dust finally settled,
most of the damage was confined to the technology-heavy NASDAQ Composite
Index.
On May 16, the Fed increased rates once more -- this time by one-half a
percent, leaving many investors to wonder if this would be the final
hike for the remainder of 2000. Responding to subsiding interest-rate
fears and the promise of strong second-quarter earnings reports, the
markets firmed over the summer. This time, however, investors focused on
stocks with proven earnings and solid prospects for growth, leaving the
speculative darlings of earlier in the year well off their highs.
Mid-cap stocks, in part because as a group they were more modestly
valued, fared even better than their large-cap peers in this
environment.
Performance summary
The "return to normalcy" that characterized the markets during the
spring and summer was beneficial to the Fund, which emphasizes a
disciplined adherence to undervalued stocks of companies with improving
fundamentals. For the six months ended August 31, 2000, John Hancock
Independence Medium Capitalization Fund returned 20.80%, beating the
16.26% return of the average multi-cap value fund, according to Lipper,
Inc. The Fund's returns also compared favorably with those of the
Standard & Poor's MidCap 400 Index, which returned 18.34% over the same
period.
[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, 2000." The chart is scaled in increments
of 5% with 0% at the bottom and 25% at the top. The first bar
represents the 20.80% total return for John Hancock Independence
Medium Capitalization Fund. The second bar represents the 16.26%
total return for Average multi-cap value fund. The third bar
represents the 18.34% 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 multi-cap value fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
Altera, a manufacturer of semiconductors for the telecommunications
industry, made the most positive contribution to the Fund's performance,
buoyed by better-than-expected second quarter earnings and investors'
belief that technology stocks won't suffer as much as other sectors if
the Fed succeeds in cooling down the economy. Two contract manufacturers
for semiconductor companies, Sanmina and Jabil Circuit, also benefited
from the positive outlook for the semiconductor group. Anadarko
Petroleum, Apache, Phillips Petroleum and El Paso Energy all did well
for the Fund and represented the strong energy sector, as prices for
crude oil and natural gas continued to climb during the period. Finally,
AXA Financial saw its share price strengthen when the company announced
that it would sell Donaldson, Lufkin & Jenrette and on the news that AXA
subsidiary Alliance Capital Management would purchase money management
firm Sanford Bernstein. In addition, AXA was helped by the growing
belief that rates would soon stabilize, a development perceived as
favorable for financial services stocks.
On the downside, VERITAS Software was the biggest detractor from
performance. The shares pulled back on the announcement that the
company's earnings growth, while still very robust, decelerated
slightly. We liquidated the Fund's position in VERITAS largely because
its capitalization exceeded the normal boundaries for a mid-cap stock.
Another software maker, Citrix Systems, announced disappointing earnings
in July and subsequently experienced the unexpected departure of some
key senior managers. Hispanic Broadcasting was adversely affected by
lower-than-anticipated advertising revenues.
"...mid-cap
stocks
currently
offer some
of the most
compelling
opportunities
in the
market..."
Outlook
The outlook for the Fund should be favorable as long as investors remain
sensitive to earnings and the economy continues to grow at a reasonable
rate without a resurgence of inflation. Considering the combination of
valuations, growth potential and management quality, mid-cap stocks
currently offer some of the most compelling opportunities in the market,
and our disciplined methodology is designed to ferret out the best of
those opportunities. Therefore, we welcome the return of a rational
market in which a stock's performance is closely linked to its
fundamental prospects.
A LOOK AT PERFORMANCE
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (10/2/95)
---------- ---------
Cumulative Total Returns 10.90% 123.57%
Average Annual Total Returns(1) 10.90% 18.48%
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.
Note 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
average annual total return for the one-year and since inception periods
would have been 10.41% and 17.20%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in 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 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. It is not possible to invest in an index.
[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 two lines. The first line represents the Standard & Poor's
Midcap 400 Index and is equal to $672,190 as of August 31, 2000.
The second 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 $614,496 as
of August 31, 2000.]
FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
August 31, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------
INDEPENDENCE INDEPENDENCE
INDEPENDENCE DIVERSIFIED CORE MEDIUM CAPITALIZATION
BALANCED FUND EQUITY FUND II FUND
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at value -- Note C:
Common stocks (cost -- $23,200,756,
$265,115,483 and $14,152,126,
respectively) $32,714,250 $390,147,682 $17,062,919
Corporate bonds (cost -- $9,066,732,
none and none, respectively) 8,940,344 -- --
U.S. government and agencies securities
(cost -- $11,834,047, none and none,
respectively) 11,957,887 -- --
Joint repurchase agreement (cost --
$8,207,000, $2,195,000 and $981,000,
respectively) 8,207,000 2,195,000 981,000
Corporate savings account 772 466 151
----------------- ----------------- -----------------
61,820,253 392,343,148 18,044,070
Receivable for investments sold 26,168 288,032 35,709
Receivable for shares sold -- 3,988 --
Dividends receivable 50,555 586,792 22,577
Interest receivable 209,989 426 182
Deferred organization expenses --
Note A -- -- 136
Other assets 6,286 66,459 929
----------------- ----------------- -----------------
Total Assets 62,113,251 393,288,845 18,103,603
----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 8,126,300 -- 2,968
Payable for shares repurchased -- 14,628 784,799
Dividend payable 82 -- --
Miscellaneous payable -- 4,843 --
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 34,835 186,749 11,777
Accounts payable and accrued expenses 86,492 137,282 27,630
----------------- ----------------- -----------------
Total Liabilities 8,247,709 343,502 827,174
----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 40,460,526 213,364,182 12,502,840
Accumulated net realized gain on
investments 3,685,278 54,063,772 1,822,237
Net unrealized appreciation of
investments 9,510,946 125,032,199 2,910,793
Undistributed net investment income 208,792 485,190 40,559
----------------- ----------------- -----------------
Net Assets $53,865,542 $392,945,343 $17,276,429
==========================================================================================================
Net Asset Value Per Share:
(Based on 4,367,271, 24,044,487 and
1,148,784 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $12.33 $16.34 $15.04
==========================================================================================================
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,
2000. 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, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------
INDEPENDENCE INDEPENDENCE
INDEPENDENCE DIVERSIFIED CORE MEDIUM CAPITALIZATION
BALANCED FUND EQUITY FUND II FUND
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends (net of foreign withholding
tax of $1,093, $22,465 and $220,
respectively) $251,974 $2,639,565 $89,484
Interest (including income on
securities loaned of $534, $6,968 and
$188, respectively) 770,956 184,074 19,371
----------------- ----------------- -----------------
1,022,930 2,823,639 108,855
----------------- ----------------- -----------------
Expenses:
Investment management fee -- Note B 213,237 1,067,860 57,406
Custodian fee 28,019 99,272 17,523
Registration and filing fees 22,387 52,136 8,016
Transfer agent fee -- Note B 15,231 106,786 3,588
Auditing fee 11,645 16,420 8,570
Accounting and legal services fee --
Note B 5,764 39,524 1,334
Printing 5,416 5,510 3,974
Miscellaneous 2,274 13,117 412
Organization expense -- Note A 647 39 881
Trustees' fees 313 9,131 285
Legal fees 311 2,448 73
----------------- ----------------- -----------------
Total Expenses 305,244 1,412,243 102,062
----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (30,464) -- (30,199)
----------------------------------------------------------------------------------------------------------
Net Expenses 274,780 1,412,243 71,863
----------------------------------------------------------------------------------------------------------
Net Investment Income 748,150 1,411,396 36,992
----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 1,974,994 25,260,016 1,294,705
Change in net unrealized appreciation/
depreciation of investments 3,975,991 32,981,629 1,405,505
----------------- ----------------- -----------------
Net Realized and Unrealized Gain on
Investments 5,950,985 58,241,645 2,700,210
----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations $6,699,135 $59,653,041 $2,737,202
==========================================================================================================
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, 2000 YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED) FEBRUARY 29, 2000 (UNAUDITED)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $1,707,102 $748,150 $3,100,403 $1,411,396
Net realized gain on investments sold 4,213,547 1,974,994 66,562,963 25,260,016
Change in net unrealized
appreciation/depreciation of
investments (4,011,488) 3,975,991 (53,039,312) 32,981,629
----------------- ----------------- ----------------- -----------------
Net Increase in Net Assets from
Operations 1,909,161 6,699,135 16,624,054 59,653,041
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders:*
Dividends from net investment
income (1,773,614) (744,182) (3,143,693) (1,293,444)
Distributions from net realized
gain on investments sold (4,431,308) -- (54,986,456) --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (6,204,922) (744,182) (58,130,149) (1,293,444)
----------------- ----------------- ----------------- -----------------
From Fund Share Transactions: **
Shares sold 17,378,820 7,643,347 138,388,241 72,635,591
Shares issued to shareholders in
reinvestment of distributions 6,205,436 746,841 58,111,697 1,298,115
----------------- ----------------- ----------------- -----------------
23,584,256 8,390,188 196,499,938 73,933,706
Less shares repurchased (41,608,218) (21,128,966) (281,414,101) (165,223,957)
----------------- ----------------- ----------------- -----------------
Net decrease (18,023,962) (12,738,778) (84,914,163) (91,290,251)
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 82,969,090 60,649,367 552,296,255 425,875,997
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income of $204,824, $208,792,
$367,238 and $485,190,
respectively) $60,649,367 $53,865,542 $425,875,997 $392,945,343
================= ================= ================= =================
* Distributions to Shareholders:
Class I
Per share dividends from net
investment income $0.2837 $0.1410 $0.0940 $0.0464
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $0.8400 -- $1.7959 --
----------------- ----------------- ----------------- -----------------
**Analysis of Fund Share Transactions:
Class I
Shares sold 1,435,960 649,357 8,579,715 4,700,387
Shares issued to shareholders in
reinvestment of distributions 531,732 63,382 3,810,449 83,032
----------------- ----------------- ----------------- -----------------
1,967,692 712,739 12,390,164 4,783,419
Less shares repurchased (3,434,169) (1,798,800) (17,676,305) (10,664,027)
----------------- ----------------- ----------------- -----------------
Net decrease (1,466,477) (1,086,061) (5,286,141) (5,880,608)
================= ================= ================= =================
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.
<CAPTION>
Statements of Changes in Net Assets (continued)
-------------------------------------------------------------------------------
INDEPENDENCE MEDIUM
CAPITALIZATION FUND
---------------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $50,075 $36,992
Net realized gain on investments sold 1,122,181 1,294,705
Change in net unrealized
appreciation/depreciation of
investments 280,163 1,405,505
----------------- -----------------
Net Increase in Net Assets from
Operations 1,452,419 2,737,202
----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment
income (51,586) --
Distributions from net realized
gain on investments sold (1,005,020) --
----------------- -----------------
Total Distributions to
Shareholders (1,056,606) --
----------------- -----------------
From Fund Share Transactions: **
Shares sold 3,498,877 3,823,700
Shares issued to shareholders in
reinvestment of distributions 1,056,809 --
----------------- -----------------
4,555,686 3,823,700
Less shares repurchased (2,936,957) (1,706,298)
----------------- -----------------
Net Increase 1,618,729 2,117,402
----------------- -----------------
Net Assets:
Beginning of period 10,407,283 12,421,825
----------------- -----------------
End of period (including
undistributed net investment
income of $3,567 and $40,559,
respectively) $12,421,825 $17,276,429
================= =================
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0602 --
----------------- -----------------
Per share distributions from net
realized gain on investments sold $1.1721 --
----------------- -----------------
**Analysis of Fund Share Transactions:
Shares sold 275,468 277,851
Shares issued to shareholders in
reinvestment of distributions 89,333 --
----------------- -----------------
364,801 277,851
Less shares repurchased (231,976) (126,624)
----------------- -----------------
Net increase 132,825 151,227
================= =================
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $11.12
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.25 0.38 0.38 0.26 0.27 0.14
Net Realized and Unrealized
Gain (Loss) on Investments 0.63 0.73 1.60 1.37 (0.02) 1.21
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.88 1.11 1.98 1.63 0.25 1.35
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.13) (0.34) (0.35) (0.29) (0.28) (0.14)
Distributions from Net
Realized Gain on
Investments Sold -- (0.08) (0.15) (0.77) (0.84) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.13) (0.42) (0.50) (1.06) (1.12) (0.14)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.25 $9.94 $11.42 $11.99 $11.12 $12.33
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 10.42%(4) 12.36% 20.44% 14.50% 1.83% 12.21%(4)
Total Adjusted Investment
Return at Net Asset Value(3,5) 7.36%(4) 11.62% 20.28% 14.45% 1.77% 12.16%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $5,155 $13,093 $77,116 $82,969 $60,649 $53,866
Ratio of Expenses to Average
Net Assets 0.90%(6) 0.90% 0.90% 0.90% 0.90% 0.90%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 5.58%(6) 1.64% 1.06% 0.95% 0.96% 1.00%(6)
Ratio of Net Investment
Income to Average Net Assets 3.96%(6) 3.96% 3.52% 2.26% 2.26% 2.46%(6)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(7,8) (0.72%)(6) 3.22% 3.36% 2.21% 2.20% 2.36%(6)
Portfolio Turnover Rate 31% 149% 224% 158% 268% 131%
Fee Reduction Per Share(2) $0.29 $0.07 $0.02 $0.01 $0.01 $0.01
(1) The Fund commenced operations on July 6, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indi cated: 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 rela tionships
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $14.23
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.20 0.20 0.17 0.12 0.09 0.05
Net Realized and Unrealized
Gain on Investments 2.38 2.23 3.91 2.76 0.34 2.11
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 2.58 2.43 4.08 2.88 0.43 2.16
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.11) (0.19) (0.17) (0.14) (0.09) (0.05)
Distributions from Net
Realized Gains on
Investments Sold (0.01) (0.44) (1.33) (2.39) (1.80) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.12) (0.63) (1.50) (2.53) (1.89) (0.05)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.96 $12.76 $15.34 $15.69 $14.23 $16.34
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 30.48%(4) 22.63% 33.61% 18.98% 1.99% 15.17%(4)
Total Adjusted Investment
Return at Net Asset Value(3,5) 30.42%(4) -- -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $188,679 $320,029 $572,093 $552,296 $425,876 $392,945
Ratio of Expenses to Average
Net Assets 0.70%(6) 0.67% 0.65% 0.63% 0.64% 0.66%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 0.76%(6) -- -- -- -- --
Ratio of Net Investment
Income to Average Net Assets 2.00%(6) 1.65% 1.12% 0.76% 0.57% 0.66%(6)
Ratio of Adjusted Net
Investment Income to
Average Net Assets(7,8) 1.94%(6) -- -- -- -- --
Portfolio Turnover Rate 39% 81% 76% 55% 69% 30%
Fee Reduction Per Share(2) $0.01 -- -- -- -- --
(1) The Fund commenced operations on March 10, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
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 ENDED YEAR ENDED FEBRUARY 28, YEAR ENDED SIX MONTHS ENDED
FEBRUARY 29, --------------------------------------------- FEBRUARY 29, AUGUST 31, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <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 $12.45
------------- ------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.08 0.12 0.09 0.08 0.06 0.04
Net Realized and Unrealized
Gain on Investments 0.74 1.45 3.69 0.06 1.58 2.55
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.82 1.57 3.78 0.14 1.64 2.59
------------- ------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.03) (0.12) (0.09) (0.09) (0.06) --
Distributions from Net
Realized Gain on
Investments Sold -- (0.29) (0.84) (1.31) (1.17) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.03) (0.41) (0.93) (1.40) (1.23) --
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.29 $10.45 $13.30 $12.04 $12.45 $15.04
============= ============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value(3) 9.71%(4) 17.19% 37.30% 0.96% 14.18% 20.80%(4)
Total Adjusted Investment
Return at Net Asset Value(3,5) 7.00%(4) 15.49% 36.94% 0.36% 13.66% 20.59%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $3,923 $5,240 $9,722 $10,407 $12,422 $17,276
Ratio of Expenses to Average
Net Assets 1.00%(6) 1.00% 1.00% 1.00% 1.00% 1.00%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 7.55%(6) 2.70% 1.36% 1.60% 1.52% 1.42%(6)
Ratio of Net Investment
Income to Average Net Assets 1.94%(6) 1.26% 0.75% 0.59% 0.44% 0.52%(6)
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets(7,8) (4.61%)(6) (0.44%) 0.39% (0.01%) (0.08%) 0.10%(6)
Portfolio Turnover Rate 3% 78% 65% 67% 136% 75%
Fee Reduction Per Share(2) $0.26 $0.17 $0.04 $0.08 $0.07 $0.03
(1) The Fund commenced operations on October 2, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Balanced Fund
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Independence Balanced Fund on August 31, 2000. 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
Advertising (0.65%)
Interpublic Group of Cos., Inc. (The) 4,300 $164,475
Omnicom Group, Inc. 2,200 183,563
------------
348,038
------------
Aerospace (1.06%)
General Dynamics Corp. 2,800 176,225
United Technologies Corp. 6,300 393,356
------------
569,581
------------
Automobile / Trucks (0.54%)
Ford Motor Co. 6,500 157,219
Lear Corp.* 2,900 62,531
Visteon Corp. 4,500 70,594
------------
290,344
------------
Banks -- United States (3.50%)
Comerica, Inc. 3,000 168,938
FleetBoston Financial Corp. 17,300 738,494
Mellon Financial Corp. 5,000 226,250
Morgan (J.P.) & Co. 4,500 752,344
------------
1,886,026
------------
Beverages (0.25%)
Anheuser-Busch Cos., Inc. 1,700 133,981
------------
Building (0.41%)
Black & Decker Corp. (The) 4,400 176,275
Danaher Corp. 800 44,950
------------
221,225
------------
Chemicals (0.78%)
Air Products & Chemicals, Inc. 3,800 137,988
Dow Chemical Co. 6,800 178,075
Eastman Chemical Co. 1,600 69,000
Grace (W. R.) & Co.* 4,300 34,131
------------
419,194
------------
Computers (12.80%)
America Online, Inc.* 7,800 457,275
Cisco Systems, Inc.* 19,000 1,303,875
Compaq Computer Corp. 4,700 160,094
Dell Computer Corp.* 6,200 270,475
Electronic Data Systems Corp. 2,700 134,494
EMC Corp.* 5,100 499,800
First Data Corp. 8,600 410,113
Hewlett-Packard Co. 2,800 338,100
International Business Machines Corp. 4,000 528,000
Microsoft Corp.* 13,000 907,563
Oracle Corp.* 8,400 763,875
Portal Software, Inc.* 700 38,675
Siebel Systems, Inc.* 700 138,469
Sun Microsystems, Inc.* 3,900 495,056
VERITAS Software Corp.* 1,800 217,013
Yahoo! Inc.* 1,900 230,850
------------
6,893,727
------------
Consumer Products -- Misc. (0.13%)
American Greetings Corp. (Class A) 3,900 72,638
------------
Cosmetics & Personal Care (0.17%)
Avon Products, Inc. 2,400 94,050
------------
Diversified Operations (1.24%)
Honeywell International, Inc. 800 30,850
Minnesota Mining & Manufacturing Co. 1,400 130,200
Textron, Inc. 2,400 134,550
Tyco International Ltd. 6,500 370,500
------------
666,100
------------
Electronics (8.08%)
Agilent Technologies, Inc.* 600 36,188
Altera Corp.* 2,400 155,550
Analog Devices, Inc.* 1,100 110,550
Applied Materials, Inc.* 1,800 155,363
General Electric Co. 26,100 1,531,744
Intel Corp. 18,300 1,370,213
Maxim Integrated Products, Inc.* 1,300 113,994
Motorola, Inc. 6,700 241,619
SCI Systems, Inc.* 1,400 86,450
Teradyne, Inc.* 900 58,331
Texas Instruments, Inc. 5,500 368,156
Xilinx, Inc.* 1,400 124,425
------------
4,352,583
------------
Fiber Optics (0.37%)
JDS Uniphase Corp.* 1,600 199,175
------------
Finance (2.56%)
Citigroup, Inc. 19,867 1,159,736
Stilwell Financial, Inc.* 4,500 217,688
------------
1,377,424
------------
Food (0.06%)
Quaker Oats Co. 500 33,969
------------
Insurance (2.77%)
Aon Corp. 4,100 152,981
AXA Financial, Inc. 8,000 414,000
CIGNA Corp. 2,200 213,950
Hartford Financial Services Group, Inc. (The) 3,600 239,850
Lincoln National Corp. 3,000 162,000
Marsh & McLennan Cos., Inc. 400 47,500
Torchmark Corp. 3,100 86,994
XL Capital Ltd. (Class A) 2,500 172,344
------------
1,489,619
------------
Machinery (0.35%)
Ingersoll-Rand Co. 4,200 191,363
------------
Media (1.92%)
AT&T Corp. -- Liberty Media Corp. (Class A)* 2,100 44,888
Clear Channel Communications, Inc.* 500 36,188
Infinity Broadcasting Corp. (Class A)* 4,100 155,288
Time Warner, Inc. 3,600 307,800
Viacom, Inc. (Class B)* 7,300 491,381
------------
1,035,545
------------
Medical (7.86%)
Abbott Laboratories 4,300 188,125
Allergan, Inc. 3,500 255,938
American Home Products Corp. 3,400 184,238
Bausch & Lomb, Inc. 500 17,875
Bristol-Myers Squibb Co. 4,400 233,200
Cardinal Health, Inc. 1,700 139,081
Cephalon, Inc. 800 40,250
Forest Laboratories, Inc.* 1,000 97,875
Johnson & Johnson 5,000 459,688
Lilly (Eli) & Co. 1,200 87,600
Merck & Co., Inc. 8,000 559,000
Pfizer, Inc. 24,400 1,055,300
Pharmacia Corp. 6,700 392,369
Schering-Plough Corp. 9,600 385,200
Wellpoint Health Networks, Inc.* 1,600 138,100
------------
4,233,839
------------
Metal (0.18%)
Illinois Tool Works, Inc. 1,700 95,306
------------
Mortgage Banking (0.95%)
Fannie Mae 9,500 510,625
------------
Office (0.11%)
Reynolds & Reynolds Co. (The) (Class A) 3,200 58,000
------------
Oil & Gas (3.67%)
Anadarko Petroleum Corp. 1,000 65,770
Chevron Corp. 1,000 84,500
Conoco Inc. (Class A)* 2,700 68,006
El Paso Energy Corp. 8,100 471,825
Exxon Mobil Corp. 10,000 816,250
Kerr-McGee Corp. 1,800 113,738
Royal Dutch Petroleum Co. American Depositary
Receipt (ADR) (Netherlands) 4,400 269,225
USX -- Marathon Group 3,200 87,800
------------
1,977,114
------------
Paper & Paper Products (0.27%)
Kimberly-Clark Corp. 2,500 146,250
------------
Retail (2.52%)
Costco Wholesale Corp.* 3,400 117,088
Gap, Inc. (The) 5,400 121,163
Home Depot, Inc. (The) 6,300 302,794
Limited, Inc. (The) 2,000 40,000
Lowe's Cos., Inc. 3,000 134,438
Outback Steakhouse, Inc.* 1,400 32,113
RadioShack Corp. 800 47,200
Sears, Roebuck & Co. 3,800 118,513
Target Corp. 4,600 106,950
TJX Cos., Inc. 9,300 174,955
Wal-Mart Stores, Inc. 3,400 161,288
------------
1,356,502
------------
Telecommunications (4.67%)
ADC Telecommunications, Inc.* 3,100 126,904
AT&T Wireless Group* 1,900 49,754
Comverse Technology, Inc.* 1,300 119,517
Corning, Inc. 1,100 360,731
Lucent Technologies, Inc. 4,900 204,881
Nortel Networks Corp. 7,900 644,342
Qwest Communications International, Inc.* 5,300 273,613
Sprint Corp. 4,900 164,150
Sprint PCS* 1,900 95,356
Verizon Communications 3,200 139,600
WorldCom, Inc.* 9,200 335,800
------------
2,514,648
------------
Tobacco (0.61%)
Philip Morris Cos., Inc. 7,600 225,150
UST, Inc. 4,800 103,800
------------
328,950
------------
Transportation (0.13%)
Burlington Northern Santa Fe Corp. 3,300 73,836
------------
Utilities (2.12%)
BellSouth Corp. 2,400 89,550
Dominion Resources, Inc. 1,100 58,300
Duke Energy Corp. 5,600 418,948
PG&E Corp. 5,500 159,156
Pinnacle West Capital Corp. 2,100 86,494
Reliant Energy, Inc. 400 14,850
SBC Communications, Inc. 7,600 317,300
------------
1,144,598
------------
TOTAL COMMON STOCKS
(Cost $23,200,756) (60.73%) 32,714,250
------------
<CAPTION>
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
------------------- --------- -------- -------------- -------------
<S> <C> <C> <C> <C>
CORPORATE BONDS
Aerospace (0.76%)
Raytheon Co.,
Sr Note 11-01-03 5.700% BBB- $430 $406,780
-------------
Automobile / Trucks (0.50%)
Ford Motor Co.,
Bond 10-01-28 6.630 A 320 271,421
-------------
Banks -- United States (3.32%)
Bank of America Corp.,
Jr Sub Note 02-15-10 7.800 A 400 407,204
Capital One Bank,
Sr Note 10-30-01 7.080 BBB- 600 594,696
First Union Corp.,
Note 11-01-04 6.950 A 320 314,230
PNC Funding Corp.,
Gtd Sub Note 09-01-03 6.130 BBB+ 490 471,581
-------------
1,787,711
-------------
Broker Services (1.45%)
Lehman Brothers Holdings, Inc.,
Note 10-01-02 6.500 A 200 196,350
Note 02-05-06 6.630 A 300 287,289
Salomon, Inc.,
Sr Note 02-01-04 7.200 A 300 299,736
-------------
783,375
-------------
Computers (0.53%)
Comdisco, Inc.,
Note 04-30-02 5.950 BBB+ 300 284,658
-------------
Finance (1.30%)
Finova Capital Corp.,
Note 11-08-04 7.250 BBB- 80 54,400
Household Finance Corp.,
Sr Note 05-01-04 6.000 A 350 334,628
MBNA Master Credit Card Trust
Note 11-15-04 6.600 AAA 315 313,523
-------------
702,551
-------------
Government -- Foreign (0.33%)
Province of Quebec,
Deb (Canada) 09-15-29 7.500 A+ 180 179,611
-------------
Media (0.25%)
News America, Inc.,
Deb 04-08-28 7.130 BBB- 80 69,194
Time Warner, Inc.,
Sr Gtd Note 05-15-29 6.630 BBB 80 67,646
-------------
136,840
-------------
Mortgage Banking (4.51%)
ABSC Home Equity Loan Trust,
Pass Thru Ctf Ser 2000-LB1 Class AF2 03-21-24 7.570 Aaa 140 140,066
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 2000-C1 Class
A-2 04-15-10 7.550 AAA 820 835,888
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1999-2 Class A-2F 06-25-11 6.220 AAA 310 308,202
Green Tree Financial Corp.,
Pass Thru Ctf Ser 1996-8 Class A-6 10-15-27 7.600 AAA 190 189,346
Pass Thru Ctf Ser 1997-6 Class A-5 01-15-29 6.680 AAA 410 405,515
Money Store Trust (The),
Pass Thru Ctf Ser 1996-B Class A-7 02-15-20 7.550 AAA 296 294,871
Mortgage Capital Funding, Inc.,
Commercial Mtg Pass Thru Ctf Ser 1996-MC2 Class
A1 12-21-26 6.760 N/R 40 39,661
Southern Pacific Secured Assets Corp.,
Pass Thru Ctf Ser 1998-1 Class A-2 02-25-18 6.270 AAA 75 74,544
-------------
2,431,705
-------------
Oil & Gas (1.06%)
Amerada Hess Corp.,
Bond 10-01-29 7.880 BBB 30 29,885
Petroleum Geo-Services,
Sr Note (Norway) 03-30-28 7.130 BBB 140 120,032
Phillips Petroleum,
Note 05-25-05 8.500 BBB 400 419,287
-------------
569,204
-------------
Retail (0.37%)
Wal-Mart Stores, Inc.,
Sr Note 02-15-30 7.550 AA 190 197,363
-------------
Telecommunications (0.26%)
Quest Capital Funding,
Gtd Note 07-15-28 6.880 BBB+ 80 69,247
Sprint Capital Corp.,
Sr Gtd Note 11-15-28 6.880 BBB+ 80 69,037
-------------
138,284
-------------
Tobacco (0.15%)
Philip Morris Cos., Inc.,
Deb 10-15-03 8.250 A 80 79,720
-------------
Transportation (0.14%)
Lockheed Martin Corp.,
Bond 12-01-29 8.500 BBB- 70 73,461
-------------
Utilities (1.67%)
Coastal Corp. (The),
Sr Note 09-15-02 8.130 BBB 300 304,860
K N Energy, Inc.,
Sr Note 11-30-01 6.450 BBB- 600 592,800
-------------
897,660
-------------
TOTAL CORPORATE BONDS
(Cost $9,066,732) (16.60%) 8,940,344
------- -------------
U.S. GOVERNMENT AND AGENCIES SECURITIES
Government -- U.S. (6.26%)
United States Treasury,
Bond 02-15-02 6.750 AAA 585 538,838
Bond 08-15-17 8.880 AAA 470 614,816
Bond 05-15-30 6.250 AAA 950 1,028,375
Note 11-15-04 5.880 AAA 740 735,834
Note 08-15-09 6.000 AAA 450 452,741
-------------
3,370,604
-------------
Government -- U.S. Agencies (15.94%)
Fannie Mae,
Note 08-15-02 6.750 AAA 379 379,413
Note 05-15-30 7.250 AAA 260 273,692
Federal National Mortgage Assn.,
30-Yr Pass Thru Ctf 09-15-29*** 7.000 AAA 600 607,042
30-Yr Pass Thru Ctf 09-15-29*** 7.000 AAA 1,640 1,598,492
30-Yr Pass Thru Ctf 09-15-29 6.500 AAA 1,590 1,518,450
30-Yr Pass Thru Ctf 09-01-30*** 8.000 AAA 2,500 2,521,873
30-Yr Pass Thru Ctf 09-01-30*** 7.500 AAA 1,700 1,688,321
-------------
8,587,283
-------------
TOTAL U.S. GOVERNMENT AND AGENCIES SECURITIES
(Cost $11,834,047) (22.20%) 11,957,887
------- -------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- --------- -------------- -------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (15.24%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.250% thru 9.250%, due
02-15-16 thru 02-15-19) -- Note A 6.61% $8,207 $8,207,000
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 5.20% 772
------------
TOTAL SHORT-TERM INVESTMENTS (15.24%) 8,207,772
--------- ------------
TOTAL INVESTMENTS (114.77%) 61,820,253
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (14.77%) (7,954,711)
--------- ------------
TOTAL NET ASSETS (100.00%) $53,865,542
========= ============
* 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 $6,415,728 or 11.91%
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
$6,544,043 of Repurchase Agreement, 6.61%, due 09-01-00, has been
segregated to cover the when-issued commitments.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
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
The Schedule of Investments is a complete list of all securities owned
by the Independence Diversified Core Equity Fund II on August 31, 2000.
It's divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
Schedule of Investments
August 31, 2000 (Unaudited)
-----------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ------------ ------------
<S> <C> <C>
COMMON STOCK
Advertising (1.18%)
Interpublic Group of Cos., Inc. (The) 57,000 $2,180,250
Omnicom Group, Inc. 29,600 2,469,750
------------
4,650,000
------------
Aerospace (1.74%)
General Dynamics Corp. 41,500 2,611,906
United Technologies Corp. 67,900 4,239,506
------------
6,851,412
------------
Automobile / Trucks (1.04%)
Borg-Warner Automotive, Inc. 20,500 704,688
Ford Motor Co. 98,700 2,387,306
Lear Corp.* 36,700 791,344
Visteon Corp. 12,923 202,730
------------
4,086,068
------------
Banks -- United States (2.84%)
Comerica, Inc. 44,500 2,505,906
FleetBoston Financial Corp. 173,300 7,397,744
Mellon Financial Corp. 27,800 1,257,950
------------
11,161,600
------------
Beverages (0.66%)
Anheuser-Busch Cos., Inc. 32,900 2,592,931
------------
Building (0.73%)
Black & Decker Corp. (The) 48,300 1,935,019
Danaher Corp. 16,900 949,569
------------
2,884,588
------------
Chemicals (1.45%)
Air Products & Chemicals, Inc. 45,800 1,663,113
Dow Chemical Co. (The) 67,800 1,775,512
Eastman Chemical Co. 18,300 789,188
Grace (W. R.) & Co.* 48,100 381,794
Praxair, Inc. 24,300 1,075,275
------------
5,684,882
------------
Computers (20.49%)
America Online, Inc.* 77,400 4,537,575
Cisco Systems, Inc.* 246,500 16,916,062
Compaq Computer Corp. 75,000 2,554,687
Dell Computer Corp.* 86,500 3,773,562
Electronic Data Systems Corp. 25,400 1,265,238
EMC Corp.* 50,000 4,900,000
First Data Corp. 50,900 2,427,294
Hewlett-Packard Co. 39,900 4,817,925
International Business Machines Corp. 61,900 8,170,800
Microsoft Corp.* 161,500 11,274,719
Oracle Corp.* 108,600 9,875,812
Sun Microsystems, Inc.* 43,100 5,471,006
VERITAS Software Corp.* 17,300 2,085,731
Yahoo! Inc.* 20,000 2,430,000
------------
80,500,411
------------
Cosmetics & Personal Care (0.69%)
Avon Products, Inc. 30,700 1,203,056
Kimberly-Clark Corp. 25,400 1,485,900
------------
2,688,956
------------
Diversified Operations (2.62%)
Honeywell International, Inc. 23,100 890,794
Minnesota Mining & Manufacturing Co. 23,400 2,176,200
Textron, Inc. 38,900 2,180,831
Tyco International Ltd. 88,700 5,055,900
------------
10,303,725
------------
Electronics (13.62%)
Agilent Technologies, Inc.* 15,217 917,775
Altera Corp.* 24,600 1,594,388
Analog Devices, Inc.* 13,900 1,396,950
Applied Materials, Inc.* 23,600 2,036,975
General Electric Co. 309,400 18,157,912
Intel Corp. 227,600 17,041,550
Maxim Integrated Products, Inc.* 22,500 1,972,969
Motorola, Inc. 64,000 2,308,000
Novellus Systems, Inc.* 12,100 744,906
SCI Systems, Inc.* 17,900 1,105,325
Teradyne, Inc.* 9,700 628,681
Texas Instruments, Inc. 56,800 3,802,050
Waters Corp.* 9,000 716,063
Xilinx, Inc.* 12,500 1,110,938
------------
53,534,482
------------
Fiber Optics (0.30%)
JDS Uniphase Corp.* 9,400 1,170,153
------------
Finance (8.42%)
Associates First Capital Corp. (Class A) 26,300 739,688
AXA Financial, Inc. 87,100 4,507,425
Citigroup, Inc. 291,333 17,006,564
Fannie Mae 108,700 5,842,625
MBNA Corp. 78,600 2,775,562
Morgan (J.P.) & Co., Inc. 5,800 969,688
Stilwell Financial, Inc.* 25,700 1,243,238
------------
33,084,790
------------
Food (0.62%)
ConAgra, Inc. 40,200 736,163
Quaker Oats Co. 25,000 1,698,438
------------
2,434,601
------------
Insurance (4.05%)
Aon Corp. 46,000 1,716,375
CIGNA Corp. 41,100 3,996,975
Hartford Financial Services Group, Inc. (The) 43,500 2,898,187
Lincoln National Corp. 67,000 3,618,000
Marsh & McLennan Cos., Inc. 17,800 2,113,750
XL Capital Ltd. (Class A) 22,700 1,564,881
------------
15,908,168
------------
Machinery (0.62%)
Ingersoll-Rand Co. 53,300 2,428,481
------------
Media (3.39%)
AT&T Corp. -- Liberty Media Group* 45,900 981,113
Clear Channel Communications, Inc.* 24,400 1,765,950
Infinity Broadcasting Corp. (Class A)* 33,400 1,265,025
Time Warner, Inc. 43,300 3,702,150
Viacom, Inc. (Class B)* 83,100 5,593,669
------------
13,307,907
------------
Medical (12.76%)
Allergan, Inc. 37,200 2,720,250
American Home Products Corp. 45,600 2,470,950
Bausch & Lomb, Inc. 16,000 572,000
Bristol-Myers Squibb Co. 93,300 4,944,900
Cardinal Health, Inc. 30,800 2,519,825
Johnson & Johnson 24,000 2,206,500
Lilly (Eli) & Co. 27,700 2,022,100
Merck & Co., Inc. 107,000 7,476,625
Pfizer, Inc. 346,600 14,990,450
Pharmacia Corp. 95,300 5,581,006
Schering-Plough Corp. 115,700 4,642,462
------------
50,147,068
------------
Metal (0.36%)
Illinois Tool Works, Inc. 25,212 1,413,448
------------
Office (0.19%)
Reynolds & Reynolds Co. (The) (Class A) 41,500 752,188
------------
Oil & Gas (5.69%)
BP Amoco Plc, American Depositary Receipt (ADR)
(United Kingdom) 8,000 442,000
El Paso Energy Corp. 45,500 2,650,375
Exxon Mobil Corp. 121,700 9,933,762
Kerr-McGee Corp. 28,200 1,781,887
Royal Dutch Petroleum Co. (ADR) (Netherlands) 97,500 5,965,781
USX -- Marathon Group 57,000 1,563,938
------------
22,337,743
------------
Retail (4.99%)
Gap, Inc. (The) 89,000 1,996,937
Home Depot, Inc. (The) 99,100 4,762,994
Lowe's Cos., Inc. 42,800 1,917,975
Outback Steakhouse, Inc.* 15,300 350,944
Sears, Roebuck & Co. 55,700 1,737,144
Target Corp. 85,400 1,985,550
TJX Cos., Inc. 104,600 1,967,787
Wal-Mart Stores, Inc. 103,200 4,895,550
------------
19,614,881
------------
Soap & Cleaning Preparations (0.06%)
Procter & Gamble Co. (The) 4,000 247,250
------------
Telecommunications (5.71%)
AT&T Wireless Group* 36,800 963,700
Corning, Inc. 6,600 2,164,387
Lucent Technologies, Inc. 53,400 2,232,787
Nortel Networks Corp. 88,000 7,177,500
RF Micro Devices, Inc.* 12,200 544,425
Sprint Corp. (FON Group) 32,000 1,072,000
Sprint Corp. (PCS Group)* 44,700 2,243,381
Verizon Communications 34,800 1,518,150
WorldCom, Inc.* 123,700 4,515,050
------------
22,431,380
------------
Tobacco (0.90%)
Philip Morris Cos., Inc. 79,400 2,352,225
UST, Inc. 55,500 1,200,188
------------
3,552,413
------------
Utilities (4.17%)
Ameren Corp. 42,700 1,726,681
Duke Energy Corp. 68,500 5,124,656
PG&E Corp. 61,200 1,770,975
Pinnacle West Capital Corp. 24,900 1,025,569
Reliant Energy, Inc. 46,000 1,707,750
SBC Communications, Inc. 120,300 5,022,525
------------
16,378,156
------------
TOTAL COMMON STOCKS
(Cost $265,115,483) (99.29%) 390,147,682
--------- ------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- --------- -------------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.56%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.250% thru 9.250%, due
02-15-16 thru 02-15-19) -- Note A 6.61% $2,195 $2,195,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 5.20% 466
------------
TOTAL SHORT-TERM INVESTMENTS (0.56%) 2,195,466
--------- ------------
TOTAL INVESTMENTS (99.85%) 392,343,148
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.15%) 602,195
--------- ------------
TOTAL NET ASSETS (100.00%) $392,945,343
========= ============
* 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
The Schedule of Investments is a complete list of all securities owned
by the Independence Medium Capitalization Fund on August 31, 2000. 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.
Schedule of Investments
August 31, 2000 (Unaudited)
-----------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ------------ ------------
<S> <C> <C>
COMMON STOCKS
Abrasives (0.07%)
Cabot Microelectronics Corp.* 200 $11,675
------------
Advertising (1.87%)
Interpublic Group of Cos., Inc. (The) 1,800 68,850
Lamar Advertising Co.* 3,300 153,244
Omnicom Group, Inc. 1,200 100,125
------------
322,219
------------
Aerospace (0.36%)
General Dynamics Corp. 1,000 62,938
------------
Automobile / Trucks (2.31%)
Borg-Warner Automotive, Inc. 2,200 75,625
Eaton Corp. 600 39,825
Lear Corp.* 3,900 84,094
Ryder System, Inc. 4,800 92,100
Superior Industries International, Inc. 3,300 107,044
------------
398,688
------------
Banks -- United States (1.78%)
AmSouth Bancorporation 3,700 67,525
Comerica, Inc. 2,200 123,887
Marshall & Ilsley Corp. 800 39,000
Mellon Financial Corp. 1,700 76,925
------------
307,337
------------
Building (1.60%)
Black & Decker Corp. (The) 2,900 116,181
Danaher Corp. 1,200 67,425
Georgia-Pacific Group 2,000 53,500
Willamette Industries, Inc. 1,300 39,650
------------
276,756
------------
Business Services -- Misc. (1.15%)
Convergys Corp.* 5,100 199,537
------------
Chemicals (2.12%)
Air Products & Chemicals, Inc. 1,400 50,838
Eastman Chemical Co. 1,200 51,750
Georgia Gulf Corp. 4,300 55,900
Grace (W. R.) & Co.* 7,200 57,150
Lubrizol Corp. 2,700 58,556
Millennium Chemicals, Inc. 3,700 61,050
Praxair, Inc. 700 30,975
------------
366,219
------------
Computers (12.03%)
Cadence Design Systems, Inc.* 6,600 140,250
DST Systems, Inc.* 2,300 216,200
E*TRADE Group, Inc.* 2,900 51,475
First Data Corp. 4,400 209,825
Fiserv, Inc.* 4,300 233,006
Intuit, Inc.* 5,700 341,288
Lexmark International, Inc.* 1,200 81,375
Network Associates, Inc.* 4,500 116,437
Portal Software, Inc.* 1,600 88,400
Rational Software Corp.* 2,100 270,244
Sabre Holdings Corp.* 4,600 128,225
SunGard Data Systems Inc.* 5,600 201,600
------------
2,078,325
------------
Consumer Products -- Misc. (0.22%)
American Greetings Corp. (Class A) 2,000 37,250
------------
Cosmetics & Personal Care (0.18%)
Avon Products, Inc. 800 31,350
------------
Diversified Operations (0.29%)
Textron, Inc. 900 50,456
------------
Electronics (17.47%)
Altera Corp.* 2,800 181,475
American Power Conversion Corp. 1,700 40,481
ANADIGICS, Inc.* 1,900 68,400
Applied Micro Circuits Corp.* 500 101,469
Atmel Corp.* 15,200 304,000
Jabil Circuit, Inc.* 4,900 312,681
Lam Research Corp.* 3,700 111,462
Linear Technology Corp. 2,300 165,456
Litton Industries, Inc. 1,300 71,906
Maxim Integrated Products, Inc.* 1,000 87,688
Novellus Systems, Inc.* 2,000 123,125
Parker- Hannifin Corp. 1,300 45,256
PE Corp.-PE Biosystems Group 900 88,537
Sanmina Corp.* 1,200 141,600
SCI Systems, Inc.* 4,400 271,700
Teradyne, Inc.* 1,100 71,294
Vishay Intertechnology, Inc.* 5,100 205,594
Vitesse Semiconductor Corp.* 1,900 168,744
Waters Corp.* 4,400 350,075
Xilinx, Inc.* 1,200 106,650
------------
3,017,593
------------
Finance (4.66%)
Associates First Capital Corp. (Class A) 1,500 42,188
AXA Financial, Inc. 4,500 232,875
Golden West Financial Corp. 1,800 85,725
Stilwell Financial, Inc.* 5,500 266,062
Washington Mutual, Inc. 5,100 178,500
------------
805,350
------------
Food (1.00%)
Hormel Foods Corp. 5,200 80,275
Quaker Oats Co. 600 40,763
Universal Foods Corp. 2,500 51,250
------------
172,288
------------
Furniture (0.50%)
Leggett & Platt, Inc. 4,900 86,669
------------
Instruments -- Scientific (0.46%)
Millipore Corp. 1,300 79,137
------------
Insurance (5.03%)
Aon Corp. 3,900 145,519
Hartford Financial Services Group, Inc. (The) 3,800 253,175
Lincoln National Corp. 2,200 118,800
PartnerRe Ltd. (Bermuda) 1,800 75,488
St. Paul Cos., Inc. (The) 1,700 80,963
Torchmark Corp. 3,800 106,637
XL Capital Ltd. (Class A) 1,300 89,619
------------
870,201
------------
Machinery (1.05%)
AK Steel Holding Corp. 6,000 65,250
Ingersoll-Rand Co. 1,400 63,788
Pentair, Inc. 1,600 52,000
------------
181,038
------------
Media (4.12%)
Hispanic Broadcasting Corp.* 4,100 105,319
Infinity Broadcasting Corp. (Class A)* 3,400 128,775
Knight-Ridder, Inc. 1,000 54,625
Reader's Digest Association, Inc. (Class A) 2,000 77,000
Univision Communications, Inc. (Class A)* 3,400 150,025
Westwood One, Inc.* 7,100 197,469
------------
713,213
------------
Medical (10.71%)
Allergan, Inc. 2,900 212,062
ALZA Corp.* 3,000 226,875
Bausch & Lomb, Inc. 1,700 60,775
Cardinal Health, Inc. 1,200 98,175
Cephalon, Inc. 1,000 50,313
CV Therapeutics, Inc.* 1,800 135,000
Edwards Lifesciences Corp.* 4,600 120,750
Forest Laboratories, Inc.* 1,500 146,812
Genzyme Corp.* 2,200 165,137
Health Management Associates, Inc. (Class A)* 10,600 172,912
Pall Corp. 1,900 40,613
St. Jude Medical, Inc.* 1,900 75,288
Stryker Corp. 2,900 129,956
Wellpoint Health Networks, Inc.* 2,500 215,781
------------
1,850,449
------------
Metal (0.13%)
Illinois Tool Works, Inc. 400 22,425
------------
Office (1.13%)
Avery Dennison Corp. 700 37,844
Pitney Bowes, Inc. 2,400 87,750
Reynolds & Reynolds Co. (The) (Class A) 3,800 68,875
------------
194,469
------------
Oil & Gas (12.00%)
Amerada Hess Corp. 3,200 219,000
Anadarko Petroleum Corp. 2,500 164,425
Apache Corp. 2,400 151,200
Burlington Resources, Inc. 2,500 98,281
Conoco Inc. (Class A) 4,600 115,862
Cooper Cameron Corp.* 1,300 101,156
El Paso Energy Corp. 4,800 279,600
Halliburton Co. 2,500 132,500
Imperial Oil Ltd. (Canada) 3,000 74,437
Kerr-McGee Corp. 1,800 113,737
Noble Drilling Corp.* 5,400 261,900
Phillips Petroleum Co. 2,500 154,687
Sunoco, Inc. 4,200 114,187
USX -- Marathon Group 3,400 93,288
------------
2,074,260
------------
Printing -- Commercial (0.42%)
Donnelley (R.R.) & Sons 2,800 72,100
------------
Retail (5.45%)
Brinker International, Inc.* 3,600 114,300
Circuit City Stores-Circuit City Group 600 15,563
Darden Restaurants, Inc. 2,400 42,450
Family Dollar Stores, Inc. 9,300 167,400
Intimate Brands, Inc. 3,500 56,437
Limited, Inc. (The) 2,200 44,000
Lowe's Cos., Inc. 1,100 49,294
Outback Steakhouse, Inc.* 1,800 41,288
RadioShack Corp. 600 35,400
Starbucks Corp.* 1,800 65,925
SYSCO Corp. 900 38,081
Target Corp. 1,600 37,200
Tiffany & Co. 2,100 87,413
TJX Cos., Inc. 5,200 97,825
Wendy's International, Inc. 2,600 49,075
------------
941,651
------------
Steel (0.28%)
USX-U.S. Steel Group, Inc. 2,800 48,650
------------
Telecommunications (3.43%)
ADC Telecommunications, Inc.* 2,200 90,062
AT&T Wireless Group* 2,600 68,088
Broadwing, Inc.* 5,700 159,244
Comverse Technology, Inc.* 1,200 110,325
Harris Corp. 2,900 87,181
RF Micro Devices, Inc.* 1,200 53,550
Scientific-Atlanta, Inc. 300 23,381
------------
591,831
------------
Textile (0.03%)
Jones Apparel Group, Inc.* 200 4,900
------------
Tobacco (0.60%)
UST, Inc. 4,800 103,800
------------
Transportation (0.67%)
CNF Transportation, Inc. 2,800 68,600
Union Pacific Corp. 1,200 47,700
------------
116,300
------------
Utilities (5.64%)
Constellation Energy Group, Inc. 2,600 99,450
Dominion Resources, Inc. 1,700 90,100
Duke Energy Corp. 800 59,850
Florida Progress Corp. 900 46,688
OGE Energy Corp. 4,400 94,050
PECO Energy Co. 1,300 62,644
PG&E Corp. 1,700 49,194
Pinnacle West Capital Corp. 3,300 135,919
Reliant Energy, Inc. 2,800 103,950
Telephone and Data Systems, Inc. 2,000 232,000
------------
973,845
------------
TOTAL COMMON STOCKS
(Cost $14,152,126) (98.76%) 17,062,919
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.68%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 08-31-00, due
09-01-00 (Secured by U.S. Treasury
Bonds, 7.250% thru 9.250%, due
02-15-16 thru 02-15-19) -- Note A 6.61% $981 981,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 5.20% 151
------------
TOTAL SHORT-TERM INVESTMENTS (5.68%) 981,151
--------- ------------
TOTAL INVESTMENTS (104.44%) 18,044,070
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (4.44%) (767,641)
--------- ------------
TOTAL NET ASSETS (100.00%) $17,276,429
========= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
(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,
organized as a Massachusetts business trust in 1994. 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 date. 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's class of shares has 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.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the 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 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, 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. The Funds have entered into a syndicated line of credit
agreement with various banks. 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 to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The Funds had no borrowing activity for
the period ended August 31, 2000.
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, 2000, the Independence
Diversified Core Equity Fund II loaned securities having a market value
of $9,622,813 collateralized by securities in the amount of $9,815,269.
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
Diversified Core 0.50% of average daily net assets up to $1 billion
Equity Fund II 0.45% of such assets in excess of $1 billion
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
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
Diversified Core 80% of the advisory fee payable on the Fund's
Equity Fund II average daily net assets
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 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, 2000, the reduction
in the Funds' expenses collectively with any additional amounts not
borne by the Funds by virtue of the expense limit amounted to $30,464
for Independence Balanced Fund and $30,199 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, 2000, 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 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. Stephen L. Brown, Ms. Maureen R. Ford 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 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, 2000 were as
follows:
PURCHASES PROCEEDS
------------- ------------
Independence
Balanced Fund
U.S. Government
Securities $54,540,594 $53,840,563
Other Investments 2,743,340 35,232,231
Independence
Diversified Core
Equity Fund II 126,074,579 216,929,559
Independence Medium
Capitalization Fund 12,552,732 10,392,438
At August 31, 2000, the cost (excluding the corporate savings account)
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 UNREALIZED
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ---------------- ---------------- --------------
<S> <S> <S> <S> <S>
Independence
Balanced
Fund $52,316,281 $10,742,020 ($1,238,820) $9,503,200
Independence
Diversified
Core Equity
Fund II 267,420,359 140,872,721 (15,950,398) 124,922,323
Independence
Medium
Capitalization
Fund 15,133,542 3,720,885 (810,508) 2,910,377
</TABLE>
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
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 8/00
10/00
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Core Growth
Fund
AUGUST 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Volatility ruled during the spring, as rising interest rates and
prospects of a slowing economy finally caught up to pricey growth
stocks. As a result, the tech-heavy NASDAQ Composite Index advanced by
only 3.37% through the end of August, while the Dow Jones Industrial
Average lost 1.46% and the Standard & Poor's 500 Index was up 4.12%.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including both blue chip and
old economy stocks in sectors like financials, health care and energy,
that combined both strong fundamentals and less frothy valuation levels.
As for bonds, rising interest rates have kept the broader bond market in
flux, but pockets of strength have emerged there, as well, including
municipal bonds and longer-maturity Treasury bonds. The 30-year bond,
for instance, has returned 14.28% since January.
Between now and year end, we expect the market's focus to be on
Washington, as it usually is in an election year. While the presidential
election is important, what warrants more attention is the Federal
Reserve Board. The November election will generate more ink, but won't
have anywhere near the impact on financial markets that further Fed
action could. So we'll be watching the economic data to see whether the
Fed has truly wound down its string of interest-rate hikes.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY COREEN KRAYSLER FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 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
Investors return to basics, renewing focus
on earnings and valuations
As investors moved out of high-flying technology shares into beaten-down
old economy stocks this past spring, the market broadened, with gains
coming from a variety of sectors instead of just one. This benefited
John Hancock Core Growth Fund, with its diversified strategy and focus
on cheap stocks with improving fundamentals. For the six months ended
August 31, 2000, the Fund's Class A, Class B, Class C and Class I shares
returned 15.30%, 14.90%, 14.90% and 15.53%, respectively, at net asset
value. The Fund's results far exceeded the average large-cap growth
fund, which returned only 6.38%, according to Lipper, Inc.1 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.
While the Fund's industry weightings and risk characteristics matched
those of the Russell 1000 Growth Index, our stock selection differed.
Using in-house analysts' earnings estimates and proprietary computer
models, we focused on what appeared to be the best stocks in the large-
cap growth universe. This strategy worked well during the period,
allowing the Fund to outpace the Index's 8.96% return.
"...investors
reached their
limit with
technology
and began
moving into
old economy
names."
Market environment
Last year investors were willing to buy earnings growth at any price.
Valuations didn't matter. Actual earnings didn't matter. Investors just
wanted technology stocks. But in March, the market made a U-turn, as
investors reached their limit with technology and began moving into old
economy names. This happened as signs of slower economic growth
increased the risk of future earnings disappointments, especially in
high-growth sectors like technology, telecommunications and
biotechnology. At the same time, old economy stocks looked more
attractive as interest rates neared their peak. The market rotation
signaled a return to rationality. Investors renewed their focus on
valuations (or how much they were willing to pay for future earnings
growth), earnings and cash flow. Stocks in many industries began doing
well, especially pharmaceuticals and financials.
[Table at top left hand column entitled "Top Five Stock Holdings." The
first listing is Cisco Systems 7.3%, the second is Intel 6.5%, the third
General Electric 6.2%, the fourth Pfizer 4.1% and the fifth Oracle 3.5%.
A note below the table reads "As a percentage of net assets on August
31, 2000."]
"Health care,
especially
large
pharmaceuticals,
rebounded
during the
spring..."
Health-care gainers
Health care, especially large pharmaceuticals, rebounded during the
spring as concerns about Medicare reimbursement issues subsided. In
addition, investors viewed these stocks as cheap, safe-haven securities
with strong and improving earnings prospects. Among our winners during
the period were Warner-Lambert, which was acquired by Pfizer, a very
diversified drug company that was also a top performer for the Fund;
Merck, which continued to beat earnings expectations; and Johnson &
Johnson, a global provider of health-care products. We also owned some
medical technology companies like Waters Corp., which benefited greatly
from increasing demand for its products, which are used by researchers
in mapping the human genome. We added to our stake in this area because
prospects seemed so strong.
[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 Warner-Lambert followed by an up arrow with the phrase
"Acquired by Pfizer, improving prospects." The second listing is Applied
Micro Circuits followed by an up arrow with the phrase "Strong demand
for semiconductors." The third listing is Cisco Systems followed by a
sideways arrow with the phrase "Concern about acquisition strategy." A
note below the table reads "See 'Schedule of Investments.' Investment
holdings are subject to change."]
Financial leaders
Financial stocks also rallied nicely, benefiting from cheap valuations
and improving prospects in a changing interest-rate environment. One of
the Fund's top performers was AXA Financial, a company with money
management and life insurance operations that also has good management,
good products and great distribution. Lincoln National also did
exceptionally well, thanks to new management and the likelihood of
further industry consolidation. Citigroup, with its unparalleled global
franchise, was another major contributor to performance. The stock
climbed quickly as excitement continued to spread about the cross-
selling opportunities coming from Citigroup's merger with Travelers.
We took advantage of the rise to pare back on our investment.
Technology bright spots
Several of our best performers came from the technology sector, which
represented roughly half of the Fund's net assets. We found pockets of
strength among semiconductor names, which were buoyed by strong demand
and a supply shortage. Intel, an industry leader, also benefited from
its fast-growing business selling high margin chips for servers. Applied
Micro Circuits, which supplies semiconductors for fiber-optic networks,
and Altera, which makes semiconductors for the communications industry,
did quite well, thanks to huge growth in the end markets they serve.
Other names prospered as the Internet grew, including Sun Microsystems,
which saw demand expand for its big, high-end servers, and EMC, which
makes data storage systems.
[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, 2000." The chart is scaled in increments of 4% with 0% at the bottom
and 16% at the top. The first bar represents the 15.30% total return for
John Hancock Core Growth Fund Class A. The second bar represents the
14.90% total return for John Hancock Core Growth Fund Class B. The third
bar represents the 14.90% total return for John Hancock Core Growth Fund
Class C. The fourth bar represents the 15.53% total return for John
Hancock Core Growth Fund Class I. The fifth bar represents the 6.38%
total return for Average large-cap 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 large-cap growth
fund is tracked by Lipper, Inc.1 See the following two pages for
historical performance information."]
Weakness in technology
Our biggest disappointments, however, also came from the technology
sector. One of our largest investments was Microsoft, which took a big
hit from the Justice Department's decision to split the company apart.
Cisco Systems, our top holding, also came under pressure as investors
questioned the company's acquisition strategy. We believe the company's
prospects remain strong and added to our stake. Texas Instruments, a
semiconductor company with significant exposure to the cell phone
industry, was weak because of a slowdown in wireless handset sales at
companies like Motorola (another disappointment) and Ericsson. Finally,
Citrix, which develops software for client servers, suffered from a
substantial revenue shortfall brought on by weak international sales and
a change in sales strategy. We decided to cut our losses and sold the
stock.
"...economic
growth, while
moderating,
continues to
be solid."
Upbeat outlook
We believe the current economic environment bodes well for both the
stock market and growth stocks. Interest rates seem to have peaked;
inflation remains under control and historically low, despite the recent
rise in oil prices; and economic growth, while moderating, continues to
be solid. These conditions should help corporate profit growth remain
strong. The only concern is whether - as the economy cools - earnings
disappointments will increase. With this possibility looming, stock
selection will be key. We will remain focused on companies with high
earnings growth whose stocks are selling at reasonable prices. Recent
buys include both El Paso Energy, a natural gas supplier, and Noble
Drilling, a deep water driller, both of which stand to benefit from
increasing demand for natural gas. We're also finding some good
opportunities in the technology and telecommunications areas, including
Oracle and Nortel Networks. We expect our emphasis on stock selection,
valuation and diversification to stand us in good stead as the market
continues to refocus on fundamentals and valuations.
------------------------------------------------------------------------
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 tables on the right show 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.* For Class A shares,
total return figures include an up-front maximum applicable sales charge
of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C
performance includes an up-front sales charge of 1% and a contingent deferred
sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.
*For certain institutional investors.
CLASS I*
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- --------
Cumulative Total Returns 19.36% 204.99%
Average Annual Total Returns(1) 19.36% 26.49%
CLASS A
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return 12.04%
Average Annual Total Return(1) 12.04%(2)
CLASS B
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return 12.25%
Average Annual Total Return(1) 12.25%(2)
CLASS C
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return 15.10%
Average Annual Total Return(1) 15.10%(2)
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses (excluding 12b-1
and transfer agent fees) to 0.90% of the Fund's average daily net
assets. Without the limitation of expenses, the average annual total
returns for the one-year period and since inception for Class I shares
would have been 19.07% and 20.92%, respectively. Without the limitation
of expenses, the cumulative total return since inception for Class A,
Class B and Class C shares would have been 11.75%, 11.96% and 14.81%,
respectively.
(2) Not annualized.
WHAT HAPPENED TO A $250,000 INVESTMENT...
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. It is not possible to invest in an
index.
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 $844,911 as of
August 31, 2000. The second line represents the value of the
hypothetical $250,000 investment made in the John Hancock Core Growth
Fund on October 2, 1995, and is equal to $815,125 as of August 31, 2000.
The chart below shows the value of a $10,000 investment in the Fund's
Class A, Class B and Class C shares, assuming all distributions were
reinvested between July 1, 1999 and August 31, 2000. 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 $12,596 $12,508 $12,508
--------------------------------------------------------------
With Maximum Sales Charge $11,970 $12,108 $12,385
--------------------------------------------------------------
Russell 1000 Growth Index $13,133 $13,133 $13,133
FINANCIAL STATEMENTS
John Hancock Funds -- Core Growth Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 2000 (Unaudited)
----------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $68,031,524) $82,735,559
Joint repurchase agreement (cost - $967,000) 967,000
Corporate savings account 319
-----------
83,702,878
Receivable for investments sold 482,778
Receivable for shares sold 18,714
Dividends receivable 28,723
Interest receivable 180
Other assets 930
-----------
Total Assets 84,234,203
-----------
Liabilities:
Payable for shares repurchased 8,179
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 54,348
Accounts payable and accrued expenses 26,787
-----------
Total Liabilities 89,314
-----------
Net Assets:
Capital paid-in 68,545,268
Accumulated net realized gain on investments 1,205,886
Net unrealized appreciation of investments 14,704,035
Accumulated net investment loss (310,300)
-----------
Net Assets $84,144,889
-----------
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 - $36,468,592/1,597,050 $22.83
========================================================================================
Class B - $35,211,256/1,552,871 $22.67
========================================================================================
Class C - $2,184,078/96,321 $22.67
========================================================================================
Class I - $10,280,963/448,806 $22.91
========================================================================================
Maximum Offering Price Per Share
Class A* - ($22.83/0.95) $24.03
========================================================================================
Class C - ($22.67/0.99) $22.90
========================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what
the Fund owns, is due and owes on August 31, 2000. You'll also find the net asset value and the
maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended August 31, 2000 (Unaudited)
----------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $140) $172,911
Interest (including income on securities loaned of $1,206) 39,564
-----------
212,475
-----------
Expenses:
Investment management fee - Note B 265,846
Distribution and service fee - Note B
Class A 41,258
Class B 141,565
Class C 7,142
Transfer agent fee - Note B 33,375
Custodian fee 23,256
Registration and filing fees 10,778
Auditing fee 8,494
Printing 7,769
Accounting and legal services fee - Note B 6,186
Miscellaneous 1,943
Trustees' fees 1,301
Organizational expense - Note A 881
Legal fees 251
-----------
Total Expenses 550,045
-----------
Less Expense Reductions - Note B (27,359)
-----------
Net Expenses 522,686
-----------
Net Investment Loss (310,211)
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 910,666
Change in net unrealized appreciation/depreciation
of investments 9,099,563
-----------
Net Realized and Unrealized Gain on
Investments 10,010,229
-----------
Net Increase in Net Assets
Resulting from Operations $9,700,018
===========
The Statement of Operations summarizes the Fund's investment income earned and expenses
incurred in operating the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($104,658) ($310,211)
Net realized gain on investments sold 768,558 910,666
Change in net unrealized appreciation/depreciation of investments 3,946,942 9,099,563
------------- -----------------
Net Increase in Net Assets Resulting from Operations 4,610,842 9,700,018
------------- -----------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A** - ($0.0162 and none per share, respectively) (8,052) --
Class B** - ($0.0162 and none per share, respectively) (10,306) --
Class C** - ($0.0162 and none per share, respectively) (394) --
Class I - ($1.1162 and none per share, respectively) (449,026) --
------------- -----------------
Total Distributions to Shareholders (467,778) --
------------- -----------------
From Fund Share Transactions - Net: * 40,985,257 21,461,973
------------- -----------------
Net Assets:
Beginning of period 7,854,577 52,982,898
------------- -----------------
End of period (including accumulated net investment loss
of $89 and $310,300, respectively) $52,982,898 $84,144,889
============= =================
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.
<CAPTION>
Statement of Changes in Net Assets (continued)
-----------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED)
---------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
CLASS A**
Shares sold 1,519,350 28,037,749 1,110,816 23,085,443
Shares issued to shareholders in reinvestment of distributions 616 11,717 77 1,433
------------- ----------------- ------------- -----------
1,519,966 28,049,466 1,110,893 23,086,876
Less shares repurchased (468,286) (8,668,556) (565,523) (11,552,593)
------------- ----------------- ------------- -----------
Net increase 1,051,680 19,380,910 545,370 11,534,283
============= ================= ============= ===========
CLASS B**
Shares sold 1,278,590 23,451,319 593,416 12,472,760
Shares issued to shareholders in reinvestment of distributions 614 11,341 61 1,215
------------- ----------------- ------------- -----------
1,279,204 23,462,660 593,477 12,473,975
Less shares repurchased (127,150) (2,412,874) (192,660) (4,057,526)
------------- ----------------- ------------- -----------
Net increase 1,152,054 21,049,786 400,817 8,416,449
============= ================= ============= ===========
CLASS C**
Shares sold 48,989 896,165 58,739 1,253,363
Shares issued to shareholders in reinvestment of distributions 29 552 55 1,187
------------- ----------------- ------------- -----------
49,018 896,717 58,794 1,254,550
Less shares repurchased (2,653) (50,979) (8,838) (178,482)
------------- ----------------- ------------- -----------
Net increase 46,365 845,738 49,956 1,076,068
============= ================= ============= ===========
CLASS I
Shares sold 177,003 3,265,932 111,472 2,346,499
Shares issued to shareholders in reinvestment of distributions 26,179 449,001 -- --
------------- ----------------- ------------- -----------
203,182 3,714,933 111,472 2,346,499
Less shares repurchased (218,474) (4,006,110) (92,398) (1,911,326)
------------- ----------------- ------------- -----------
Net increase (decrease) (15,292) (291,177) 19,074 435,173
============= ================= ============= ===========
** Class A, Class B and Class C shares commenced operations on July 1, 1999.
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:
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED AUGUST 31, 2000
FEBRUARY 29, 2000(1) (UNAUDITED)
------------------- ----------------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14 $19.80
-------- --------
Net Investment Loss(2) (0.05) (0.07)
Net Realized and Unrealized Gain on Investments 1.73 3.10
-------- --------
Total from Investment Operations 1.68 3.03
-------- --------
Less Distributions:
Dividends from Net Realized Gain on Investments Sold (0.02) --
-------- --------
Net Asset Value, End of Period $19.80 $22.83
======== ========
Total Investment Return at Net Asset Value(3) 9.25%(4) 15.30%(4)
Total Adjusted Investment Return at Net Asset Value(3,5) 9.00%(4) 15.26%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $20,821 $36,469
Ratio of Expenses to Average Net Assets 1.25%(6) 1.31%(6)
Ratio of Adjusted Expenses to Average Net Assets(7,8) 1.63%(6) 1.39%(6)
Ratio of Net Investment Loss to Average Net Assets (0.39%)(6) (0.68%)(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets(7,8) (0.77%)(6) (0.76%)(6)
Portfolio Turnover Rate 72% 54%
Fee Reduction Per Share(2) $0.05 $0.01
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.
<CAPTION>
Financial Highlights (continued)
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED AUGUST 31, 2000
FEBRUARY 29, 2000(1) (UNAUDITED)
------------------- ----------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14 $19.73
-------- --------
Net Investment Loss(2) (0.13) (0.14)
Net Realized and Unrealized Gain on Investments 1.74 3.08
-------- --------
Total from Investment Operations 1.61 2.94
-------- --------
Less Distributions:
Dividends from Net Realized Gain on Investments Sold (0.02) --
-------- --------
Net Asset Value, End of Period $19.73 $22.67
======== ========
Total Investment Return at Net Asset Value(3) 8.86%(4) 14.90%(4)
Total Adjusted Investment Return at Net Asset Value(3,5) 8.61%(4) 14.86%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $22,728 $35,211
Ratio of Expenses to Average Net Assets 1.95%(6) 2.01%(6)
Ratio of Adjusted Expenses to Average Net Assets(7,8) 2.33%(6) 2.09%(6)
Ratio of Net Investment Loss to Average Net Assets (1.09%)(6) (1.37%)(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets(7,8) (1.47%)(6) (1.45%)(6)
Portfolio Turnover Rate 72% 54%
Fee Reduction Per Share(2) $0.05 $0.01
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14 $19.73
-------- --------
Net Investment Loss(2) (0.13) (0.15)
Net Realized and Unrealized Gain on Investments 1.74 3.09
-------- --------
Total from Investment Operations 1.61 2.94
-------- --------
Less Distributions:
Dividends from Net Realized Gain on Investments Sold (0.02) --
-------- --------
Net Asset Value, End of Period $19.73 $22.67
======== ========
Total Investment Return at Net Asset Value(3) 8.86%(4) 14.90%(4)
Total Adjusted Investment Return at Net Asset Value(3,5) 8.61%(4) 14.86%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $915 $2,184
Ratio of Expenses to Average Net Assets 1.95%(6) 2.02%(6)
Ratio of Adjusted Expenses to Average Net Assets(7,8) 2.33%(6) 2.10%(6)
Ratio of Net Investment Loss to Average Net Assets (1.09%)(6) (1.38%)(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets(7,8) (1.47%)(6) (1.46%)(6)
Portfolio Turnover Rate 72% 54%
Fee Reduction Per Share(2) $0.05 $0.01
<CAPTION>
Financial Highlights (continued)
-------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
PERIOD ENDED YEAR ENDED FEBRUARY 28 YEAR ENDED AUGUST 31,
FEBRUARY 29, ------------------------------ FEBRUARY 29, 2000
1996(1) 1997 1998 1999 2000 (UNAUDITED)
------- -------- ------- ------- ------- --------
<S> <C> <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 $19.83
------- -------- ------- ------- ------- -------
Net Investment Income (Loss)(2) 0.03 0.05 0.04 0.01 (0.01) (0.03)
Net Realized and Unrealized Gain
on Investments 0.81 2.16 4.34 3.40 3.31 3.11
------- -------- ------- ------- ------- -------
Total from Investment Operations 0.84 2.21 4.38 3.41 3.30 3.08
------- -------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.03) (0.04) (0.03) (0.02) -- --
Distributions in Excess
of Net Investment Income -- -- -- --(10) -- --
Distributions from Net Realized Gain
on Investments Sold (0.02) (0.45) (0.48) (0.62) (1.12) --
------- -------- ------- ------- ------- -------
Total Distributions (0.05) (0.49) (0.51) (0.64) (1.12) --
------- -------- ------- ------- ------- -------
Net Asset Value, End of Period $9.29 $11.01 $14.88 $17.65 $19.83 $22.91
======= ======== ======= ======= ======= =======
Total Investment Return
at Net Asset Value(3) 9.94%(4) 24.19% 40.52% 22.92% 19.67% 15.53%(4)
Total Adjusted Investment Return
at Net Asset Value(3,5) (5.63%)(4) 17.40% 37.95% 21.89% 19.29% 15.49%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $549 $883 $4,605 $7,855 $8,520 $10,281
Ratio of Expenses
to Average Net Assets 0.95%(6) 0.95% 0.95% 0.95% 0.95% 0.95%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7,8) 38.57%(6) 7.74% 3.52% 1.98% 1.33% 1.03%(6)
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.91%(6) 0.49% 0.34% 0.06% (0.06%) (0.30%)(6)
Ratio of Adjusted Net Investment Loss
to Average Net Assets(7,8) (36.71%)(6) (6.30%) (2.23%) (0.97%) (0.44%) (0.38%)(6)
Portfolio Turnover Rate 21% 142% 91% 54% 72% 54%
Fee Reduction Per Share(2) $1.36 $0.68 $0.33 $0.17 $0.05 $0.01
(1) Class A, Class B and Class C shares began operations on July 1, 1999. Class I shares began operations on
October 2, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into consideration fee reductions by the
Adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) 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.
(9) Effective July 1, 1999, existing shares of the Fund were designated Class I shares.
(10) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Core Growth Fund on August 31, 2000. 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 (0.87%)
Lamar Advertising Co.* 6,500 $301,844
Omnicom Group, Inc. 5,200 433,875
----------
735,719
----------
Building (0.24%)
Black & Decker Corp. (The) 5,000 200,312
----------
Business Services - Misc. (0.41%)
Convergys Corp.* 8,800 344,300
----------
Chemicals (0.15%)
Air Products & Chemicals, Inc. 3,500 127,094
----------
Computer - Services (2.44%)
Electronic Data Systems Corp. 5,300 264,006
First Data Corp. 18,800 896,525
Fiserv, Inc.* 6,300 341,381
SunGard Data Systems Inc.* 15,400 554,400
----------
2,056,312
----------
Computer - Software (9.41%)
Adobe Systems, Inc. 3,700 481,000
Intuit, Inc.* 9,700 580,787
Microsoft Corp.* 32,000 2,234,000
Networks Associates, Inc.* 12,300 318,263
Oracle Corp.* 32,700 2,973,656
Portal Software, Inc.* 7,600 419,900
Siebel Systems, Inc.* 4,600 909,938
----------
7,917,544
----------
Computers (22.68%)
America Online, Inc.* 38,100 2,233,612
Cisco Systems, Inc.* 89,300 6,128,212
Compaq Computer Corp. 13,500 459,844
Dell Computer Corp.* 25,500 1,112,437
EMC Corp.* 18,200 1,783,600
Hewlett-Packard Co. 5,700 688,275
International Business Machines Corp. 13,500 1,782,000
Palm, Inc.* 8,454 371,976
Sun Microsystems, Inc.* 18,900 2,399,119
VERITAS Software Corp.* 9,600 1,157,400
Yahoo! Inc.* 8,000 972,000
----------
19,088,475
----------
Diversified Operations (6.47%)
General Electric Co. 89,100 5,229,056
Tyco International Ltd. 3,800 216,600
----------
5,445,656
----------
Electronics (19.71%)
Agilent Technologies, Inc.* 9,200 554,875
Altera Corp.* 11,600 751,825
ANADIGICS, Inc.* 6,100 219,600
Analog Devices, Inc.* 8,100 814,050
Applied Materials, Inc.* 8,000 690,500
Applied Micro Circuits Corp.* 3,600 730,575
Atmel Corp.* 24,500 490,000
Intel Corp. 72,600 5,435,925
Jabil Circuit, Inc.* 4,900 312,681
Lam Research Corp.* 11,100 334,388
Linear Technology Corp. 7,600 546,725
Maxim Integrated Products, Inc.* 7,400 648,888
Motorola, Inc. 7,000 252,438
Novellus Systems, Inc.* 6,800 418,625
PE Corp.-PE Biosystems Group 4,300 423,012
Sanmina Corp.* 4,000 472,000
SCI Systems, Inc.* 6,500 401,375
Teradyne, Inc.* 4,700 304,619
Texas Instruments, Inc. 21,500 1,439,156
Vishay Intertechnology, Inc.* 5,700 229,781
Waters Corp.* 5,800 461,463
Xilinx, Inc.* 7,300 648,788
----------
16,581,289
----------
Finance (1.31%)
AXA Financial, Inc. 15,200 786,600
Citigroup, Inc. 5,467 319,136
----------
1,105,736
----------
Insurance (1.79%)
Aon Corp. 11,100 414,169
Hartford Financial Services Group, Inc.
(The) 9,700 646,262
Lincoln National Corp. 8,200 442,800
----------
1,503,231
----------
Media (2.28%)
AT&T Corp. - Liberty Media Group* 15,400 329,175
Clear Channel Communications, Inc.* 5,300 383,588
Time Warner, Inc. 8,400 718,200
Viacom, Inc. (Class B)* 7,200 484,650
----------
1,915,613
----------
Medical (13.44%)
Allergan, Inc. 10,600 775,125
ALZA Corp.* 6,000 453,750
American Home Products Corp. 7,100 384,731
Amgen, Inc.* 4,300 325,994
Bristol-Myers Squibb Co. 8,900 471,700
Cardinal Health, Inc. 3,700 302,706
Cephalon, Inc.* 3,900 196,219
Forest Laboratories, Inc.* 2,500 244,687
Genentech, Inc.* 2,900 552,450
King Pharmaceuticals, Inc.* 4,700 150,988
Lilly (Eli) & Co. 7,400 540,200
Medtronic, Inc. 9,100 466,375
Merck & Co., Inc. 14,600 1,020,175
Pfizer, Inc. 79,800 3,451,350
Pharmacia Corp. 18,400 1,077,550
Schering-Plough Corp. 22,300 894,788
----------
11,308,788
----------
Oil & Gas (0.85%)
El Paso Energy Corp. 8,000 466,000
Noble Drilling Corp.* 5,200 252,200
----------
718,200
----------
Retail (4.46%)
Family Dollar Stores, Inc. 15,600 280,800
Gap, Inc. (The) 14,100 316,369
Home Depot, Inc. (The) 26,100 1,254,431
Lowe's Cos., Inc. 6,800 304,725
RadioShack Corp. 4,600 271,400
TJX Cos., Inc. 20,300 381,894
Wal-Mart Stores, Inc. 19,800 939,263
----------
3,748,882
----------
Telecommunications (11.81%)
ADC Telecommunications, Inc.* 16,200 663,187
AT&T Wireless Group* 20,600 539,462
CIENA Corp.* 2,400 532,050
Comverse Technology, Inc.* 5,200 478,075
Corning, Inc. 4,600 1,508,512
General Motors Corp. (Class H)* 9,800 324,625
JDS Uniphase Corp.* 12,600 1,568,503
Lucent Technologies, Inc. 37,800 1,580,512
Nokia Corp., American Depositary
Receipt 7,500 337,031
Nortel Networks Corp. 3,800 309,938
Qwest Communications International, Inc.* 7,400 382,025
RF Micro Devices, Inc.* 5,000 223,125
Scientific-Atlanta, Inc. 4,600 358,513
Sprint Corp. 3,200 107,200
Sprint PCS* 9,600 481,800
WorldCom, Inc.* 14,900 543,850
----------
9,938,408
----------
TOTAL COMMON STOCKS
(Cost $68,031,524) (98.32%) 82,735,559
---------- ----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.15%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
08-31-00, due 09-01-00
(Secured by U.S. Treasury
Bonds, 7.25% thru 9.25%,
due 02-15-16 thru 02-15-19)
- Note A 6.61% $967 967,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 319
-----------
TOTAL SHORT-TERM INVESTMENTS (1.15%) 967,319
---------- -----------
TOTAL INVESTMENTS (99.47%) 83,702,878
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.53%) 442,011
---------- -----------
TOTAL NET ASSETS (100.00%) $84,144,889
========== ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Core Growth Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Core Growth Fund ("the Fund") is a diversified series of
John Hancock Institutional Series Trust (the "Trust"), an open-end
management investment company, registered under the Investment Company
Act of 1940. 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.
The shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
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, 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 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 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 size 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 Fund. Actual results
could differ 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 require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. 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 to each fund 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, 2000.
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 securitites on loan. As with other extensions of
credit, the Fund 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, 2000, the Fund loaned
securities having a market value of $764,425 collateralized by
securities in the amount of $779,714.
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 12b-1 and transfer
agent fees) from exceeding 0.90% of the Fund's average daily net assets.
Accordingly, for the period ended August 31, 2000, the reduction in the
Fund's expenses collectively with any additional amounts not borne by
the Fund by virtue of the expense limit amounted to $27,359. 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, 2000, net sales charges received with regard to sales of
Class A shares amounted to $158,667. Out of this amount, $13,377 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $105,373 was paid as sales commissions to
unrelated broker-dealers and $39,917 was paid as sales commissions to
sales personnel of Signator Investors, Inc. ("Signator Investors"), a
related broker-dealer. The Adviser's indirect parent, John Hancock Life
Insurance Company ("JHLICo"), is the indirect sole shareholder of
Signator Investors.
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 5.00% 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 B shares. For the period ended August 31, 2000, CDSCs amounted to
$60,937.
Effective May 1, 2000, all Class C share retail purchases are assessed a
1.00% up-front sales charge. For the period ended August 31, 2000, up-
front sales charges received with regard to sales of Class C shares
amounted to $25,610. Out of this amount $23,142 was paid as sales
commissions to unrelated broker-dealers and $2,468 was paid as sales
commissions to sales personnel of Signator Investors. 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, 2000, CDSCs amounted to
$54.
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
Conduct Rules of the National Association of Securities Dealers. Under
the Conduct Rules, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned
subsidiary of JHLICo. The Fund pays Signature Services transfer agent
fees based on the number of shareholder accounts for Class A, Class B
and Class C shares, plus certain out-of-pocket expenses. For Class I
shares, the Fund pays Signature Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.05% of the average daily net assets
attributable to Class I shares.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford 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, 2000, aggregated $55,616,914 and
$35,362,284, respectively.
The cost of investments owned at August 31, 2000 (excluding the
corporate savings account) for federal income tax purposes was
$69,145,667. Gross unrealized appreciation and depreciation of
investments aggregated $17,405,018 and $2,848,126, respectively,
resulting in net unrealized appreciation of $14,556,892.
NOTES
[This page intentionally left blank.]
NOTES
[This page intentionally left blank.]
NOTES
[This page intentionally left blank.]
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
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 8/00
10/00
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Core Value
Fund
AUGUST 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
* Members of Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
DEAR FELLOW SHAREHOLDERS:
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Volatility ruled during the spring, as rising interest rates and
prospects of a slowing economy finally caught up to pricey growth
stocks. As a result, the tech-heavy NASDAQ Composite Index advanced by
only 3.37% through the end of August, while the Dow Jones Industrial
Average lost 1.46% and the Standard & Poor's 500 Index was up 4.12%.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including both blue chip and
old economy stocks in sectors like financials, health care and energy,
that combined both strong fundamentals and less frothy valuation levels.
As for bonds, rising interest rates have kept the broader bond market in
flux, but pockets of strength have emerged there, as well, including
municipal bonds and longer-maturity Treasury bonds. The 30-year bond,
for instance, has returned 14.28% since January.
Between now and year end, we expect the market's focus to be on
Washington, as it usually is in an election year. While the presidential
election is important, what warrants more attention is the Federal
Reserve Board. The November election will generate more ink, but won't
have anywhere near the impact on financial markets that further Fed
action could. So we'll be watching the economic data to see whether the
Fed has truly wound down its string of interest-rate hikes.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY JOHN FORELLI FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 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 outpace growth stocks
as technology moves out of favor
After years of being overlooked, value stocks finally moved back into
the limelight this spring and summer. In March, investors punted on
expensive technology stocks that had been leading the market's charge.
Higher interest rates weighed on the market, increasing the risks
associated with very high-priced growth investments. Capital markets
also began pulling the plug on Internet and wireless communications
companies, causing speculative securities to weaken further. Technology
and telecommunications stock prices fell sharply. Investors became more
cautious and began moving into traditional old-economy names that
represented both good value and good earnings growth potential. Led by
financial, utility, health-care and energy stocks, the Russell 1000
Value Index climbed 14.31% for the six months ended August 31, 2000.
This was well ahead of the Russell 1000 Growth Index, which returned
8.96% for the same period, and the Standard & Poor's 500 Index, which
returned 11.72%.
"Investors
became more
cautious..."
Performance review
John Hancock Core Value Fund was well positioned to capitalize on the
value sector's rally, thanks to our focus on cheap stocks with improving
prospects. For the six months ended August 31, 2000, John Hancock Core
Value Fund's Class A, Class B, Class C and Class I shares returned
17.85%, 17.21%, 17.21% and 17.94%, respectively, at net asset value. By
comparison, the average multi-cap value fund returned 16.26%, according
to Lipper, Inc.1 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 5.1%, the second is Exxon Mobil 4.5%, the
third FleetBoston Financial 2.4%, the fourth SBC Communications 2.3% and
the fifth Johnson & Johnson 2.1%. A note below the table reads "As a
percentage of net assets on August 31, 2000."]
"...financial
stocks...
rebounded on
the prospect
that interest
rates were
nearing their
peak."
Strength in financials and energy
More than 25% of the Fund's net assets were invested in financial
stocks, which rebounded on the prospect that interest rates were nearing
their peak. Among our top-performing financial names were Citigroup and
FleetBoston Financial, both of which enjoyed improved earnings outlooks
from the changing interest-rate environment. Insurance stocks like AXA
Financial, XL Capital and Lincoln National also had an excellent run, as
signs of improved pricing and further industry consolidation attracted
investor interest. Other large financial investments -- including Bank of
America and Fannie Mae -- did fairly well, but remained undervalued.
[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 AXA Financial followed by an up arrow with the phrase "Strong
rebound in the financial sector." The second listing is El Paso Energy
followed by an up arrow with the phrase "Rising natural gas prices." The
third listing is Bausch & Lomb followed by a down arrow with the phrase
"Increased competition, weakening demand." A note below the table reads
"See 'Schedule of Investments.' Investment holdings are subject to
change."]
Another 10% of the Fund's net assets were in the energy sector.
Stronger-than-expected natural gas prices boosted the fortunes of
companies like Anadarko Petroleum, which we subsequently sold, and El
Paso Energy. We continue to own ExxonMobil, whose stock benefited from
rising oil prices as well as cost savings from the recent merger.
Gains in health care and utilities
The environment for health-care stocks also improved as concerns about
changes in Medicare reimbursement subsided and the outlook for health
insurers improved. The Fund's top performing health-care investment was
Cardinal Health, a leading distributor of drugs to hospitals. The stock
soared 96% during the period, causing us to pare back on our stake.
Other strong performers included United Healthcare, a well-run HMO, and
Baxter International, a medical technology company best known for its
blood products. In the electric utilities area, companies like Duke
Energy and Reliant Energy also gave a nice boost to performance. These
stocks rose as investors began to recognize the value of the unregulated
businesses owned by each company.
Weakness in telephone services
Telephone service providers were hurt during the period by stiff
competition in the consumer long-distance business as well as failed
mergers within the industry. Most of the phone stocks we owned posted
significant declines for the period, including AT&T, Verizon
Communications (formerly Bell Atlantic), Sprint and WorldCom. SBC
Communications was the one exception, generating positive returns for
the period. SBC is beginning to reap the benefits of being a leader in
local phone service with wireless and Internet capabilities, as well as
international assets. These attributes, along with a lack of exposure to
the consumer long-distance business, gave the stock superior earnings
prospects relative to its peers.
[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, 2000." The chart is scaled in increments of 5% with 0% at the bottom
and 20% at the top. The first bar represents the 17.85% total return for
John Hancock Core Value Fund Class A. The second bar represents the
17.21% total return for John Hancock Core Value Fund Class B. The third
bar represents the 17.21% total return for John Hancock Core Value Fund
Class C. The fourth bar represents the 17.94% total return for John
Hancock Core Value Fund Class I. The fifth bar represents the 16.26%
total return for Average multi-cap value 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 multi-cap value
fund is tracked by Lipper, Inc.1 See the following two Pages for
historical performance information."]
Other stocks that turned in disappointing results for the period
included Motorola, which continues to struggle with turning around its
cellular handset business, and Bausch & Lomb, which suffered as
competition increased and laser eye surgery cut back on demand for
contact lens products.
New purchases
We continued to adjust the portfolio as opportunities arose. In the
health-care area, we took advantage of depressed prices to add to many
of our existing large pharmaceutical investments, including Abbott
Laboratories and Bristol-Myers Squibb. We also increased our stake in
Johnson & Johnson, a global, diversified provider of health-care
products. New purchases included Merck, a large global pharmaceutical
company that continues to beat earnings expectations. In the finance
area, we added to our investments in Merrill Lynch and J.P. Morgan, both
of which stand to benefit from a stronger outlook for the securities
industry. We also bought Stilwell Financial, a money management firm
with strong asset growth whose stock took a nosedive when a key manager
resigned. Finally, we added a number of new media stocks, including
Infinity Broadcasting, Lamar Advertising, Omnicom and Interpublic Group.
These stocks tumbled as investors worried that Internet companies would
pull back on advertising. They've since come back as total ad revenues
have remained strong.
"We're
optimistic
about the
prospects for
the stock
market and
value stocks
in particular."
Positive outlook
We're optimistic about the prospects for the stock market and value
stocks in particular. The fact that interest rates appear to be at or
near their peak bodes well for the market. Economic growth, while
slowing slightly, remains strong, and consumer confidence continues to
be high. And inflation remains low, as productivity continues to
improve. In this environment, we expect corporate earnings growth to
stay in the 10% range. The only question is whether slower economic
growth will produce more earnings shortfalls. Given this concern, we
expect stock selection to become more critical, and stocks with more
moderate valuations to look particularly attractive.
------------------------------------------------------------------------
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 tables on the right show 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 an up-front 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 performance reflects a maximum contingent
deferred sales charge (maximum 5% and declining to 0% over six years).
Class C performance includes an up-front sales charge of 1% and a
contingent deferred sales charge (1% declining to 0% after one year).
Sales charge is not applicable for Class I shares.*
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, 2000
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- --------
Cumulative Total Returns (15.25%) 89.46%
Average Annual Total Returns(1) (15.25%) 14.42%
CLASS B
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return (16.80%)
Average Annual Total Return(1) (16.80%)(2)
CLASS C
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return (14.16%)
Average Annual Total Return(1) (14.16%)(2)
CLASS I*
For the period ended June 30, 2000
SINCE
INCEPTION
(7/1/99)
--------
Cumulative Total Return (11.57%)
Average Annual Total Return(1) (11.57%)(2)
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses (excluding 12b-1
and transfer agent fees) to 0.90% (until June 30, 2001) of the Fund's
average daily net assets. In addition, the Distributor did not impose
the Class A 12b-1 fee until July 1, 2000. Without the limitation of
expenses, the average annual total returns for the one-year period and
since inception for Class A shares would have been (15.80%) and 9.84%,
respectively. Without the limitation of expenses, the cumulative total
return since inception for Class B, Class C and Class I shares would
have been (17.35%), (14.71%) and (12.11%), respectively.
(2) Not annualized.
WHAT HAPPENED TO A $10,000 INVESTMENT...
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. It is not possible to invest in
an index.
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 $22,280 as of
August 31, 2000. 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 $21,611 as of
August 31, 2000. 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 $20,525 as of August 31, 2000.
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, assuming all distributions were reinvested
between July 1, 1999 and August 31, 2000. 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 $9,472 $9,472 $239,687
----------------------------------------------------------------
With Maximum Sales Charge $9,093 $9,378 --
----------------------------------------------------------------
Russell 1000 Value Index $9,735 $9,735 $243,381
----------------------------------------------------------------
FINANCIAL STATEMENTS
John Hancock Funds -- Core Value Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 2000 (Unaudited)
---------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $23,860,313) $25,789,727
Joint repurchase agreement (cost - $719,000) 719,000
Corporate savings account 873
-----------
26,509,600
Receivable for shares sold 42,681
Dividends receivable 63,660
Interest receivable 134
Deferred organization expense - Note A 136
Other assets 587
-----------
Total Assets 26,616,798
-----------
Liabilities:
Payable for shares repurchased 330
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 21,753
Accounts payable and accrued expenses 18,465
-----------
Total Liabilities 40,548
-----------
Net Assets:
Capital paid-in 24,856,558
Accumulated net realized loss on investments (339,346)
Net unrealized appreciation of investments 1,929,414
Undistributed net investment income 129,624
-----------
Net Assets $26,576,250
===========
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 - $8,424,230/668,316 $12.61
=====================================================================
Class B - $11,227,612/896,021 $12.53
=====================================================================
Class C - $1,132,410/90,372 $12.53
=====================================================================
Class I - $5,791,998/458,972 $12.62
=====================================================================
Maximum Offering Price Per Share
Class A* - ($12.61/0.95) $13.27
=====================================================================
Class C - ($12.53/0.99) $12.66
=====================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of
what the Fund owns, is due and owes on August 31, 2000. You'll also find the net asset value
and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended August 31, 2000 (Unaudited)
---------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $93) $260,627
Interest (including securities lending income of $343) 17,550
-----------
278,177
-----------
Expenses:
Investment management fee - Note B 99,039
Distribution and service fee - Note B
Class A 16,417
Class B 49,502
Class C 3,012
Custodian fee 20,194
Transfer agent fee - Note B 16,437
Registration and filing fees 15,329
Auditing fee 9,402
Printing 6,729
Accounting and legal services fee - Note B 2,298
Organization expense - Note A 886
Miscellaneous 746
Trustees' fees 372
Legal fees 326
Interest expense - Note A 111
-----------
Total Expenses 240,800
-----------
Less: Expense Reductions - Note B (43,843)
Distribution and Service Fee Reduction - Note B
Class A (12,080)
-----------
Net Expenses 184,877
-----------
Net Investment Income 93,300
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments sold (345,643)
Change in net unrealized appreciation/depreciation
of investments 3,864,833
-----------
Net Realized and Unrealized Gain on
Investments 3,519,190
-----------
Net Increase in Net Assets
Resulting from Operations $3,612,490
===========
The Statement of Operations summarizes the Fund's investment income earned and expenses
incurred in operating the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED)
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $111,434 $93,300
Net realized gain (loss) on investments sold 533,950 (345,643)
Change in net unrealized appreciation/depreciation of investments (2,969,929) 3,864,833
------------- -----------------
Net Increase (Decrease) in Net Assets Resulting from Operations (2,324,545) 3,612,490
------------- -----------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0785 and none per share, respectively) (74,593) --
Class B** - ($0.0161 and none per share, respectively) (8,743) --
Class C** - ($0.0161 and none per share, respectively) (270) --
Class I** - ($0.0785 and none per share, respectively) (3,333) --
Distributions from net realized gain on investments sold
Class A - ($0.7001 and none per share, respectively) (435,361) --
Class B** - ($0.1001 and none per share, respectively) (54,266) --
Class C** - ($0.1001 and none per share, respectively) (1,677) --
Class I** - ($0.1001 and none per share, respectively) (4,252) --
------------- -----------------
Total Distributions to Shareholders (582,495) --
------------- -----------------
From Fund Share Transactions - Net: * 16,193,047 2,993,022
------------- -----------------
Net Assets:
Beginning of period 6,684,731 19,970,738
------------- -----------------
End of period (including undistributed net investment income
of $36,324 and $129,624, respectively) $19,970,738 $26,576,250
============= =================
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 redeemed
during the last two periods, along with the corresponding dollar value.
<CAPTION>
Statement of Changes in Net Assets (continued)
-----------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, 2000
FEBRUARY 29, 2000 (UNAUDITED)
---------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 983,090 11,856,359 648,111 7,803,728
Shares issued to shareholders in reinvestment of distributions 39,669 510,527 24 285
------------- ----------------- ------------- -----------
1,022,759 12,366,886 648,135 7,804,013
Less shares repurchased (488,368) (5,886,379) (1,054,967) (12,712,923)
------------- ----------------- ------------- -----------
Net increase (decrease) 534,391 6,480,507 (406,832) (4,908,910)
============= ================= ============= ===========
CLASS B**
Shares sold 795,287 9,680,255 372,723 4,441,720
Shares issued to shareholders in reinvestment of distributions 4,377 49,054 131 1,529
------------- ----------------- ------------- -----------
799,664 9,729,309 372,854 4,443,249
Less shares repurchased (94,215) (1,095,387) (182,282) (2,154,947)
------------- ----------------- ------------- -----------
Net increase 705,449 8,633,922 190,572 2,288,302
============= ================= ============= ===========
CLASS C**
Shares sold 32,121 391,553 73,114 881,122
Shares issued to shareholders in reinvestment of distributions 120 1,264 -- --
------------- ----------------- ------------- -----------
32,241 392,817 73,114 881,122
Less shares repurchased (8,107) (91,269) (6,876) (83,026)
------------- ----------------- ------------- -----------
Net increase 24,134 301,548 66,238 798,096
============= ================= ============= ===========
CLASS I**
Shares sold 62,785 783,431 462,236 5,601,227
Shares issued to shareholders in reinvestment of distributions 603 7,855 -- --
------------- ----------------- ------------- -----------
63,388 791,286 462,236 5,601,227
Less shares repurchased (1,163) (14,216) (65,489) (785,693)
------------- ----------------- ------------- -----------
Net increase 62,225 777,070 396,747 4,815,534
============= ================= ============= ===========
** Class B, Class C and Class I shares commenced operations on July 1, 1999.
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:
-------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
PERIOD ENDED YEAR ENDED FEBRUARY 28 YEAR ENDED AUGUST 31,
FEBRUARY 29, ------------------------------ FEBRUARY 29, 2000
1996(2) 1997 1998 1999 2000 (UNAUDITED)
------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A(1)
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.47 $10.88 $13.93 $12.36 $10.70
------- -------- ------- ------- ------- -------
Net Investment Income(3) 0.10 0.23 0.21 0.15 0.13 0.07
Net Realized and Unrealized Gain
(Loss) on Investments 0.96 1.77 3.33 1.23 (1.01) 1.84
------- -------- ------- ------- ------- -------
Total from Investment Operations 1.06 2.00 3.54 1.38 (0.88) 1.91
------- -------- ------- ------- ------- -------
Less Distributions:
Dividends from Net
Investment Income (0.09) (0.19) (0.13) (0.18) (0.08) --
Distributions from
Net Realized Gain
on Investments Sold -- (0.40) (0.36) (2.77) (0.70) --
------- -------- ------- ------- ------- -------
Total Distributions (0.09) (0.59) (0.49) (2.95) (0.78) --
------- -------- ------- ------- ------- -------
Net Asset Value,
End of Period $9.47 $10.88 $13.93 $12.36 $10.70 $12.61
======= ======== ======= ======= ======= =======
Total Investment Return
at Net Asset Value(4) 12.52%(5) 21.36% 32.97% 9.87% (8.08%) 17.85%(5)
Total Adjusted Investment
Return at Net Asset
Value(4,6) (1.18%)(5) 15.92% 32.02% 8.94% (8.94%) 17.67%(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $682 $1,323 $7,747 $6,685 $11,508 $8,424
Ratio of Expenses
to Average Net Assets 0.95%(7) 0.95% 0.95% 0.95% 0.95% 1.11%(7)
Ratio of Adjusted Expenses
to Average Net Assets(8,9) 34.06%(7) 6.39% 1.90% 1.88% 1.89% 1.56%(7)
Ratio of Net Investment Income
to Average Net Assets 2.81%(7) 2.26% 1.60% 1.03% 1.09% 1.16%(7)
Ratio of Adjusted Net
Investment Income (Loss)
to Average Net Assets(8,9) (30.30%)(7) (3.18%) 0.65% 0.10% 0.15% 0.71%(7)
Portfolio Turnover Rate 12% 66% 119% 61% 76% 80%
Fee Reduction Per Share(3) $1.22 $0.55 $0.12 $0.13 $0.09 $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.
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.
<CAPTION>
Financial Highlights (continued)
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED AUGUST 31, 2000
FEBRUARY 29, 2000(2) (UNAUDITED)
------------------- ----------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35 $10.69
-------- --------
Net Investment Income(3) 0.02 0.01
Net Realized and Unrealized Gain (Loss) on Investments (2.56) 1.83
-------- --------
Total from Investment Operations (2.54) 1.84
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) --
Distributions from Net Realized Gain on Investments (0.10) --
-------- --------
Total Distributions (0.12) --
-------- --------
Net Asset Value, End of Period $10.69 $12.53
======== ========
Total Investment Return at Net Asset Value(4) (19.19%)(5) 17.21%(5)
Total Adjusted Investment Return at Net Asset Value(4,6) (19.61%)(5) 17.03%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $7,539 $11,228
Ratio of Expenses to Average Net Assets 1.95%(7) 2.05%(7)
Ratio of Adjusted Expenses to Average Net Assets(8,9) 2.59%(7) 2.40%(7)
Ratio of Net Investment Income to Average Net Assets 0.19%(7) 0.20%(7)
Ratio of Adjusted Net Investment Loss to Average Net Assets(8,9) (0.45%)(7) (0.15%)(7)
Portfolio Turnover Rate 76% 80%
Fee Reduction Per Share(3) $0.07 $0.02
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35 $10.69
-------- --------
Net Investment Income(3) 0.02 0.01
Net Realized and Unrealized Gain (Loss) on Investments (2.56) 1.83
-------- --------
Total from Investment Operations (2.54) 1.84
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) --
Distributions from Net Realized Gain on Investments (0.10) --
-------- --------
Total Distributions (0.12) --
-------- --------
Net Asset Value, End of Period $10.69 $12.53
======== ========
Total Investment Return at Net Asset Value(4) (19.19%)(5) 17.21%(5)
Total Adjusted Investment Return at Net Asset Value(4,6) (19.61%)(5) 17.03%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $258 $1,132
Ratio of Expenses to Average Net Assets 1.95%(7) 2.11%(7)
Ratio of Adjusted Expenses to Average Net Assets(8,9) 2.59%(7) 2.46%(7)
Ratio of Net Investment Income to Average Net Assets 0.21%(7) 0.21%(7)
Ratio of Adjusted Net Investment Loss to Average Net Assets(8,9) (0.43%)(7) (0.14%)(7)
Portfolio Turnover Rate 76% 80%
Fee Reduction Per Share(3) $0.07 $0.02
<CAPTION>
Financial Highlights (continued)
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED AUGUST 31, 2000
FEBRUARY 29, 2000(2) (UNAUDITED)
------------------- ----------------
<S> <C> <C>
CLASS I
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35 $10.70
-------- --------
Net Investment Income(3) 0.09 0.07
Net Realized and Unrealized Gain (Loss) on Investments (2.56) 1.85
-------- --------
Total from Investment Operations (2.47) 1.92
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.08) --
Distributions from Net Realized Gain on Investments (0.10) --
-------- --------
Total Distributions (0.18) --
-------- --------
Net Asset Value, End of Period $10.70 $12.62
======== ========
Total Investment Return at Net Asset Value(4) (18.71%)(5) 17.94%(5)
Total Adjusted Investment Return at Net Asset Value(4,6) (19.13%)(5) 17.76%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $666 $5,792
Ratio of Expenses to Average Net Assets 0.95%(7) 0.95%(7)
Ratio of Adjusted Expenses to Average Net Assets(8,9) 1.59%(7) 1.30%(7)
Ratio of Net Investment Income to Average Net Assets 1.09%(7) 1.18%(7)
Ratio of Adjusted Net Investment Income to Average Net Assets(8,9) 0.45%(7) 0.83%(7)
Portfolio Turnover Rate 76% 80%
Fee Reduction Per Share(3) $0.07 $0.02
(1) 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.
(2) Class A shares began operations on October 2, 1995. Class B, Class C and Class I shares began
operations on July 1, 1999.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration fee reductions
by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 2000 (Unaudited)
------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Core Value Fund on August 31, 2000. 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 (1.67%)
Interpublic Group of Cos., Inc. (The) 2,500 $95,625
Lamar Advertising Co.* 3,900 181,106
Omnicom Group, Inc. 2,000 166,875
----------
443,606
----------
Aerospace (2.09%)
Boeing Co. (The) 2,900 155,513
General Dynamics Corp. 2,700 169,931
United Technologies Corp. 3,700 231,019
----------
556,463
----------
Automobile/Trucks (1.62%)
Ford Motor Co. 8,600 208,012
General Motors Corp. 3,100 223,781
----------
431,793
----------
Banks - United States (11.42%)
Bank of America Corp. 8,900 476,706
Bank of New York Co., Inc. (The) 3,000 157,312
Chase Manhattan Corp. (The) 6,500 363,187
Comerica, Inc. 3,300 185,831
First Union Corp. 6,000 173,625
FleetBoston Financial Corp. 15,000 640,312
Mellon Financial Corp. 4,700 212,675
Morgan (J.P.) & Co., Inc. 3,100 518,281
State Street Corp. 1,300 153,075
SunTrust Banks, Inc. 3,100 153,063
----------
3,034,067
----------
Beverages (1.37%)
Anheuser-Busch Cos., Inc. 1,900 149,744
PepsiCo, Inc. 5,000 213,125
----------
362,869
----------
Broker Services (0.55%)
Merrill Lynch & Co., Inc. 1,000 145,000
----------
Building (1.68%)
Black & Decker Corp. (The) 4,200 168,262
Georgia-Pacific Group 4,200 112,350
Sherwin-Williams Co. 3,800 87,400
Willamette Industries, Inc. 2,600 79,300
----------
447,312
----------
Chemicals (2.31%)
Air Products & Chemicals, Inc. 5,000 181,562
Dow Chemical Co. 6,300 164,981
Du Pont (E.I.) de Nemours & Co. 4,400 197,450
Eastman Chemical Co. 1,600 69,000
----------
612,993
----------
Computers (6.36%)
Apple Computer, Inc.* 2,100 127,969
Compaq Computer Corp. 7,600 258,875
DST Systems, Inc.* 1,100 103,400
Electronic Data Systems Corp. 2,300 114,569
First Data Corp. 7,000 333,812
Fiserv, Inc.* 1,900 102,956
Hewlett-Packard Co. 2,400 289,800
International Business Machines Corp. 1,800 237,600
SunGard Data Systems Inc.* 3,400 122,400
----------
1,691,381
----------
Cosmetics & Personal Care (0.37%)
Avon Products, Inc. 2,500 97,969
----------
Diversified Operations (2.06%)
Honeywell International, Inc. 3,100 119,544
Illinois Tool Works, Inc. 1,500 84,094
Minnesota Mining & Manufacturing Co. 2,300 213,900
Textron, Inc. 2,300 128,944
----------
546,482
----------
Electronics (2.34%)
Atmel Corp.* 3,600 72,000
General Electric Co. 3,700 217,144
Motorola, Inc. 6,600 238,012
Parker Hannifin Corp. 2,700 93,994
----------
621,150
----------
Finance (9.37%)
American Express Co. 3,100 183,288
Associates First Capital Corp. (Class A) 4,700 132,188
Citigroup, Inc. 23,067 1,346,536
Fannie Mae 7,800 419,250
Stilwell Financial, Inc.* 5,100 246,712
Washington Mutual, Inc. 4,600 161,000
----------
2,488,974
----------
Food (0.70%)
ConAgra, Inc. 4,900 89,731
Quaker Oats Co. 1,400 95,113
----------
184,844
----------
Insurance (6.77%)
Aon Corp. 5,700 212,681
AXA Financial, Inc. 6,800 351,900
CIGNA Corp. 3,400 330,650
Hartford Financial Services Group, Inc.
(The) 3,900 259,837
Lincoln National Corp. 4,400 237,600
Marsh & McLennan Cos., Inc. 1,400 166,250
XL Capital Ltd. (Class A) 3,500 241,281
----------
1,800,199
----------
Leisure (1.45%)
Disney (Walt) Co. (The) 7,500 292,031
Eastman Kodak Co. 1,500 93,375
----------
385,406
----------
Machinery (0.93%)
Caterpillar, Inc. 2,300 84,525
Ingersoll-Rand Co. 3,600 164,025
----------
248,550
----------
Media (3.60%)
AT&T Corp. - Liberty Media Corp.*
(Class A) 14,100 301,388
Clear Channel Communications, Inc.* 1,400 101,325
Gannett Co., Inc. 1,900 107,588
Infinity Broadcasting Corp. (Class A)* 3,000 113,625
Viacom, Inc. (Class B)* 3,800 255,788
Westwood One, Inc.* 2,800 77,875
----------
957,589
----------
Medical (10.19%)
Abbott Laboratories 6,700 293,125
ALZA Corp.* 1,700 128,563
American Home Products Corp. 3,200 173,400
Bausch & Lomb, Inc. 1,500 53,625
Medical (continued)
Baxter International, Inc. 2,800 233,100
Bristol-Myers Squibb Co. 5,000 265,000
Cardinal Health, Inc. 1,600 130,900
Genentech, Inc.* 400 76,200
Johnson & Johnson 6,000 551,625
Merck & Co., Inc. 6,400 447,200
Pharmacia Corp. 4,000 234,250
Wellpoint Health Networks, Inc.* 1,400 120,838
----------
2,707,826
----------
Office (0.30%)
Avery Dennison Corp. 1,500 81,094
----------
Oil & Gas (9.38%)
Chevron Corp. 3,300 278,850
Conoco Inc. (Class A)* 3,300 83,119
El Paso Energy Corp. 6,400 372,800
Exxon Mobil Corp. 14,700 1,199,887
Halliburton Co. 2,600 137,800
Kerr-McGee Corp. 2,400 151,650
Texaco, Inc. 2,600 133,900
USX - Marathon Group 4,900 134,444
----------
2,492,450
----------
Paper & Paper Products (0.53%)
Kimberly-Clark Corp. 2,400 140,400
----------
Printing - Commercial (0.29%)
Donnelley (R.R.) & Sons 3,000 77,250
----------
Retail (3.04%)
Brinker International, Inc.* 2,500 79,375
Costco Wholesale Corp.* 3,200 110,200
Family Dollar Stores, Inc. 5,200 93,600
Limited, Inc. (The) 3,400 68,000
Lowe's Cos., Inc. 2,300 103,069
Sears, Roebuck & Co. 3,000 93,563
Target Corp. 5,200 120,900
TJX Cos., Inc. 7,400 139,213
----------
807,920
----------
Soap & Cleaning Preparations (0.79%)
Procter & Gamble Co. (The) 3,400 210,162
----------
Steel (0.25%)
Nucor Corp. 1,800 66,150
----------
Telecommunications (8.49%)
AT&T Corp. 12,900 406,350
AT&T Wireless Group* 3,400 89,038
Telecommunications (continued)
BellSouth Corp. 7,400 276,112
General Motors Corp. (Class H)* 4,700 155,688
SBC Communications, Inc. 14,300 597,025
Sprint Corp. (FON Group) 5,400 180,900
Telephone and Data Systems, Inc. 1,000 116,000
Verizon Communications 5,300 231,212
WorldCom, Inc.* 5,600 204,400
----------
2,256,725
----------
Tobacco (1.04%)
Philip Morris Cos., Inc. 9,300 275,512
----------
Transportation (0.74%)
Burlington Northern Santa Fe Corp. 5,400 120,825
FedEx Corp.* 1,900 76,665
----------
197,490
----------
Utilities (5.34%)
Constellation Energy Group, Inc. 2,900 110,925
Dominion Resources, Inc. 3,600 190,800
Duke Energy Corp. 6,100 456,356
FPL Group, Inc. 2,900 154,788
PG&E Corp. 6,900 199,669
Pinnacle West Capital Corp. 2,600 107,088
Reliant Energy, Inc. 5,400 200,475
----------
1,420,101
----------
TOTAL COMMON STOCKS
(Cost $23,860,313) (97.04%) 25,789,727
--------- ----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.71%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
08-31-00, due 09-01-00
(Secured by U.S. Treasury
Bonds, 7.250% thru 9.250%,
due 02-15-16 thru 02-15-19)
- Note A 6.61% $719 719,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 5.20% 873
-----------
TOTAL SHORT-TERM INVESTMENTS (2.71%) 719,873
---------- -----------
TOTAL INVESTMENTS (99.75%) 26,509,600
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.25%) 66,650
---------- -----------
TOTAL NET ASSETS (100.00%) $26,576,250
========== ===========
* Non-income producing security.
The percentage shown for each investment category is the total value
of that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Core Value Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Core Value Fund ("the Fund") is a diversified series of
John Hancock Institutional Series Trust (the "Trust"), an open-end
management investment company, registered under the Investment Company
Act of 1940. 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.
The shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximated market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, 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, 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 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 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 size 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 Fund. Actual results
could differ 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 require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. 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 to each fund 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, 2000.
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 securitites on loan. As with other extensions of
credit, the Fund 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, 2000, there were no
outstanding securities loaned.
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 12b-1 fee and
transfer agent fees) from exceeding 0.90% of the Fund's average daily
net asset. Accordingly, for the period ended August 31, 2000, the
reduction in the Fund's expenses with any additional amounts not borne
by the Fund by virtue of the expense limit amounted to $43,843. 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, 2000, net sales charges received with regard to sales of
Class A shares amounted to $24,447. Out of this amount, $5,098 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $12,219 was paid as sales commissions to
unrelated broker-dealers and $7,130 was paid as sales commissions to
sales personnel of Signator Investors, Inc. ("Signator Investors"), a
related broker-dealer. The Adviser's indirect parent, John Hancock Life
Insurance Company ("JHLICo"), is the indirect sole shareholder of
Signator Investors.
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 5.00% 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 B shares. For the period ended August 31, 2000, CDSCs amounted to
$14,402.
Effective May 1, 2000, all Class C share retail purchases are assessed a
1.00% up-front sales charge. For the period ended August 31, 2000, up-
front sales charges received with regard to sales of Class C shares
amounted to $12,982. Out of this amount $12,022 was paid as sales
commissions to unrelated broker-dealers and $960 was paid as sales
commissions to sales personnel of Signator Investors. 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, 2000, CDSCs amounted to
$99.
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 agreed
not to impose the Fund's Class A 12b-1 fee until July 1, 2000, which,
for the period ended August 31, 2000, amounted to $12,080. A maximum of
0.25% of such payments may be service fees as defined by the Conduct
Rules of the National Association of Securities Dealers. Under the
Conduct Rules, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect wholly owned
subsidiary of JHLICo. The Fund paid Signature Services a monthly
transfer agent fee equivalent, on an annual basis, to 0.05% of its
average daily net assets through June 30, 2000. Effective July 1, 2000,
Class A, B and C shares pay transfer agent fees based on the number of
shareholder accounts for Class A, Class B and Class C shares, plus
certain out-of-pocket expenses. For Class I shares, the Fund pays
Signature Services a monthly transfer agent fee equivalent, on an annual
basis, to 0.05% of the average daily net assets attributable to Class I
shares.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford 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, 2000, aggregated $21,550,559 and
$19,060,310, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended August 31, 2000.
The cost of investments owned at August 31, 2000 (excluding the
corporate savings account) for federal income tax purposes was
$24,609,744. Gross unrealized appreciation and depreciation of
investments aggregated $3,311,587 and $1,412,604, respectively,
resulting in net unrealized appreciation of $1,898,983.
NOTES
[This page intentionally left blank.]
NOTES
[This page intentionally left blank.]
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
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 8/00
10/00
