The latest report from your
Fund's management team
ANNUAL 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
FEBRUARY 29, 2000
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
Table of Contents
Page
1) 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 63
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
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 and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer and
Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
International Equity Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Active Bond Fund
Dividend Performers Fund
Medium Capitalization Growth Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
SUB-INVESTMENT ADVISER
International Equity Fund
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
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, the market's advances were restricted to an
increasingly select group of stocks -- primarily in the technology and
communications areas. Even those gains were accompanied by tremendous
levels of daily volatility. But many other stocks, including the
household blue-chip names, fell in response to a tough combination of
investor apathy, rising interest rates and earnings concerns.
In this same period, bonds struggled through one of their worst years in
more than two decades, as the strength of the U.S. economy and the
rebound of many others around the world provoked inflation fears. Though
their longer-term outlook looks brighter, in many instances bond mutual
fund investors have actually lost a little ground or made only slight
advances lately.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds that
target a variety of market segments. This strategy, executed under the
guidance of a seasoned investment professional, could provide you with a
better chance of both realizing results and weathering the market's
changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the reports from
your fund portfolio management teams on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
ANTHONY A. GOODCHILD, BENJAMIN A. MATTHEWS AND TRIET NGUYEN,
PORTFOLIO MANAGERS
[A 3" x 2" photo at bottom right side of page of John Hancock Active
Bond Fund. Caption below reads "Fund management team members (l-r): Ben
Matthews, Jim Ho, Triet Nguyen and Tony Goodchild."]
John Hancock
Active Bond Fund
Fund produces positive results in a difficult year for bonds
The 12 months ended February 29, 2000 proved difficult for the broad
fixed-income market. For the first 10 months of the period, U.S.
Treasury securities experienced a severe downturn. Heightened inflation
fears and successive interest-rate increases by the Federal Reserve
Board caused the Treasury market to suffer its worst period since 1994.
In the past two months, however, the bellwether 30-year bond appreciated
in price due to the U.S. Treasury's buyback program. Investment-grade
corporate bonds and high-yield debt produced gains very early on and
then again near period's end, yet they too came under pressure much of
the time. In midsummer, the possibility of excessive new-issuance supply
added to existing inflation concerns and caused these sectors to pull
back. Mortgage-backed and agency securities performed fitfully while
emerging-market issues soared.
"Individual
security
selection
played
a vital
role..."
Fund bests peers, benchmark
John Hancock Active Bond Fund produced a total return of 1.83% for the
12 months ended February 29, 2000, outperforming the -0.30% return of
the average corporate debt A-rated fund, according to Lipper, Inc. The
Fund's benchmark, the Lehman Brothers Government/Corporate Bond Index
returned 1.23% in the same period. Historical performance information
can be found on page six.
Performance explained
Several strategic moves helped the Fund outperform. We maintained a
relatively defensive duration stance through early fall, keeping the
Fund's duration shorter than average in anticipation of rising interest
rates. Duration is a measure of a fund's sensitivity to interest rate
changes. The shorter the duration, the less volatility a portfolio is
likely to experience when interest rates rise. Conversely, the longer
the duration in such an interest-rate environment, the greater the
performance downturn. Our shorter duration approach helped buoy the
Fund's share price when the Fed began tightening monetary policy.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 1% with -1% at the bottom
and 4% at the top. The first bar represents the 1.83% total return for
John Hancock Active Bond Fund. The second bar represents the -0.30%
total return for Average corporate debt A-rated fund. The third bar
represents the 1.23% 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."]
We also increased and decreased the port folio's exposure to
investment-grade corporate and high-yield bonds at the right times. We
participated in the corporate sectors' run-up through mid-April of 1999
and then began paring back on positions in anticipation of oversupply
and increased volatility. In early fall, we started selectively
increasing the Fund's weighting once again as credit spreads (the
difference in yield between bonds of different credit qualities) became
attractive. In the final months of the fiscal year, credit spreads
narrowed and many Fund holdings bounced back in price.
What also helped was our clustering of assets at both the long and short
ends of the maturity spectrum. This "barbell" positioning allowed the
Fund to benefit from the yield curve's flattening through the end of
calendar 1999. Investors' confidence in the Fed's resolve to control
inflation pushed long-term bond yields lower, while the Fed's rate hikes
pushed short-term yields higher. Additionally, the very recent dramatic
dislocation that long-term Treasury bonds experienced and the inversion
of the yield curve has propelled 30-year bond prices higher, further
benefiting the portfolio's barbell orientation.
Individual security selection played a vital role in how the Fund
performed, particularly in the telecommunications, wireless and cable
arenas. Companies such as CSC Holdings, Worldwide Fiber, Metromedia
Fiber Network and Adelphia Communications were key contributors along
with other issues in the real estate investment trust, energy and
industrial sectors.
"We are now
positioning
the Fund
for what we
believe will
be the
market's
next
phase..."
Brighter outlook ahead
We are now positioning the Fund for what we believe will be the market's
next phase -- a slowdown in the economy and declining interest rates
much later in the year. We have extended the portfolio's average
duration slightly so that it is now neutral to its benchmark. We are
beginning to lighten up on the Fund's longer-term, investment-grade
corporate and high-yield bonds in favor of more intermediate issues with
less credit risk. Higher-quality issues are garnering our increased
attention as well. We are also moving away from a barbell posture and
looking for opportunities in the intermediate part of the Treasury yield
curve, adding to government agency positions as they become attractive.
By exercising the Fund's flexibility to rotate in and out of the various
sectors, we believe we can position the Fund to weather the short-term
choppiness that may likely lie ahead.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
--------- ---------
Cumulative Total Returns (0.41%) 36.61%
Average Annual Total Returns(1) (0.41%) 6.78%
YIELD
As of February 29, 2000
SEC 30-DAY
YIELD
----------
John Hancock Active Bond Fund(1) 7.16%
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 and since inception periods
would have been (2.44%) and 3.16%, respectively, and the yield would
have been 4.83%.
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 $347,763
as of February 29, 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 $345,241 as of February 29,
2000.]
BY JOHN F. SNYDER, III, AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 3" x 2" photo at bottom right side of page of John Hancock Dividend
Performers Fund. Caption below reads "Fund management team (l-r):
William W. Young, Steve Paspal, John Snyder and Peter Schofield."]
John Hancock
Dividend Performers Fund
Tech surges, rest of the market struggles with rising interest rates
It was a tale of two markets over the last 12 months. New Economy
technology, communications and biotechnology stocks surged, while Old
Economy blue chips, and much of the rest of the market, struggled,
especially value stocks. The discrepancy in performance grew wider and
volatility rose as the year progressed, with a narrow band of stocks
driving market returns. Investors enamored of the Internet and the lure
of technology gains focused only on momentum stocks -- those that are
going up -- while ignoring both quality and valuations. For the year
ended February 29, 2000, the Standard & Poor's 500 Index returned
11.73%, the bulk of it coming from technology and communications names.
To illustrate the breadth of the divide, in the same period the
technology-laden Nasdaq Composite Index returned 105.27%.
Fund performance
For the year ended February 29, 2000, John Hancock Dividend Performers
Fund posted a total return of 4.17% at net asset value, compared to the
3.14% return of the average large-cap value fund, according to Lipper,
Inc. (Lipper recently introduced new competitive categories that more
accurately reflect the portfolio holdings of the funds they track.)
Historical performance information can be found on page nine.
"The Fund's
exposure to
technology
stocks
helped us
outperform
our peers..."
Technology helps mitigate disappointments
The Fund's exposure to technology stocks helped us outperform our peers
in the period, since they helped counter the effects of the rest of the
market's weaker results. While we continue to focus primarily on
"dividend performer" companies that have a 10-year history of increasing
dividends, our ability to invest a portion of the Fund's assets in
companies that do not meet that criteria led us to up our stake in
technology companies, especially last summer. That helped us when
technology stocks soared in the fourth quarter of 1999. Companies such
as Cisco Systems, Sun Microsystems, EMC, Intel and Hewlett-Packard were
the biggest contributors to the Fund's performance. Even in this high-
flying group, we concentrated on companies with most of the same
characteristics as our dividend performers, meaning they generate stable
earnings growth, are market leaders and have the ability to dominate or
increase their market share. Early in 2000, we began to pare our
technology stake slightly to lock in gains after the spectacular run up.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 2% with 0% at the bottom and
12% at the top. The first bar represents the 4.17% total return for John
Hancock Dividend Performers Fund. The second bar represents the 3.14%
total return for Average large-cap value fund. The third bar represents
the 11.73% 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."]
Retail, health care cut
We also cut our weighting in large drug-company stocks, which struggled
during the year not only from neglect, but also from concerns about
expiring drug patents and the unfavorable political environment around
Medicare reimbursements. As a result, we sold our stakes in
Bristol-Myers Squibb, Schering-Plough and Merck. In the retail group,
although their fundamentals are still strong, we reduced the size of our
positions in Wal-Mart Stores, Home Depot and Target in the belief that
rising interest rates will inevitably cause consumer spending to slow.
Basic materials, consumer staples grow
On the other hand, we added to our weightings in basic materials and
capital goods stocks, since their valuations became extremely compelling
in the rush away from all but technology stocks. Yet we believe they
stand to be the beneficiaries of the ongoing global recovery. So we've
beefed up our holdings in cyclical companies such as Nucor and Avery
Dennison. We've also recently added consumer staples giants General
Mills and Sara Lee, since after a bruising period food companies have
regrouped, cut costs and appear poised for the first time in a while to
produce results in line with the market's expectations.
Outlook
As investors try to figure out where the market -- and technology stocks
- -- are headed, we are likely to experience more volatility going
forward. We will monitor our technology stake and perhaps even reduce it
some more if we think they have become overextended. As the economy
slows, which we believe it will later in the year, we also believe that
participation in the market's bounty will eventually broaden, allowing a
greater number of stocks -- including our dividend performers -- to
prosper.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
------ ----------
Cumulative Total Returns 13.38% 151.99%
Average Annual Total Returns(1) 13.38% 21.45%
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 and since inception periods
would have been 13.03% and 20.38%, 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 $745,098 as
of February 29, 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 $567,421 as of
February 29, 2000.]
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
[A 3" x 2" photo at bottom right side of page of John Hancock Medium
Capitalization Growth Fund. Caption below reads "Fund management team
members (l-r): Barbara Friedman, Lisa Welch and John Golden."]
John Hancock
Medium Capitalization
Growth Fund
Mid-cap stocks take off; Fund posts strong return
Mid-cap stocks zoomed past large-company stocks over the last 12 months,
due in large part to the formidable strength of the technology sector.
In a two-tiered market, Internet, telecommunications and technology
stocks in general produced the bulk of the market's gains across
companies of all sizes. Most other non-tech stocks struggled with
inflation fears and rising interest rates that threatened to cut into
profits. After lagging larger-company stocks for several years,
mid-sized companies displayed a powerful combination of valuations that
were more attractive and growth prospects that were better. Investors
finally took notice, pushing the Russell Midcap Growth Index up 86.87%
for the year ended February 29, 2000.
"...we
invested
heavily in
companies
...that are
building out
the fiber-
optics
network."
Performance review
John Hancock Medium Capitalization Growth Fund returned 98.13% at net
asset value for the 12 months ended February 29, 2000. That compared to
the 128.49% return of the average mid-cap growth fund, according to
Lipper, Inc. (Lipper recently introduced new competitive categories that
more accurately reflect the average portfolio holdings of the funds
they track.) See page 12 for historical performance information.
The Fund benefited from our focus on companies with market
capitalizations between $1 billion and $10 billion, particularly in the
technology sector, including telecommunications. A surge of mid-cap
buyouts, such as Omnipoint and Oak Industries, also helped. While our
technology weighting was at the market's average, many of our peers had
a more significant exposure to the sector, and that gave them a
performance edge. We chose instead to maintain a more diversified
portfolio of stocks across a broad range of sectors.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 25% with 0% at the bottom
and 150% at the top. The first bar represents the 98.13% total return
for John Hancock Medium Capitalization Growth Fund. The second bar
represents the 128.49% total return for Average mid-cap growth fund. The
third bar represents the 86.87% 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."]
Telecommunication leads
Throughout the year, we invested heavily in companies like NEXTLINK
Communications, Global Crossing and McLeodUSA that are building out the
fiber-optics network. More recently, we began to take positions in the
companies that manufacture the optical equipment used in these
fiber-optic networks, including Oak Industries and NetOptics. These two
companies have recently been bought by Corning, which supplies the fiber
for the networks. Other stellar performers included telecommunications
semiconductor company Conexant Systems, and Comverse Technology and
QUALCOMM, both of which provide equipment to the telecom industry.
Conexant's stock was up 1,100% since we bought it in January 1999, and
many of our other telecom names returned anywhere from 100% to 600%.
Software, Internet, media winners
In the software sector, i2 Technologies, a leader in inventory and
production management software, rose by more than 1,000%, and VERITAS
Software was up nearly 600% as demand for their products grew. We also
benefited from owning CMGI, a holding company with a portfolio of
Internet stocks. Media companies were also strong performers, including
AMFM, a radio company that is being bought by Clear Channel
Communications.
"We chose
...to main-
tain a more
diversified
portfolio
of stocks
across a
broad range
of sectors."
Finance cut, biotech grows
During the year we cut back on insurance and bank stocks, which were
hurt by rising interest rates. Within health care, we shifted our focus
from health services companies, which weakened as concerns grew about
Medicare reimbursement levels, to biotechnology, adding stocks like
Affymetrix. That served us well as the group surged later in the period.
Our energy stocks were also solid performers. We began adding to them
early last year when oil prices were low, and then we took profits and
began reducing our position as energy prices shot up. Lately, we've
begun to build the position back up as oil prices have held firm at
their higher level.
Opportunities ahead
While we caution shareholders that it is unrealistic to expect another
year of nearly 100% gains, we do believe lots of opportunities still
exist. That said, we expect the U.S. economy to slow later this year as
the result of higher interest rates, which could also cut into corporate
profits. In this environment, strong stock selection becomes even more
important, to avoid companies whose profit margins may deteriorate.
Because we also expect the economies of Europe and Asia to accelerate,
we will continue to increase our exposure to mid-cap names with an
international presence, concentrating on sectors that we already like.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (4/11/95)
---------- ----------
Cumulative Total Returns 60.19%(2) 183.12%
Average Annual Total Returns(1) 60.19%(2) 24.65%
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 59.85% and 23.90%, 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 $938,836 as
of February 29, 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 $825,124 as
of February 29, 2000.]
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND LAURA J.
ALLEN, CFA, AND ANURAG PANDIT, CFA, PORTFOLIO MANAGERS
[A 2" x 2" photo at bottom right side of page of John Hancock Small
Capitalization Growth Fund. Caption below reads "Fund management team
members (l-r): Anurag Pandit, Bernice Behar and Laura Allen."]
John Hancock
Small Capitalization
Growth Fund
Small-cap stock rebound gains strength as the year progresses
Small-capitalization stocks overpowered their larger brethren in the
last 12 months, sparked by the extraordinary performance of technology,
communications and biotechnology companies. With their extremely cheap
stock prices compared to large-company stocks, and their
better-than-expected earnings, small companies finally got investors'
attention -- especially those with compelling growth stories. For the
year ended February 29, 2000, the Russell 2000 Growth Index returned
84.06%, while the broader S&P 500 Index returned 11.73%.
Fund outperforms benchmark and peers
Good stock picking and the surging tech sector combined to help John
Hancock Small Capitalization Growth Fund produce outstanding results.
For the 12 months ended February 29, 2000, the Fund returned 136.18% at
net asset value, compared to the 119.36% return of the average small-cap
growth fund, according to Lipper, Inc. (Lipper recently introduced new
competitive categories that more accurately reflect the average
portfolio holdings of the funds they track.) See page 15 for historical
performance information.
"It was a
remarkable
and unusual
period..."
The Fund's performance came from a broad array of stocks, including
Internet, semiconductor, software and telecommunications equipment
companies within the technology group, as well as health-care and
communications companies. It was a remarkable and unusual period in
which some of our holdings were up anywhere from 100% to 1,000%.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 25% with 0% at the bottom
and 150% at the top. The first bar represents the 136.18% total return
for John Hancock Small Capitalization Growth Fund. The second bar
represents the 119.36% total return for Average small-cap growth fund.
The third bar represents the 84.06% 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."]
Biotech grows
Biotechnology companies such as Alkermes, Human Genome Sciences and IDEC
Pharmaceuticals soared when investors finally realized that waves of
their products were set to hit the market and that large pharmaceutical
companies were forming marketing and research partnerships with them. In
the second half of the period, we added a number of new biotech names,
focusing on smaller companies such as NPS Pharmaceuticals that have
products in late stages of developments (with more products in the
works) and strong partners, such as Amgen for NPS.
"...it's
unrealistic
to expect a
repeat of
100%-plus
returns."
Technology dominates
Telecommunications equipment and semiconductor companies skyrocketed
with the continued build-out of the broadband network and mushrooming
cell-phone subscriber growth. Among our best performers were cable-
modem company Terayon Communi cation Systems; Powerwave Technologies,
which makes power amplifiers for wireless handsets; and semiconductor
companies RF MicroDevices and PMC-Sierra, both of which we sold when
they grew too large for our small-cap focus.
Internet stocks also provided us with some stellar performance. We
focused at first on web-hosting companies like Verio, Digex and Exodus
Communications, and later on Internet infrastructure companies like
WebTrends and Broadbase Software that provide information and tools to
measure how the Internet and individual Web sites are being used. Some
of our top performers came later in the period from the
business-to-business (B2B) sub-sector, including Chemdex.
Radio shines, retail disappoints
Our media and radio stocks were also winners this year, as consolidation
activity picked up and the strong economy provided a boost to
advertising revenue. Cumulus Media and Citadel Communications served us
well, as they are the top consolidators in the mid- and small-sized
markets. Pegasus Communications, the largest rural distributor of Direct
TV, saw its stock rise along with demand for satellite TV. Our biggest
disappointments came from our retail stocks, such as Linens 'N Things,
which suffered from fears that rising interest rates would slow consumer
spending.
Going forward
After such a remarkable year, it's unrealistic to expect a repeat of
100%-plus returns. But even with their strong run up, many small-cap
stock prices remain attractive relative to their growth prospects. We
are maintaining our cautiously optimistic outlook, keeping an eye on
rising interest rates and being selective in maintaining a diversified
portfolio of high-quality small companies.
- -----------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (5/2/96)
---------- ----------
Cumulative Total Returns 77.12%(2) 169.06%
Average Annual Total Returns(1) 77.12%(2) 31.00%
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 74.89% and 25.32%, 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 $855,067 as of February 29, 2000. The second line represents the
Russell 2000 Growth Index and is equal to $488,067 as of February 29, 2000.
The third line represents the Russell 2000 Index and is equal to $436,020
as of February 29, 2000.]
BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 2" x 3" photo at bottom right side of page of John Hancock Small
Capitalization Value Fund. Caption below reads "Tim Quinlisk, portfolio
manager."]
John Hancock Small
Capitalization Value Fund
Fund outpaces its peers, as small-cap stocks stage major rally
Small-cap stocks provided investors with huge gains this past year. John
Hancock Small Capitalization Value Fund fully participated in the
sector's rally, returning 124.33% at net asset value for the year ended
February 29, 2000. Our strategy of finding great businesses at
relatively low prices compared to the company's true value again worked
well, with the Fund dramatically outperforming the Russell 2000 Index's
49.28% return for the same period. The Fund also beat the average
small-cap core fund, which returned 58.90% for the year, according to
Lipper, Inc. (Lipper recently introduced new competitive categories that
reflect more accurately the average portfolio holdings of the funds they
track.) Historical performance information can be found on page 18.
"The Fund
benefited
from strong
stock selec-
tion and a
concen-
trated
strategy."
Market review
Volatility rocked the stock market throughout the past year, with
technology names proving to be the biggest winners. Renewed confidence
in U.S. economic growth and signs of improvement overseas prompted
investors to begin buying both cyclical stocks and smaller-company
stocks last spring. But by mid-summer rising interest rates had ended
the comeback. Investors shifted back toward technology stocks with high
earnings growth prospects. Improved earnings outlooks late in the year,
however, rekindled interest in small-cap stocks, which took off and kept
on sailing into the new year.
Top performers
The Fund benefited from strong stock selection and a concentrated
strategy. One of our largest investments and best performers was Oak
Industries, which makes components for the cable, TV, wireless and
fiber-optics markets. We expected Oak to spin out or sell off its
Lasertron optics division. Instead, Corning, which makes the fiber for
fiber-optics networks, announced it was acquiring Oak, causing Oak's
stock to soar. Another great performer was Calpine, an energy company
with a strong base of low-cost power plants. Penton Media, an
advertising company, also did well as it successfully launched a new
Internet business. Finally, we benefited from our stakes in Nielsen
Media Research, a leading television ratings company that was recently
bought out, and Vicor, a power conversion company with a new
second-generation product.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 50% with 0% at the bottom
and 150% at the top. The first bar represents the 124.33% total return
for John Hancock Small Capitalization Value Fund. The second bar
represents the 58.90% total return for Average small-cap core fund. The
third bar represents the 49.28% 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."]
Technology shift
Typically investors do not think of technology stocks as value
investments. However, we found many technology names at bargain prices
that met our investment criteria. Early last year, when hardware
companies were hit by problems in Asia, we built our stakes in stocks
like Data General, ANADIGICS and Etec Systems. As these names rebounded
during the summer, we scaled back and began moving into software and
service names beaten down by Y2K concerns. Our focus was on companies
like Wind River Systems, Aspen Technology and AXENT Technologies -- all
of which took off once Y2K concerns began to ease.
Telecommunications gains
Some of our best gains came from telecommunications and related areas.
We took profits in companies like Commonwealth Telephone Enterprises, a
phone company serving rural eastern Pennsylvania whose stock price rose
as the company penetrated new markets. Our focus shifted to
higher-growth competitive local exchange carriers like CTC
Communications Group, CFW Communications and Intermedia Communications,
all of which did exceptionally well as they siphoned business away from
the regional Bell carriers. We also benefited from owning companies like
Amphenol, which makes components for the cable and wireless industries.
"...more chal-
lenging to
find great
investment
opportunities
at unbeliev-
able prices."
A look ahead
Although the Fund has recently had a phenom enal run, 124% returns are
an historical anomaly. The recent rally in small-cap stocks will most
likely make it more challenging to find great investment opportunities
at unbelievable prices. But they still exist. And we remain optimistic
that our disciplined investment process will help us find them. We also
have many existing investments that have yet to reach what we believe
to be their full value. They include companies like Financial Securities
Assurance Holdings, a global municipal bond insurer; Sensormatic
Electronics, which makes electronic tags to prevent shoplifting; and
Iron Mountain, a paper storage company. Recent purchases like
Brightpoint, a distributor of wireless phones and accessories to
retailers and ANTEC, an equipment manufacturer for both the cable TV and
broadband communications industries, also look promising.
- -----------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (4/19/95)
---------- ----------
Cumulative Total Returns 101.91%(2) 220.70%
Average Annual Total Returns(1) 101.91%(2) 28.13%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.80% of the
Fund's daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year and since inception
periods would have been 101.24% and 26.82%, 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 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 $889,888 as of February 29, 2000. The second line represents
the Russell 2000 Index and is equal to $592,758 as of February 29,
2000.]
BY MIREN ETCHEVERRY FOR THE PORTFOLIO MANAGEMENT TEAM
[A 2" x 2" photo at bottom right side of page of John Hancock
International Equity Fund. Caption below reads "Fund management team
members (l-r): Jean-Claude Kaltenbach and Miren Etcheverry."]
John Hancock
International Equity Fund
International markets rebound from turmoil
and outperform the U.S.
Recently, shareholders voted to approve a new subadvisory investment
management contract with Indocam International Investment Services,
effective January 1, 2000.
Overseas markets turned in strong results over the past 12 months,
highlighted by the remarkable rebound of Asian markets from 1998's
global economic turmoil. By association, many other emerging markets
also surged, aided further by rising commodity prices. In Japan, the
first signs of corporate restructuring, combined with banking reform and
hints of economic recovery, boosted its market, as foreign investors
came back in droves and caused the yen to strengthen versus the dollar.
Europe's results were more modest for U.S. investors because the decline
of the new euro currency all year eroded most of the market's gains.
Overall, overseas stock markets, as measured by the MSCI All Country
World Free Ex-U.S. Index, returned 31.37% during the last 12 months, far
surpassing the U.S. market's return for the first time in several years.
Much of the overseas advances were driven by the same technology and
telecommunications frenzy that struck the U.S.
Fund performance
John Hancock International Equity Fund participated fully in the
strength of the overseas markets, returning 38.84% at net asset value
for the year ended February 29, 2000. An overweighting in Japan and good
stock selection there helped us outperform our MSCI benchmark. For
another comparison, the average international fund returned 44.15% in
the period, according to Lipper, Inc. See page 21 for historical
performance information. Relative to our peers, we had little exposure
to emerging markets and were significantly overweighted in Europe, where
results were more modest.
"...we went
from a
large under-
weighting in
Japan to a
significant
overweighting..."
Shifting emphasis
As we grew more confident in the prospects for recovery in Asia, we
repositioned the portfolio to reflect that, moving to a more average
weight in Europe -- ending the year at 57% of net assets from 80% a year
ago. Like the markets in general, our Fund's best performers were our
technology, telecommunications and electronics stocks across all
continents, including Japan's Sony, Finland's Nokia, Germany's
Mannesmann and Canada's Nortel Networks.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 10% with 0% at the bottom
and 50% at the top. The first bar represents the 38.84% total return for
John Hancock International Equity Fund. The second bar represents the
44.15% total return for Average international fund. The third bar
represents the 31.37% 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."]
Japan
In the last 12 months, we went from a large underweighting in Japan to a
significant overweighting -- from 12% of net assets a year ago to 22% --
and it was our top country performer. Sony, which recently began a major
corporate restructuring, was our top holding and best-performing stock,
while Nomura Securities rose as confidence grew in the financial sector.
Corporate restructuring is the main theme driving the Japanese market,
followed by the prospects for economic recovery, and our portfolio is
composed of blue-chip companies benefiting from those trends.
"For now,
our focus
remains on
Japan and
Europe..."
Europe
We got to our reduced focus in Europe by cutting our stakes in France,
Switzerland, Belgium and Ireland. Going forward, we plan to keep a
market-weight position in Europe because of the growing restructuring
and merger opportunities there. In addition, its economic outlook is
brightening, although this could result in rising interest rates in the
near term. Europe produced some of our biggest winners, but some
disappointments as well, including Allied Irish Banks, which was hurt by
concerns over its recent merger with a bank in Singapore.
Cautious optimism ahead
We remain encouraged about the long-term prospects for international
equities, while recognizing the shorter-term uncertainties surrounding
interest rates. For now, our focus remains on Japan and Europe, because
of their restructuring opportunities and their potential for rapid
growth in the newest generation of wireless telecom technology. We are
still keeping our exposure to emerging markets minimal, since current
macroeconomic and political conditions make it difficult for these
companies to generate the stable earnings growth that characterizes our
more conservative investment strategy. As for the Fund, the addition of
a subadviser should bolster our investment capabilities, but will not
alter our strategy. We will continue to own a diversified portfolio of
stocks chosen through a combination of country, sector and individual
stock selection.
- -----------------------------------------------------------------
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 December 31, 1999
SINCE
ONE INCEPTION
YEAR (3/30/95)
------ ----------
Cumulative Total Returns 34.52% 71.21%
Average Annual Total Returns(1) 34.52% 11.97%
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 and since inception periods
would have been 32.80% and 9.22%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in John Hancock
International Equity Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $250,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index -- an unmanaged index that
measures the performance of both developed and emerging foreign stock
markets. The index represents freely traded stocks. 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
$458,598 as of February 29, 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 $431,580 as
of February 29, 2000.]
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
February 29, 2000
- ----------------------------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at value -- Note C:
Bonds (cost -- $4,108,104, none and
none, respectively) $3,971,828 $ -- $ --
Common stocks (cost -- none,
$11,115,261 and $21,951,399,
respectively) -- 13,554,609 35,127,512
Warrants (cost -- $103, none and none,
respectively) 1,600 -- --
Short-term investments (cost --
$242,000, $1,245,000 and $2,059,000,
respectively) 242,000 1,245,000 2,059,000
Corporate savings account 1,001 597 968
----------------- ----------------- -----------------
4,216,429 14,800,206 37,187,480
Cash -- 56,250 --
Foreign currency, at value (cost -- $8,
none and none, respectively) 8 -- --
Receivable for forward foreign currency
exchange contracts sold -- Note A 1,309 -- --
Receivable for investments sold 147,655 -- 348,184
Receivable for shares sold -- 269 --
Receivable for futures variation margin
- -- Note A -- 18,225 --
Interest receivable 64,285 202 333
Dividends receivable -- 20,230 2,094
Deferred organization expenses --
Note A 131 132 230
Receivable from John Hancock Advisers,
Inc. and affiliates -- Note B 13,659 -- --
Other assets 248 885 2,348
----------------- ----------------- -----------------
Total Assets 4,443,724 14,896,399 37,540,669
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for forward foreign currency
exchange contracts purchased -- Note A 994 -- --
Payable for investments purchased 181,943 -- 586,409
Payable for shares repurchased 29 -- 4,221
Dividend payable 996 -- --
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B -- 8,918 29,930
Accounts payable and accrued expenses 37,585 24,850 27,289
----------------- ----------------- -----------------
Total Liabilities 221,547 33,768 647,849
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 4,542,421 11,718,167 20,827,039
Accumulated net realized gain (loss) on
investments, financial futures
contracts and foreign currency
transactions (184,575) 748,403 2,891,332
Net unrealized appreciation
(depreciation) of investments,
financial futures contracts and
foreign currency transactions (134,456) 2,379,577 13,176,113
Undistributed net investment income
(distributions in excess of net
investment income) (1,213) 16,484 (1,664)
----------------- ----------------- -----------------
Net Assets $4,222,177 $14,862,631 $36,892,820
==========================================================================================================
Net Asset Value Per Share:
(Based on 518,688, 1,100,106 and
1,748,335 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $8.14 $13.51 $21.10
==========================================================================================================
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 February 29,
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)
February 29, 2000
- ----------------------------------------------------------------------------------------------------------
SMALL SMALL INTERNATIONAL
CAPITALIZATION CAPITALIZATION EQUITY
GROWTH FUND VALUE FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at value -- Note C:
Common stocks and warrants (cost --
$5,049,171, $12,259,081 and
$8,904,519, respectively) $8,632,736 $19,094,392 $11,729,718
Preferred stocks (cost -- none,
$277,500 and $30,171, respectively) -- 263,514 39,536
Bonds (cost -- none, $444,093 and none,
respectively) -- 674,500 --
Short-term investments (cost --
$492,000, $4,250,000 and $1,884,219,
respectively) -- Note A 492,000 4,250,000 1,884,219
Corporate savings account 793 537 --
----------------- ----------------- -----------------
9,125,529 24,282,943 13,653,473
Cash -- -- 59,306
Foreign currency, at value (cost --
none, none and $76,053, respectively) -- -- 75,980
Receivable for forward foreign currency
exchange contracts sold -- Note A -- -- 624
Receivable for investments sold 114,225 -- 71,953
Receivable for shares sold 200 111 62
Interest receivable 81 686 163
Dividends receivable 245 3,569 11,226
Foreign tax receivable -- -- 7,115
Deferred organization expenses --
Note A 4,793 219 130
Receivable from John Hancock Advisers,
Inc. and affiliates -- Note B 14,567 656 14,467
Other assets 117 491 706
----------------- ----------------- -----------------
Total Assets 9,259,757 24,288,675 13,895,205
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for open forward foreign
currency exchange contracts purchased
- -- Note A -- -- 1,952
Payable for investments purchased 321,666 -- 131,220
Payable upon return of securities on
loan -- Note A -- -- 870,219
Accounts payable and accrued expenses 29,912 30,089 43,791
----------------- ----------------- -----------------
Total Liabilities 351,578 30,089 1,047,182
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 4,563,041 15,623,201 9,723,428
Accumulated net realized gain on
investments and foreign currency
transactions 761,632 1,535,002 369,985
Net unrealized appreciation of
investments and foreign currency
transactions 3,583,565 7,051,732 2,833,497
Undistributed net investment income
(distributions in excess of net
investment income) (59) 48,651 (78,887)
----------------- ----------------- -----------------
Net Assets $8,908,179 $24,258,586 $12,848,023
==========================================================================================================
Net Asset Value Per Share:
(Based on 364,674, 1,341,213 and
963,483 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $24.43 $18.09 $13.33
==========================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Year ended February 29, 2000
- ----------------------------------------------------------------------------------------------------------
ACTIVE DIVIDEND MEDIUM
BOND PERFORMERS CAPITALIZATION
FUND FUND GROWTH FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest (including income from
securities loaned of none, $717 and
$479, respectively) $372,731 $35,432 $52,534
Dividends (net of foreign withholding
tax of none, none and $37,
respectively) -- 204,964 59,526
----------------- ----------------- -----------------
372,731 240,396 112,060
----------------- ----------------- -----------------
Expenses:
Custodian fee 64,509 12,583 27,458
Registration and filing fees 26,332 25,992 29,345
Investment management fee -- Note B 24,923 102,379 167,714
Auditing fee 17,989 18,164 18,274
Printing 6,086 3,885 4,486
Transfer agent fee -- Note B 2,492 8,531 10,482
Organization expense -- Note A 1,647 1,662 2,046
Accounting and legal services fee --
Note B 902 3,096 3,853
Miscellaneous 829 1,376 1,148
Trustees' fees 331 1,690 805
Legal fees 202 423 329
Interest expense -- Note A -- -- 1,554
----------------- ----------------- -----------------
Total Expenses 146,242 179,781 267,494
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (116,309) (60,247) (78,665)
- ----------------------------------------------------------------------------------------------------------
Net Expenses 29,933 119,534 188,829
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 342,798 120,862 (76,769)
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments, Financial Futures Contracts and
Foreign Currency Transactions:
Net realized gain (loss) on investments
sold (167,952) 1,960,778 4,019,150
Net realized loss on foreign currency
transactions (38) -- --
Change in net unrealized
appreciation/(depreciation) of
investments (89,291) (1,180,556) 12,122,951
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 (256,958) 720,451 16,142,101
- ----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations $85,840 $841,313 $16,065,332
==========================================================================================================
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)
Year ended February 29, 2000
- ----------------------------------------------------------------------------------------------------------
SMALL SMALL INTERNATIONAL
CAPITALIZATION CAPITALIZATION EQUITY
GROWTH FUND VALUE FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest (including interest from
securities loaned of $97, $650 and
$673, respectively) $9,985 $41,388 $15,408
Dividends (net of foreign withholding
tax of none, $7,064 and $17,571,
respectively) 3,224 102,907 122,163
----------------- ----------------- -----------------
13,209 144,295 137,571
----------------- ----------------- -----------------
Expenses:
Custodian fee 40,015 21,825 106,238
Investment management fee -- Note B 32,355 86,288 78,003
Registration and filing fees 28,247 37,786 26,659
Auditing fee 15,164 17,164 17,164
Organization expense -- Note A 4,103 1,647 1,647
Printing 3,288 7,348 8,403
Miscellaneous 2,497 711 623
Transfer agent fee -- Note B 2,022 6,163 4,334
Accounting and legal services fee --
Note B 752 2,289 1,587
Trustees' fees 269 623 417
Legal fees 181 316 2,970
----------------- ----------------- -----------------
Total Expenses 128,893 182,160 248,045
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (92,484) (83,513) (161,337)
- ----------------------------------------------------------------------------------------------------------
Net Expenses 36,409 98,647 86,708
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (23,200) 45,648 50,863
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions:
Net realized gain on investments sold 1,195,121 3,502,995 900,201
Net realized loss on foreign currency
transactions -- (104) (44,454)
Change in net unrealized
appreciation/(depreciation) of
investments 3,128,562 6,887,323 2,049,460
Change in net unrealized
appreciation/(depreciation) of foreign
currency transactions -- -- (381)
----------------- ----------------- -----------------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 4,323,683 10,390,214 2,904,826
- ----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations $4,300,483 $10,435,862 $2,955,689
==========================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
ACTIVE BOND DIVIDEND PERFORMERS
FUND FUND
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $353,845 $342,798 $188,995 $120,862
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions 63,900 (167,990) 1,169,983 1,960,778
Change in net unrealized
appreciation/(depreciation) of
investments, financial futures
contracts and foreign currency
transactions (87,318) (88,968) 46,410 (1,240,327)
----------------- ----------------- ----------------- -----------------
Net Increase in Net Assets
Resulting from Operations 330,427 85,840 1,405,388 841,313
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment
income (353,845) (342,798) (204,553) (125,515)
Distributions in excess of net
investment income (677) (47) -- --
Distributions from net realized
gain on investments sold (139,091) (11,387) (1,850,025) (1,568,997)
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (493,613) (354,232) (2,054,578) (1,694,512)
----------------- ----------------- ----------------- -----------------
From Portfolio Share Transactions: **
Shares sold 3,910,036 3,005,999 6,443,397 5,626,668
Shares issued to shareholders in
reinvestment of distributions 487,064 351,436 2,053,566 1,694,964
----------------- ----------------- ----------------- -----------------
4,397,100 3,357,435 8,496,963 7,321,632
Less shares repurchased (3,705,926) (4,552,479) (10,989,374) (9,348,646)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) 691,174 (1,195,044) (2,492,411) (2,027,014)
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 5,157,625 5,685,613 20,884,445 17,742,844
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($821), ($1,213), $21,113 and
$16,484, respectively) $5,685,613 $4,222,177 $17,742,844 $14,862,631
================= ================= ================= =================
* Distributions to Shareholders:
Per share dividends from net
investment income $0.5633 $0.5791 $0.1544 $0.1106
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net investment income $0.0011 $0.0001 -- --
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $0.2195 $0.0206 $1.5008 $1.5543
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio Share Transactions:
Shares sold 440,336 358,987 432,497 375,404
Shares issued to shareholders in
reinvestment of distributions 55,263 42,197 140,269 116,345
----------------- ----------------- ----------------- -----------------
495,599 401,184 572,766 491,749
Less shares repurchased (417,608) (544,753) (745,329) (618,694)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) 77,991 (143,569) (172,563) (126,945)
================= ================= ================= =================
The Statement of Changes in Net Assets shows how the value of each Fund's net assets has changed since the previous period.
The difference reflects net investment income, any investment gains and losses, distributions paid to shareholders and any
increase or decrease in money shareholders invested in each Fund. The footnotes illustrate the number of Fund shares sold,
reinvested and repurchased during the period, along with the per share amount of distributions made to shareholders of each
Fund for the period indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
MEDIUM CAPITALIZATION SMALL CAPITALIZATION
GROWTH FUND GROWTH FUND
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($42,177) ($76,769) ($13,678) ($23,200)
Net realized gain (loss) on
investments sold (98,184) 4,019,150 386,742 1,195,121
Change in net unrealized
appreciation/(depreciation) of
investments (2,469,617) 12,122,951 (133,026) 3,128,562
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations (2,609,978) 16,065,332 240,038 4,300,483
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Distributions from net realized
gain on investments sold (2,304,137) (808,355) (134,250) (579,250)
Distributions in excess of net
realized gain on investments sold (130,832) -- -- --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (2,434,969) (808,355) (134,250) (579,250)
----------------- ----------------- ----------------- -----------------
From Portfolio Share Transactions: **
Shares sold 10,062,888 13,799,897 1,965,870 9,505,733
Shares issued to shareholders in
reinvestment of distributions 2,416,095 802,909 134,329 579,258
----------------- ----------------- ----------------- -----------------
12,478,983 14,602,806 2,100,199 10,084,991
Less shares repurchased (31,049,470) (9,653,548) (2,855,403) (7,350,836)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) (18,570,487) 4,949,258 (755,204) 2,734,155
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 40,302,019 16,686,585 3,102,207 2,452,791
----------------- ----------------- ----------------- -----------------
End of period (including
distributions in excess of net
investment income of $1,192,
$1,664, $7 and $59, respectively) $16,686,585 $36,892,820 $2,452,791 $8,908,179
================= ================= ================= =================
* Distributions to Shareholders:
Per share distributions from net
realized gain on investments sold $1.7180 $0.5502 $0.6321 $2.2594
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net realized gain on
investments sold $0.0975 -- -- --
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio Share Transactions:
Shares sold 789,843 887,756 174,923 558,531
Shares issued to shareholders in
reinvestment of distributions 217,862 46,642 11,640 32,488
----------------- ----------------- ----------------- -----------------
1,007,705 934,398 186,563 591,019
Less shares repurchased (2,472,121) (703,733) (240,362) (436,856)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) (1,464,416) 230,665 (53,799) 154,163
================= ================= ================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
SMALL CAPITALIZATION INTERNATIONAL
VALUE FUND EQUITY FUND
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $35,793 $45,648 $58,714 $50,863
Net realized gain (loss) on
investments sold and foreign
currency transactions (106,535) 3,502,891 263,779 855,747
Change in net unrealized
appreciation/(depreciation) of
investments and foreign currency
transactions (817,107) 6,887,323 246,447 2,049,079
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations (887,849) 10,435,862 568,940 2,955,689
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment
income (32,061) (52,590) (58,714) (50,863)
Distributions in excess of net
investment income -- -- (38,609) (28,356)
Distributions from net realized
gain on investments sold (855,792) (1,849,452) -- (475,044)
Distributions in excess of net
realized gain on investments sold (116,108) -- -- --
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (1,003,961) (1,902,042) (97,323) (554,263)
----------------- ----------------- ----------------- -----------------
From Portfolio Share Transactions: **
Shares sold 3,189,293 12,736,754 4,778,538 5,684,244
Shares issued to shareholders in
reinvestment of distributions 1,003,958 1,902,123 97,210 554,265
----------------- ----------------- ----------------- -----------------
4,193,251 14,638,877 4,875,748 6,238,509
Less shares repurchased (4,432,149) (6,332,233) (5,525,145) (3,596,999)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) (238,898) 8,306,644 (649,397) 2,641,510
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 9,548,830 7,418,122 7,982,867 7,805,087
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
$10,454, $48,651, ($42,136) and
($78,887), respectively) $7,418,122 $24,258,586 $7,805,087 $12,848,023
================= ================= ================= =================
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0426 $0.0575 $0.0687 $0.0688
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net investment income -- -- $0.0451 $0.0383
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $1.1962 $2.0232 -- $0.6428
----------------- ----------------- ----------------- -----------------
Per share distributions in excess
of net realized gain on
investments sold $0.1623 -- -- --
----------------- ----------------- ----------------- -----------------
**Analysis of Portfolio Share Transactions:
Shares sold 306,719 857,366 475,462 464,681
Shares issued to shareholders in
reinvestment of distributions 114,375 124,240 9,438 44,555
----------------- ----------------- ----------------- -----------------
421,094 981,606 484,900 509,236
Less shares repurchased (424,679) (449,846) (546,741) (312,613)
----------------- ----------------- ----------------- -----------------
Net Increase (Decrease) (3,585) 531,760 (61,841) 196,623
================= ================= ================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Active Bond Fund
Financial Highlights
Selected data for a share of beneficial interest
outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
MARCH 30, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $8.64 $8.54 $8.83 $8.59
------------- ------------- ------------- ------------- -------------
Net Investment Income (6) 0.51 0.60 0.59 0.56 0.58
Net Realized and Unrealized
Gain (Loss) on Investments 0.16 (0.09) 0.34 (0.02) (0.43)
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.67 0.51 0.93 0.54 0.15
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.51) (0.60) (0.59) (0.56) (0.58)
Distributions in Excess of
Net Investment Income -- -- (0.00)(8) (0.00)(8) (0.00)(8)
Distributions from Net
Realized Gain on
Investments Sold (0.02) (0.01) (0.05) (0.22) (0.02)
------------- ------------- ------------- ------------- -------------
Total Distributions (0.53) (0.61) (0.64) (0.78) (0.60)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $8.64 $8.54 $8.83 $8.59 $8.14
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (5) 7.76%(3) 6.17% 11.25% 6.24% 1.83%
Total Adjusted Investment
Return at Net Asset Value (5,7) (0.46%)(3) 2.72% 9.21% 4.51% (0.50%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,171 $2,191 $5,158 $5,686 $4,222
Ratio of Expenses to Average
Net Assets 0.65%(2) 0.60% 0.60% 0.60% 0.60%
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 9.60%(2) 4.05% 2.64% 2.33% 2.93%
Ratio of Net Investment
Income to Average Net Assets 6.53%(2) 7.10% 6.78% 6.36% 6.88%
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (1,4) (2.42%)(2) 3.65% 4.74% 4.63% 4.55%
Portfolio Turnover Rate 71% 136% 230% 356% 301%
Fee Reduction Per Share (6) $0.75 $0.30 $0.18 $0.15 $0.19
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(8) Less than $0.01 per share.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period 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 relationships
between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund
Financial Highlights (continued)
Selected data for a share of beneficial
interest outstanding throughout each period indicated, investment
returns, key ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
MARCH 30, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $10.15 $11.91 $14.92 $14.46
------------- ------------- ------------- ------------- -------------
Net Investment Income (6) 0.23 0.21 0.18 0.15 0.11
Net Realized and Unrealized
Gain on Investments 1.68 1.92 3.92 1.04 0.60
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 1.91 2.13 4.10 1.19 0.71
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.19) (0.18) (0.17) (0.15) (0.11)
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)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $10.15 $11.91 $14.92 $14.46 $13.51
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (5) 22.79%(3) 21.26% 35.55% 7.97% 4.17%
Total Adjusted Investment
Return at Net Asset Value (5,7) 19.79%(3) 20.07% 35.23% 7.72% 3.82%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $3,319 $8,668 $20,884 $17,743 $14,863
Ratio of Expenses to Average
Net Assets 0.75%(2) 0.70% 0.70% 0.70% 0.70%
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 4.02%(2) 1.89% 1.02% 0.95% 1.05%
Ratio of Net Investment
Income to Average Net Assets 2.51%(2) 1.94% 1.31% 0.95% 0.71%
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (1,4) (0.76%)(2) 0.75% 0.99% 0.70% 0.36%
Portfolio Turnover Rate 70% 37% 77% 64% 46%
Fee Reduction Per Share (6) $0.30 $0.13 $0.04 $0.04 $0.05
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund
Financial Highlights (continued)
Selected data for a share of beneficial
interest outstanding throughout each period indicated, investment
returns, key ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
APRIL 11, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $10.69 $12.67 $13.51 $10.99
------------- ------------- ------------- ------------- -------------
Net Investment Income (Loss) (6) (0.01) 0.01 0.00(7) (0.02) (0.05)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency Transactions 2.22 2.02 2.06 (0.68) 10.71
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 2.21 2.03 2.06 (0.70) 10.66
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) -- (0.00)(7) -- --
Distributions from Net
Realized Gain on
Investments Sold -- (0.05) (1.22) (1.72) (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
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (5) 25.98%(3) 19.00% 17.39% (5.34%) 98.13%
Total Adjusted Investment
Return at Net Asset Value (5,8) 23.70%(3) 18.48% 17.19% (5.55%) 97.75%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $8,399 $29,085 $40,302 $16,687 $36,893
Ratio of Expenses to Average
Net Assets 0.93%(2) 0.90% 0.90% 0.90% 0.90%(9)
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 3.51%(2) 1.42% 1.10% 1.11% 1.28%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.10%)(2) 0.06% 0.03% (0.13%) (0.37%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets (1,4) (2.68%)(2) (0.46%) (0.17%) (0.34%) (0.75%)
Portfolio Turnover Rate 189% 281% 341% 116% 153%
Fee Reduction Per Share (6) $0.23 $0.06 $0.03 $0.03 $0.05
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) Less than $0.01 per share.
(8) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
(9) Expense ratio does not include interest expense due to bank loans,
which amounted to 0.01% for the year ended February 29, 2000.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund
Financial Highlights (continued)
Selected data for a share of beneficial
interest outstanding throughout each period indicated, investment
returns, key ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------
PERIOD FROM
MAY 2, 1996
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.24 $11.74 $11.65
------------- ------------- ------------- -------------
Net Investment Income (Loss) (5) 0.03 (0.03) (0.07) (0.09)
Net Realized and Unrealized
Gain on Investments and
Foreign Currency
Transactions 0.73 2.53 0.61 15.13
------------- ------------- ------------- -------------
Total from Investment Operations 0.76 2.50 0.54 15.04
------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) (0.00)(6) -- --
Distributions from Net
Realized Gain on
Investments Sold -- -- (0.63) (2.26)
------------- ------------- ------------- -------------
Total Distributions (0.02) (0.00)(6) (0.63) (2.26)
------------- ------------- ------------- -------------
Net Asset Value, End of Period $9.24 $11.74 $11.65 $24.43
============= ============= ============= =============
Total Investment Return at
Net Asset Value (7) 8.89%(3) 27.07% 4.67% 136.18%
Total Adjusted Investment
Return at Net Asset Value (7,8) (3.84%)(3) 23.92% 1.45% 133.89%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $999 $3,102 $2,453 $8,908
Ratio of Expenses to Average
Net Assets 0.90%(2) 0.90% 0.90% 0.90%
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 16.24%(2) 4.05% 4.12% 3.19%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.35%(2) (0.25%) (0.60%) (0.57%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets (1,4) (14.99%)(2) (3.40%) (3.82%) (2.86%)
Portfolio Turnover Rate 92% 117% 125% 238%
Fee Reduction Per Share (5) $1.22 $0.34 $0.35 $0.36
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Based on the average of the shares outstanding at the end of each month.
(6) Less than $0.01 per share.
(7) Total investment return assumes dividend reinvestment.
(8) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund
Financial Highlights (continued)
Selected data for a share of beneficial
interest outstanding throughout each period indicated, investment
returns, key ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
APRIL 19, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.09 $9.38 $11.74 $9.16
------------- ------------- ------------- ------------- -------------
Net Investment Income (6) 0.17 0.14 0.07 0.05 0.05
Net Realized and Unrealized
Gain (Loss) on Investments 0.56 1.08 3.65 (1.23) 10.96
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.73 1.22 3.72 (1.18) 11.01
------------- ------------- ------------- ------------- -------------
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
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (5) 8.61%(3) 13.78% 41.81% (9.46%) 124.33%
Total Adjusted Investment
Return at Net Asset Value (5,7) 5.40%(3) 12.75% 41.19% (10.12%) 123.65%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $5,293 $6,011 $9,549 $7,418 $24,259
Ratio of Expenses to Average
Net Assets 0.83%(2) 0.80% 0.80% 0.80% 0.80%
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 4.55%(2) 1.83% 1.42% 1.46% 1.48%
Ratio of Net Investment
Income to Average Net Assets 2.04%(2) 1.46% 0.62% 0.45% 0.37%
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (1,4) (1.68%)(2) 0.43% 0.00% (0.21%) (0.31%)
Portfolio Turnover Rate 0% 96% 216% 126% 104%
Fee Reduction Per Share (6) $0.30 $0.10 $0.07 $0.07 $0.09
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- International Equity Fund
Financial Highlights (continued)
Selected data for a share of beneficial
interest outstanding throughout each period indicated, investment
returns, key ratios and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
MARCH 30, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.24 $9.35 $9.63 $10.18
------------- ------------- ------------- ------------- -------------
Net Investment Income (6) 0.15 0.12 0.06 0.07 0.07
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions 0.68 0.14 0.23 0.59 3.83
------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.83 0.26 0.29 0.66 3.90
------------- ------------- ------------- ------------- -------------
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
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (5) 9.81%(3) 2.79% 3.07% 6.88% 38.84%
Total Adjusted Investment
Return at Net Asset Value (5,7) 3.26%(3) 0.47% 2.05% 5.15% 36.98%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,897 $4,204 $7,983 $7,805 $12,848
Ratio of Expenses to Average
Net Assets 1.05%(2) 1.00% 1.00% 1.00% 1.00%
Ratio of Adjusted Expenses
to Average Net Assets (1,4) 8.19%(2) 3.32% 2.02% 2.73% 2.86%
Ratio of Net Investment
Income to Average Net Assets 1.75%(2) 1.26% 0.60% 0.69% 0.59%
Ratio of Adjusted Net
Investment Loss to Average
Net Assets (1,4) (5.39%)(2) (1.06%) (0.42%) (1.04%) (1.27%)
Portfolio Turnover Rate 59% 68% 125% 83% 139%
Fee Reduction Per Share (6) $0.60 $0.22 $0.10 $0.17 $0.21
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(5) Total investment return assumes dividend reinvestment.
(6) Based on the average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Active Bond Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Active Bond Fund on February 29, 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 (0.23%)
Lockheed Martin Corp.,
Note 12-01-05 7.950% BBB- $10 $9,814
-------------
Banks -- Foreign (1.46%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04, (Y) 8.200 AA- 20 20,451
Royal Bank of Scotland Plc,
Bond (United Kingdom) 03-31-05 (Y) 8.817 A- 5 5,000
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom) 11-01-06 (R) (Y) 8.850 A+ 35 36,380
-------------
61,831
-------------
Banks -- United States (3.50%)
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 25 23,647
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 25 26,401
FleetBoston Financial Corp.,
Sub Note 12-01-05 6.625 A- 15 14,173
National Westminster Bank Plc -- New York Branch,
Sub Note 05-01-01 9.450 AA- 15 15,393
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 10 9,800
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 30 32,504
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 25 25,934
-------------
147,852
-------------
Beverages (0.59%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 15 14,400
Seagram (Joseph) & Sons, Inc.,
Gtd Deb 09-15-11 8.875 BBB- 10 10,445
-------------
24,845
-------------
Broker Services (0.57%)
Bear Stearns Cos., Inc.,
Sr Note 02-01-05 7.625 A 10 9,887
Goldman Sachs Group, Inc.,
Med Term Note Ser B 10-01-09 7.350 A+ 15 14,328
-------------
24,215
-------------
Chemicals (0.69%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A 15 14,204
Equistar Chemicals L.P./Equistar Funding Corp.,
Note 02-15-04 8.500 BBB- 15 14,775
-------------
28,979
-------------
Computers (1.50%)
Ceridian Corp.,
Sr Note 06-01-04 7.250 BBB 15 14,363
International Business Machines Corp.,
Med Term Note 09-22-03 5.370 A+ 20 18,865
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 10 10,100
Sr Note 08-01-09 11.000 B- 5 5,100
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 15 14,775
-------------
63,203
-------------
Energy (1.21%)
AES Corp.,
Sr Note 06-01-09 9.500 BB 5 4,950
Sr Sub Note 07-15-06 10.250 B+ 17 17,212
CalEnergy Co., Inc.,
Sr Bond 09-15-28 8.480 BBB- 15 15,296
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 15 13,613
-------------
51,071
-------------
Finance (8.45%)
Associates Corp. of North America,
Sr Deb 11-01-18 6.950 A+ 10 9,004
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 A- 20 19,480
Chrysler Financial Co. LLC,
Med Term Note Ser S 11-15-01 5.690 A+ 15 14,638
CIT Group Holdings, Inc.,
Note 10-15-01 5.500 A+ 20 19,540
Commercial Credit Co.,
Note 07-01-02 6.450 AA- 30 29,433
DaimlerChrysler North America Holding Corp.,
Note 01-20-05 7.400 A+ 15 14,902
FINOVA Capital Corp.,
Note 11-01-02 6.250 A- 15 14,486
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 (Y) 9.875 A+ 35 36,715
Ford Motor Credit Co.,
Note 04-28-03 6.125 A+ 20 19,259
General Motors Acceptance Corp.,
Note 12-01-01 6.375 A 20 19,683
Note 01-19-10 7.750 A 10 9,950
HomeSide Lending, Inc.,
Note 05-15-03 6.200 A+ 30 28,731
Household Finance Corp.,
Note 11-01-02 5.875 A 25 23,981
Note 09-25-04 5.875 A 25 23,396
Marlin Water Trust & Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 BBB 15 14,700
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 55 52,374
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) 8.400 BBB- 7 6,442
-------------
356,714
-------------
Government -- Foreign (0.38%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 A- 15 15,885
-------------
Government -- U.S. (23.09%)
United States Treasury,
Bond 08-15-17 8.875 AAA 92 114,698
Bond 02-15-23 7.125 AAA 409 444,084
Note 08-15-03 5.750 AAA 87 84,702
Note 02-15-05 7.500 AAA 44 45,519
Note 07-15-06 7.000 AAA 69 70,089
Note 05-15-08 5.625 AAA 230 215,696
-------------
974,788
-------------
Government -- U.S. Agencies (8.20%)
Fannie Mae,
30 Yr Pass Thru Ctf 06-01-29 6.000 AAA 20 17,768
Bond 02-15-05 7.125 AAA 25 25,012
Bond 05-15-29 6.250 AAA 55 49,328
Note 08-15-04 6.500 AAA 20 19,525
Note 09-15-09 6.625 AAA 35 33,542
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 04-15-28 to 03-01-29 + 6.500 AAA 101 94,113
30 Yr SF Pass Thru Ctf 04-15-29 7.000 AAA 39 37,188
30 Yr SF Pass Thru Ctf 03-01-30 + 7.500 AAA 20 19,634
30 Yr SF Pass Thru Ctf 11-15-24 to 03-01-30 8.000 AAA 49 50,149
-------------
346,259
-------------
Insurance (1.93%)
Conseco, Inc.,
Note 10-15-06 9.000 BBB+ 15 15,225
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R) 6.950 A+ 10 9,625
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 15 14,356
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 15 13,669
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 18,500
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 10 10,000
-------------
81,375
-------------
Leasing Companies (0.11%)
United Rentals, Inc.,
Sr Sub Note Ser B 04-01-09 9.000 BB- 5 4,588
-------------
Leisure (1.03%)
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 7.500 BBB- 15 14,105
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 7.875 BB 10 9,050
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 10 9,525
Trump Hotels & Casino Resorts Funding, Inc./
Holdings, L.P.,
Sr Note 06-15-05 15.500 CCC+ 10 6,000
Waterford Gaming LLC/Waterford Gaming Finance Corp.,
Sr Note 03-15-10 (R) 9.500 B+ 5 4,900
-------------
43,580
-------------
Manufacturing (0.12%)
Tenneco, Inc.,
Sr Sub Note 10-15-09 (R) 11.625 B+ 5 5,081
-------------
Media (5.58%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 15 15,000
Sr Note Ser B 07-15-03 8.125 B+ 8 7,460
AMFM, Inc.,
Sr Sub Note 10-01-08 9.000 B 10 10,225
Charter Communications Holdings, LLC/Capital Corp.,
Sr Note 04-01-09 (R) 10.000 B+ 10 9,950
Comcast Cable Communications, Inc.,
Note 11-15-08 6.200 BBB 10 8,894
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB 15 15,357
CSC Holdings, Inc.,
Sr Note Ser B 07-15-09 8.125 BB+ 15 14,625
Sr Sub Deb 05-15-16 10.500 BB- 10 11,000
Cumulus Media Inc.,
Sr Sub Note 07-01-08 10.375 B- 5 5,125
EchoStar DBS Corp.,
Sr Note 02-01-09 9.375 B 5 4,888
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 10 9,000
Sr Sub Note Ser B 10-01-09 8.750 B+ 8 7,280
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 Baa3 20 19,248
Liberty Media Corp.,
Sr Deb 07-15-29 8.500 BBB- 10 10,000
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 10 9,125
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 11 10,898
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 20 19,904
Telewest Communications Plc,
Sr Note (United Kingdom) 02-01-10 (R) (Y) 9.875 B+ 5 5,000
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 21 22,862
TV Guide, Inc.,
Sr Sub Note Ser B 03-01-09 8.125 B+ 10 9,875
United Pan-Europe Communications N.V.,
Sr Note (Netherlands) 11-01-09 (R) (Y) 11.250 B 10 9,800
-------------
235,516
-------------
Medical (1.23%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 18 16,920
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 7.875 B+ 15 13,350
IASIS Healthcare Corp.,
Sr Sub Note 10-15-09 (R) 13.000 B- 10 10,150
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 11 11,605
-------------
52,025
-------------
Metal (0.25%)
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 10 10,450
-------------
Mortgage Banking (6.59%)
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 6.790 Aaa 19 18,713
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29 6.570 AAA 40 37,826
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25 6.600 AAA 20 19,094
JCP Master Credit Card Trust,
Pass Thru Ctf Ser C Class A 06-15-00 9.625 AA+ 55 55,395
LB Commercial Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07 6.410 Aaa 15 13,936
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38 6.485 AAA 24 23,190
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1 10-15-06 (R) 6.830 AAA 71 69,790
Salomon Brothers Mortgage Securities VII, Inc.,
Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 6.750 Aaa 11 10,838
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28 7.220 AAA 30 29,658
-------------
278,440
-------------
Oil & Gas (1.47%)
Amerada Hess Corp.,
Bond 10-01-29 7.875 BBB 15 14,495
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07 8.875 BB- 5 4,875
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 20 18,145
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 8.750 BB- 10 9,825
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 BB- 15 14,888
-------------
62,228
-------------
Paper & Paper Products (0.72%)
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB 10 9,749
Packaging Corp. of America,
Sr Sub Note Ser B 04-01-09 9.625 B 5 5,000
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 12.000 B+ 15 15,619
-------------
30,368
-------------
Real Estate Investment Trust (1.46%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 10 9,012
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 15 14,307
Camden Property Trust,
Note 04-15-04 7.000 BBB 10 9,568
Liberty Property L.P.,
Med Term Note 06-05-02 6.600 BBB- 10 9,660
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 10 9,516
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BB 10 9,665
-------------
61,728
-------------
Retail (0.89%)
Dillard's, Inc.,
Deb 08-01-18 7.130 BBB 10 8,532
Great Atlantic & Pacific Tea Co., Inc. (The),
Note 04-15-07 7.750 BBB- 5 4,696
Meyer (Fred), Inc.,
Note 03-01-08 7.450 BBB- 15 14,419
Safeway, Inc.,
Note 11-15-01 5.875 BBB 10 9,769
-------------
37,416
-------------
Soap & Cleaning Preparations (0.34%)
Procter & Gamble Co. (The),
Note 09-15-09 6.875 AA 15 14,420
-------------
Steel (0.85%)
EES Coke Battery Co., Inc.,
Sr Note 04-15-02 (R) 7.125 BBB 5 5,260
National Steel Corp.,
1st Mtg Ser D 03-01-09 9.875 B+ 10 9,925
UCAR Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 12.000 B 20 20,900
-------------
36,085
-------------
Telecommunications (5.84%)
AXIA, Inc.,
Sr Sub Note 07-15-08 10.750 B- 10 8,500
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%, 05-01-04)
(Canada) 05-01-09 (A) (Y) Zero B3 10 6,000
Sr Disc Note, Step Coupon (14.75%, 12-15-00)
(Canada) 12-15-05 (A) (Y) Zero B3 5 5,000
Crown Castle International Corp.,
Sr Note 05-15-11 9.000 B 5 4,750
Global Crossing Holdings Ltd.,
Sr Note 11-15-09 (R) 9.500 BB 15 14,531
GT Group Telecom,
Unit (Sr Disc Note & Warrant) (Canada) 02-01-10
(R) (Y) Zero CCC+ 10 5,850
Hermes Europe Railtel BV,
Sr Note (Netherlands) 08-15-07 (Y) 11.500 B 5 4,850
Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 5 4,700
LCI International, Inc.,
Sr Note 06-15-07 7.250 BB+ 15 14,449
Level 3 Communications, Inc.,
Sr Note 03-15-08 (R) 11.000 B 10 10,025
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 15 14,513
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B+ 10 9,850
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 10 11,300
Nextel Communications, Inc.,
Sr Note 11-15-09 9.375 B 15 14,494
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 10 10,000
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 15 15,788
Omnipoint Corp.,
Sr Note 09-15-09 (R) 11.500 CCC+ 5 5,400
Sprint Capital Corp.,
Note 05-01-19 6.900 BBB+ 15 13,464
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon (11.625%, 04-15-04)
04-15-09 (A) Zero B3 10 6,525
Triton PCS, Inc.,
Sr Sub Disc Note, Step Coupon (11.00%, 05-01-03)
05-01-08 (A) Zero CCC+ 10 7,150
WorldCom, Inc.,
Note 08-15-01 6.125 A- 35 34,555
Note 08-15-28 6.950 A- 10 9,035
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (Y) 12.500 B+ 15 15,788
-------------
246,517
-------------
Transport (3.84%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08 6.930 A- 3 3,199
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 AA+ 19 17,591
Pass Thru Ctf Ser 1997-2C 06-30-04 7.206 BBB 22 21,015
Sr Note 12-15-05 8.000 BB- 15 13,500
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 21 19,826
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 B 15 12,750
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 5 4,535
Northwest Airlines, Inc.,
Note 03-15-04 8.375 BB 10 9,379
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 33 34,738
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB- 19 19,131
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 7 6,406
-------------
162,070
-------------
Utilities (11.95%)
AES Eastern Energy,
Pass Thru Ctf 01-02-17 (R) 9.000 BBB- 15 14,044
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) (Y) 6.730 BBB+ 10 9,784
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BB- 9 9,000
BellSouth Capital Funding Corp.,
Deb 02-15-30 7.875 AAA 10 9,987
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 7 7,017
Calpine Corp.,
Sr Note 04-01-08 7.875 BB+ 5 4,700
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 35 35,962
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 19,432
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 15 14,764
Sr Note 01-15-09 7.500 BB 20 18,500
Sr Note Ser B 01-15-04 6.750 BB 15 13,988
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02 7.750 BBB- 15 15,001
East Coast Power LLC,
Sr Sec Note 03-31-12 7.066 BBB- 15 13,488
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 23 24,390
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 12 11,661
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 AA- 15 13,129
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 15 17,325
Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 10 10,563
Gtd Deb (Canada) 02-01-03 (Y) 7.375 A+ 25 24,969
Iberdrola International B.V.,
Note (Spain) 10-01-02 (Y) 7.500 AA- 25 24,987
Note (Spain) 06-01-03 (R) (Y) 7.125 AA- 25 24,792
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 20 19,600
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 14 14,083
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 20 21,408
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 25 25,565
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB+ 9 9,080
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB+ 4 3,533
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 6.050 AAA 15 13,922
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 15 15,496
System Energy Resources, Inc.,
1st Mtg 08-01-01 7.710 BBB- 5 4,975
U S WEST Capital Funding, Inc.,
Deb 07-15-28 6.875 A- 15 13,091
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 27 26,249
-------------
504,485
-------------
TOTAL BONDS
(Cost $4,108,104) (94.07%) 3,971,828
------ -------------
NUMBER OF
WARRANTS
--------
WARRANTS
MetroNet Communications Corp. (Canada) (R)** 10 1,600
-------------
TOTAL WARRANTS
(Cost $103) (0.04%) 1,600
------ -------------
INTEREST PAR VALUE
RATE (000S OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.73%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds, 7.50%
thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.790% $242 $242,000
------------
Corporate Savings Account (0.02%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
4.65% 1,001
------------
TOTAL SHORT-TERM INVESTMENTS (5.75%) 243,001
--------- ------------
TOTAL INVESTMENTS (99.86%) 4,216,429
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.14%) 5,748
--------- ------------
TOTAL NET ASSETS (100.00%) $4,222,177
========= ============
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.
where Standard & Poor's ratings are not available.
** Non-income producing security.
+ These securities having an aggregate value of $38,266 or 0.91% of
the Fund's net assets, have been purchased as a forward commitment; that
is, the Fund has agreed on trade date to take delivery of and make
payment for such securities on a delayed basis subsequent to the date of
this schedule. The purchase price and interest rate of such securities
are fixed at trade date, although the Fund does not earn any interest on
such securities until settlement date. The Fund has instructed its
Custodian Bank to segregate assets with a current value at least equal
to the amount of the forward commitment. Accordingly, the market value
of $39,088 of United States Treasury Bonds, 7.125%, 02-15-23, has been
segregated to cover the forward commitment.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $406,786 or 9.63% of net
assets as of February 29, 2000.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Dividend Performers Fund on February 29, 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 (0.95%)
Interpublic Group of Companies, Inc. (The) 3,500 $140,656
------------
Banks -- United States (1.80%)
Bank of America Corp. 2,800 128,975
State Street Corp. 1,900 138,463
------------
267,438
------------
Beverages (3.16%)
Anheuser-Busch Cos., Inc. 2,800 179,550
PepsiCo, Inc. 9,000 290,250
------------
469,800
------------
Building (0.72%)
Masco Corp. 6,000 107,250
------------
Computers (19.84%)
Cisco Systems, Inc.* 4,600 608,062
Computer Associates International, Inc. 4,600 295,837
Dell Computer Corp.* 6,000 244,874
EMC Corp.* 2,900 345,100
Hewlett-Packard Co. 2,500 336,250
International Business Machines Corp. 1,500 153,000
Microsoft Corp.* 6,000 536,250
Sun Microsystems, Inc.* 4,500 428,624
------------
2,947,997
------------
Diversified Operations (4.04%)
Du Pont (E.I.) De Nemours & Co. 2,800 141,400
Honeywell International, Inc. 3,375 162,421
Johnson Controls, Inc. 1,300 69,387
Minnesota Mining & Manufacturing Co. 1,500 132,187
Tyco International Ltd. 2,500 94,843
------------
600,238
------------
Electronics (8.59%)
Emerson Electric Co. 4,000 182,250
General Electric Co. 4,000 528,750
Intel Corp. 5,000 565,000
------------
1,276,000
------------
Finance (2.60%)
Citigroup, Inc. 5,000 258,438
Household International, Inc. 4,000 127,750
------------
386,188
------------
Food (3.42%)
Bestfoods 5,000 209,688
General Mills, Inc. 2,000 65,875
Nabisco Holdings Corp. (Class A) 5,800 169,650
Sara Lee Corp. 4,200 63,000
------------
508,213
------------
Furniture (0.74%)
Leggett & Platt, Inc. 6,500 109,281
------------
Insurance (3.48%)
AFLAC, Inc. 4,000 146,250
American General Corp. 2,200 114,813
American International Group, Inc. 2,900 256,469
------------
517,532
------------
Machinery (2.04%)
Dover Corp. 4,300 165,819
Pentair, Inc. 4,000 137,500
------------
303,319
------------
Media (2.34%)
Gannett Co., Inc. 3,000 195,563
McGraw-Hill Cos., Inc. (The) 3,000 152,625
------------
348,188
------------
Medical (7.42%)
American Home Products Corp. 3,500 152,250
Baxter International, Inc. 5,500 299,750
Johnson & Johnson 3,000 215,250
Medtronic, Inc. 4,400 213,125
Warner-Lambert Co. 2,600 222,463
------------
1,102,838
------------
Metal (0.83%)
Illinois Tool Works, Inc. 2,400 124,050
------------
Mortgage Banking (1.81%)
Fannie Mae 3,500 185,500
Freddie Mac 2,000 83,500
------------
269,000
------------
Office (3.25%)
Avery Dennison Corp. 2,500 151,719
Pitney Bowes, Inc. 6,700 331,650
------------
483,369
------------
Oil & Gas (5.59%)
Chevron Corp. 2,200 164,313
Conoco Inc. (Class A)* 7,200 138,150
Exxon Mobil Corp. 5,280 397,650
Royal Dutch Petroleum Co. American Depositary
Receipts (ADR) (Netherlands) 2,500 131,250
------------
831,363
------------
Paper & Paper Products (1.01%)
Kimberly-Clark Corp. 2,900 149,894
------------
Retail (7.12%)
CVS Corp. 4,000 140,000
Home Depot, Inc. (The) 4,500 260,156
Lowe's Cos., Inc. 6,000 285,750
SYSCO Corp. 2,400 78,750
Target Corp. 2,500 147,500
Wal-Mart Stores, Inc. 3,000 146,063
------------
1,058,219
------------
Soap & Cleaning Preparations (3.18%)
Clorox Co. (The) 4,000 161,750
Ecolab, Inc. 4,800 135,600
Procter & Gamble Co. (The) 2,000 176,000
------------
473,350
------------
Steel (1.07%)
Nucor Corp. 3,200 159,000
------------
Telecommunications (5.42%)
Bell Atlantic Corp. 3,200 156,600
CenturyTel, Inc. 4,300 144,588
Lucent Technologies, Inc. 2,000 119,000
MCI WorldCom, Inc.* 3,300 147,263
Nokia Corp. (ADR) (Finland) 1,200 237,975
------------
805,426
------------
Utilities (0.78%)
ALLTEL Corp. 2,000 116,000
------------
TOTAL COMMON STOCKS
(Cost $11,115,261) (91.20%) 13,554,609
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (8.38%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $1,245 $1,245,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
4.65% 597
------------
TOTAL SHORT-TERM INVESTMENTS (8.38%) 1,245,597
--------- ------------
TOTAL INVESTMENTS (99.58%) 14,800,206
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.42%) 62,425
--------- ------------
TOTAL NET ASSETS (100.00%) $14,862,631
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Medium Capitalization Growth Fund on February 29, 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 (1.38%)
Interpublic Group of Companies, Inc. (The) 2,750 $110,516
Omnicom Group, Inc. 1,900 178,956
TMP Worldwide, Inc.* 1,050 142,734
Young & Rubicam, Inc. 1,500 75,750
------------
507,956
------------
Banks -- United States (1.12%)
Comerica, Inc. 1,700 62,794
First Security Corp. 3,100 71,881
Northern Trust Corp. 4,950 279,675
------------
414,350
------------
Computers (22.12%)
Active Software, Inc.* 1,650 173,250
Akamai Technologies, Inc.* 300 78,375
Art Technology Group, Inc.* 2,500 361,250
Baltimore Technologies Plc,* American Depositary
Receipts (ADR) (United Kingdom) 830 157,700
BMC Software, Inc.* 1,000 46,000
Cambridge Technology Partners, Inc.* 3,650 54,750
China.com Corp. (Class A)* (Hong Kong) 1,870 229,776
CMGI, Inc.* 1,250 161,953
Computer Sciences Corp.* 1,650 130,041
DST Systems, Inc.* 1,950 109,444
E.piphany, Inc.* 1,050 230,869
Edwards (J.D.) & Co.* 1,500 60,937
EMC Corp.* 1,530 182,070
Entrust Technologies Inc.* 2,250 198,562
Exodus Communications, Inc.* 2,350 334,581
Fiserv, Inc.* 6,400 174,400
Foundry Networks, Inc.* 800 111,750
GigaMedia Ltd.* (Taiwan) 150 10,509
i2 Technologies, Inc.* 3,700 604,950
Informix Corp.* 26,500 424,000
Interwoven, Inc.* 1,440 215,280
JNI Corp.* 1,850 151,006
Lexmark International Group, Inc. (Class A)* 2,690 320,782
MatrixOne, Inc.* 150 3,750
Mercury Interactive Corp.* 3,000 289,125
NBC Internet, Inc. (Class A)* 1,950 102,497
Network Appliance, Inc.* 1,900 358,625
Niku Corp.* 1,120 77,280
Onvia.com, Inc.* 350 7,350
OpenTV Corp.* 150 27,750
Organic, Inc.* 150 5,119
Parametric Technology Corp.* 17,650 535,016
Perot Systems Corp. (Class A)* 7,000 178,062
Phone.com, Inc.* 2,100 293,212
PSINet, Inc.* 4,300 199,413
RealNetworks, Inc.* 1,000 70,313
Rhythms NetConnections, Inc.* 2,650 94,572
S1 Corp.* 950 95,594
Siebel Systems, Inc. 2,500 346,719
StarMedia Network, Inc.* 2,800 131,600
Unisys Corp.* 5,550 166,153
VERITAS Software Corp.* 1,725 341,334
VerticalNet, Inc.* 450 99,000
VIA NET.WORKS, Inc.* 550 36,300
Viant Corp.* 4,700 178,306
------------
8,159,325
------------
Cosmetics & Personal Care (0.41%)
Dial Corp. (The) 10,585 152,159
------------
Diversified Operations (0.61%)
Mitsubishi Corp. (ADR) (Japan) 15,096 222,898
------------
Electronics (20.15%)
Altera Corp.* 2,940 234,465
Amphenol Corp. (Class A)* 4,450 355,722
Analog Devices, Inc.* 2,100 329,700
Applied Micro Circuits Corp.* 750 206,297
ASM Lithography Holding NV* (Netherlands) 2,200 281,875
Atmel Corp.* 6,400 316,800
Broadcom Corp. (Class A)* 2,000 394,750
Conexant Systems, Inc.* 3,900 383,175
Flextronics International Ltd.* (Singapore) 3,500 213,063
Intersil Holding Corp.* 1,400 83,125
Jabil Circuit, Inc.* 3,510 243,726
JDS Uniphase Corp.* 2,400 632,700
KLA-Tencor Corp.* 4,220 328,896
Linear Technology Corp. 3,050 320,059
Maxim Intergrated Products, Inc.* 5,100 340,744
Novellus Systems, Inc.* 3,900 231,319
PE Corp.-PE Biosystems Group 2,100 221,550
Sanmina Corp.* 1,570 183,788
SCI Systems, Inc.* 7,000 281,750
ST Assembly Test Services Ltd.* (ADR)
(Singapore) 397 19,056
STMicroelectronics NV (Netherlands) 1,850 370,000
Teradyne, Inc.* 4,500 391,500
Vitesse Semiconductor Corp.* 2,950 306,247
Waters Corp.* 3,370 330,471
Xilinx, Inc.* 5,440 433,840
------------
7,434,618
------------
Fiber Optics (1.73%)
Avanex Corp.* 250 52,094
C-COR.net Corp.* 10,150 453,896
Sycamore Networks, Inc.* 900 133,200
------------
639,190
------------
Finance (1.23%)
Capital One Financial Corp. 2,450 90,191
Concord EFS, Inc.* 9,772 191,165
NextCard, Inc.* 4,950 111,994
Providian Financial Corp. 950 61,572
------------
454,922
------------
Insurance (0.64%)
AFLAC, Inc. 2,550 93,234
Reinsurance Group of America, Inc. 8,277 141,226
------------
234,460
------------
Media (6.90%)
AMFM, Inc.* 2,860 175,532
Cox Radio, Inc. (Class A)* 2,150 172,000
Cumulus Media, Inc. (Class A)* 2,850 85,144
Emmis Communications Corp. (Class A)* 2,400 87,600
Entercom Communications Corp.* 4,500 189,281
Hispanic Broadcasting Corp.* 1,825 170,523
Infinity Broadcasting Corp. (Class A)* 7,250 231,547
Insight Communications Co., Inc.* 2,900 60,537
Mediacom Communications Corp. (Class A)* 6,230 106,299
Pegasus Communications Corp.* 2,550 316,200
Radio One, Inc.* 3,650 239,988
Spanish Broadcasting System, Inc. (Class A)* 4,900 93,713
Telewest Communications Plc* (ADR) (United
Kingdom) 4,465 317,015
Univision Communications, Inc. (Class A)* 1,400 142,625
Wink Communications, Inc.* 2,700 156,600
------------
2,544,604
------------
Medical (9.32%)
Affymetrix, Inc.* 1,270 367,824
Alkermes, Inc.* 1,650 316,594
Allergan, Inc. 2,300 115,719
Biogen, Inc.* 2,800 302,225
Express Scripts, Inc. (Class A)* 1,900 87,519
Forest Laboratories, Inc.* 1,700 116,131
Health Management Associates, Inc. (Class A)* 5,500 59,125
Immunex Corp.* 1,300 256,669
Incyte Pharmaceuticals, Inc.* 1,050 289,341
MedImmune, Inc.* 1,700 337,450
Millennium Pharmaceuticals, Inc.* 1,200 312,150
Protein Design Labs, Inc.* 1,000 250,187
QLT PhotoTherapeutics, Inc.* (Canada) 4,700 335,463
Stryker Corp. 2,300 134,550
Wellpoint Health Networks, Inc.* 2,350 158,625
------------
3,439,572
------------
Oil & Gas (3.40%)
Baker Hughes, Inc. 12,350 319,556
BJ Services Co.* 6,150 350,934
Cooper Cameron Corp.* 2,660 146,965
R&B Falcon Corp.* 12,450 192,197
Weatherford International, Inc.* 5,450 245,250
------------
1,254,902
------------
Paper & Paper Products (0.74%)
Bowater, Inc. 2,500 122,969
Fort James Corp. 7,850 147,678
------------
270,647
------------
Retail (1.47%)
Best Buy Co., Inc.* 2,850 154,969
Circuit City Stores-Circuit City Group 3,600 145,350
SYSCO Corp. 2,100 68,906
Tandy Corp. 4,550 173,184
------------
542,409
------------
Telecommunications (24.00%)
Adelphia Business Solutions, Inc.* 2,200 113,025
Alamosa PCS Holdings, Inc.* 4,350 157,687
Allegiance Telecom, Inc.* 4,575 452,353
American Tower Corp. (Class A) 4,600 226,550
ANTEC Corp.* 11,700 619,369
Broadwing, Inc.* 7,100 210,781
Carrier 1 International S.A.* (ADR)
(Switzerland) 276 8,953
COLT Telecom Group Plc* (ADR) (United Kingdom) 1,730 403,063
Comverse Technology, Inc.* 2,595 510,891
Corning, Inc. 2,543 478,084
Crown Castle International Corp.* 5,250 169,312
Dobson Communications Corp. (Class A)* 10,950 208,050
Global Crossing Ltd.* (Bermuda) 7,312 340,922
Global TeleSystems Group, Inc.* 8,800 220,000
i-CABLE Communications Ltd.* (ADR) (Hong Kong) 9,644 213,374
ICG Communications, Inc.* 3,350 105,106
IMPSAT Fiber Networks, Inc.* 7,550 276,991
Intermedia Communications, Inc.* 2,700 170,944
Jazztel Plc* (ADR) (United Kingdom) 117 13,777
McLeodUSA, Inc. (Class A)* 7,060 621,280
Metromedia Fiber Network, Inc. (Class A)* 3,350 240,834
Microcell Telecommunications, Inc.* (Canada) 3,750 172,500
Nextel Communications, Inc. (Class A)* 2,600 355,550
Nextel Partners, Inc. (Class A)* 550 17,600
NEXTLINK Communications, Inc. (Class A)* 3,300 363,619
NTL, Inc.* 2,987 273,310
Omnipoint Corp.* 3,400 417,137
Partner Communications Co. Ltd.* (ADR) (Israel) 8,300 141,100
SAVVIS Communications Corp.* 1,650 33,000
Scientific-Atlanta, Inc. 2,600 266,988
Time Warner Telecom, Inc. (Class A)* 1,650 127,050
UnitedGlobalCom, Inc. (Class A)* 4,200 438,900
Versatel Telecom International NV* (ADR)
(Netherlands) 3,300 198,825
Western Wireless Corp. (Class A)* 5,950 288,575
------------
8,855,500
------------
TOTAL COMMON STOCKS
(Cost $21,951,399) (95.22%) 35,127,512
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.58%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $2,059 2,059,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
4.65% 968
------------
TOTAL SHORT-TERM INVESTMENTS (5.58%) 2,059,968
--------- ------------
TOTAL INVESTMENTS (100.80%) 37,187,480
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.80%) (294,660)
--------- ------------
TOTAL NET ASSETS (100.00%) $36,892,820
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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 February 29, 2000 assigned to country categories.
MARKET VALUE AS A
PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
<S> <C>
Bermuda 0.92%
Canada 1.38
Hong Kong 1.20
Israel 0.38
Japan 0.60
Netherlands 2.31
Singapore 0.63
Switzerland 0.02
Taiwan 0.03
United Kingdom 2.42
United States 90.91
-------
TOTAL INVESTMENTS 100.80%
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Growth Fund on February 29, 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 (1.90%)
Cybergold, Inc.* 2,960 $59,200
Getty Images, Inc.* 1,220 62,754
24/7 Media, Inc.* 1,020 47,430
------------
169,384
------------
Automobile/Trucks (0.22%)
Monaco Coach Corp.* 1,110 19,980
------------
Banks -- United States (0.31%)
Greater Bay Bancorp. 690 27,082
------------
Broker Services (0.16%)
Web Street, Inc.* 2,150 14,109
------------
Business Services -- Misc. (4.90%)
Charles River Associates, Inc.* 950 26,006
Corporate Executive Board Co. (The)* 790 39,401
Forrester Research, Inc.* 1,800 72,000
Jupiter Communications, Inc.* 790 25,280
META Group, Inc. * 1,690 52,390
Modem Media.Poppe Tyson, Inc.* 680 53,975
On Assignment, Inc.* 1,110 41,486
ProBusiness Services, Inc.* 1,700 46,112
Profit Recovery Group International, Inc. (The)* 1,060 19,610
Quanta Services, Inc.* 1,480 59,940
------------
436,200
------------
Computers (24.47%)
Accrue Software, Inc.* 1,160 54,448
Advent Software, Inc.* 445 40,356
Apex, Inc. * 1,380 61,927
Apropos Technology, Inc.* 50 2,394
Aspect Development, Inc.* 580 86,347
Aspen Technology, Inc.* 1,950 87,262
Avenue A, Inc. * 50 3,600
Be Free, Inc.* 740 66,877
BindView Development Corp.* 2,640 89,100
Broadbase Software, Inc.* 420 63,604
Clarus Corp.* 800 93,300
Cognizant Technology Solutions Corp.* 640 69,840
Commtouch Software, Ltd. * (Israel) 950 52,725
Concord Communications, Inc.* 580 25,955
Data Return Corp.* 1,160 74,385
Dendrite International, Inc.* 975 24,009
Digex, Inc.* 600 97,200
Digimarc Corp.* 100 5,750
DigitalThink, Inc.* 50 2,037
Diversinet Corp. * (Canada) 2,470 65,918
Extensity, Inc.* 50 3,625
FactSet Research Systems, Inc. 950 28,619
FirePond, Inc.* 150 14,616
Fundtech Ltd.* (Israel) 1,280 49,120
Hotel Reservations Network, Inc. (Class A)* 50 1,300
Inforte Corp.* 50 4,022
IntraNet Solutions, Inc.* 950 38,712
JNI Corp.* 580 47,342
Landacorp, Inc.* 150 1,941
Lante Corp.* 110 8,772
Level 8 Systems, Inc.* 240 7,530
Lifeminders.com, Inc.* 1,010 53,656
MarketWatch.com, Inc.* 1,050 45,019
MatrixOne, Inc. * 50 1,250
Maxtor Corp.* 1,150 9,200
Media Metrix, Inc.* 1,000 35,125
Mediaplex, Inc.* 790 65,965
Micromuse, Inc.* 640 90,760
Multex.com, Inc.* 1,160 35,380
National Computer Systems, Inc. 1,460 58,035
National Instruments Corp.* 950 42,661
Net Perceptions, Inc.* 790 38,611
net.Genesis Corp.* 50 2,841
NetObjects, Inc.* 400 14,900
NetRatings, Inc.* 740 26,501
Official Payments Corp.* 790 28,341
Packeteer, Inc. * 640 33,040
Predictive Systems, Inc.* 890 54,067
Preview Systems, Inc.* 50 2,650
Secure Computing Corp.* 3,280 57,400
SportsLine.com, Inc.* 1,040 47,970
Transaction Systems Architects, Inc. (Class A)* 650 29,331
Visual Networks, Inc.* 420 27,615
WebTrends Corp.* 530 50,350
Wind River Systems, Inc.* 690 40,063
XCare.net, Inc.* 720 13,680
------------
2,177,044
------------
Computers -- Peripheral Equipment (1.11%)
Immersion Corp.* 1,010 39,264
SCM Microsystems, Inc.* 520 61,880
------------
101,144
------------
Electronics (12.31%)
Alpha Industries, Inc. * 400 58,075
ATMI, Inc.* 1,060 50,019
Credence Systems Corp.* 530 70,622
DuPont Photomasks, Inc.* 950 55,575
Exar Corp.* 1,110 77,076
GaSonics International Corp.* 1,360 44,625
Integrated Silicon Solution, Inc. * 1,200 33,375
Metalink Ltd.* (Israel) 1,110 55,222
Micrel, Inc.* 320 36,880
Nanometrics, Inc.* 150 5,737
Novellus Systems, Inc.* 600 35,587
PLX Technology, Inc.* 2,490 71,276
Powerwave Technologies, Inc.* 640 102,320
PRI Automation, Inc.* 640 51,120
QLogic Corp.* 300 46,800
Quantum Effect Devices, Inc.* 50 4,819
Rudolph Technologies, Inc.* 1,000 45,125
Sage, Inc.* 950 30,400
Semtech Corp.* 890 55,625
Veeco Instruments, Inc.* 420 34,492
Vicor Corp.* 300 6,825
Virata Corp.* 850 125,375
------------
1,096,970
------------
Engineering/R&D Services (0.13%)
Symyx Technologies, Inc.* 210 11,550
------------
Finance (1.13%)
Affiliated Managers Group, Inc.* 740 29,091
Medallion Financial Corp. 1,110 20,257
Metris Cos., Inc. 1,010 26,134
NextCard, Inc.* 1,110 25,114
------------
100,596
------------
Food (0.24%)
American Italian Pasta Co. (Class A)* 950 21,672
------------
Instruments -- Scientific (0.44%)
Varian, Inc.* 990 39,476
------------
Leisure (0.74%)
Imax Corp.* (Canada) 1,590 40,148
Premier Parks, Inc.* 1,270 25,718
------------
65,866
------------
Machinery (0.78%)
CVC, Inc.* 2,060 69,525
------------
Media (5.02%)
Ackerley Group, Inc. (The) 1,690 21,653
Acme Communications, Inc.* 1,270 30,956
Citadel Communications Corp.* 900 30,488
Classic Communications, Inc. (Class A)* 1,220 26,230
Cumulus Media, Inc. (Class A)* 300 8,963
Pegasus Communications Corp.* 630 78,120
Radio One, Inc.* 530 34,848
Regent Communications Inc. * 3,860 45,838
TiVo, Inc.* 850 28,528
Westwood One, Inc. * 580 38,751
Wink Communications, Inc.* 1,050 60,900
YouthStream Media Networks, Inc.* 2,200 42,075
------------
447,350
------------
Medical (18.78%)
Alexion Pharmaceuticals, Inc.* 1,100 93,775
Alkermes, Inc.* 540 103,613
Alpharma, Inc. (Class A) 950 32,894
Antigenics, Inc.* 50 2,250
Aspect Medical Systems, Inc.* 50 3,294
Aurora Biosciences Corp.* 900 96,300
BioSource International, Inc.* 250 6,000
Cell Genesys, Inc.* 920 35,765
COR Therapeutics, Inc.* 1,260 112,928
CV Therapeutics, Inc. * 1,740 112,230
Cyberonics, Inc.* 1,580 40,290
Cytyc Corp. 1,590 73,140
Gene Logic, Inc.* 300 35,813
Genome Therapeutics Corp.* 690 34,155
Human Genome Sciences, Inc.* 300 65,475
IDEC Pharmaceuticals Corp.* 250 35,219
Inhale Therapeutic Systems, Inc.* 530 53,663
Interpore International, Inc.* 4,230 57,105
King Pharmaceuticals, Inc.* 950 45,303
LifePoint Hospitals, Inc.* 2,330 35,096
Ligand Pharmaceuticals, Inc. (Class B)* 1,840 40,020
Molecular Devices Corp.* 150 12,300
NPS Pharmaceuticals, Inc.* 2,020 54,919
OXiGENE, Inc.* 1,270 29,607
Pharmacopeia, Inc.* 1,270 86,439
Pharmacyclics, Inc.* 580 46,291
Province Healthcare Co.* 1,480 29,785
Sequenom, Inc.* 50 6,250
Techne Corp.* 580 49,753
Titan Pharmaceuticals, Inc.* 1,230 61,808
Triangle Pharmaceuticals, Inc.* 2,270 51,926
Tularik, Inc.* 640 50,480
Visible Genetics, Inc.* 850 79,156
------------
1,673,042
------------
Metal (0.65%)
Maverick Tube Corp.* 2,580 58,050
------------
Oil & Gas (2.99%)
Atwood Oceanics, Inc.* 990 52,594
Core Laboratories N.V.* (Netherlands) 1,270 26,908
Dril-Quip, Inc.* 640 21,720
Marine Drilling Cos., Inc.* 1,800 41,063
NATCO Group, Inc. (Class A)* 2,490 32,214
Newfield Exploration Co.* 950 29,450
Pride International, Inc.* 1,850 27,403
Stone Energy Corp.* 850 34,531
------------
265,883
------------
Retail (6.26%)
Applebee's International, Inc. 1,160 32,661
Brightpoint, Inc.* 4,260 54,848
Chemdex Corp.* 350 78,706
Cost Plus, Inc.* 1,110 20,604
Duane Reade, Inc.* 1,680 40,215
Hain Food Group, Inc. (The)* 500 18,375
Insight Enterprises, Inc.* 790 24,786
Linens 'N Things, Inc.* 1,160 22,838
99 Cents Only Stores* 1,581 39,624
O'Reilly Automotive, Inc.* 1,270 17,780
Pacific Sunwear of California, Inc.* 1,615 41,082
ScanSource, Inc.* 1,150 43,700
Tech Data Corp.* 1,530 33,182
Tweeter Home Entertainment Group, Inc.* 640 19,600
Whole Foods Market, Inc.* 640 24,300
Wild Oats Markets, Inc.* 2,420 45,375
------------
557,676
------------
Shoes & Related Apparel (0.42%)
Vans, Inc.* 2,430 37,665
------------
Steel (0.76%)
Lone Star Technologies, Inc.* 1,800 67,500
------------
Telecommunications (11.76%)
Advanced Radio Telecom Corp.* 1,480 56,610
AirGate PCS, Inc.* 900 88,200
Alamosa PCS Holdings, Inc.* 1,600 58,000
Choice One Communications, Inc. * 100 6,000
CoreComm Ltd.* 950 37,763
Delano Technology Corp.* 400 19,125
Efficient Networks, Inc.* 580 93,525
I-Link, Inc.* 5,020 43,925
Illuminet Holdings, Inc.* 580 42,920
InterWAVE Communications International, Ltd.* 150 9,656
Latitude Communications, Inc.* 1,220 25,773
Orckit Communications Ltd.* (Israel) 1,100 96,044
Pinnacle Holdings, Inc.* 1,160 67,860
Powertel, Inc.* 530 49,621
Radyne ComStream, Inc.* 1,250 29,844
Rural Cellular Corp. (Class A)* 730 40,333
SBA Communications Corp.* 1,580 63,990
Telaxis Communications Corp.* 210 16,393
Terayon Communication Systems, Inc.* 380 97,708
US LEC Corp. (Class A)* 1,420 61,770
XM Satellite Radio Holdings, Inc.* 1,060 42,334
------------
1,047,394
------------
Transportation (1.43%)
Circle International Group, Inc. 1,690 41,299
EGL, Inc.* 950 26,719
Expeditors International of Washington, Inc. 740 27,935
Forward Air Corp.* 1,375 31,625
------------
127,578
------------
TOTAL COMMON STOCKS
(Cost $5,049,171) (96.91%) 8,632,736
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.52%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $492 492,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
4.65% 793
------------
TOTAL SHORT-TERM INVESTMENTS (5.53%) 492,793
--------- ------------
TOTAL INVESTMENTS (102.44%) 9,125,529
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (2.44%) (217,350)
--------- ------------
TOTAL NET ASSETS (100.00%) $8,908,179
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Value Fund on February 29, 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 (3.04%)
Cybergold, Inc.* 8,000 $160,000
Penton Media, Inc. 22,000 577,500
------------
737,500
------------
Automobile/Trucks (0.61%)
Tenneco Automotive, Inc. 20,000 147,500
------------
Broker Services (0.67%)
Jefferies Group, Inc. 7,000 163,625
------------
Business Services -- Misc. (8.00%)
Heidrick & Struggles International, Inc.* 1,700 69,700
Iron Mountain, Inc.* 27,600 841,800
Metamor Worldwide, Inc.* 22,050 452,025
Sensormatic Electronics Corp.* 27,550 523,450
Xpedior, Inc.* 3,000 54,000
------------
1,940,975
------------
Computers (13.49%)
ARIS Corp.* 7,000 105,000
Aspen Technology, Inc.* 16,150 722,712
AXENT Technologies, Inc.* 24,850 674,056
Diversinet Corp. (Canada)* 5,500 146,781
FVC.COM Inc.* 14,350 278,031
NetCreations, Inc.* 4,700 219,725
Secure Computing Corp.* 6,300 110,250
Wind River Systems, Inc.* 17,500 1,016,094
------------
3,272,649
------------
Electronics (6.90%)
Amphenol Corp. (Class A)* 9,700 775,394
ESCO Electronics Corp.* 20,250 303,750
Vicor Corp.* 26,100 593,775
------------
1,672,919
------------
Energy (1.13%)
Calpine Corp.* 3,000 274,500
------------
Finance (1.08%)
Core Cap, Inc. (Class A)* (r) 11,100 182,040
Duff & Phelps Credit Rating Co. 1,000 79,875
------------
261,915
------------
Insurance (4.76%)
Ace, Ltd. 8,125 145,234
Financial Security Assurance Holdings Ltd. 14,907 670,815
MIIX Group, Inc. 5,600 65,100
Radian Group, Inc. 5,000 173,438
Reinsurance Group of America, Inc. 5,910 100,839
------------
1,155,426
------------
Leisure (0.14%)
Metromedia International Group, Inc.* 5,000 34,375
------------
Manufacturing (2.66%)
Dexter Corp. (The) 14,000 645,750
------------
Medical (2.69%)
DENTSPLY International, Inc. 18,000 461,250
ProxyMed, Inc.* 3,250 32,094
Shire Pharmaceuticals Group Plc* (United
Kingdom) 10,000 158,874
------------
652,218
------------
Metal (0.22%)
Brush Wellman, Inc. 3,250 54,438
------------
Office (2.18%)
Danka Business Systems, Plc, American Depositary
Receipts (ADR) (United Kingdom) 54,595 528,889
------------
Oil & Gas (2.19%)
Basin Exploration* 9,500 100,344
Chieftain International, Inc.* (Canada) 11,150 154,009
Grey Wolf, Inc.* 42,300 148,050
Veritas DGC, Inc.* 6,400 128,000
------------
530,403
------------
Pollution Control (0.27%)
Newpark Resources, Inc.* 8,500 66,406
------------
Protection -- Safety Equip. & Service (0.74%)
Pittston Brink's Group 10,000 178,750
------------
Retail (1.16%)
Brightpoint, Inc.* 10,000 128,750
Whole Foods Market, Inc.* 4,000 151,875
------------
280,625
------------
Telecommunications (23.65%)
Alaska Communications Systems Holdings, Inc.* 36,700 513,800
ANTEC Corp.* 25,750 1,363,141
CFW Communications Co. 18,000 774,000
Corning, Inc. 5,810 1,092,280
CT Communications, Inc. 6,000 333,000
CTC Communications Group, Inc.* 16,100 1,207,500
Intermedia Communications, Inc.* 7,150 452,684
------------
5,736,405
------------
Transportation (0.52%)
Air Canada* (Canada) 10,694 126,397
------------
Utilities (2.40%)
Independent Energy Holdings, Plc (ADR)* (United
Kingdom) 11,632 582,327
------------
Waste Disposal Service & Equipment (0.21%)
Waste Systems International, Inc.* 12,600 50,400
------------
TOTAL COMMON STOCKS
(Cost $12,259,081) (78.71%) 19,094,392
------------
PREFERRED STOCK
Finance (1.09%)
Core Cap, Inc., Ser A/I, 10.00% (r) 11,100 263,514
------------
TOTAL PREFERRED STOCK
(Cost $277,500) (1.09%) 263,514
------------
INTEREST CREDIT PAR VALUE
RATE RATING (000s OMITTED)
-------- ------ --------------
BONDS
Retail (2.78%)
Brightpoint, Inc., Liquid Yield Option
Notes (LYONS) Zero-coupon
Convertible 03-11-18 0.00% B $1,900 674,500
------------
TOTAL BONDS
(Cost $444,093) (2.78%) 674,500
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (17.52%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $4,250 $4,250,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
4.65% 537
------------
TOTAL SHORT-TERM INVESTMENTS (17.52%) 4,250,537
--------- ------------
TOTAL INVESTMENTS (100.10%) 24,282,943
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.10%) (24,357)
--------- ------------
TOTAL NET ASSETS (100.00%) $24,258,586
========= ============
* Non-income producing security.
(r) The securities listed below are direct placement securities and are
restricted as to resale. The Fund has limited rights to registration
under the Securities Act of 1933 with respect to restricted securities
(not including rule 144A securities). In certain circumstances the Fund
may bear a portion of the cost of such registrations; otherwise, such
costs would be borne by the issuer. Additional information on these
restricted securities is as follows:
MARKET VALUE
AS A PERCENTAGE MARKET VALUE
ACQUISITION ACQUISITION OF FUND'S AS OF
DATE COST NET ASSETS FEBRUARY 29, 2000
----------- ----------- ---------- -----------------
Core Cap, Inc. (Common) 10-31-97 $222,000 0.75% $182,040
Core Cap, Inc. (Preferred) 10-31-97 277,500 1.09 263,514
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
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the International Equity Fund on February 29, 2000. It's divided into
four main categories: common stocks, warrants, preferred stocks and
short-term investments. Common stocks, 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
Australia (0.80%)
Publishing & Broadcasting Ltd. (Media) 2,030 $18,982
Telstra Corp. Ltd. (Telecom -- Services) 6,317 29,713
Westpac Banking Corp. Ltd. (Banks -- Foreign) 3,000 19,204
WMC Ltd. (Metal) 5,264 19,829
Woodside Petroleum Ltd. (Oil & Gas) 2,730 15,627
------------
103,355
------------
Belgium (0.00%)
Fortis (B)* (Insurance) 567 5
------------
Canada (2.52%)
Alcan Aluminium Ltd. (Metal) 1,000 32,901
Bombardier, Inc. (Diversified Operations) 1,420 28,531
Nortel Networks Corp. (Telecom -- Equipment) 1,505 166,783
Suncor Energy, Inc. (Oil & Gas) 2,500 95,284
------------
323,499
------------
China (0.08%)
Shandong International Power Development Co.
Ltd.* (Utilities) 98,000 10,199
------------
Denmark (0.17%)
Tele Danmark A/S (Telecom -- Services) 267 21,922
------------
Finland (2.84%)
Nokia AB (Telecom -- Equipment) 1,418 283,047
Nordic Baltic Holding AB (Banks -- Foreign) 4,399 23,543
Sonera Oyj (Telecom -- Services) 750 57,930
------------
364,520
------------
France (9.76%)
Alcatel SA (Telecom -- Equipment) 442 103,657
Bouygues SA (Building) 119 99,260
Canal Plus SA (Media) 100 28,254
Cap Gemini SA (Computers) 300 82,737
Carrefour SA (Retail) 378 57,410
Credit Lyonais SA* (Banks -- Foreign) 1,000 33,943
Dassault Systemes SA (Computers) 450 49,469
France Telecom SA (Telecom -- Services) 980 158,290
Lagardere SCA (Diversified Operations) 350 32,974
Legrand SA (Electronics) 144 24,578
Pinault-Printemps-Redoute SA (Retail) 220 44,360
PSA Peugeot Citroen SA (Automobile/Trucks) 222 45,833
Rexel SA (Electronics) 500 37,873
Schneider Electric SA (Machinery) 530 34,242
STMicroelectronics NV (Electronics) 300 59,594
Suez Lyonnaise des Eaux SA (Diversified
Operations) 400 65,958
Total Fina SA (Oil & Gas) 998 132,326
Valeo SA (Automobile/Trucks) 536 26,102
Vivendi SA (Diversified Operations) 1,164 136,938
------------
1,253,798
------------
Germany (4.95%)
Allianz AG (Insurance) 401 138,820
BASF AG (Chemicals) 800 36,952
Bayerische Hypo- und Vereinsbank AG (Banks --
Foreign) 439 23,833
Bayerische Motoren Werke AG (Automobile/Trucks) 1,042 26,788
Deutsche Telekom AG (Telecom -- Services) 952 79,041
Dresdner Bank AG (Banks -- Foreign) 600 28,645
SAP AG (Computers) 136 85,244
Siemens AG (Diversified Operations) 1,222 217,292
------------
636,615
------------
Hong Kong (4.33%)
Aeon Credit Service Co. Ltd. (Finance) 36,000 12,026
ASM Pacific Technology Ltd. (Electronics) 8,000 25,697
Cable & Wireless HKT Ltd. (Telecom -- Services) 9,162 30,548
Cheung Kong Holdings Ltd. (Real Estate
Operations) 5,000 67,134
China Resources Enterprises Ltd. (Real Estate
Operations) 16,000 20,661
Citic Pacific Ltd. (Diversified Operations) 4,000 20,095
Dah Sing Financial Group (Finance) 10,000 32,507
e-New Media Co. Ltd.* (Diversified Operations) 108,000 38,161
Guoco Group Ltd. (Finance) 6,000 11,911
HSBC Holdings Plc (Banks -- Foreign) 3,005 34,460
Hutchison Whampoa Ltd. (Diversified Operations) 4,000 62,702
JCG Holdings Ltd. (Finance) 45,000 21,104
Legend Holdings Ltd. (Computers) 14,000 64,757
Li & Fung Ltd. (Business Services -- Misc.) 8,000 31,145
Next Media Ltd.* (Printing -- Commercial) 142,000 70,244
QPL International Holdings Ltd.* (Electronics) 7,000 12,951
------------
556,103
------------
Indonesia (0.08%)
PT Bank Internasional Indonesia* (Banks --
Foreign) 745,000 10,027
------------
Ireland (0.27%)
CRH Plc (Building) 2,009 34,580
------------
Italy (5.86%)
ACEA SpA* (Utilities) 1,995 45,632
Banca Nazionale del Lavoro* (Banks -- Foreign) 9,395 33,973
Eni SpA (Oil & Gas) 5,135 23,917
Gruppo Editoriale L'Espresso (Media) 5,000 116,777
Mediaset SpA (Media) 1,559 37,884
Rolo Banca 1473 SpA (Banks -- Foreign) 2,150 35,784
Seat Pagine Gialle SpA (Media) 10,229 63,622
Tecnost Spa* (Telecom -- Services) 20,000 83,315
Telecom Italia Mobile SpA (Telecom -- Cellular) 14,604 199,269
Telecom Italia SpA (Telecom -- Services) 6,399 112,366
------------
752,539
------------
Japan (22.27%)
Bank of Tokyo-Mitsubishi, Ltd. (Banks --
Foreign) 6,000 73,440
Daiwa House Industry Co., Ltd. (Building) 3,000 20,503
Denso Corp. (Automobile/Trucks) 2,000 37,403
Fuji Heavy Industries Ltd. (Automobile/Trucks) 5,000 31,897
Fujitsu Ltd. (Computers) 5,000 166,083
Fujitsu Systems Construction Ltd.
(Engineering/R&D Services) 4,000 59,699
Ito-Yokado Co., Ltd. (Retail) 1,000 58,243
Japan Business Computer Co., Ltd. (Computers) 1,000 60,518
Marubeni Corp. (Diversified Operations) 31,000 126,105
NEC Corp. (Electronics) 7,000 156,391
Nihon Unisys, Ltd. (Computers) 1,000 27,301
Nikko Securities Co., Ltd. (The) (Broker
Services) 22,000 283,697
Nintendo Co. Ltd. (Leisure) 400 87,328
Nippon Telegraph & Telephone Corp. (Telecom --
Services) 10 138,326
Nomura Securities Co., Ltd. (Broker Services) 8,000 225,690
NTT Mobile Communication Network, Inc. (Telecom
- -- Cellular) 5 201,574
Orix Corp. (Leasing Companies) 700 121,036
Sakura Bank, Ltd. (The) (Banks -- Foreign) 19,000 108,413
Sekisui House, Ltd. (Building) 5,000 37,312
Sony Corp. (Electronics) 2,000 591,528
Takeda Chemical Industries, Ltd. (Medical) 3,000 169,268
Toyota Motor Corp. (Automobile/Trucks) 2,000 79,902
------------
2,861,657
------------
Mexico (1.06%)
Grupo Televisa SA, American Depositary Receipts
(ADR)* (Media) 417 32,031
Telefonos de Mexico SA (ADR) (Telecom --
Services) 1,582 104,017
------------
136,048
------------
Netherlands (4.74%)
Aegon NV (Insurance) 500 34,522
Akzo Nobel NV (Chemicals) 1,340 51,699
Dordtsche Petroleum-Industrie Maatschappij NV
(Diversified Operations) 2,624 129,679
Fortis (NL) NV (Insurance) 1,000 25,149
Getronics NV (Computers) 600 50,336
ING Groep NV (Banks -- Foreign) 1,000 50,645
Koninklijke Numico NV (Food) 931 30,030
Royal Philips Electronics NV (Electronics) 331 61,363
United Pan-Europe Communications NV* (Media) 370 73,017
Verenigde Nederlandse Uitgeversbedrijven NV
(Media) 818 56,517
Wolters Kluwer NV (Media) 1,294 46,181
------------
609,138
------------
Norway (0.23%)
Tomra Systems ASA (Machinery) 1,558 29,570
------------
Portugal (0.50%)
PT Multimedia Servicos SGPS SA* (Telecom --
Services) 500 63,692
------------
Singapore (0.67%)
DBS Group Holdings Ltd. (Banks -- Foreign) 2,000 24,717
Pacific Century Regional Developments Ltd.* (Real
Estate Operations) 2,000 37,482
Singapore Technologies Engineering Ltd.
(Engineering/R&D Services) 20,000 24,485
------------
86,684
------------
South Korea (1.49%)
Korea Telecom Corp. (Telecom -- Services) 400 33,772
Samsung Electronics Co. (Electronics) 370 83,741
Samsung Securities Co. Ltd. (Finance) 1,050 32,119
Shinhan Bank (Banks -- Foreign) 1,080 10,312
SK Corp.* (Oil & Gas) 1,370 30,886
------------
190,830
------------
Spain (4.02%)
Amadeus Global Travel Distribution SA (Class A)*
(Transport) 3,000 43,278
Banco Bilbao Vizcaya SA (Banks -- Foreign) 7,000 101,926
Banco Santander Central Hispano, SA (Banks --
Foreign) 9,002 94,619
Bankinter, SA (Banks -- Foreign) 700 44,213
Centros Comerciales Pryca, SA (Retail) 1,072 14,183
Telefonica SA* (Telecom -- Services) 6,196 178,348
Terra Networks, SA* (Computers) 311 40,486
------------
517,053
------------
Sweden (2.20%)
Ericsson (LM) Telefonaktiebolaget (Telecom --
Equipment) 2,346 224,896
Skandia Forsakrings AB (Insurance) 1,400 57,427
------------
282,323
------------
Switzerland (2.21%)
Adecco SA (Business Services -- Misc.) 81 64,158
Credit Suisse Group (Banks -- Foreign) 127 20,233
Novartis AG (Medical) 57 72,648
Roche Holding AG (Medical) 8 86,313
Zurich Allied AG (Insurance) 97 41,152
------------
284,504
------------
Taiwan (1.55%)
Advanced Semiconductor Engineering, Inc.* Global
Depositary Receipts (GDR) (Electronics) (R) 800 17,600
Asustek Computer, Inc. (GDR) (Computers) 2,350 41,478
China Steel Corp. (GDR) (Steel) 1,509 24,710
Quanta Computer, Inc. (Computers) 4,000 29,837
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 13,000 85,114
------------
198,739
------------
Thailand (0.05%)
Golden Land Property Development Pcl* (Real
Estate Operations) (Foreign Shares) 17,500 3,903
Golden Land Property Development Pcl* (Real
Estate Operations) 14,000 2,975
------------
6,878
------------
United Kingdom (18.64%)
ARM Holdings Plc* (Electronics) 800 60,357
Bank of Scotland (Banks -- Foreign) 3,701 33,245
Barclays Plc (Banks -- Foreign) 2,677 63,562
BP Amoco Plc (Oil & Gas) 25,190 194,463
British Sky Broadcasting Group Plc* (Media) 1,085 27,715
British Telecommunications Plc (Telecom --
Services) 10,074 175,737
Cable & Wireless Plc (Telecom -- Services) 2,000 41,425
Carlton Communications Plc (Media) 6,017 67,823
Centrica Plc (Utilities) 13,330 44,876
CMG Plc (Computers) 300 28,900
COLT Telecom Group Plc* (Telecom -- Services) 630 36,173
Compass Group Plc (Food) 4,733 56,040
Dialog Semiconductor Plc* (Electronics) 300 31,243
Dixons Group Plc (Retail) 1,372 29,457
EMAP Plc (Media) 3,000 63,322
Freeserve Plc* (Computers) 2,500 29,956
Glaxo Wellcome Plc (Medical) 3,493 83,764
Invensys Plc (Diversified Operations) 6,574 30,175
Jazztel Plc* (Telecom -- Services) 1,200 134,520
Kingfisher Plc (Retail) 6,000 44,519
Lloyds TSB Group Plc (Banks -- Foreign) 6,237 57,601
Logica Plc (Computers) 1,060 45,517
Marconi Plc (Telecom -- Equipment) 4,000 49,824
Misys Plc (Computers) 2,324 34,855
Pearson Plc (Media) 2,009 67,555
Prudential Corp. Plc (Insurance) 3,300 48,659
Reuters Group Plc (Business Services -- Misc.) 2,073 46,635
Sage Group Plc (Computers) 5,067 63,914
SEMA Group Plc (Computers) 1,655 35,455
SmithKline Beecham Plc (Medical) 6,024 67,712
Telewest Communications Plc* (Media) 5,609 38,519
Vodafone AirTouch Plc (Telecom -- Cellular) 90,048 503,953
WPP Group Plc (Advertising) 2,999 57,832
------------
2,395,303
------------
TOTAL COMMON STOCKS
(Cost $8,904,429) (91.29%) 11,729,581
------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs- Gesellschaft AG*
(Insurance) 2 137
------------
TOTAL WARRANTS
(Cost $90) (0.00%) 137
------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $8,904,519) (91.29%) 11,729,718
------------
PREFERRED STOCKS
Italy (0.31%)
Telecom Italia SpA (Telecom -- Services) 5,000 39,536
------------
TOTAL PREFERRED STOCKS
(Cost $30,171) (0.31%) 39,536
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (7.89%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.125% thru 7.500%, due 02-15-23 thru
11-15-24, and U.S. Treasury Notes,
5.500% thru 7.000% due 12-31-02 thru
07-15-06) -- Note A 5.79% $1,014 1,014,000
------------
Non-Cash Security Lending Collateral (1.14%)
U.S. Treasury Bonds, 3.625% thru
8.750%, due 05-15-20 thru 04-15-29,
and U.S. Treasury Notes, 3.375% thru
3.875%, due 01-15-07 thru 01-15-09** 146 146,180
------------
Cash Equivalents (5.64%)
Navigator Securities Lending Prime
Portfolio ** 724 724,039
------------
TOTAL SHORT-TERM INVESTMENTS (14.67%) 1,884,219
--------- ------------
TOTAL INVESTMENTS (106.27%) 13,653,473
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (6.27%) (805,450)
--------- ------------
TOTAL NET ASSETS (100.00%) $12,848,023
========= ============
* 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 $17,600 as of February
29, 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>
<TABLE>
<CAPTION>
Portfolio Concentration (Unaudited)
- ---------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of
other countries. The performance of the Fund is closely tied to the
economic conditions within the countries in which it invests. The
concentration of investments by country for individual securities held
by the Fund is shown in the schedule of investments. In addition, the
concentration of investments can be aggregated by various industry
groups. The table below shows the percentages of the Fund's investments
at February 29, 2000 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
- --------------------- --------------------
<S> <C>
Advertising 0.45%
Automobile/ Trucks 1.93
Banks -- Foreign 7.21
Broker Services 3.96
Building 1.49
Business Services -- Misc. 1.11
Chemicals 0.69
Computers 7.29
Diversified Operations 6.92
Electronics 9.71
Engineering/R&D Services 0.66
Finance 0.85
Food 0.67
Insurance 2.69
Leasing Companies 0.94
Leisure 0.68
Machinery 0.50
Media 5.75
Medical 3.73
Metal 0.41
Oil & Gas 3.83
Printing -- Commercial 0.55
Real Estate Operations 1.03
Retail 1.93
Steel 0.19
Telecom -- Cellular 7.04
Telecom -- Equipment 6.45
Telecom -- Services 11.82
Transport 0.34
Utilities 0.78
Short-Term Investments 14.67
-------
TOTAL INVESTMENTS 106.27%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
NOTE A --
ACCOUNTING POLICIES
John Hancock Active Bond Fund ("Active Bond Fund"), John Hancock
Dividend Performers Fund ("Dividend Performers Fund"), John Hancock
Medium Capitalization Growth Fund ("Medium Capitalization Growth Fund"),
John Hancock Small Capitalization Growth Fund ("Small Capitalization
Growth Fund"), John Hancock Small Capitalization Value Fund ("Small
Capitalization Value Fund") and John Hancock International Equity Fund
("International Equity Fund") (each, a "Fund," and collectively, the
"Funds") are separate portfolios of John Hancock Institutional Series
Trust (the "Trust") an open-end management investment company registered
under the Investment Company Act of 1940. The Trust, organized as a
Massachusetts business trust in 1994, consists of eleven series
portfolios: the Funds, John Hancock Independence Balanced Fund, John
Hancock Core Growth Fund, John Hancock Core Value Fund, John Hancock
Independence Diversified Core Equity Fund II and John Hancock
Independence Medium Capitalization Fund. The other five series of the
Trust are reported in separate financial statements. Prior to July 1,
1999, Medium Capitalization Growth Fund was known as John Hancock
Multi-Sector Growth Fund, John Hancock Core Growth Fund was known as
John Hancock Independence Growth Fund and John Hancock Core Value Fund
was known as John Hancock Independence Value Fund. Each Fund's class of
shares has equal rights as to voting, redemption, dividends and
liquidation within their respective Fund. The Trustees may authorize the
creation of additional portfolios from time to time to satisfy various
investment objectives.
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 share
holders. 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. Additionally, net capital losses attributable
to security transactions occurring after October 31, 1999 are treated as
arising on the first day (March 1, 2000) of the Funds' next taxable
year.
<TABLE>
<CAPTION>
POST
POST OCTOBER 31, 1999
CAPITAL LOSS OCTOBER 31, 1999 CURRENCY
CARRYFORWARD LOSS TREATED LOSS TREATED
EXPIRING AS ARISING AS ARISING
FUND FEBRUARY 28, 2008 MARCH 1, 2000 MARCH 1, 2000
- ---- ----------------- ------------- -------------
<S> <C> <C> <C>
Active Bond
Fund $49,819 $64,790 $--
Small
Capitalization
Value Fund -- -- 32
</TABLE>
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Funds record all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles.
DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the Funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that began with
the commencement of investment operations of the Funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Funds. Actual results
could differ from these estimates.
BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. 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 unsecured lines
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each of the funds based on its
borrowings. In addition, a commitment fee is charged per annum based on
the average daily unused portion of the line of credit, and is allocated
among the participating funds. The maximum loan balance for the Medium
Capitalization Growth Fund and Small Capitalization Growth Fund during
the year was $1,550,000 and $3,088,000, respectively. The annualized
interest rate charged during the year for the Medium Capitalization
Growth Fund and Small Capitalization Growth Fund ranged from 5.31% thru
6.00% and 4.50% thru 6.00%, respectively. At February 29, 2000, there
was no outstanding loan balance for the Medium Capitalization Growth
Fund and Small Capitalization Growth Fund. There was no borrowing
activity for the year ended February 29, 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 February 29, 2000, the International
Equity Fund loaned securities having a market value of $828,287
collateralized by cash and securities in the amount of $870,219. The
cash portion of the investment was invested in a short-term instrument.
At February 29, 2000, there were no outstanding security loans for all
other Funds.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 p.m.,
London time, on the date of any determination of the net asset value of
the Funds. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds, other than
Dividend Performers Fund, may enter into forward foreign currency
exchange contracts as a hedge against the effect of fluctuations in
currency exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the
contracts are marked to market daily at the applicable foreign currency
exchange rates. Any resulting unrealized gains and losses are included
in the determination of the Funds' daily net assets. The Funds record
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may arise
upon entering these contracts from the potential inability of
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Funds' Statement of Assets and
Liabilities. The Funds may also purchase and sell forward contracts to
facilitate the settlement of foreign currency denominated portfolio
transactions, under which it intends to take delivery of the foreign
currency. Such contracts normally involve no market risk if they are
offset by the currency amount of the underlying transaction.
Open forward foreign currency exchange contracts for the Trust at
February 29, 2000 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ------ ------------
<S> <C> <C> <C>
ACTIVE BOND
Buys
Euro Currency 20,515 MAR 00 ($994)
============
Sells
Euro Currency 20,515 MAR 00 $1,309
============
INTERNATIONAL EQUITY
Buys
Euro Currency 52,752 MAR 00 ($1,693)
Pound Sterling 13,747 MAR 00 (259)
------------
($1,952)
============
Sells
Pound Sterling 33,166 MAR 00 $624
============
</TABLE>
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 the Fund enters
into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the value of
the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange on which it trades. Subsequent
payments, known as "variation margin," to and from the broker are made
on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark
to market," are recorded by the Funds as unrealized gains or losses.
When the contracts are closed, the Funds recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the
contracts may not correlate with changes in the value of the underlying
securities.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
Open financial futures contracts for the Funds at February 29, 2000 were
as follows:
<TABLE>
<CAPTION>
OPEN UNREALIZED
EXPIRATION CONTRACTS POSITION DEPRECIATION
- ---------- --------- ---------- ------------
<S> <C> <C> <C>
DIVIDEND PERFORMERS
MAR 00 3 S&P 500 Long $59,771
===========
</TABLE>
At February 29, 2000, the Dividend Performers Fund had deposited $56,250
in a segregated account to cover margin requirements on open financial
futures contracts.
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 certain financial instruments. Writing puts and buying
calls will tend to increase the Fund's exposure to the underlying
instrument and buying puts and writing calls will tend to decrease the
Fund's 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 year ended
February 29, 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:
<TABLE>
<CAPTION>
FUND RATE
- ---- ----
<S> <C>
Active
Bond Fund 0.50% of average daily net assets up to $1.5 billion
0.45% of such assets in excess of $1.5 billion
Dividend
Performers
Fund 0.60% of average daily net assets up to $500 million
0.55% of such assets in excess of $500 million
Medium
Capitalization
Growth Fund 0.80% of average daily net assets up to $500 million
0.75% of such assets in excess of $500 million
Small
Capitalization
Growth Fund 0.80% of average daily net assets
Small
Capitalization
Value Fund 0.70% of average daily net assets up to $500 million
0.65% of such assets in excess of $500 million
International
Equity Fund 0.90% of average daily net assets up to $500 million
0.65% of such assets in excess of $500 million
</TABLE>
Effective September 12, 1995, the Adviser agreed to limit the Funds'
expenses further to the extent required to prevent expenses from
exceeding: 0.60% of Active Bond Fund's average daily net assets, 0.70%
of Dividend Performers Fund's average daily net assets, 0.90% of Medium
Capitalization Growth Fund's average daily net assets, 0.90% of Small
Capitalization Growth Fund's average daily net assets, 0.80% of Small
Capitalization Value Fund's average daily net assets, and 1.00% of
International Equity Fund's average daily net assets. The Adviser
reserves the right to terminate this limitation in the future.
Accordingly, for the year ended February 29, 2000, the reduction in the
Funds' expenses with any additional amounts not borne by the Funds by
virtue of the expense limit amounted to $116,309 for the Active Bond
Fund, $60,247 for the Dividend Performers Fund, $78,665 for the Medium
Capitalization Growth Fund, $92,484 for the Small Capitalization Growth
Fund, $83,513 for the Small Capitalization Value Fund and $161,337 for
the International Equity Fund.
John Hancock Advisers International, Ltd. ("JHAI") served as subadviser
to International Equity Fund pursuant to a sub-advisory agreement with
that Fund, the Adviser and JHAI. JHAI was formed in 1987 and is a wholly
owned subsidiary of the Adviser. JHAI provided international investment
research and advisory services to investment companies and institutional
clients. The Adviser paid JHAI a monthly management fee equivalent, on
an annual basis, to the sum of (a) 70% of the advisory fee payable on
the Fund's average daily net assets up to $500 million and (b) 90% of
the advisory fee payable on the Fund's assets exceeding $500 million.
The sub-advisory contract with JHAI was terminated March 1, 2000.
On December 1, 1999, the shareholders of the International Equity Fund
approved a new subadvisory contract between the Adviser and Indocam
International Investments Services ("IIIS"), effective January 1, 2000.
Under the new contract, IIIS will provide advice and recommendations
regarding the International Equity Fund's investments. As of January 1,
2000, the Adviser will pay a portion of its advisory fee from
International Equity Fund to IIIS at the following rate: 55% of the
advisory fee payable by the Fund. The Funds are not responsible for
payment of these subadvisory fees.
The Funds have a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the year
ended February 29, 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
year 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, Ms. Anne C. Hodsdon and Mr.
Richard S. Scipione and 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 investment
had no impact on the operation of the Funds.
NOTE C --
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, excluding
short-term obligations, for the year ended February 29, 2000 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Active Bond Fund
U.S. Government
Securities $6,499,518 $7,094,240
Other Investments 7,636,190 8,089,457
Dividend Performers
Fund 7,429,240 12,043,231
Medium
Capitalization
Growth Fund 34,837,305 31,268,204
Small Capitalization
Growth Fund 11,504,258 9,622,177
Small
Capitalization
Value Fund 14,930,588 12,602,751
International
Equity Fund 13,258,417 11,742,860
</TABLE>
At February 29, 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
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Active Bond
Fund $4,420,131 $9,239 $213,942 ($204,703)
Dividend
Performers
Fund 12,360,261 3,314,362 875,014 2,439,348
Medium
Capitalization
Growth Fund 24,054,207 14,254,729 1,122,424 13,132,305
Small
Capitalization
Growth Fund 5,633,281 3,677,155 185,700 3,491,455
Small
Capitalization
Value Fund 17,255,380 7,634,345 607,319 7,027,026
International
Equity Fund 10,923,477 3,252,341 522,345 2,729,996
</TABLE>
NOTE D ---
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended February 29, 2000, reclassifications have been
made in each Fund's capital accounts to report these balances on a tax
basis, excluding certain temporary differences. These reclassifications,
which have no impact on the net asset value of the Funds, are primarily
attributable to differences in the treatment of net operating losses and
foreign currency gains and losses under federal tax rules versus
generally accepted accounting principles. The calculation of net
investment income per share in the financial highlights excludes these
adjustments.
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
CAPITAL NET INVESTMENT NET REALIZED
PAID-IN INCOME/(LOSS) GAIN (LOSS)
------------- -------------- ------------
<S> <C> <C> <C>
Active Bond Fund ($29) ($345) $374
Dividend Performers
Fund (90) 24 66
Medium Capitalization
Growth Fund (149) 76,297 (76,148)
Small Capitalization
Growth Fund (10) 23,148 (23,138)
Small Capitalization
Value Fund (45,267) 45,139 128
International Equity
Fund (38) (8,395) 8,433
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
John Hancock Institutional Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of John Hancock Institutional
Series Trust (comprising, respectively, John Hancock Active Bond Fund,
John Hancock Dividend Performers Fund, John Hancock Medium
Capitalization Growth Fund (formerly John Hancock Multi-Sector Growth
Fund), John Hancock Small Capitalization Growth Fund, John Hancock
Small Capitalization Value Fund and John Hancock International Equity
Fund (the "Funds") as of February 29, 2000, the related statements of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of February 29, 2000 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of each
of the Funds constituting John Hancock Institutional Series Trust at
February 29, 2000, the results of their operations, the changes in their
net assets, and their financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 2000
TAX INFORMATION (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Funds for the fiscal
year ended February 29, 2000.
The Funds designated the following as long-term capital gain dividends
during the fiscal year ended February 29, 2000.
Additionally, the following dividend distributions qualify for the
dividends received deduction available to corporations.
<TABLE>
<CAPTION>
LONG-TERM DIVIDENDS
CAPITAL GAINS RECEIVED
DESIGNATED DEDUCTION
---------------- ----------
<S> <C> <C>
Active Bond Fund $ -- --%
Dividend Performers Fund 1,568,997 100.00
Medium Capitalization Growth Fund 434,617 1.80
Small Capitalization Growth Fund 375,371 0.39
Small Capitalization Value Fund 649,481 4.53
International Equity Fund 341,465 --
</TABLE>
SHAREHOLDER MEETING
On December 1, 1999, the shareholders of John Hancock International
Equity Fund approved a sub-advisory contract between the Adviser and
Indocam International Investment Services (405,569 FOR, 9,675 AGAINST
and 183,540 ABSTAINING).
NOTES
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NOTES
[This page intentionally left blank.]
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101 Huntington Avenue, Boston, MA 02199-7603
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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."]
KB00A 2/00
4/00
The latest report from your
Fund's management team
ANNUAL REPORT
Institutional Series Trust
Independence Balanced Fund
Independence Diversified Core Equity Fund II
Independence Medium Capitalization Fund
FEBRUARY 29, 2000
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right. A tag line below reads "A Global Investment Management Firm."]
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 35
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
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 and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, the market's advances were restricted to an
increasingly select group of stocks -- primarily in the technology and
communications areas. Even those gains were accompanied by tremendous
levels of daily volatility. But many other stocks, including the
household blue-chip names, fell in response to a tough combination of
investor apathy, rising interest rates and earnings concerns.
In this same period, bonds struggled through one of their worst years in
more than two decades, as the strength of the U.S. economy and the
rebound of many others around the world provoked inflation fears. Though
their longer-term outlook looks brighter, in many instances bond mutual
fund investors have actually lost a little ground or made only slight
advances lately.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds that
target a variety of market segments. This strategy, executed under the
guidance of a seasoned investment professional, could provide you with a
better chance of both realizing results and weathering the market's
changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JANE A. SHIGLEY AND JEFFREY B. SAEF
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Balanced Fund
Technology leads narrow stock gains; rising rates hurt bonds
Driven almost exclusively by gains in technology companies, the stock
market continued to move higher during the past 12 months. Bonds, on the
other hand, came under pressure as interest rates moved higher and
inflation worries persisted. For the 12-month period ended February 29,
2000, John Hancock Independence Balanced Fund posted a total return of
1.83% at net asset value, compared to the average balanced fund's 7.34%
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 6.54%. For historical performance
information, see page six.
"...a
diversified
approach
such as ours
could not
compete..."
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into four sections (from top to
left): Short-term Investments 2%, U.S. Government & Agencies 18%,
Corporate Bonds 20% and Common Stock 60%. A note below the chart reads
"As a percentage of net assets on February 29, 2000."]
Performance review
The bulk of the Fund's lag can be attributed to two conditions that
defined the stock market during the period. The environment was one in
which high price-to-earnings stocks dramatically outperformed.
Furthermore, the market's gains were almost exclusively concentrated in
technology and telecommunications stocks, especially in the fourth
quarter of 1999. While the Fund's weighting in tech and telecom
companies was in line with the overall market throughout the year, we
did not hold the extreme high-flyers in those sectors. In our view,
their expected growth did not justify the extraordinary P/E multiples
they were commanding. In addition, a diversified approach such as ours
could not compete in a market dominated by two sectors producing most of
the returns. Our asset allocation was neutral, with a relatively
constant 60% stake in stocks and 40% in bonds.
Stocks: Leaders and laggards
Not surprisingly, some of our best-performing stocks during the year
were technology companies. Texas Instruments, a dominant supplier of
semiconductor chips for wireless communications, was one of our biggest
gainers. Rebounding semiconductor chip prices also helped boost
Teradyne, a supplier of semiconductor testing equipment, and Intel, the
dominant supplier of chips for the personal computer industry. Energy
companies rebounded in the second half of the period when oil prices
climbed, helping holdings such as BP Amoco. Other big winners included
CBS, buoyed by rising advertising revenues, and Home Depot, which
enjoyed impressive sales and earnings growth.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 1% with 0% at the bottom and
8% at the top. The first bar represents the 1.83% total return for John
Hancock Independence Balanced Fund. The second bar represents the 7.34%
total return for Average balanced fund. The third bar represents the
6.54% 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 were health-care companies, such as drug distributor
Cardinal Health, which faltered under growing pressure to control costs.
Toy maker Mattel posted sizable losses stemming from integration pains
associated with its acquisition of The Learning Company. Compaq
Computer, too, had problems with its acquisition of Digital Equipment
Corporation. MCI WorldCom didn't do especially well due to competitive
pricing pressures among long-distance carriers.
Bonds weaken
In response to rising interest rates, inflation fears and generally weak
demand, bonds slumped during the past 12 months. The Federal Reserve
had raised interest rates on four separate occasions to fight potential
inflationary pressures resulting from very strong U.S. economic growth
and recovering economies overseas. While there were virtually no signs
that inflation was on the rise throughout the year, fear overwhelmed
reality.
During the year, we kept a relatively light stake in Treasuries,
concentrating instead on fixed-income securities that offered higher
yields, including corporate bonds. At times this focus hurt performance
and at times it helped. For example, a supply glut put pressure on
agency and corporate securities last summer and fall, as many issuers
concentrated their issuance then in order to sidestep potential
Y2K-related market volatility later. As supply abated in the final
months of 1999, however, agency and corporate securities gained ground
and aided our performance. The same held true for mortgage securities,
which ebbed and flowed as supply grew when home loan refinancing
activity intensified and then contracted when interest rates rose.
"...potentially
higher
interest
rates over
the near
term could
cause
further
volatility."
Outlook
Our overall stock market outlook remains favorable, although potentially
higher interest rates over the near term could cause further volatility.
With the notable exception of Japan, world economies are getting
stronger. We believe that the U.S. will continue to grow, albeit at a
somewhat slower pace in response to the interest-rate increases we've
seen over the past year. From a profitability perspective, strong
economic growth should translate into attractive profit growth. That
said, rising oil prices ultimately may cut into profit growth. We think
interest rates will drift higher in response to strong economic
conditions over the near term, but should stabilize or fall near year
end.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (7/6/95)
---------- ----------
Cumulative Total Returns 7.15% 84.22%
Average Annual Total Returns(1) 7.15% 14.58%
YIELD
As of February 29, 2000
SEC 30-DAY
YIELD
----------
John Hancock Independence Balanced Fund(1) 2.69%
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 return for the one-year and since inception periods
would have been 7.10% and 13.69%, respectively. Without the limitation
of expenses, the yield would have been 2.63%.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in the John Hancock
Independence Balanced Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$250,000 investment in a 50/50 blend of the Standard & Poor's 500 Index
and the Lehman Brothers 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 $452,569 as of
February 29, 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 $435,478 as of February
29, 2000.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Diversified
Core Equity Fund II
Growth feast, value famine
The stock market maintained its upward bias during the past year, but
gains were concentrated in the technology, telecommunications and
biotechnology sectors. The broadening we saw in April and May did not
last. If anything, market leadership became narrower as the period wore
on. After a shaky third quarter, the popular averages were lifted by a
powerful fourth-quarter rally, with Internet shares leading the way.
Even within growth sectors, the stocks with the highest
price-to-earnings ratios -- a common measure of stock value --
outperformed those with lower P/E ratios. Meanwhile, many high-quality
stocks with solid earnings prospects were passed by in the rush to get
on the technology bandwagon.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings." The first listing is Microsoft 4.7%, the second is General
Electric 4.6%, the third Cisco Systems 4.5%, the fourth Intel 4.0% and
the fifth Citigroup 2.9%. A note below the table reads "As a percentage
of net assets on February 29, 2000."]
Even aggressive tightening action by the Federal Reserve Board could not
spook technology investors. The Fed raised short-term interest rates in
June, August, November and February, as economic growth continued to be
stronger than expected. While higher rates contributed to sluggish
performance in many market sectors, technology stocks shrugged off each
hike and surged higher. This divergence was especially evident during
the first two months of 2000, when we frequently saw a rising Nasdaq
Composite Index, reflecting that yardstick's heavy technology
representation, and a falling Dow Jones Industrial Average and S&P 500
Index.
"Health care
repeated as
one of the
Fund's
weaker
sectors..."
Performance review
The Fund's strategy of purchasing undervalued stocks of companies with
improving fundamentals did not work well in the recent market
environment. Investors' bias toward the extreme-growth end of the
growth/value spectrum made it difficult for any investment approach that
incorporated sensitivity to stock prices. The Fund's emphasis on
diversification also hurt because gains were so narrowly concentrated in
just a few sectors. For the year ending February 29, 2000, John Hancock
Independence Diversified Core Equity Fund II returned 1.99%, slightly
behind the 3.14% gain posted by the average large-cap value fund,
according to Lipper, Inc. (Lipper recently introduced new competitive
categories that more accurately reflect the average portfolio holdings
of the funds they track.) See page nine for historical performance. The
Fund's results were also more modest than the Standard & Poor's 500
Index, which returned 11.73% over the same period. With the addition of
technology stocks such as QUALCOMM (one of 1999's best performers),
America Online, Microsoft and Yahoo!, the S&P 500 has become
increasingly technology-sensitive, which helped its performance.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 2% with 0% at the bottom and
12% at the top. The first bar represents the 1.99% total return for John
Hancock Independence Diversified Core Equity Fund II. The second bar
represents the 3.14% total return for Average large-cap value fund. The
third bar represents the 11.73% 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."]
Technology and health care repeat
A number of the Fund's best performers were once again technology
holdings. Intel benefited from strengthening demand at the high end of
the semiconductor price spectrum, where it is most dominant. Investors
also bought Intel in anticipation of Microsoft's recent rollout of its
Windows 2000 operating system, which requires personal computers with
faster microprocessors. Another semiconductor holding that helped
performance was Texas Instruments. The company's main market is the
wireless com munications industry, which experienced exploding demand
during the period. Finally, Citigroup was a strong performer, bucking
the trend toward lower share prices in the financial services sector.
The company continued to benefit from the synergies of the
Citicorp/Salomon Smith Barney merger.
Health care repeated as one of the Fund's weaker sectors, with Cardinal
Health, HEALTHSOUTH and Omnicare all detracting from performance. We cut
back or eliminated these positions. Philip Morris was another
disappointment. The company failed to make meaningful progress in the
smoking-related lawsuits filed against it. We still hold the stock,
which is very cheap by almost any valuation method. Another consumer
holding, Anheuser-Busch, was hurt by concerns about higher interest
rates and pricing power. We like the longer-term prospects for this
stock and maintained a position in it.
"...more
robust
growth world
wide should
lead to a
broadening
of investor
interest..."
Outlook
With Asia recovering from its deep slump and European economic growth
gaining momentum, one dominant trend during the coming year could be a
strengthening of demand abroad, which represents potentially greater
demand for U.S. products and services. On the other hand, we face the
possibility of more interest-rate hikes in the U.S. However, if the Fed
can achieve its goal of slowing growth enough to keep inflation in check
without pushing the economy into recession, stocks should do reasonably
well. Overall, more robust growth worldwide should lead to a broadening
of investor interest beyond the technology sector, which should be
constructive for the market and the Fund.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (3/10/95)
---------- ----------
Cumulative Total Returns 11.59% 184.18%
Average Annual Total Returns(1) 11.59% 24.23%
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 year ended February
29, 2000, the Fund's expense ratio was 0.64% of the Fund's average daily
net assets. Without the limitation of expenses, the average annual total
return for the since inception period would have been 24.22%.
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 $767,050 as of February 29, 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 $648,493 as of February 29, 2000.]
BY STEPHEN LANZENDORF FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Independence Medium
Capitalization Fund
Mid-cap growth shares push higher
The past year was a positive one for mid-cap stocks. Although it began
with investors concentrating their buying in the large-cap sector, April
and May saw a broadening of the rally to include mid- and small-cap
shares, as well as value and cyclical stocks. Interest in value
investing quickly faded, but growth stocks of all capitalizations
continued to perform well throughout the rest of the period, with the
technology, telecommunications and biotechnology sectors leading the
way. Particularly noteworthy was the powerful fourth-quarter rally
spearheaded by Internet shares. Even within growth sectors, the stocks
with the highest price-to-earnings ratios -- a common measure of stock
values -- outperformed those with lower P/E ratios. A red-hot market for
initial public offerings contributed to the frenzied buying of
technology shares. Meanwhile, many high-quality stocks with solid
earnings prospects were passed by in the rush to get on the technology
bandwagon.
"The Fund's
emphasis
on diversifi-
cation also
hurt because
gains were
so narrowly
concen-
trated..."
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings." The first listing is VERITAS Software 5.7%, the second is
Siebel Systems 3.0%, the third Vitesse Semiconductor 2.3%, the fourth
Altera 2.2% and the fifth Maxim Integrated Products 2.0%. A note below
the table reads "As a percentage of net assets on February 29, 2000."]
The primary negative influence on share prices during the period was
rising interest rates. The Fed raised short-term rates in June, August,
November and February, as economic growth continued to be stronger than
expected. While higher interest rates contributed to sluggish
performance in many market sectors, technology stocks shrugged off each
hike and surged higher.
Performance review
The Fund's strategy of purchasing undervalued stocks of companies with
improving fundamentals was out of step with the prevailing sentiment
during the period. Investors' bias toward the extreme growth end of the
growth/value spectrum made it difficult for any investment approach that
incorporated sensitivity to the normal measures of value. The Fund's
emphasis on diversification also hurt because gains were so narrowly
concentrated in just a few sectors. For the year ending February 29,
2000, John Hancock Independence Medium Capitalization Fund returned
14.18% at net asset value, well ahead of the 1.12% return of the average
multi-cap value funds, according to Lipper, Inc. (Lipper recently
introduced new competitive categories that more accurately reflect the
average portfolio holdings of the funds they track.) However, the Fund
was left behind by the relatively technology-sensitive Standard & Poor's
MidCap 400 Index, which returned 30.47%. See page 12 for historical
performance information.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 5% with 0% at the bottom and
35% at the top. The first bar represents the 14.18% total return for
John Hancock Independence Medium Capitalization Fund. The second bar
represents the 1.12% total return for Average multi-cap value fund. The
third bar represents the 30.47% 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."]
Positives and negatives
A number of the Fund's technology holdings did well. The robust Internet
software group was represented by VERITAS Software, the Fund's largest
holding for much of the period, as well as Citrix Systems and Siebel
Systems. These companies are all involved in various aspects of helping
companies store and manage their data on the Internet. Semiconductor
manufacturers such as Analog Devices and Altera, both suppliers of the
burgeoning wireless communications market, also turned in strong
performances. Another company in that industry, Vitesse Semiconductor,
supplies high-speed chips for the fiber-optics market and benefited from
the trend toward upgrading to fiber-optics communications networks.
Biogen was a winner in the outperforming biotechnology sector.
Offsetting some of the technology gains were poor performances in other
sectors. Service Corp. International, an operator of funeral homes, felt
the pinch from decreasing mortality rates and management problems. Toy
manufacturer Mattel faltered due to missteps in product development and
difficulty in digesting a recent acquisition. We sold both stocks. On
the other hand, we still hold Black & Decker, which was buffeted by the
negative sentiment brought on by higher interest rates that afflicted
many companies in the retail sector, but it remains a promising stock,
in our opinion.
"Offsetting
some of the
technology
gains were
poor perfor-
mances in
other
sectors."
Outlook
With Asia recovering from its deep slump and European economic growth
gaining momentum, one dominant trend during the coming year could be a
strengthening of demand abroad, which represents potentially greater
demand for U.S. products and services. On the other hand, we face the
possibility of more interest-rate hikes in the U.S. However, if the Fed
can achieve its goal of slowing growth enough to keep inflation in check
without pushing the economy into recession, we look for a reasonably
favorable environment for mid-cap stocks and the market overall. More
robust growth worldwide should lead to a broadening of investor interest
beyond the technology sector, which would be constructive for the market
and the Fund.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
---------- ----------
Cumulative Total Returns 11.04% 103.47%
Average Annual Total Returns(1) 11.04% 18.21%
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 10.56% and 16.86%, respectively.
WHAT HAPPENED TO
A $250,000 INVESTMENT...
The chart below shows how much a $250,000 investment in the John Hancock
Independence Medium Capitalization Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the 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 $568,024 as of February 29, 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 $508,675 as of February 29, 2000.]
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
February 29, 2000
- -----------------------------------------------------------------------------------------------------------
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 -- $30,537,731,
$330,538,049 and $10,697,128,
respectively) $36,379,700 $422,588,619 $12,202,416
Corporate bonds (cost -- $12,598,194,
none and none, respectively) 12,255,692 -- --
U.S. government and agencies securities
(cost -- $11,056,689, none and none,
respectively) 11,092,177 -- --
Joint repurchase agreement (cost --
$9,082,000, $185,000 and $144,000,
respectively) 9,082,000 185,000 144,000
Corporate savings account 624 136,201 276
----------------- ----------------- -----------------
68,810,193 422,909,820 12,346,692
Receivable for investments sold 3,918,590 5,562,505 99,399
Receivable for shares sold -- 13,981 --
Dividends receivable 45,330 580,297 11,342
Interest receivable 260,151 109 25
Deferred organization expenses --
Note A 647 39 1,017
Receivable from John Hancock Advisers,
Inc. -- Note B 54,325 -- --
Other assets 3,115 37,364 623
----------------- ----------------- -----------------
Total Assets 73,092,351 429,104,115 12,459,098
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 12,257,639 2,579,678 --
Payable for shares repurchased -- 125,562 2,866
Miscellaneous payable -- 4,843 --
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B -- 462,187 964
Accounts payable and accrued expenses 185,345 55,848 33,443
----------------- ----------------- -----------------
Total Liabilities 12,442,984 3,228,118 37,273
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 53,199,304 304,654,433 10,385,438
Accumulated net realized gain on
investments 1,710,284 28,803,756 527,532
Net unrealized appreciation of
investments 5,534,955 92,050,570 1,505,288
Undistributed net investment income 204,824 367,238 3,567
----------------- ----------------- -----------------
Net Assets $60,649,367 $425,875,997 $12,421,825
==========================================================================================================
Net Asset Value Per Share:
(Based on 5,453,332, 29,925,095 and
997,557 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value) $11.12 $14.23 $12.45
==========================================================================================================
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 February 29,
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
Year ended February 29, 2000
- -----------------------------------------------------------------------------------------------------------
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 $3,565, $44,353 and $608,
respectively) $552,250 $6,336,452 $147,733
Interest (including income on
securities loaned of none, $111 and
none, respectively) 1,834,568 213,478 14,953
----------------- ----------------- -----------------
2,386,818 6,549,930 162,686
----------------- ----------------- -----------------
Expenses:
Investment management fee -- Note B 528,389 2,710,449 90,053
Custodian fee 56,724 209,654 19,181
Registration and filing fees 45,578 52,957 26,244
Transfer agent fee -- Note B 37,742 271,045 5,628
Auditing fee 25,664 32,489 17,164
Accounting and legal services fee --
Note B 13,666 98,578 2,048
Printing 8,191 7,342 7,774
Miscellaneous 4,542 22,158 684
Trustees' fees 4,802 32,561 511
Organization expense -- Note A 1,883 1,898 1,754
Legal fees 956 7,542 333
Interest expense -- Note A -- 2,854 --
----------------- ----------------- -----------------
Total Expenses 728,137 3,449,527 171,374
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions -- Note B (48,421) -- (58,763)
- ----------------------------------------------------------------------------------------------------------
Net Expenses 679,716 3,449,527 112,611
- ----------------------------------------------------------------------------------------------------------
Net Investment Income 1,707,102 3,100,403 50,075
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold 4,213,547 66,562,963 1,122,181
Change in net unrealized appreciation/
depreciation of investments (4,011,488) (53,039,312) 280,163
----------------- ----------------- -----------------
Net Realized and Unrealized
Gain on Investments 202,059 13,523,651 1,402,344
- ----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $1,909,161 $16,624,054 $1,452,419
==========================================================================================================
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
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $1,768,480 $1,707,102 $4,155,133 $3,100,403
Net realized gain on investments
sold 5,998,751 4,213,547 71,775,828 66,562,963
Change in net unrealized
appreciation/depreciation of
investments 2,931,412 (4,011,488) 17,841,527 (53,039,312)
----------------- ----------------- ----------------- -----------------
Net Increase in Net Assets from
Operations 10,698,643 1,909,161 93,772,488 16,624,054
----------------- ----------------- ----------------- -----------------
Distributions to Shareholders*
Dividends from net investment income (1,883,494) (1,773,614) (4,534,833) (3,143,693)
Distributions from net realized
gain on investments sold (4,942,695) (4,431,308) (74,134,615) (54,986,456)
----------------- ----------------- ----------------- -----------------
Total Distributions to
Shareholders (6,826,189) (6,204,922) (78,669,448) (58,130,149)
----------------- ----------------- ----------------- -----------------
From Fund Share Transactions: **
Shares sold 22,172,670 17,378,820 141,552,444 138,388,241
Shares issued to shareholders in
reinvestment of distributions 6,826,699 6,205,436 77,658,752 58,111,697
----------------- ----------------- ----------------- -----------------
28,999,369 23,584,256 219,211,196 196,499,938
Less shares repurchased (27,019,194) (41,608,218) (254,111,398) (281,414,101)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,980,175 (18,023,962) (34,900,202) (84,914,163)
----------------- ----------------- ----------------- -----------------
Net Assets:
Beginning of period 77,116,461 82,969,090 572,093,417 552,296,255
----------------- ----------------- ----------------- -----------------
End of period (including
undistributed net investment
income of $270,826, $204,824,
$409,597 and $367,238,
respectively) $82,969,090 $60,649,367 $552,296,255 $425,875,997
================= ================= ================= =================
The Statement of Changes in Net Assets shows how the value of each
Fund's net assets has changed since the end of the previous period. The
difference reflects net investment income, any investment gains and
losses, distributions paid to shareholders and any increase or decrease
in money shareholders invested in each Fund. The footnotes illustrate
the number of Fund shares sold, reinvested and repurchased during the
period, along with the per share amount of distributions made to
shareholders of each Fund for the period indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
INDEPENDENCE INDEPENDENCE DIVERSIFIED
BALANCED FUND CORE EQUITY FUND II
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* Distributions to Shareholders:
Per share dividends from net
investment income $0.2864 $0.2837 $0.1350 $0.0940
----------------- ----------------- ----------------- -----------------
Per share distributions from net
realized gain on investments sold $0.7715 $0.8400 $2.3923 $1.7959
----------------- ----------------- ----------------- -----------------
**Analysis of Fund Share Transactions:
Shares sold 1,880,717 1,435,960 8,858,010 8,579,715
Shares issued to shareholders in
reinvestment of distributions 573,736 531,732 4,981,738 3,810,449
----------------- ----------------- ----------------- -----------------
2,454,453 1,967,692 13,839,748 12,390,164
Less shares repurchased (2,286,756) (3,434,169) (15,920,888) (17,676,305)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 167,697 (1,466,477) (2,081,140) (5,286,141)
================= ================= ================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- -------------------------------------------------------------------------------
INDEPENDENCE MEDIUM
CAPITALIZATION FUND
---------------------------------------
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
- -------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $60,605 $50,075
Net realized gain on investments sold 1,069,926 1,122,181
Change in net unrealized
appreciation/depreciation of
investments (1,128,728) 280,163
----------------- -----------------
Net Increase in Net Assets from
Operations 1,803 1,452,419
----------------- -----------------
Distributions to Shareholders: *
Dividends from net investment income (63,104) (51,586)
Distributions from net realized
gain on investments sold (958,878) (1,005,020)
----------------- -----------------
Total Distributions to
Shareholders (1,021,982) (1,056,606)
----------------- -----------------
From Fund Share Transactions: **
Shares sold 3,319,841 3,498,877
Shares issued to shareholders in
reinvestment of distributions 1,021,983 1,056,809
----------------- -----------------
4,341,824 4,555,686
Less shares repurchased (2,636,138) (2,936,957)
----------------- -----------------
Net Increase 1,705,686 1,618,729
----------------- -----------------
Net Assets:
Beginning of period 9,721,776 10,407,283
----------------- -----------------
End of period (including
undistributed net investment
income of $4,774 and $3,567,
respectively) $10,407,283 $12,421,825
================= =================
* Distributions to Shareholders
Per share dividends from net
investment income $0.0860 $0.0602
----------------- -----------------
Per share distributions from net
realized gain on investments sold $1.3068 $1.1721
----------------- -----------------
**Analysis of Fund Share Transactions:
Shares sold 256,677 275,468
Shares issued to shareholders in
reinvestment of distributions 84,531 89,333
----------------- -----------------
341,208 364,801
Less shares repurchased (207,351) (231,976)
----------------- -----------------
Net Increase 133,857 132,825
================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Balanced Fund
Financial Highlights
The following tables include selected data for a share outstanding
throughout each period, total investment return, key ratios and
supplemental data.
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
JULY 6, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.25 $9.94 $11.42 $11.99
------------- ------------- ------------- ------------- -------------
Net Investment Income (3) 0.25 0.38 0.38 0.26 0.27
Net Realized and Unrealized
Gain (Loss) on Investments 0.63 0.73 1.60 1.37 (0.02)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.88 1.11 1.98 1.63 0.25
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.13) (0.34) (0.35) (0.29) (0.28)
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)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $9.25 $9.94 $11.42 $11.99 $11.12
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (6) 10.42%(2) 12.36% 20.44% 14.50% 1.83%
Total Adjusted Investment
Return at Net Asset Value (6,7) 7.36%(2) 11.62% 20.28% 14.45% 1.77%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $5,155 $13,093 $77,116 $82,969 $60,649
Ratio of Expenses to Average
Net Assets 0.90%(1) 0.90% 0.90% 0.90% 0.90%
Ratio of Adjusted Expenses
to Average Net Assets (4,5) 5.58%(1) 1.64% 1.06% 0.95% 0.96%
Ratio of Net Investment
Income to Average Net
Assets 3.96%(1) 3.96% 3.52% 2.26% 2.26%
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (4,5) (0.72%)(1) 3.22% 3.36% 2.21% 2.20%
Portfolio Turnover Rate 31% 149% 224% 158% 268%
Fee Reduction Per Share (3) $0.29 $0.07 $0.02 $0.01 $0.01
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
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 FROM
MARCH 10, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $10.96 $12.76 $15.34 $15.69
------------- ------------- ------------- ------------- -------------
Net Investment Income (3) 0.20 0.20 0.17 0.12 0.09
Net Realized and Unrealized
Gain on Investments and
Foreign Currency
Transactions 2.38 2.23 3.91 2.76 0.34
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 2.58 2.43 4.08 2.88 0.43
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.11) (0.19) (0.17) (0.14) (0.09)
Distributions from Net
Realized Gains on
Investments Sold and
Foreign Currency
Transactions (0.01) (0.44) (1.33) (2.39) (1.80)
------------- ------------- ------------- ------------- -------------
Total Distributions (0.12) (0.63) (1.50) (2.53) (1.89)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $10.96 $12.76 $15.34 $15.69 $14.23
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (6) 30.48%(2) 22.63% 33.61% 18.98% 1.99%
Total Adjusted Investment
Return at Net Asset Value (6,7) 30.42%(2) -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $188,679 $320,029 $572,093 $552,296 $425,876
Ratio of Expenses to Average
Net Assets 0.70%(1) 0.67% 0.65% 0.63% 0.64%
Ratio of Adjusted Expenses
to Average Net Assets (4,5) 0.76%(1) -- -- -- --
Ratio of Net Investment
Income to Average Net Assets 2.00%(1) 1.65% 1.12% 0.76% 0.57%
Ratio of Adjusted Net
Investment Income to
Average Net Assets (4,5) 1.94%(1) -- -- -- --
Portfolio Turnover Rate 39% 81% 76% 55% 69%
Fee Reduction Per Share (3) $0.01 -- -- -- --
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Medium Capitalization Fund
Financial Highlights (continued)
The following tables include selected data for a share outstanding
throughout each period, total investment return, key ratios and
supplemental data.
- ----------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
OCTOBER 2, 1995
(COMMENCEMENT YEAR ENDED FEBRUARY 28, YEAR ENDED
OF OPERATIONS) ------------------------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning
of Period $8.50 $9.29 $10.45 $13.30 $12.04
------------- ------------- ------------- ------------- -------------
Net Investment Income (3) 0.08 0.12 0.09 0.08 0.06
Net Realized and Unrealized
Gain on Investments 0.74 1.45 3.69 0.06 1.58
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.82 1.57 3.78 0.14 1.64
------------- ------------- ------------- ------------- -------------
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
============= ============= ============= ============= =============
Total Investment Return at
Net Asset Value (6) 9.71%(2) 17.19% 37.30% 0.96% 14.18%
Total Adjusted Investment
Return at Net Asset Value (6,7) 7.00%(2) 15.49% 36.94% 0.36% 13.66%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $3,923 $5,240 $9,722 $10,407 $12,422
Ratio of Expenses to Average
Net Assets 1.00%(1) 1.00% 1.00% 1.00% 1.00%
Ratio of Adjusted Expenses
to Average Net Assets (4,5) 7.55%(1) 2.70% 1.36% 1.60% 1.52%
Ratio of Net Investment
Income to Average Net Assets 1.94%(1) 1.26% 0.75% 0.59% 0.44%
Ratio of Adjusted Net
Investment Income (Loss) to
Average Net Assets (4,5) (4.61%)(1) (0.44%) 0.39% (0.01%) (0.08%)
Portfolio Turnover Rate 3% 78% 65% 67% 136%
Fee Reduction Per Share (3) $0.26 $0.17 $0.04 $0.08 $0.07
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are expected
to decrease and adjusted net investment income as a percentage of
average net assets is expected to increase as the net assets of the Fund
grow.
(6) Total investment return assumes dividend reinvestment.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Balanced Fund
Schedule of Investments
February 29, 2000
- ---------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Independence Balanced Fund on February 29, 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 (0.54%)
Interpublic Group of Companies, Inc. (The) 3,200 $128,600
Omnicom Group, Inc. 2,100 197,794
------------
326,394
------------
Aerospace (1.18%)
General Dynamics Corp. 6,000 259,500
Goodrich (B.F.) Co. (The) 3,000 71,813
United Technologies Corp. 7,600 387,125
------------
718,438
------------
Automobile/Trucks (0.66%)
Ford Motor Co. 7,400 308,025
Lear Corp.* 4,300 90,838
------------
398,863
------------
Banks -- United States (2.42%)
Bank of America Corp. 7,700 354,681
Comerica, Inc. 8,200 302,888
Fifth Third Bancorp 1,300 67,681
First Tennessee National Corp. 2,700 46,575
Firstar Corp. 12,400 220,875
FleetBoston Financial Corp. 9,100 247,975
Mellon Financial Corp. 3,600 108,450
Wells Fargo Co. 3,700 122,331
------------
1,471,456
------------
Beverages (0.53%)
Anheuser-Busch Cos., Inc. 5,000 320,625
------------
Building (0.62%)
Black & Decker Corp. (The) 6,400 210,800
Centex Corp. 2,700 53,156
Danaher Corp. 2,800 114,275
------------
378,231
------------
Chemicals (0.13%)
Grace (W. R.) & Co.* 7,800 78,488
------------
Computers (12.57%)
America Online, Inc.* 6,500 383,500
Cisco Systems, Inc.* 11,800 1,559,812
Compaq Computer Corp. 7,000 174,124
Computer Associates International, Inc. 2,700 173,643
Dell Computer Corp.* 8,000 326,500
EMC Corp.* 3,600 428,400
Hewlett-Packard Co. 4,400 591,800
International Business Machines Corp. 6,200 632,400
Microsoft Corp.* 17,800 1,590,874
Network Appliance, Inc.* 500 94,374
Oracle Corp.* 9,900 735,074
Sun Microsystems, Inc.* 4,600 438,150
Veritas Software Corp.* 900 178,087
Yahoo! Inc.* 2,000 319,374
------------
7,626,112
------------
Consumer Products (0.13%)
American Greetings Corp. (Class A) 4,700 81,075
------------
Cosmetics & Personal Care (0.28%)
Avon Products, Inc. 2,500 67,656
Dial Corp. (The) 7,100 102,063
------------
169,719
------------
Diversified Operations (2.12%)
Honeywell International, Inc. 9,700 466,813
Monsanto Co. 3,500 135,844
Textron, Inc. 3,300 201,300
Tyco International Ltd. 12,800 485,600
------------
1,289,557
------------
Electronics (8.29%)
Altera Corp.* 1,700 135,575
General Electric Co. 11,700 1,546,594
Intel Corp. 11,600 1,310,800
JDS Uniphase Corp.* 400 105,450
LSI Logic Corp.* 1,800 115,313
Maxim Intergrated Products, Inc.* 2,300 153,669
Motorola, Inc. 2,600 443,300
SCI Systems, Inc.* 3,000 120,750
Solectron Corp.* 2,400 157,200
Teradyne, Inc.* 1,100 95,700
Texas Instruments, Inc. 4,000 666,000
Xilinx, Inc.* 2,200 175,450
------------
5,025,801
------------
Finance (2.94%)
Associates First Capital Corp. (Class A) 8,400 166,950
Citigroup, Inc. 19,300 997,569
Kansas City Southern Industries, Inc. 700 55,125
MBNA Corp. 10,500 238,875
Morgan Stanley Dean Witter & Co. 4,600 324,013
------------
1,782,532
------------
Food (0.39%)
Kellogg Co. 2,100 53,156
Quaker Oats Co. 3,400 183,388
------------
236,544
------------
Insurance (2.23%)
American General Corp. 3,300 172,219
American International Group, Inc. 3,700 327,219
AXA Financial, Inc. 11,500 344,281
Hartford Financial Services Group, Inc. (The) 3,100 96,875
Hartford Life, Inc. (Class A) 2,700 95,513
Marsh & McLennan Cos., Inc. 1,400 108,325
Travelers Property Casualty Corp. (Class A) 3,500 110,688
XL Capital Ltd. (Class A) 2,400 97,050
------------
1,352,170
------------
Machinery (0.39%)
Ingersoll-Rand Co. 6,100 233,706
------------
Media (2.02%)
CBS Corp. 7,200 428,850
Clear Channel Communications, Inc.* 3,700 246,513
Infinity Broadcasting Corp. (Class A)* 4,400 140,525
Time Warner, Inc. 4,800 410,400
------------
1,226,288
------------
Medical (5.19%)
American Home Products Corp. 4,100 178,350
Bristol-Myers Squibb Co. 9,600 545,400
Cardinal Health, Inc. 1,700 70,124
Johnson & Johnson 4,200 301,350
Lilly (Eli) & Co. 3,200 190,200
Merck & Co., Inc. 10,000 615,624
Pfizer, Inc. 10,900 350,163
Schering-Plough Corp. 9,500 331,313
Warner-Lambert Co. 6,600 564,712
------------
3,147,236
------------
Metal (0.28%)
Illinois Tool Works, Inc. 3,300 170,569
------------
Mortgage Banking (0.64%)
Fannie Mae 7,300 386,900
------------
Office (0.30%)
Pitney Bowes, Inc. 1,400 69,300
Reynolds & Reynolds Co. (The) (Class A) 4,000 110,500
------------
179,800
------------
Oil & Gas (4.05%)
Anadarko Petroleum Corp. 2,500 76,875
Atlantic Richfield Co. 7,200 511,200
BP Amoco PLC (American Depositary Receipts),
(ADR) (United Kingdom) 2,400 112,800
Chevron Corp. 2,400 179,250
Conoco Inc. (Class A)* 2,700 51,806
Exxon Mobil Corp. 10,100 760,656
Kerr-McGee Corp. 3,500 156,625
Royal Dutch Petroleum Co. (ADR) (Netherlands) 8,300 435,750
Texaco, Inc. 800 37,950
USX -- Marathon Group 6,100 131,913
------------
2,454,825
------------
Paper & Paper Products (0.74%)
International Paper Co. 5,100 187,744
Kimberly-Clark Corp. 5,100 263,606
------------
451,350
------------
Pollution Control (0.07%)
Allied Waste Industries, Inc.* 7,300 41,063
------------
Retail (3.67%)
Gap, Inc. (The) 4,100 198,081
Home Depot, Inc. (The) 9,600 555,000
Lowe's Cos., Inc. 3,600 171,450
Outback Steakhouse, Inc.* 4,300 112,338
Tandy Corp. 2,000 76,125
Target Corp. 2,900 171,100
TJX Cos., Inc. 10,600 168,938
Wal-Mart Stores, Inc. 15,900 774,131
------------
2,227,163
------------
Soap & Cleaning Preparations (0.10%)
Procter & Gamble Co. (The) 700 61,600
------------
Steel (0.06%)
Ryerson Tull, Inc. 2,700 35,775
------------
Telecommunications (3.08%)
ADC Telecommunications, Inc.* 2,400 107,700
AT&T Corp. 9,700 479,544
MCI WorldCom, Inc.* 12,500 557,813
Sprint Corp. 4,700 286,700
Sprint PCS* 5,700 294,975
Tellabs, Inc.* 2,900 139,200
------------
1,865,932
------------
Tobacco (0.86%)
Philip Morris Cos., Inc. 18,500 371,156
UST, Inc. 7,700 148,706
------------
519,862
------------
Transportation (0.51%)
Alaska Air Group, Inc.* 2,900 76,850
Burlington Northern Santa Fe Corp. 6,300 124,031
Northwest Airlines Corp. 2,000 34,500
Union Pacific Corp. 1,900 72,200
------------
307,581
------------
Utilities (2.99%)
Ameren Corp. 2,700 81,000
BellSouth Corp. 11,100 452,325
Dominion Resources, Inc. 3,400 124,738
Edison International 9,800 257,863
Florida Progress Corp. 6,200 264,275
GTE Corp. 2,300 135,700
Reliant Energy, Inc. 6,300 129,544
SBC Communications, Inc. 9,700 368,600
------------
1,814,045
------------
TOTAL COMMON STOCKS
(Cost $30,537,731) (59.98%) 36,379,700
------- ------------
CREDIT
INTEREST RATING** PAR VALUE MARKET
RATE (UNAUDITED) (000s OMITTED) VALUE
-------- --------- -------------- -----------
CORPORATE BONDS
Aerospace (0.66%)
Raytheon Co.,
Sr Note 11-01-03 5.700% BBB- $430 $398,799
-------------
Automobile/Trucks (0.71%)
Ford Motor Co.,
Bond 10-01-28 6.625 A+ 500 428,910
-------------
Banks -- Foreign (1.06%)
Popular, Inc.,
Med Term Note Ser 3 04-30-01 6.200 A3 650 641,459
-------------
Banks -- United States (3.54%)
AmSouth Bancorp.,
Sub Note 03-01-09 6.125 BBB+ 800 738,200
Bank of America Corp.,
Jr Sub Note 02-15-10 7.800 A 40 39,541
Capital One Bank,
Sr Note 10-30-01 7.080 BBB- 600 592,050
First Union Corp.,
Note 11-01-04 6.950 A 320 311,306
PNC Funding Corp.,
Gtd Sub Note 09-01-03 6.125 BBB+ 490 466,568
-------------
2,147,665
-------------
Broker Services (1.31%)
Lehman Brothers Holdings, Inc.,
Note 10-01-02 6.500 A 200 194,122
Note 01-15-05 7.780 A 310 307,532
Salomon, Inc.,
Sr Note 02-01-04 7.200 A 300 295,662
-------------
797,316
-------------
Computers (0.48%)
Comdisco, Inc.,
Note 04-30-02 5.950 BBB+ 300 289,098
-------------
Diversified Operations (0.61%)
Textron Financial Corp.,
Note 12-09-04 7.125 A- 150 146,879
Tyco International Group S.A.,
Gtd Note (Luxembourg) 06-15-01 6.125 A- 230 226,095
-------------
372,974
-------------
Finance (1.03%)
Finova Capital Corp.,
Note 11-08-04 7.250 A- 300 295,875
Household Finance Corp.,
Note 05-01-04 6.000 A 350 330,785
-------------
626,660
-------------
Government -- Foreign (0.89%)
Province of Quebec,
Deb (Canada) 07-15-23 7.500 A+ 300 294,729
Note (Canada) 09-15-29 7.500 A+ 250 243,400
-------------
538,129
-------------
Media (0.29%)
Cox Communications, Inc.,
Deb 08-01-28 6.800 BBB+ 150 129,503
News America, Inc.,
Sr Deb 04-08-28 7.125 BBB- 50 43,167
-------------
172,670
-------------
Mortgage Banking (5.41%)
AMRESCO Commercial Mortgage Funding I Corp.,
Mtg Pass Thru Ctf Ser 1997-C1 Class A3 06-17-29 7.190 AAA 348 354,193
Chase Commercial Mortgage Securities Corp.,
Commercial Pass Thru Ctf Ser 1997-1 Class A2
02-19-07 7.370 AAA 140 143,612
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1997-C1 Class
A1C 04-20-07 7.240 AAA 580 583,247
Commercial Mtg Pass-Thru Ctf Ser 1999-C1 Class
A-1 01-15-08 6.910 AAA 251 244,616
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1999-2 Class A-2F 06-25-11 6.223 AAA 310 308,202
Green Tree Financial Corp.,
Pass Thru Ctf Ser 1996-8 Class A-6 10-15-27 7.600 AAA 190 189,939
Pass Thru Ctf Ser 1997-6 Class A-5 01-15-29 6.680 AAA 410 406,540
Merrill Lynch Mortgage Investors, Inc.,
Mtg Pass Thru Ctf Ser 1997-C1 Class A3 06-18-29 7.120 AAA 90 91,098
Money Store Trust (The),
Pass Thru Ctf Ser 1996-B Class A-7 02-15-20 7.550 AAA 430 430,537
Mortgage Capital Funding, Inc.,
Commercial Mtg Pass Thru Ctf Ser 1996-MC2 Class
A1 12-21-26 6.758 AAA 41 41,191
Residential Funding Mortgage Securities II, Inc.,
Home Loan Backed Notes Ser 1999-HI4 Class A-2
07-25-10 6.780 AAA 320 320,400
Southern Pacific Secured Assets Corp.,
Pass Thru Ctf Ser 1998-1 Class A-2 02-25-18 6.270 AAA 171 169,716
-------------
3,283,291
-------------
Oil & Gas (0.48%)
El Paso Energy Corp.,
Sr Note 07-15-01 6.625 BBB 100 96,000
Petroleum Geo-Services,
Sr Note (Norway) 03-30-28 7.125 BBB 225 194,461
-------------
290,461
-------------
Retail (0.25%)
Kroger Co. (The),
Sr Note 02-01-10 8.050 BBB- 150 150,915
-------------
Telecommunications (0.91%)
AT & T Corp.,
Note 03-15-29 6.500 AA- 75 63,868
Sprint Capital Corp.,
Note 11-15-28 6.875 BBB+ 290 253,524
WorldCom, Inc.,
Note 08-15-28 6.950 A- 260 234,918
-------------
552,310
-------------
Tobacco (0.13%)
Philip Morris Cos., Inc.,
Deb 10-15-03 8.250 A 80 79,818
-------------
Transportation (0.69%)
Delta Air Lines, Inc.,
Deb 12-15-29 (R) 8.300 BBB- 340 317,407
Lockheed Martin Corp.,
Bond 12-01-29 8.500 BBB- 100 98,479
-------------
415,886
-------------
Utilities (1.76%)
BellSouth Capital Funding,
Bond 02-15-30 7.875 AAA 170 177,689
Coastal Corp. (The),
Sr Note 09-15-02 8.125 BBB 300 303,282
K N Energy, Inc.,
Sr Note 11-30-01 6.450 BBB- 600 588,360
-------------
1,069,331
-------------
TOTAL CORPORATE BONDS
(Cost $12,598,194) (20.21%) 12,255,692
------- -------------
U.S. GOVERNMENT AND AGENCIES SECURITIES
Government -- U.S. (1.96%)
United States Treasury,
Bond 02-15-02 5.250 AAA 250 216,015
Bond 05-15-30 6.250 AAA 960 974,700
-------------
1,190,715
-------------
Government -- U.S. Agencies (16.33%)
Fannie Mae REMIC Trust,
Pass Thru Ctf Ser 1999-55 Class PA 06-18-13 7.000 AAA 666 660,737
Federal National Mortgage Assn.,
12 Yr Pass Thru Ctf 06-03-00*** 6.000 AAA 1,200 1,125,936
15 Yr Pass Thru Ctf 02-01-09*** 7.000 AAA 659 665,772
30 Yr Pass Thru Ctf 03-01-29*** 6.000 AAA 1,500 1,359,615
30 Yr Pass Thru Ctf 03-01-29*** 6.500 AAA 1,590 1,484,917
30 Yr Pass Thru Ctf 03-01-29*** 7.000 AAA 1,640 1,571,579
30 Yr Pass Thru Ctf 03-15-29*** 7.500 AAA 1,650 1,618,040
30 Yr Pass Thru Ctf 03-15-30*** 8.000 AAA 1,000 1,001,560
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 03-23-30 6.000 AAA 420 413,306
-------------
9,901,462
-------------
TOTAL U.S. GOVERNMENT AND AGENCIES SECURITIES
(Cost $11,056,689) (18.29%) 11,092,177
------- -------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (14.98%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds, 7.50%
thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.790 9,082 9,082,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.65% 624
------------
TOTAL SHORT-TERM INVESTMENTS (14.98%) 9,082,624
--------- ------------
TOTAL INVESTMENTS (113.46%) 68,810,193
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (13.46%) (8,160,826)
--------- ------------
TOTAL NET ASSETS (100.00%) $60,649,367
========= ============
* Non-income producing security.
** Credit ratings are rated by Moody's Investors Service or John
Hancock Advisers, Inc. where Standard and Poor's ratings are not
available.
*** These securities, having an aggregate value of $8,827,419 or 14.55%
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
$9,003,967 of Repurchase Agreement, 5.790%, due 3-01-00, has been
segregated to cover the when-issued commitments.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $317,407 or 0.52% of net
assets as of February 29, 2000.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Diversified Core Equity Fund II
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Independence Diversified Core Equity Fund II on February 29,
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.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Aerospace (1.82%)
General Dynamics Corp. 43,900 $1,898,675
Goodrich (B.F.) Co. (The) 43,300 1,036,494
United Technologies Corp. 94,200 4,798,312
------------
7,733,481
------------
Automobile/Trucks (1.68%)
Borg-Warner Automotive, Inc. 35,900 1,148,800
Ford Motor Co. 98,700 4,108,387
Lear Corp.* 54,400 1,149,200
Meritor Automotive, Inc. 52,600 736,400
------------
7,142,787
------------
Banks -- United States (3.66%)
Bank of America Corp. 98,000 4,514,125
Comerica, Inc. 52,800 1,950,300
First Tennessee National Corp. 28,300 488,175
FleetBoston Financial Corp. 44,100 1,201,725
Mellon Financial Corp. 125,500 3,780,687
Wells Fargo Co. 111,000 3,669,937
------------
15,604,949
------------
Beverages (1.32%)
Anheuser-Busch Cos., Inc. 87,500 5,610,937
------------
Building (1.16%)
Black & Decker Corp. (The) 63,300 2,084,944
Centex Corp. 42,700 840,656
Danaher Corp. 35,600 1,452,925
Georgia-Pacific Group 15,800 548,063
------------
4,926,588
------------
Chemicals (0.40%)
Grace (W. R.) & Co.* 82,600 831,163
Solutia, Inc. 62,100 857,756
------------
1,688,919
------------
Computers (20.65%)
America Online, Inc.* 77,400 4,566,600
Cisco Systems, Inc.* 145,600 19,246,500
Citrix Systems, Inc.* 8,800 927,850
Compaq Computer Corp. 76,900 1,912,888
Computer Associates International, Inc. 40,700 2,617,519
Dell Computer Corp.* 82,100 3,350,706
EMC Corp.* 35,300 4,200,700
Hewlett-Packard Co. 45,700 6,146,650
International Business Machines Corp. 89,300 9,108,600
Microsoft Corp.* 225,100 20,118,312
Network Appliance, Inc.* 11,100 2,095,125
Oracle Corp.* 121,400 9,013,950
VERITAS Software Corp.* 5,400 1,068,525
Yahoo! Inc.* 22,400 3,577,000
------------
87,950,925
------------
Consumer Products Misc. (0.18%)
American Greetings Corp. (Class A) 44,700 771,075
------------
Cosmetics & Personal Care (0.38%)
Avon Products, Inc. 40,600 1,098,738
Dial Corp. (The) 36,200 520,375
------------
1,619,113
------------
Diversified Operations (4.18%)
Honeywell International, Inc. 126,900 6,107,063
Monsanto Co. 81,700 3,170,981
Textron, Inc. 50,600 3,086,600
Tyco International Ltd. 143,500 5,444,031
------------
17,808,675
------------
Electronics (13.85%)
Altera Corp.* 12,300 980,925
Analog Devices, Inc.* 12,400 1,946,800
General Electric Co. 148,500 19,629,844
Intel Corp. 151,600 17,130,800
Maxim Intergrated Products, Inc.* 33,300 2,224,856
Motorola, Inc. 26,400 4,501,200
SCI Systems, Inc.* 18,400 740,600
Solectron Corp.* 17,900 1,172,450
Teradyne, Inc.* 21,400 1,861,800
Texas Instruments, Inc. 34,600 5,760,900
Xilinx, Inc.* 38,200 3,046,450
------------
58,996,625
------------
Finance (6.37%)
Associates First Capital Corp. (Class A) 114,582 2,277,317
Citigroup, Inc. 236,400 12,218,925
Fannie Mae 108,700 5,761,100
Kansas City Southern Industries, Inc. 22,200 1,748,250
MBNA Corp. 119,300 2,714,075
Morgan Stanley Dean Witter & Co. 34,200 2,408,962
------------
27,128,629
------------
Food (1.03%)
ConAgra, Inc. 40,200 658,275
Kellogg Co. 39,100 989,719
Quaker Oats Co. 51,000 2,750,812
------------
4,398,806
------------
Insurance (3.32%)
American International Group, Inc. 25,400 2,246,312
AXA Financial, Inc. 118,100 3,535,619
Hartford Financial Services Group, Inc. (The) 60,200 1,881,250
Hartford Life, Inc. (Class A) 43,500 1,538,813
Marsh & McLennan Cos., Inc. 36,400 2,816,450
Travelers Property Casualty Corp. (Class A) 46,600 1,473,725
XL Capital Ltd. (Class A) (Bermuda) 15,600 630,825
------------
14,122,994
------------
Machinery (0.59%)
Ingersoll-Rand Co. 65,700 2,517,131
------------
Media (3.43%)
AT&T Corp. -- Liberty Media Group 14,000 731,500
CBS Corp. 86,100 5,128,331
Clear Channel Communications, Inc.* 45,200 3,011,450
Time Warner, Inc. 67,200 5,745,600
------------
14,616,881
------------
Medical (8.73%)
Allergan, Inc. 15,600 784,875
American Home Products Corp. 45,600 1,983,600
Bristol-Myers Squibb Co. 83,600 4,749,525
Cardinal Health, Inc. 41,100 1,695,375
Genentech, Inc.* 6,300 1,215,113
Johnson & Johnson 24,400 1,750,700
Lilly (Eli) & Co. 59,600 3,542,475
Merck & Co., Inc. 119,200 7,338,250
Pfizer, Inc. 153,300 4,924,762
Schering-Plough Corp. 103,900 3,623,512
Warner-Lambert Co. 65,300 5,587,231
------------
37,195,418
------------
Metal (0.31%)
Illinois Tool Works, Inc. 25,212 1,303,145
------------
Office (0.30%)
Reynolds & Reynolds Co. (The) (Class A) 46,200 1,276,275
------------
Oil & Gas (6.19%)
Atlantic Richfield Co. 78,400 5,566,400
Exxon Mobil Corp. 121,700 9,165,531
Kerr-McGee Corp. 28,200 1,261,950
Royal Dutch Petroleum Co. (Netherlands) 149,300 7,838,250
Texaco, Inc. 27,200 1,290,300
USX -- Marathon Group 57,000 1,232,625
------------
26,355,056
------------
Paper & Paper Products (0.12%)
Smurfit-Stone Container Corp.* 36,700 500,038
------------
Retail (6.33%)
Circuit City Stores-Circuit City Group 16,100 650,038
Gap, Inc. (The) 35,900 1,734,419
Home Depot, Inc. (The) 113,600 6,567,500
Lowe's Cos., Inc. 44,100 2,100,263
Outback Steakhouse, Inc.* 38,000 992,750
Tandy Corp. 25,800 982,013
Target Corp. 55,100 3,250,900
TJX Cos., Inc. 119,700 1,907,719
Wal-Mart Stores, Inc. 180,300 8,778,356
------------
26,963,958
------------
Soap & Cleaning Preparations (0.24%)
Procter & Gamble Co. (The) 11,700 1,029,600
------------
Steel (0.10%)
Ryerson Tull, Inc. 33,400 442,550
------------
Telecommunications (5.40%)
AT&T Corp. 51,200 2,531,200
Bell Atlantic Corp. 36,900 1,805,794
MCI WorldCom, Inc.* 159,100 7,099,837
Nortel Networks Corp. (Canada) 34,900 3,891,350
RF Micro Devices, Inc.* 8,200 1,134,163
Sprint Corp. (FON Group) 25,400 1,549,400
Sprint Corp. (PCS Group)* 67,000 3,467,250
Tellabs, Inc.* 31,300 1,502,400
------------
22,981,394
------------
Textile (0.14%)
WestPoint Stevens, Inc.* 34,700 576,888
------------
Tobacco (0.80%)
Philip Morris Cos., Inc. 97,600 1,958,100
UST, Inc. 75,000 1,448,438
------------
3,406,538
------------
Transportation (0.64%)
Airborne Freight Corp. 36,400 673,400
Alaska Air Group, Inc.* 37,700 999,050
UAL Corp.* 21,800 1,062,750
------------
2,735,200
------------
Utilities (5.91%)
Ameren Corp. 64,500 1,935,000
BellSouth Corp. 150,900 6,149,175
Florida Progress Corp. 72,200 3,077,525
GTE Corp. 67,100 3,958,900
PECO Energy Co. 30,900 1,152,956
Reliant Energy, Inc. 57,200 1,176,175
SBC Communications, Inc. 149,000 5,662,000
Southern Co. 93,400 2,072,313
------------
25,184,044
------------
TOTAL COMMON STOCKS
(Cost $330,538,049) (99.23%) 422,588,619
------- -------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.04%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $185 $185,000
------------
Corporate Savings Account (0.03%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 4.65% 136,201
------------
TOTAL SHORT-TERM INVESTMENTS (0.07%) 321,201
--------- ------------
TOTAL INVESTMENTS (99.30%) 422,909,820
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.70%) 2,966,177
--------- ------------
TOTAL NET ASSETS (100.00%) $425,875,997
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds -- Institutional Series Trust -- Independence Medium Capitalization Fund
Schedule of Investments
February 29, 2000
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Independence Medium Capitalization Fund on February 29, 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.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
<S> <C> <C>
COMMON STOCKS
Advertising (1.79%)
Lamar Advertising Co.* 900 $39,206
Omnicom Group, Inc. 1,100 103,606
WPP Group Plc, American Depositary Receipts (ADR)
(United Kingdom) 800 79,200
------------
222,012
------------
Aerospace (1.59%)
Cordant Technologies, Inc. 1,800 58,275
General Dynamics Corp. 1,900 82,175
Goodrich (B.F.) Co. (The) 2,400 57,450
------------
197,900
------------
Automobile/Trucks (1.13%)
Borg-Warner Automotive, Inc. 900 28,800
Dana Corp. 1,300 27,706
Lear Corp.* 1,400 29,575
Meritor Automotive, Inc. 2,100 29,400
Ryder System, Inc. 1,300 24,213
------------
139,694
------------
Banks -- United States (3.65%)
AmSouth Bancorporation 3,300 47,850
Comerica, Inc. 3,000 110,812
Fifth Third Bancorp 1,500 78,094
First Tennessee National Corp. 2,000 34,500
Firstar Corp. 1,464 26,072
Marshall & Ilsley Corp. 1,900 87,281
Mellon Financial Corp. 2,300 69,288
------------
453,897
------------
Beverages (0.29%)
Whitman Corp. 2,900 36,250
------------
Building (2.25%)
Black & Decker Corp. (The) 2,500 82,344
Centex Corp. 1,600 31,500
Danaher Corp. 1,600 65,300
Ryland Group, Inc. 2,300 40,825
Webb (Del E.) Corp. 1,000 15,000
Willamette Industries, Inc. 1,300 44,119
------------
279,088
------------
Business Services -- Misc. (1.46%)
Convergys Corp.* 4,700 180,950
------------
Chemicals (0.72%)
Grace (W.R.) & Co.* 2,000 20,125
Lubrizol Corp. 1,200 29,775
Solutia, Inc. 2,900 40,056
------------
89,956
------------
Computers (16.02%)
Citrix Systems, Inc.* 800 84,350
Computer Associates International, Inc. 1,300 83,606
DST Systems, Inc.* 1,300 72,962
Electronic Arts, Inc.* 800 80,000
Fiserv, Inc.* 2,500 68,125
Intuit, Inc.* 3,500 183,750
Network Appliance, Inc.* 500 94,375
Rational Software Corp.* 2,300 163,588
Siebel Systems, Inc.* 2,700 374,456
SunGard Data Systems, Inc.* 2,400 72,000
VERITAS Software Corp.* 3,600 712,350
------------
1,989,562
------------
Consumer Products Misc. (0.28%)
American Greetings Corp. (Class A) 2,000 34,500
------------
Cosmetics & Personal Care (0.51%)
Avon Products, Inc. 800 21,650
Dial Corp. (The) 2,900 41,688
------------
63,338
------------
Diversified Operations (0.96%)
Honeywell International, Inc. 600 28,875
Monsanto Co. 600 23,288
Textron, Inc. 1,100 67,100
------------
119,263
------------
Electronics (18.08%)
Altera Corp.* 3,500 279,125
Analog Devices, Inc.* 500 78,500
Applied Micro Circuits Corp.* 300 82,519
Atmel Corp.* 3,100 153,450
JDS Uniphase Corp.* 100 26,362
Jabil Circuit, Inc.* 1,600 111,100
Lam Research Corp.* 300 46,838
Linear Technology Corp. 1,900 199,381
Maxim Intergrated Products, Inc.* 3,800 253,888
Novellus Systems, Inc.* 1,800 106,762
SCI Systems, Inc.* 3,600 144,900
Sanmina Corp.* 900 105,356
Teradyne, Inc.* 900 78,300
Vishay Intertechnology, Inc.* 2,200 94,600
Vitesse Semiconductor Corp.* 2,700 280,294
Waters Corp.* 1,600 156,900
Xilinx, Inc.* 600 47,850
------------
2,246,125
------------
Finance (3.26%)
Associates First Capital Corp. (Class A) 1,400 27,825
Charter One Financial, Inc. 5,400 85,050
E*TRADE Group, Inc.* 4,000 98,500
Kansas City Southern Industries, Inc.* 1,000 78,750
MBNA Corp. 2,900 65,975
Washington Mutual, Inc. 2,200 48,675
------------
404,775
------------
Food (0.71%)
Quaker Oats Co. 1,100 59,331
Universal Foods Corp. 1,600 28,900
------------
88,231
------------
Furniture (0.39%)
Leggett & Platt, Inc. 2,900 48,756
------------
Insurance (4.19%)
AXA Financial, Inc. 4,100 122,744
Hartford Financial Services Group, Inc. (The) 1,900 59,375
Hartford Life, Inc. (Class A) 1,000 35,375
Lincoln National Corp. 2,000 55,625
Marsh & McLennan Cos., Inc. 800 61,900
PartnerRe Ltd. (Bermuda) 1,900 58,900
Travelers Property Casualty Corp. (Class A) 2,600 82,225
XL Capital Ltd. (Class A) 1,100 44,481
------------
520,625
------------
Machinery (0.89%)
Ingersoll-Rand Co. 2,000 76,625
Pentair, Inc. 1,000 34,375
------------
111,000
------------
Media (4.03%)
Clear Channel Communications, Inc.* 1,400 93,275
Hispanic Broadcasting Corp.* 1,000 93,438
Knight-Ridder, Inc. 800 37,500
Univision Communications, Inc. (Class A)* 1,600 163,000
Westwood One, Inc.* 1,700 113,581
------------
500,794
------------
Medical (6.21%)
Allergan, Inc. 800 40,250
ALZA Corp.* 400 14,675
Bausch & Lomb, Inc. 600 31,650
Biogen, Inc.* 1,600 172,700
Cardinal Health, Inc. 1,200 49,500
Forest Laboratories, Inc.* 2,800 191,275
Genentech, Inc.* 500 96,438
Pall Corp. 1,200 23,700
Pharmacia & Upjohn, Inc. 700 33,337
Tenet Healthcare Corp.* 1,200 21,000
United HealthCare Corp. 400 20,450
VISX, Inc.* 1,300 22,019
Wellpoint Health Networks, Inc.* 800 54,000
------------
770,994
------------
Metal (0.50%)
Illinois Tool Works, Inc. 1,200 62,025
------------
Office (1.65%)
Avery Dennison Corp. 1,000 60,687
Pitney Bowes, Inc. 800 39,600
Reynolds & Reynolds Co. (The) (Class A) 3,800 104,975
------------
205,262
------------
Oil & Gas (6.96%)
Amerada Hess Corp. 1,800 91,013
Anadarko Petroleum Corp. 4,200 129,150
Apache Corp. 2,200 80,300
Atlantic Richfield Co. 1,500 106,500
Conoco Inc. (Class A) 5,900 113,206
El Paso Energy Corp. 2,100 77,831
Imperial Oil Ltd. (Canada) 3,100 58,319
Kerr-McGee Corp. 1,700 76,075
Phillips Petroleum Co. 2,200 84,150
USX -- Marathon Group 2,200 47,575
------------
864,119
------------
Paper & Paper Products (0.92%)
Boise Cascade Corp. 1,700 50,681
Bowater, Inc. 600 29,512
Smurfit-Stone Container Corp.* 2,500 34,063
------------
114,256
------------
Pollution Control (0.20%)
Allied Waste Industries, Inc.* 4,500 25,312
------------
Printing -- Commercial (0.29%)
Donnelley (R.R.) & Sons Co. 1,900 36,337
------------
Retail (6.59%)
Brinker International, Inc.* 4,600 100,050
Circuit City Stores-Circuit City Group 600 24,225
Darden Restaurants, Inc. 2,200 29,012
Family Dollar Stores, Inc. 4,500 78,188
Land's End, Inc.* 900 29,869
Lowe's Cos., Inc. 1,200 57,150
Outback Steakhouse, Inc.* 2,900 75,762
Starbucks Corp.* 2,600 91,325
SYSCO Corp. 900 29,531
Tandy Corp. 1,000 38,063
Target Corp. 800 47,200
Tiffany & Co. 1,100 70,606
TJX Cos., Inc. 4,000 63,750
Wendy's International, Inc. 1,800 28,350
Williams-Sonoma, Inc.* 1,800 55,688
------------
818,769
------------
Steel (0.27%)
AK Steel Holding Corp. 1,900 15,794
Ryerson Tull, Inc. 1,300 17,225
------------
33,019
------------
Telecommunications (2.38%)
ADC Telecommunications, Inc.* 1,800 80,775
Comverse Technology, Inc.* 500 98,437
RF Micro Devices, Inc.* 600 82,988
Tellabs, Inc.* 700 33,600
------------
295,800
------------
Textile (0.66%)
Jones Apparel Group, Inc.* 1,400 31,675
WestPoint Stevens, Inc. 3,000 49,875
------------
81,550
------------
Tobacco (1.25%)
Universal Corp. 5,100 83,513
UST, Inc. 3,700 71,456
------------
154,969
------------
Transportation (2.04%)
Airborne Freight Corp. 2,100 38,850
Alaska Air Group, Inc.* 1,100 29,150
CNF Transportation, Inc. 2,700 86,569
UAL Corp.* 400 19,500
Union Pacific Corp. 2,100 79,800
------------
253,869
------------
Utilities (6.11%)
AES Corp. (The)* 400 33,525
Ameren Corp. 1,600 48,000
Edison International 1,300 34,206
Florida Progress Corp. 1,600 68,200
LG&E Energy Corp. 3,300 73,219
Montana Power Co. 2,500 98,437
Northeast Utilities 1,200 22,575
OGE Energy Corp. 2,800 48,125
PECO Energy Co. 1,900 70,894
Pinnacle West Capital Corp. 1,700 46,963
Reliant Energy, Inc. 2,800 57,575
Sempra Energy 2,900 52,200
Telephone and Data Systems, Inc. 1,000 105,500
------------
759,419
------------
TOTAL COMMON STOCKS
(Cost $10,697,128) (98.23%) 12,202,416
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.16%)
Investment in a joint repurchase
agreement transaction with Barclay's,
Inc. -- Dated 02-29-00, due 03-01-00
(Secured by U.S. Treasury Bonds,
7.50% thru 10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury Notes,
5.125% thru 6.25% due 07-31-00 thru
08-15-07) -- Note A 5.79% $144 $144,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 4.65% 276
------------
TOTAL SHORT-TERM INVESTMENTS (1.16%) 144,276
--------- ------------
TOTAL INVESTMENTS (99.39%) 12,346,692
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.61%) 75,133
--------- ------------
TOTAL NET ASSETS (100.00%) $12,421,825
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Institutional Series Trust
NOTE A --
ACCOUNTING POLICIES
John Hancock Independence Balanced Fund ("Independence Balanced Fund"),
John Hancock Independence Diversified Core Equity Fund II ("Independence
Diversified Core Equity Fund II") and John Hancock Independence Medium
Capitalization Fund ("Independence Medium Capitalization Fund") (each, a
"Fund" and collectively, the "Funds"), are separate portfolios of John
Hancock Institutional Series Trust (the "Trust"), an open-end management
investment company registered under the Investment Company Act of 1940.
The Trust, organized as a Massachusetts business trust in 1994, consists
of eleven series portfolios: the Funds, John Hancock Active Bond Fund,
John Hancock Small Capitalization Value Fund, John Hancock Dividend
Performers Fund, John Hancock Medium Capitalization Growth Fund, John
Hancock Small Capitalization Growth Fund, John Hancock International
Equity Fund, John Hancock Core Growth Fund and John Hancock Core Value
Fund. The other eight series of the Trust are reported in separate
financial statements. Prior to July 1, 1999, John Hancock Medium
Capitalization Growth Fund was known as John Hancock Multi-Sector Growth
Fund, John Hancock Core Growth Fund was known as John Hancock
Independence Growth Fund and John Hancock Core Value Fund was known as
John Hancock Independence Value Fund. Effective October 1, 1999, the
Board of Trustees authorized the existing shares of Independence
Diversified Core Equity Fund II to be designated Class I shares and the
issuance of Class P shares, which will become available for sale to
individual investors at a later time. The investment objective of
Independence Balanced Fund and Independence Diversified Core Equity Fund
II is to seek above average total return consisting of capital
appreciation and income. The investment objective of Independence Medium
Capitalization Fund is to seek above average total return. Each Funds'
class of shares has equal rights as to voting, redemption, dividends and
liquidation within their respective Fund. The Trustees may authorize the
creation of additional portfolios from time to time to satisfy
various investment objectives.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolios are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value. All portfolio transactions initially
expressed in terms of foreign currencies have been translated into U.S.
dollars as described in "Foreign Currency Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Funds'
custodian bank receives delivery of the underlying securities for the
joint account on the Funds' behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to foreign
taxes and are accrued, as applicable.
FEDERAL INCOME TAXES The Funds' policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of their taxable
income, including net realized gain on investments, to their
shareholders. Therefore, no federal income tax provisions are required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Funds record all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations,
which may differ from generally accepted accounting principles.
DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund will be allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that began with
the commencement of the investment operations of the Funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amount of
assets, liabilities, revenues and expenses of the Funds. Actual results
could differ from these estimates.
BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. 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 based on the average daily
unused portion of the line of credit and is allocated among the
participating funds. The maximum loan balance outstanding for
Independence Diversified Core Equity Fund II during the year was
$12,830,000. The annualized interest rate charged during the year ranged
from 4.50% to 6.44%. At February 29, 2000, there was no outstanding loan
balance for the Independence Diversified Core Equity Fund II. The other
Funds had no borrowing activity for the year ended February 29, 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 in recovery of the loaned
securities or even loss of rights in the collateral should the borrower
of the securities fail financially. At February 29, 2000, there were no
outstanding security loans.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 P.M.,
London time, on the date of any determination of the net asset value of
the Funds. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Funds do not isolate those portions of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
or losses arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end, resulting from
changes in the exchange rate.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Funds pay a
monthly management fee to the Adviser, for a continuous investment
program equivalent, on an annual basis, as follows:
<TABLE>
<CAPTION>
FUND RATE
- ---- ----
<S> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
FUND RATE
- ---- ----
<S> <C>
Independence 60% of the advisory fee payable on the Fund's
Balanced Fund average daily net assets
Independence
Diversified 80% of the advisory fee payable on the Fund's
Core 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
</TABLE>
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 year ended February 29, 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 $48,421
for Independence Balanced Fund, none for Independence Diversified Core
Equity Fund II and $58,763 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 year
ended February 29, 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, Ms. Anne C. Hodsdon and Mr.
Richard S. Scipione are directors and officers of the Adviser, and/or
its affiliates, as well as Trustees of the Funds. The compensation of
unaffiliated Trustees is borne by the Funds. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The
Funds make investments into other John Hancock funds, as applicable, to
cover their liabilities for the deferred compensation. Investments to
cover the Funds' deferred compensation liability are recorded on the
Funds' books as an other asset. The deferred compensation liability and
the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses. The investment had 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 year ended February 29, 2000, were as follows:
<TABLE>
<CAPTION>
PURCHASES PROCEEDS
--------------- ---------------
<S> <C> <C>
Independence
Balanced Fund
U.S. Government
Securities $149,497,387 $148,540,174
Other Investments 46,010,268 69,503,280
Independence
Diversified Core
Equity Fund II 364,946,642 504,321,564
Independence Medium
Capitalization
Fund 13,854,947 16,246,710
</TABLE>
At February 29, 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>
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Independence
Balanced
Fund $63,394,169 $8,956,890 ($3,541,490) $5,415,400
Independence
Diversified
Core Equity
Fund II 330,928,357 127,048,693 (35,203,431) 91,845,262
Independence
Medium
Capitalization
Fund 10,862,132 3,005,530 (1,521,246) 1,484,284
</TABLE>
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended February 29, 2000, reclassifications have been
made in each Fund's capital accounts which represent the cumulative
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of February 29, 2000. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the
Funds, are primarily attributable to the treatment of certain
differences in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
The calculation of net investment income per share in the financial
highlights excludes these adjustments.
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
CAPITAL NET INVESTMENT NET REALIZED
PAID-IN INCOME GAIN
--------------- --------------- ---------------
<S> <C> <C> <C>
Independence
Balanced
Fund ($777) $510 $267
Independence
Diversified
Core Equity
Fund II (2,694) 931 1,763
Independence
Medium
Capitalization
Fund (337) 304 33
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
John Hancock Institutional Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of John Hancock Institutional
Series Trust (comprising, respectively, John Hancock Independence
Balanced Fund, John Hancock Independence Diversified Core Equity Fund II
and John Hancock Independence Medium Capitalization Fund) (the "Funds")
as of February 29, 2000, the related statements of operations for the
year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for
each of the four years in the period then ended, and the period from the
commencement of operations to February 29, 1996. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
February 29, 2000 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Funds constituting John Hancock Institutional Series Trust at February
29, 2000, the results of their operations, the changes in their net
assets, and their financial highlights for the respective stated periods
in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Funds for the fiscal
year ended February 29, 2000.
The Funds designated the following as long-term capital gain dividends
during the fiscal year ended February 29, 2000.
Additionally, the following dividend distributions qualify for the
dividends received deduction available to corporations.
<TABLE>
<CAPTION>
LONG-TERM DIVIDENDS
CAPITAL RECEIVED
GAINS DESIGNATED DEDUCTION
---------------- ----------
<S> <C> <C>
Independence Balanced Fund $2,420,696 22.40%
Independence Diversified Core Equity Fund II 40,766,942 45.13
Independence Medium Capitalization Fund 873,774 26.93
</TABLE>
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Institutional Series Trust. It may be used as sales literature when preceded
or accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
KI00A 2/00
4/00
The latest report from your
Fund's management team
ANNUAL REPORT
Core Growth Fund
FEBRUARY 29, 2000
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
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 and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, the market's advances were restricted to an
increasingly select group of stocks -- primarily in the technology and
communications areas. Even those gains were accompanied by tremendous
levels of daily volatility. But many other stocks, including the
household blue-chip names, fell to new 52-week lows in response to a
tough combination of investor apathy, rising interest rates and
earnings concerns.
In this same period, bonds struggled through one of their worst years
in more than two decades, as the strength of the U.S. economy and the
rebound of many others around the world provoked inflation fears.
Though their longer-term outlook looks brighter, in many instances bond
mutual fund investors have actually lost a little ground or made only
slight advances lately.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN 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
Technology stocks drive market's gains during volatile year
As interest rates climbed higher this past year, the stock market took
most investors on a bumpy ride. Last spring began with signs of strong
economic growth at home and improving growth abroad. The market began
broadening, as investors bought stocks in smaller companies as well as
economically sensitive sectors. But by summer, investors were dumping
these names in favor of growth stocks -- mainly in the technology
sector -- where it looked like higher interest rates would have little
impact on earnings growth. Late in the year, the market rebounded
sharply as Y2K concerns eased and many companies reported improved
earnings prospects. The market's gains, which remained heavily
concentrated in technology growth stocks, propelled the Russell 1000
Growth Index to a 31.75% finish for the year ended February 29, 2000.
By contrast, the Russell 1000 Value Index returned -3.27% for the same
period, while the Standard & Poor's 500 Index returned 11.73%.
"...difficult
for funds
with
diversified
strategies
such as
ours to
keep pace."
Fund results
The narrow market environment made it difficult for funds with
diversified strategies such as ours to keep pace. John Hancock Core
Growth Fund's Class I shares returned 19.67% at net asset value during
the year ended February 29, 2000. By comparison, the average large-cap
growth fund returned 38.72% for the same period, according to Lipper,
Inc.1 (Lipper recently introduced new competitive categories to reflect
more accurately the average portfolio holdings of the funds they
track.) The Fund's Class A, Class B and Class C shares, which were
introduced on July 1, 1999, returned 9.25%, 8.86% and 8.86%,
respectively, at net asset value, from inception through February 29,
2000. Keep in mind that your net asset value return will differ from
the Fund's if you were not invested for the exact same periods and did
not reinvest all distributions. See pages six and seven for historical
performance information.
[Table at top left hand column entitled "Top Five Common Stock
Holdings." The first listing is Cisco Systems 6.3%, the second is
Microsoft 5.5%, the third Intel 5.4%, the fourth General Electric 4.9%
and the fifth Pfizer 2.5%. A note below the table reads "As a percentage
of net assets on February 29, 2000."]
"Our bio-
technology
stocks also
took off..."
Performance explained
Although the Fund invests in growth stocks, our focus on inexpensive
stocks with strong earnings growth prospects kept us from buying the
most expensive technology names -- many of which were the top
performers for the past year. In addition, we run a diversified
portfolio, which mirrors the industry weightings of the Russell 1000
Growth Index. Outside of technology, including both computers and
electronics, the rest of the index is in a variety of sectors, most of
which did not do well during the past year. Among the sectors that hurt
our performance were health care and retail. Drug manufacturers like
Pfizer, Schering-Plough and Merck, as well as drug distributors like
Cardinal Health, tumbled as the government considered a Medicare
benefit affecting drug reimbursement. Election year politics added
further uncertainty. Retail stocks like Tommy Hilfiger and TJX
Companies also suffered as investors worried that higher interest rates
would curb consumer spending.
[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 Oracle Systems followed by an up arrow with the phrase
"Strong sales growth from Internet applications." The second listing is
Tommy Hilfiger followed by a down arrow with the phrase "Projected
slowdown in consumer spending." The third listing is Cardinal Health
followed by a down arrow with the phrase "Concerns about Medicare drug
reimbursement." A note below the table reads "See 'Schedule of
Investments.' Investment holdings are subject to change."]
Technology leaders
Fortunately, some of the Fund's largest technology investments produced
terrific returns -- well over 100% -- for the year. They included Cisco
Systems, the dominant network provider for Internet traffic; Oracle, a
software company specializing in business applications for the
Internet; Intel and Texas Instruments, both leading semiconductor
manufacturers, and EMC, which makes data storage hardware equipment.
Several stocks in which we had smaller stakes also produced
exceptionally strong gains. They included Teradyne, the leading
supplier of testing equipment to the semiconductor industry; Analog
Devices, another semiconductor company, and VERITAS Software, which
dominates in data storage management software. We also owned a few
large technology investments that produced far more modest returns.
Among them were Microsoft, whose stock has been hurt as the Department
of Justice investigation drags on, and IBM, whose growth prospects
slowed as Y2K approached and corporations cut back on new hardware
purchases.
Biotechnology gains
Our biotechnology stocks also took off as industry advances made it
possible to develop new drugs that do a better job of targeting
specific illnesses. Our best performer was Genentech, which has two big
cancer drugs and a strong pipeline of drugs in development. Amgen also
rallied strongly as it prepared to launch a second-generation version
of a kidney dialysis and cancer drug called Epogen. Finally, both
Biogen, which makes a multiple sclerosis drug called Avonex, and CV
Therapeutics, which makes cardiology drugs, turned in great results.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 5% with 0% at the bottom and
40% at the top. The first bar represents the 9.25%* total return for
John Hancock Core Growth Fund Class A. The second bar represents the
8.86%* total return for John Hancock Core Growth Fund Class B. The third
bar represents the 8.86%* total return for John Hancock Core Growth Fund
Class C. The fourth bar represents the 19.67% total return for John
Hancock Core Growth Fund Class I. The fifth bar represents the 38.72%
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. *From inception July 1, 1999 through
February 29, 2000."]
Buys and sells
During the second half of the Fund's fiscal year, we took profits in
several stocks whose prices had either reached levels where we felt
they were fully valued or where prospects had weakened. We scaled back
on America Online after the merger with Time Warner was announced,
fearing that the union might slow AOL's growth in the near term. We
also sold QUALCOMM, a semiconductor company that targets digital
wireless technology, when its price skyrocketed. In addition, we sold
Marsh-McLennan, a company whose stock has benefited from strength in
its mutual fund business, as well as a turnaround in its insurance
brokerage operation. We added to our stakes in media stocks, building
our investment in Clear Channel Communications and acquiring shares of
Infinity Broadcasting. Both broadcasting stocks are benefiting from the
surge in radio advertising by Internet companies. We also recently
bought AT&T Corp. - Liberty Media Group, a well-managed company with
ownership interests in major entertainment networks and video
distribution businesses.
"...we believe
investor
interest will
eventually
broaden
beyond the
high-priced
technology
sector."
Optimistic outlook
Despite the challenges of the past year, we remain optimistic about the
Fund's prospects. We expect the U.S. economy to continue growing, even
as higher interest rates work their way through the system. This bodes
well for the stock market, especially the growth sector. In addition,
we believe investor interest will eventually broaden beyond the
high-priced technology sector. When this happens, it should benefit
diversified funds like ours. In the meantime, we're still finding
stocks like Siebel Systems, a leader in customer relationship
management software, that meet our investment criteria. Our disciplined
investment strategy has been very successful long term, and we expect
it will be again.
- ---------------------------------------------------------------------
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 a 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 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 December 31, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- -------
Cumulative Total Return 20.00% 184.92%
Average Annual Total Return(1) 20.00% 27.96%
CLASS A
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return 4.86%
Average Annual Total Return(1) 4.86%(2)
CLASS B
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return 5.07%
Average Annual Total Return(1) 5.07%(2)
CLASS C
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return 9.13%
Average Annual Total Return(1) 9.13%(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 return for the
one-year and since inception periods for Class I shares would have been
19.51% and 21.78%, respectively. Without the limitation of expenses, the
cumulative total return since inception for Class A, Class B and Class C
shares would have been 4.67%, 4.88% and 8.94%, 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 $775,397 as of
February 29, 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 $705,543 as of February 29,
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 February 29, 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 $10,925 $10,886 $10,886
- ----------------------------------------------------------------------------
With Maximum Sales Charge $10,381 $10,386 $10,786
- ----------------------------------------------------------------------------
Russell 1000 Growth Index $12,052 $12,052 $12,052
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet
and shows the value of what the Fund owns, is due and owes as of
February 29, 2000. You'll also find the net asset value per share
as of that date.
Statement of Assets and Liabilities
February 29, 2000
- ------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $46,866,228) $52,470,700
Joint repurchase agreement
(cost - $1,136,000) 1,136,000
Corporate savings account 56
-----------
53,606,756
Receivable for investments sold 422,977
Receivable for shares sold 34,551
Dividends receivable 32,977
Interest receivable 321
Receivable from John Hancock
Advisers, Inc. - Note B 24,435
Other assets 149
Deferred organization expense -
Note A 1,018
-----------
Total Assets 54,123,184
- ------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,031,337
Payable for shares repurchased 4,168
Payable to John Hancock Advisers,
Inc. and affiliates - Note B 61,392
Accounts payable and accrued
expenses 43,389
-----------
Total Liabilities 1,140,286
- ------------------------------------------------------------
Net Assets:
Capital paid-in 47,083,295
Accumulated net realized gain on
investments 295,220
Net unrealized appreciation of
investments 5,604,472
Accumulated net investment loss (89)
-----------
Net Assets $52,982,898
============================================================
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* - $20,820,721/1,051,680 $19.80
============================================================
Class B* - $22,727,744/1,152,054 $19.73
============================================================
Class C* - $914,814/46,365 $19.73
============================================================
Class I** - $8,519,619/429,732 $19.83
============================================================
Maximum Offering Price Per Share
Class A - ($19.80 x 105.26%) $20.84
============================================================
* Class A, Class B and Class C shares commenced operations on July 1, 1999.
** Effective July 1, 1999, existing shares of the Fund were renamed Class I shares.
*** On single retail sales of less than $50,000. On sales of $50,000 or more and on
group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows net
gains for the period stated.
Statement of Operations
Year ended February 29, 2000
- ------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign
withholding taxes of $20) $126,437
Interest (including income on
securities loaned of $93) 48,113
-----------
174,550
-----------
Expenses:
Investment management fee - Note B 161,467
Distribution and service fee - Note B
Class A 16,201
Class B 68,828
Class C 2,424
Registration and filing fees 42,251
Custodian fee 23,764
Auditing fee 18,489
Printing 9,534
Transfer agent fee - Note B 3,829
Accounting and legal services fee -
Note B 3,827
Organizational expense - Note A 1,753
Trustees' fees 1,685
Miscellaneous 1,230
Legal fees 276
-----------
Total Expenses 355,558
- ------------------------------------------------------------
Less Expense Reductions - Note B (76,350)
- ------------------------------------------------------------
Net Expenses 279,208
- ------------------------------------------------------------
Net Investment Loss (104,658)
- ------------------------------------------------------------
Realized and Unrealized Gain on
Investments:
Net realized gain on investments
sold 768,558
Change in net unrealized
appreciation/depreciation of
investments 3,946,942
-----------
Net Realized and Unrealized Gain on
Investments 4,715,500
- ------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $4,610,842
============================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) 3,645 (104,658)
Net realized gain on investments sold 295,853 768,558
Change in net unrealized appreciation/depreciation
of investments 922,438 3,946,942
----------- -----------
Net Increase in Net Assets Resulting from Operations 1,221,936 4,610,842
----------- -----------
Distributions to Shareholders:
Dividends from net investment income
Class I*** - ($0.0108 and none per share, respectively) (4,291) --
Distributions in excess of net investment income
Class I*** - ($0.0047 and none per share, respectively) (1,769) --
Distributions from net realized gain on investments sold
Class A** - (none and $0.0162 per share, respectively) -- (8,052)
Class B** - (none and $0.0162 per share, respectively) -- (10,306)
Class C** - (none and $0.0162 per share, respectively) -- (394)
Class I*** - ($0.6213 and $1.1162 per share, respectively) (243,704) (449,026)
----------- -----------
Total Distributions to Shareholders (249,764) (467,778)
----------- -----------
From Fund Share Transactions - Net:* 2,276,910 40,985,257
----------- -----------
Net Assets:
Beginning of period 4,605,495 7,854,577
----------- -----------
End of period (including distributions in excess of
net investment income of $38 and accumulated net investment
loss of $89, respectively) 7,854,577 52,982,898
=========== ===========
The Statement of Changes in Net Assets shows how the value of the
Fund's net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment gains and
losses, distributions paid to shareholders and any increase or decrease
in money shareholders invested in the Fund. The footnote illustrates
the number of Fund shares sold, reinvested and repurchased during the
last two periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A**
Shares sold -- -- 1,519,350 28,037,749
Shares issued to shareholders in reinvestment
of distributions -- -- 616 11,717
----------- ----------- ----------- -----------
-- -- 1,519,966 28,049,466
Less shares repurchased -- -- (468,286) (8,668,556)
----------- ----------- ----------- -----------
Net increase -- -- 1,051,680 19,380,910
=========== =========== =========== ===========
CLASS B**
Shares sold -- -- 1,278,590 23,451,319
Shares issued to shareholders in reinvestment
of distributions -- -- 614 11,341
----------- ----------- ----------- -----------
-- 1,279,204 23,462,660
Less shares repurchased -- -- (127,150) (2,412,874)
----------- ----------- ----------- -----------
Net increase -- -- 1,152,054 21,049,786
=========== =========== =========== ===========
CLASS C**
Shares sold -- -- 48,989 896,165
Shares issued to shareholders in reinvestment
of distributions -- -- 29 552
----------- ----------- ----------- -----------
-- -- 49,018
Less shares repurchased -- -- (2,653) (50,979)
----------- ----------- ----------- -----------
Net increase -- -- 46,365 845,738
=========== =========== =========== ===========
CLASS I***
Shares sold 227,978 3,737,661 177,003 $3,265,932
Shares issued to shareholders in reinvestment
of distributions 14,225 249,790 26,179 449,001
----------- ----------- ----------- -----------
242,203 3,987,451 203,182 3,714,933
Less shares repurchased (106,691) (1,710,541) (218,474) (4,006,110)
----------- ----------- ----------- -----------
Net increase (decrease) 135,512 2,276,910 (15,292) (291,177)
=========== =========== =========== ===========
** Class A, Class B and Class C shares commenced operations on July 1, 1999.
*** Effective July 1, 1999, existing shares of the Fund were renamed Class I shares.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
The following tables include selected data for a share outstanding
throughout each period, total investment return, key ratios and
supplemental data are listed as follows:
- ------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 29, 2000
----------------------------
<S> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.05)
Net Realized and Unrealized Gain on
Investments 1.73
--------
Total from Investment Operations 1.68
--------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold (0.02)
--------
Net Asset Value, End of Period $19.80
========
Total Investment Return at Net Asset Value (6) 9.25%(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) 9.00%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $20,821
Ratio of Expenses to Average Net Assets 1.25%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 1.63%(1)
Ratio of Net Investment Loss to Average Net Assets (0.39%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (0.77%)(1)
Portfolio Turnover Rate 72%
Fee Reduction Per Share (3) $0.05
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. Additionally, important relationships
between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 29, 2000
----------------------------
<S> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.13)
Net Realized and Unrealized Gain on
Investments 1.74
--------
Total from Investment Operations 1.61
--------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold (0.02)
--------
Net Asset Value, End of Period $19.73
========
Total Investment Return at Net Asset Value (6) 8.86%(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) 8.61%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $22,728
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 2.33%(1)
Ratio of Net Investment Loss to Average Net Assets (1.09%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (1.47%)(1)
Portfolio Turnover Rate 72%
Fee Reduction Per Share (3) $0.05
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $18.14
--------
Net Investment Loss (3) (0.13)
Net Realized and Unrealized Gain on
Investments 1.74
--------
Total from Investment Operations 1.61
--------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold (0.02)
--------
Net Asset Value, End of Period $19.73
========
Total Investment Return at Net Asset Value (6) 8.86%(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) 8.61%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $915
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 2.33%(1)
Ratio of Net Investment Loss to Average Net Assets (1.09%)(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (1.47%)(1)
Portfolio Turnover Rate 72%
Fee Reduction Per Share (3) $0.05
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- --------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 2, 1995 YEAR ENDED FEBRUARY 29, YEAR ENDED
(COMMENCEMENT OF OPERATIONS) -------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS I (9)
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.29 $11.01 $14.88 $17.65
-------- -------- -------- -------- --------
Net Investment Income (Loss)(3) 0.03 0.05 0.04 0.01 (0.01)
Net Realized and Unrealized Gain on
Investments 0.81 2.16 4.34 3.40 3.31
-------- -------- -------- -------- --------
Total from Investment Operations 0.84 2.21 4.38 3.41 3.30
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.03) (0.04) (0.03) (0.02) --
Distributions in Excess of Net Investment
Income -- -- -- (0.00)(8) --
Distributions from Net Realized Gain on
Investments 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
======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value (6) 9.94%(2) 24.19% 40.52% 22.92% 19.67%
Total Adjusted Investment Return at Net
Asset Value (6,7) (5.63%)(2) 17.40% 37.95% 21.89% 19.29%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $549 $883 $4,605 $7,855 $8,520
Ratio of Expenses to Average Net Assets 0.95%(1) 0.95% 0.95% 0.95% 0.95%
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 38.57%(1) 7.74% 3.52% 1.98% 1.33%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.91%(1) 0.49% 0.34% 0.06% (0.06%)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (36.71%)(1) (6.30%) (2.23%) (0.97%) (0.44%)
Portfolio Turnover Rate 21% 142% 91% 54% 72%
Fee Reduction Per Share (3) $1.36 $0.68 $0.33 $0.17 $0.05
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are
expected to decrease and adjusted net investment income as a percentage
of average net assets is expected to increase as the net assets of the
Fund grow.
(6) Assumes dividend reinvestment and does not reflect the effect of
sales charges.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(8) Less than $0.01 per share.
(9) Effective July 1, 1999, existing shares of the Fund were designated
Class I shares.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
February 29, 2000
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Core Growth Fund
on February 29, 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
Aerospace (1.57%)
General Dynamics Corp. 5,900 $255,175
United Technologies Corp. 11,300 575,594
-----------
830,769
-----------
Automobile/Trucks (0.18%)
Lear Corp.* 4,600 97,175
-----------
Business Services - Misc. (0.56%)
Convergys Corp.* 7,700 296,450
-----------
Computer - Software (8.10%)
Citrix Systems, Inc.* 3,400 358,487
Computer Associates International, Inc. 6,500 418,031
Intuit, Inc.* 3,500 183,750
Microsoft Corp.* 32,600 2,913,625
Siebel Systems, Inc.* 3,000 416,062
-----------
4,289,955
-----------
Computers (21.46%)
America Online, Inc.* 15,600 920,400
Cisco Systems, Inc.* 25,200 3,331,125
Compaq Computer Corp. 15,000 373,125
Dell Computer Corp.* 17,700 722,381
EMC Corp.* 9,100 1,082,900
Hewlett-Packard Co. 5,700 766,650
International Business Machines Corp. 11,500 1,173,000
Network Appliance, Inc.* 2,200 415,250
Oracle Corp.* 17,200 1,277,100
VERITAS Software Corp.* 3,700 732,137
Yahoo! Inc.* 3,600 574,875
-----------
11,368,943
-----------
Cosmetics & Personal Care (0.61%)
Avon Products, Inc. 5,800 156,962
Dial Corp. (The) 11,600 166,750
-----------
323,712
-----------
Diversified Operations (2.48%)
Honeywell International, Inc. 12,300 591,938
Monsanto Co. 5,800 225,112
Textron, Inc. 4,300 262,300
Tyco International Ltd. 6,200 235,212
-----------
1,314,562
-----------
Electronics (22.76%)
Altera Corp.* 6,600 526,350
Analog Devices, Inc.* 3,300 518,100
Applied Micro Circuits Corp.* 1,500 412,594
General Electric Co. 19,500 2,577,656
Intel Corp. 25,400 2,870,200
Jabil Circuit, Inc.* 2,900 201,369
JDS Uniphase Corp.* 2,200 579,975
Linear Technology Corp. 2,100 220,369
LSI Logic Corp.* 4,000 256,250
Maxim Intergrated Products, Inc.* 6,000 400,875
Motorola, Inc. 3,200 545,600
Novellus Systems, Inc.* 2,800 166,075
SCI Systems, Inc.* 5,600 225,400
Solectron Corp.* 5,000 327,500
Teradyne, Inc.* 3,700 321,900
Texas Instruments, Inc. 7,200 1,198,800
Vishay Intertechnology, Inc.* 4,400 189,200
Xilinx, Inc.* 6,500 518,375
-----------
12,056,588
-----------
Finance (2.21%)
Associates First Capital Corp.
(Class A) 16,800 333,900
Citigroup, Inc. 9,200 475,525
MBNA Corp. 16,000 364,000
-----------
1,173,425
-----------
Financial Services - Misc. (0.47%)
First Data Corp. 5,500 247,500
-----------
Food (0.26%)
Quaker Oats Co. 2,600 140,237
-----------
Insurance (1.74%)
American General Corp. 5,000 260,937
AXA Financial, Inc. 13,900 416,131
Lincoln National Corp. 4,700 130,719
XL Capital Ltd. (Class A) 2,800 113,225
-----------
921,012
-----------
Machinery (0.56%)
Ingersoll-Rand Co. 7,700 295,006
-----------
Media (4.71%)
AT&T Corp. - Liberty Media Group* 10,700 559,075
CBS Corp.* 7,500 446,719
Clear Channel Communications, Inc.* 6,900 459,712
Infinity Broadcasting Corp. (Class A)* 9,700 309,794
Time Warner, Inc. 8,400 718,200
-----------
2,493,500
-----------
Medical (14.41%)
Abbott Laboratories 7,900 258,725
Allergan, Inc. 2,200 110,687
American Home Products Corp. 5,100 221,850
Biogen, Inc.* 3,900 420,956
Bristol-Myers Squibb Co. 18,500 1,051,031
Cardinal Health, Inc. 5,300 218,625
CV Therapeutics, Inc.* 3,500 225,750
Forest Laboratories, Inc.* 2,500 170,781
Genentech, Inc.* 2,400 462,900
Johnson & Johnson 8,300 595,525
Lilly (Eli) & Co. 6,500 386,344
Merck & Co., Inc. 9,400 578,688
Pfizer, Inc. 41,300 1,326,763
Schering-Plough Corp. 17,300 603,338
Warner-Lambert Co. 11,700 1,001,081
-----------
7,633,044
-----------
Metal (0.38%)
Illinois Tool Works, Inc. 3,900 201,581
-----------
Mortgage Banking (0.62%)
Fannie Mae 6,200 328,600
-----------
Office (0.41%)
Pitney Bowes, Inc. 4,400 217,800
-----------
Oil & Gas (0.82%)
Atlantic Richfield Co. 3,400 241,400
USX - Marathon Group 8,900 192,463
-----------
433,863
-----------
Paper & Paper Products (0.51%)
Kimberly-Clark Corp. 5,200 268,775
-----------
Retail (8.27%)
Brinker International, Inc.* 7,400 160,950
Circuit City Stores-Circuit City Group 9,900 399,713
Family Dollar Stores, Inc. 15,300 265,838
Gap, Inc. (The) 7,300 352,681
Home Depot, Inc. (The) 17,900 1,034,844
Lowe's Cos., Inc. 6,400 304,800
Tandy Corp. 4,800 182,700
Target Corp. 4,900 289,100
TJX Cos., Inc. 19,700 313,969
Wal-Mart Stores, Inc. 22,100 1,075,994
-----------
4,380,589
-----------
Telecommunications (4.60%)
Corning, Inc. 1,800 338,400
MCI WorldCom, Inc.* 18,700 834,488
RF Micro Devices, Inc.* 1,500 207,469
Sprint Corp. 4,500 274,500
Sprint PCS* 9,000 465,750
Tellabs, Inc.* 6,600 316,800
-----------
2,437,407
-----------
Textile (0.25%)
WestPoint Stevens, Inc. 8,100 134,663
-----------
Tobacco (1.10%)
Philip Morris Cos., Inc. 21,100 423,319
UST, Inc. 8,400 162,225
-----------
585,544
-----------
TOTAL COMMON STOCKS
(Cost $46,866,228) (99.04%) 52,470,700
------- -----------
INTEREST PAR VALUE
RATE (000S OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.14%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 02-29-00,
due 03-01-00 (Secured by U.S.
Treasury Bonds, 7.50% thru
10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury
Notes, 5.125% thru 6.25%
due 07-31-00 thru 08-15-07) -
Note A 5.79% $1,136 1,136,000
------- -----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.65% 56
-----------
TOTAL SHORT-TERM INVESTMENTS (2.15%) 1,136,056
------- -----------
TOTAL INVESTMENTS (101.18%) 53,606,756
------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.18%) (623,858)
------- -----------
TOTAL NET ASSETS (100.00%) $52,982,898
======= ===========
* 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
NOTE A -
ACCOUNTING POLICIES
John Hancock Institutional Series Trust (the "Trust") is an open-end
management investment company registered under the Investment Company
Act of 1940. The Trust, organized as a Massachusetts business trust in
1994, consists of eleven series portfolios: John Hancock Core Growth
Fund ("the Fund"), John Hancock Active Bond Fund, John Hancock Dividend
Performers Fund, John Hancock Medium Capitalization Growth Fund, John
Hancock Small Capitalization Growth Fund, John Hancock Small
Capitalization Value Fund, John Hancock International Equity Fund, John
Hancock Independence Balanced Fund, John Hancock Core Value Fund, John
Hancock Independence Diversified Core Equity Fund II and John Hancock
Independence Medium Capitalization Fund. Prior to July 1, 1999, John
Hancock Core Value Fund was known as John Hancock Independence Value
Fund, John Hancock Core Growth Fund was known as John Hancock
Independence Growth Fund and John Hancock Medium Capitalization Growth
Fund was known as John Hancock Multi-Sector Growth Fund. The other ten
series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to seek above-average total return.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B, Class C and Class I
shares. Effective July 1, 1999, the Fund, which had previously been
sold only to institutional investors, also became available for sale to
individual investors. Existing shares of the Fund were designated Class
I shares and the Fund issued Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulation of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund portfolio are valued on
the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value. All portfolio transactions initially
expressed in terms of foreign currencies have been translated into U.S.
dollars as described in "Foreign Currency Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of
The Berkeley Financial Group, Inc., may participate in a joint
repurchase agreement transaction. Aggregate cash balances are invested
in one or more repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to
foreign taxes and are accrued as applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required.
DIVIDENDS, 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 identified the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles. Dividends paid by
the Fund with respect to each class of shares will be calculated in the
same manner, at the same time and will be in the same amount, except
for the effect of expenses that may be applied differently to each
class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the Fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution and service fees, if any, are
calculated daily at the class level based on the appropriate net assets
of each class and the specific expense rate(s) applicable to each
class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust were directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund will be allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporated
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Fund. Actual results
could have differed from these estimates.
ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to
the Fund's operations ratably over a five-year period that began with
the commencement of the investment operations of the Fund.
BANK BORROWING 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 of up to $500
million, collectively. Interest is charged to each fund based on its
borrowing. In addition, a commitment fee is charged based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity for
the year ended February 29, 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 securities on loan. As with other extensions of
credit, the Fund may bear risk of delay of the loaned securities in
recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. At February 29, 2000, there were no
outstanding security loans.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 P.M.,
London time, on the date of any determination of the net asset value of
the Fund. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser, for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of the
first $500,000,000 of the Fund's average daily net asset value and (b)
0.75% of the Fund's average daily net asset value in excess of
$500,000,000.
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of Independence
Investment Associates, Inc. (the "Sub-Adviser"). The Adviser has a
sub-investment management contract with the Sub-Adviser, under which
the Sub-Adviser, subject to the review of the Trustees and the overall
supervision of the Adviser, provides the Fund with investment services
and advice with respect to investment transactions, for which the
Adviser pays the Sub-Adviser 55% of the advisory fee payable on the
Fund's average daily net assets. Effective July 1, 1995, the
Sub-Adviser has waived its fees until further notice.
The Adviser has agreed to limit the Fund's expenses further to the
extent required to prevent expenses (not including 12b-1 and transfer
agent fees) from exceeding 0.90% of the Fund's average daily net
assets. Accordingly, for the year ended February 29, 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 $76,350. 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 year
ended February 29, 2000, net sales charges received with regard to
sales of Class A shares amounted to $210,331. Out of this amount,
$5,622 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $139,995 was paid as sales
commissions to unrelated broker-dealers and $64,714 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 5.0% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares
being redeemed. Proceeds from the CDSC are paid to JH Funds and are
used in whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale
of Class B shares. For the year ended February 29, 2000, contingent
deferred sales charges amount to $18,388.
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 year ended February 29, 2000,
contingent deferred sales charges amount to $470.
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. 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 subsidiary of
JHLICo. The Fund pays Signature Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.05% of its average daily net
assets, plus certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, Ms. Anne C. Hodsdon and Mr.
Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this
compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock
funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any
income earned by the investment as well as any unrealized gains or
losses. The investment has no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended February 29, 2000, aggregated $54,609,342 and
$14,482,563, respectively.
The cost of investments owned at February 29, 2000 (excluding the
corporate savings account) for federal income tax purposes was
$48,190,424. Gross unrealized appreciation and depreciation of
investments aggregated $9,284,519 and $3,868,243, respectively,
resulting in net unrealized appreciation of $5,416,276.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended February 29, 2000, the Fund has reclassified
amounts to reflect an increase in capital paid-in of $79,260, a
decrease in accumulated net investment gain of $183,867, and a decrease
in accumulated net investment loss of $104,607. This represents the
cumulative amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of February 29, 2000.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to the net operating losses in the
computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles and the Fund's
use of the tax accounting practice known as equalization. The
calculation of net investment income per share in the financial
highlights excludes these adjustments.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
John Hancock Institutional Series Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of John Hancock Core Growth Fund
(the "Fund") as of February 29, 2000, the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the four years in the period then
ended, and the period from the commencement of operations to February
29, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
February 29, 2000 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Fund at February 29, 2000, the results of its operations, the changes
in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund for the fiscal
year ended February 29, 2000.
The Fund has designated distributions to shareholders of $346,305 as a
long-term capital gain dividend. These amounts were reported on the
1999 U.S. Treasury Department form 1099-DIV.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended February 29, 2000, 20.65% of the dividends qualify for the corporate
dividends received deduction.
SHAREHOLDER MEETING (UNAUDITED)
On June 16, 1999, a special meeting of John Hancock Core Growth Fund
was held. The shareholders voted against the following proposal (votes
in parentheses):
To adopt a distribution plan providing for payments to John Hancock
Funds, Inc. ("JH Funds") to provide certain services to the Fund's
shareholders and to reimburse JH Funds for its expenses in connection
with the sale of fund shares (87,720 FOR, 115,974 AGAINST and 0 ABSTAINING).
NOTES
[This page intentionally left blank.]
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
101 Huntington Avenue, Boston, MA 02199-7603
1-800-755-4371 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Core Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
7900A 2/00
4/00
The latest report from your
Fund's management team
ANNUAL REPORT
Core Value Fund
FEBRUARY 29, 2000
[A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."]
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
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 and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
INVESTMENT SUBADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, the market's advances were restricted to an
increasingly select group of stocks -- primarily in the technology and
communications areas. Even those gains were accompanied by tremendous
levels of daily volatility. But many other stocks, including the
household blue-chip names, fell to new 52-week lows in response to a
tough combination of investor apathy, rising interest rates and
earnings concerns.
In this same period, bonds struggled through one of their worst years
in more than two decades, as the strength of the U.S. economy and the
rebound of many others around the world provoked inflation fears.
Though their longer-term outlook looks brighter, in many instances bond
mutual fund investors have actually lost a little ground or made only
slight advances lately.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN 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 lag as investors favor technology names
Technology growth stocks dominated the market's returns, leaving value
investors out in the cold for most of the past year. Value stocks
enjoyed a brief rally last spring, but rising interest rates and the
possibility of slower economic growth soon dimmed their earnings growth
prospects. Investors shifted away from economically sensitive sectors
and into technology, where earnings growth seemed unassailable. This
flight produced the widest performance gap ever between growth and
value stocks, which historically have had similar long-term returns.
The Russell 1000 Value Index, for example, lost ground, returning
- -3.27% for the year ended February 29, 2000, compared to a 31.75%
return for the Russell 1000 Growth Index. The Standard & Poor's 500
Index returned 11.73% for the same period.
"...the widest
performance
gap ever
between
growth and
value
stocks..."
Fund performance
In this environment, the winners were funds concentrated in expensive
technology names -- not funds like ours that take a risk-controlled,
diversified approach. For the year ended February 29, 2000, John
Hancock Core Value Fund's Class A shares returned -8.08% at net asset
value. By comparison, the average multi-cap value fund returned 1.12%,
according to Lipper, Inc.1 (Lipper recently introduced new competitive
categories to reflect more accurately the average portfolio holdings of
the funds they track.) The Fund's Class B, Class C and Class I shares,
which were introduced on July 1, 1999, returned -19.19%, -19.19% and
- -18.71%, respectively, at net asset value, from inception through
February 29, 2000. 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 Common Stock
Holdings." The first listing is Exxon Mobil 5.7%, the second is
Citigroup 4.1%, the third AT&T 2.8%, the fourth SBC Communications 2.1%
and the fifth Fannie Mae 1.9%. A note below the table reads "As a
percentage of net assets on February 29, 2000."]
"...our stock
selection
leans heavily
toward the
more reason
ably priced
names..."
Strategy review
The Fund focuses on cheap stocks with improving prospects. While we try
to match the industry weightings of the Russell 1000 Value Index, our
stock selection leans heavily toward the more reasonably priced names
within the value universe. Typically, we do not buy stocks that are
more expensive than the market or whose earnings are growing no faster
than the market. This approach has generally worked well. During the
past year, however, the reverse was true. Our conservative focus also
meant we had sizable stakes in some of the sectors that took the
hardest hits, including finance, industrials and consumer cyclicals.
[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 General Dynamics followed by a down arrow with the phrase
"Concerns about Gulfstream acquisition." The second listing is TJX
Companies followed by a down arrow with the phrase "Discount retailers
out of favor, earnings on target." The third listing is LSI Logic
followed by an up arrow with the phrase "Booming semiconductor cycle."
A note below the table reads "See 'Schedule of Investments.' Investment
holdings are subject to change."]
Weakness in financials, industrials
As investors grew increasingly concerned about rising short-term
interest rates, they abandoned interest-rate-sensitive sectors. This
caused stock prices to tumble even though earnings often met
expectations. Most of our finance stocks fell as interest rates
climbed, including banks like FleetBoston Financial, Comerica and Bank
of America; insurers like Lincoln National and Hartford Financial
Services Group; and finance companies like Associates First Capital and
Fannie Mae. Industrials also suffered amidst concerns that an economic
slowdown would hurt sales and earnings prospects. This, combined with
fears that the Internet would increase price competition, hurt
companies like General Dynamics, Ingersoll-Rand, Illinois Tool Works
and Black & Decker. Finally, we scaled back or sold retailers like TJX
Companies and Tommy Hilfiger, as well as auto stocks like Ford Motor,
whose prices declined on the expectation that higher interest rates
would slow consumer spending.
Telephone services under pressure
Telephone service providers also had a tough year. The explosion in
voice, data and Internet communications buoyed their stock prices early
on. But the stocks later retreated as investors worried about price
wars in traditional phone services. We held on to companies like MCI
WorldCom. Although the stock price suffered in the short term from the
company's pending merger with Sprint, the company has strong long-term
prospects from its dominant positions in the cellular, Internet and
traditional phone markets. We also rebuilt our stake in SBC
Communications -- a leader in local service that also has national long
distance and Internet capabilities, as well as international assets.
Finally, we kept a sizable investment in AT&T, which is uniquely
positioned to become a one-stop telephone, cable and Internet provider
to homes nationwide.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the year ended February 29,
2000." The chart is scaled in increments of 5% with -20% at the bottom
and 5% at the top. The first bar represents the -8.08% total return for
John Hancock Core Value Fund Class A. The second bar represents the
- -19.19%* total return for John Hancock Core Value Fund Class B. The
third bar represents the -19.19%* total return for John Hancock Core
Value Fund Class C. The fourth bar represents the -18.71%* total return
for John Hancock Core Value Fund Class I. The fifth bar represents the
1.12% 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. *From inception July 1, 1999
through February 29, 2000."]
Bright spots in technology and media
Some technology stocks met our investment criteria and did quite well,
causing us in some cases to take profits. Among the strong performers
were Teradyne, which makes testing equipment for semiconductor
companies, LSI Logic, a semiconductor manufacturer, and Computer
Associates, a software company. We also benefited from owning IBM. In
the media area, CBS and Clear Channel Communications did well, thanks
to increased spending by Internet start-ups on radio and billboard
advertising. Finally, our energy investments, including Texaco and BP
Amoco, climbed as oil prices doubled over the past year. We recently
scaled back on Texaco in favor of companies like ExxonMobil, whose
recent merger should translate into improved earnings prospects.
Finally, a few finance stocks turned in exceptional results despite the
sector rout. Citigroup benefited from the turnaround in emerging
economies and better-than-expected earnings. And Morgan Stanley Dean
Witter enjoyed brisk business from underwriting, Internet capital
raising and merger advisory activity.
"...the bar
gains and
earnings
growth
potential in
the value
sector will
become
apparent..."
Opportunity ahead
We remain optimistic about the prospects for value stocks. In the
coming year, we expect steady economic growth in the United States,
improving growth in Europe, and much better growth in the Far East. All
of this bodes well for the earnings prospects of U.S. companies,
particularly large, economically sensitive companies that do business
overseas. Since stock prices typically follow earnings, this should
translate into a broad-based boost for the market. At some point, the
bargains and earnings growth potential in the value sector will become
apparent to investors. In the meantime, we plan to take advantage of
the excellent buying opportunities that currently exist.
- -------------------------------------------------------------------------
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 a maximum applicable
sales charge of 5%. Effective July 1, 1999, existing shares of the Fund
were designated as Class A shares and became available to individual
investors. Class B performance reflects a maximum contingent deferred
sales charge (maximum 5% and declining to 0% over six years). Class C
performance includes 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 December 31, 1999
SINCE
ONE INCEPTION
YEAR (10/2/95)
------- -------
Cumulative Total Return (0.60%) 100.53%
Average Annual Total Return(1) (0.60%) 17.80%
CLASS B
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return (11.41%)
Average Annual Total Return(1) (11.41%)(2)
CLASS C
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return (7.71%)
Average Annual Total Return(1) (7.71%)(2)
CLASS I*
For the period ended December 31, 1999
SINCE
INCEPTION
(7/1/99)
-------
Cumulative Total Return (6.40%)
Average Annual Total Return(1) (6.40%)(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 July 1, 2000) of the Fund's
average daily net assets. In addition, the Distributor will not impose the
Class A 12b-1 fee until July 1, 2000. Without the limitation of expenses,
the average annual total return for the one-year and since inception
periods for Class A shares would have been (1.20%) and 12.75%,
respectively. Without the limitation of expenses, the cumulative total
return for the period since inception for Class B, Class C and Class I
shares would have been (11.68%), (7.98%) and (6.67%), 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 Independence 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 $19,491 as
of February 29, 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 $18,338 as
of February 29, 2000. The third line represents the same hypothetical
investment made in the John Hancock Core Value Fund, after sales charge,
and is equal to $17,416 as of February 29, 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 February 29, 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 $8,081 $8,081 $203,222
- ----------------------------------------------------------------------------
With Maximum Sales Charge $7,677 $8,001 --
- ----------------------------------------------------------------------------
Russell 1000 Value Index $8,517 $8,517 $212,919
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet
and shows the value of what the Fund owns, is due and owes as of
February 29, 2000. You'll also find the net asset value per share
as of that date.
Statement of Assets and Liabilities
February 29, 2000
- ------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $21,715,707) $19,780,288
Joint repurchase agreement (cost -
$214,000) 214,000
Corporate savings account 54
-----------
19,994,342
Receivable for investments sold 2,941
Receivable for shares sold 4,496
Dividends receivable 53,603
Interest receivable 36
Receivable from John Hancock
Advisers, Inc. and affiliates -
Note B 32,141
Deferred organization expense -
Note A 1,022
Other assets 274
-----------
Total Assets 20,088,855
-----------
Liabilities:
Payable for shares repurchased 44,940
Payable to John Hancock Advisers,
Inc. and affiliates - Note B 30,267
Accounts payable and accrued
expenses 42,910
-----------
Total Liabilities 118,117
-----------
Net Assets:
Capital paid-in 21,863,536
Accumulated net realized gain on
investments 6,297
Net unrealized depreciation of
investments (1,935,419)
Undistributed net investment income 36,324
-----------
Net Assets $19,970,738
============================================================
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* - $11,507,832/1,075,148 $10.70
============================================================
Class B* - $7,538,924/705,449 $10.69
============================================================
Class C* - $257,874/24,134 $10.69
============================================================
Class I* - $666,108/62,225 $10.70
============================================================
Maximum Offering Price Per Share**
Class A - ($10.70 x 105.26%) $11.26
============================================================
* Effective July 1, 1999, existing shares of the Fund were renamed
Class A shares and Class B, Class C and Class I shares commenced
operations.
** On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows net
gains for the period stated.
Statement of Operations
Year ended February 29, 2000
- ------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign
withholding taxes of $362) $249,785
Interest (including securities
lending income of $161) 18,442
-----------
268,227
-----------
Expenses:
Investment management fee - Note B 103,756
Distribution and service fee - Note B
Class A 20,435
Class B 32,466
Class C 1,086
Registration and filing fees 36,266
Custodian fee 23,429
Auditing fee 18,489
Printing 10,671
Transfer agent fee - Note B 6,485
Accounting and legal services fee -
Note B 2,447
Organization expense - Note A 1,749
Trustees' fees 1,403
Miscellaneous 857
Legal fees 332
-----------
Total Expenses 259,871
-----------
Less Expense Reductions - Note B (82,643)
-----------
Less: Distribution and Service Fee -
Class A - Note B (20,435)
-----------
Net Expenses 156,793
-----------
Net Investment Income 111,434
-----------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 533,950
Change in net unrealized
appreciation/depreciation of
investments (2,969,929)
-----------
Net Realized and Unrealized Loss
on Investments (2,435,979)
-----------
Net Decrease in Net Assets
Resulting from Operations ($2,324,545)
===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 29,
1999 2000
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $69,714 $111,434
Net realized gain on investments sold 834,769 533,950
Change in net unrealized appreciation/depreciation of investments (193,421) (2,969,929)
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 711,062 (2,324,545)
----------- -----------
Distributions to Shareholders:
Dividends from net investment income
Class A* - ($0.1785 and $0.0785 per share, respectively) (79,584) (74,593)
Class B* - (none and $0.0161 per share, respectively) -- (8,743)
Class C* - (none and $0.0161 per share, respectively) -- (270)
Class I* - (none and $0.0785 per share, respectively) -- (3,333)
Distributions from net realized gain on investments sold
Class A* - ($2.7712 and $0.7001 per share, respectively) (1,235,864) (435,361)
Class B* - (none and $0.1001 per share, respectively) -- (54,266)
Class C* - (none and $0.1001 per share, respectively) -- (1,677)
Class I* - (none and $0.1001 per share, respectively) -- (4,252)
----------- -----------
Total Distributions to Shareholders (1,315,448) (582,495)
----------- -----------
From Fund Share Transactions - Net:** (458,243) 16,193,047
----------- -----------
Net Assets:
Beginning of period 7,747,360 6,684,731
----------- -----------
End of period (including undistributed net investment income
of $11,526 and $36,324, respectively) $6,684,731 $19,970,738
=========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A*
Shares sold 106,470 $1,518,766 983,090 $11,856,359
Shares issued to shareholders in reinvestment of distributions 106,255 1,315,448 39,669 510,527
----------- ----------- ----------- -----------
212,725 2,834,214 1,022,759 12,366,886
Less shares repurchased (228,113) (3,292,457) (488,368) (5,886,379)
----------- ----------- ----------- -----------
Net increase (decrease) (15,388) $(458,243) 534,391 $6,480,507
=========== =========== =========== ===========
CLASS B*
Shares sold -- -- 795,287 $9,680,255
Shares issued to shareholders in reinvestment of distributions -- -- 4,377 49,054
----------- ----------- ----------- -----------
-- -- 799,664 9,729,309
Less shares repurchased -- -- (94,215 (1,095,387)
----------- ----------- ----------- -----------
Net increase -- -- 705,449 $8,633,922
=========== =========== =========== ===========
CLASS C*
Shares sold -- -- 32,121 $391,553
Shares issued to shareholders in reinvestment of distributions -- -- 120 1,264
----------- ----------- ----------- -----------
-- -- 32,241 392,817
Less shares repurchased -- -- (8,107 (91,269)
----------- ----------- ----------- -----------
Net increase -- -- 24,134 $301,548
=========== =========== =========== ===========
CLASS I*
Shares sold -- -- 62,785 $783,431
Shares issued to shareholders in reinvestment of distributions -- -- 603 7,855
----------- ----------- ----------- -----------
-- -- 63,388 791,286
Less shares repurchased -- -- (1,163 (14,216)
----------- ----------- ----------- -----------
Net increase -- -- 62,225 $777,070
=========== =========== =========== ===========
* Effective July 1, 1999, existing shares of the Fund were renamed Class A shares,
and Class B, Class C and Class I shares commenced operations.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
The following tables include selected data for a share outstanding
throughout each period, total investment return, key ratios and
supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------
PERIOD FROM OCTOBER 2, 1995 YEAR ENDED FEBRUARY 29, YEAR ENDED
(COMMENCEMENT OF OPERATIONS) -------------------------------- FEBRUARY 29,
TO FEBRUARY 29, 1996 1997 1998 1999 2000
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A(8)
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $9.47 $10.88 $13.93 $12.36
-------- -------- -------- -------- --------
Net Investment Income (3) 0.10 0.23 0.21 0.15 0.13
Net Realized and Unrealized Gain (Loss) on
Investments 0.96 1.77 3.33 1.23 (1.01)
-------- -------- -------- -------- --------
Total from Investment Operations 1.06 2.00 3.54 1.38 (0.88)
-------- -------- -------- -------- --------
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
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value (6) 12.52%(2) 21.36% 32.97% 9.87% (8.08%)
Total Adjusted Investment Return at Net
Asset Value (6,7) (1.18%)(2) 15.92% 32.02% 8.94% (8.94%)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $682 $1,323 $7,747 $6,685 $11,508
Ratio of Expenses to Average Net Assets 0.95%(1) 0.95% 0.95% 0.95% 0.95%
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 34.06%(1) 6.39% 1.90% 1.88% 1.89%
Ratio of Net Investment Income to Average
Net Assets 2.81%(1) 2.26% 1.60% 1.03% 1.09%
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (4,5) (30.30%)(1) (3.18%) 0.65% 0.10% 0.15%
Portfolio Turnover Rate 12% 66% 119% 61% 76%
Fee Reduction Per Share (3) $1.22 $0.55 $0.12 $0.13 $0.09
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income,
gains (losses), dividends and total investment return of the Fund. It
shows how the Fund's net asset value for a share has changed since the
end of the previous period. Additionally, important relationships
between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 29, 2000
----------------------------
<S> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.02
Net Realized and Unrealized Loss on
Investments (2.56)
--------
Total from Investment Operations (2.54)
--------
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
========
Total Investment Return at Net Asset Value (6) (19.19%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (19.61%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $7,539
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 2.59%(1)
Ratio of Net Investment Income to Average
Net Assets 0.19%(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (0.45%)(1)
Portfolio Turnover Rate 76%
Fee Reduction Per Share (3) $0.07
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.02
Net Realized and Unrealized Loss on
Investments (2.56)
--------
Total from Investment Operations (2.54)
--------
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
========
Total Investment Return at Net Asset Value (6) (19.19%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (19.61%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $258
Ratio of Expenses to Average Net Assets 1.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 2.59%(1)
Ratio of Net Investment Income to Average
Net Assets 0.21%(1)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (4,5) (0.43%)(1)
Portfolio Turnover Rate 76%
Fee Reduction Per Share (3) $0.07
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------
FOR THE PERIOD FROM
JULY 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 29, 2000
----------------------------
<S> <C>
CLASS I
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.35
--------
Net Investment Income (3) 0.09
Net Realized and Unrealized Loss on
Investments (2.56)
--------
Total from Investment Operations (2.47)
--------
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
========
Total Investment Return at Net Asset Value (6) (18.71%)(2)
Total Adjusted Investment Return at Net
Asset Value (6,7) (19.13%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $666
Ratio of Expenses to Average Net Assets 0.95%(1)
Ratio of Adjusted Expenses to Average Net
Assets (4,5) 1.59%(1)
Ratio of Net Investment Income to Average
Net Assets 1.09%(1)
Ratio of Adjusted Net Investment Income to
Average Net Assets (4,5) 0.45%(1)
Portfolio Turnover Rate 76%
Fee Reduction Per Share (3) $0.07
(1) Annualized.
(2) Not annualized.
(3) Based on the average of the shares outstanding at the end of each month
(4) Unreimbursed, without fee reduction.
(5) Adjusted expenses as a percentage of average net assets are
expected to decrease and adjusted net investment income as a percentage
of average net assets is expected to increase as the net assets of the
Fund grow.
(6) Assumes dividend reinvestment and does not reflect the effect of
sales charges.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(8) Effective July 1, 1999, existing shares of the fund were designated
Class A shares. The Fund which had previously only been sold to
institutional investors, also became available for sale to individual
investors.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
February 29, 2000
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Core Value Fund on February 29, 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.
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
- ------------------------------- ---------- ---------
<S> <C> <C>
COMMON STOCKS
Aerospace (2.94%)
Boeing Co. (The) 1,700 $62,688
Cordant Technologies, Inc. 1,700 55,038
General Dynamics Corp. 5,100 220,575
United Technologies Corp. 4,900 249,594
-----------
587,895
-----------
Automobile/Trucks (1.63%)
Dana Corp. 1,400 29,838
Ford Motor Co. 7,100 295,537
-----------
325,375
-----------
Banks - United States (9.57%)
AmSouth Bancorp. 4,200 60,900
Bank of America Corp. 5,500 253,344
Bank One Corp. 3,100 80,019
Chase Manhattan Corp. 2,400 191,100
Comerica, Inc. 2,600 96,038
Fifth Third Bancorp. 1,600 83,300
First Union Corp. 4,100 120,950
Firstar Corp. 4,000 71,250
FleetBoston Financial Corp. 9,500 258,875
KeyCorp 3,000 50,813
Marshall & Ilsley Corp. 1,400 64,313
Mellon Financial Corp. 5,400 162,675
Morgan (J.P.) & Co., Inc. 700 77,700
SunTrust Banks, Inc. 3,100 157,519
Wells Fargo Co. 5,500 181,844
-----------
1,910,640
-----------
Beverages (1.00%)
Anheuser-Busch Cos., Inc. 3,100 198,787
-----------
Broker Services (0.87%)
Merrill Lynch & Co., Inc. 1,700 174,250
-----------
Building (1.79%)
Black & Decker Corp. (The) 3,100 102,106
Georgia-Pacific Group 1,300 45,094
Weyerhauser Co. 1,600 82,100
Willamette Industries, Inc. 3,800 128,962
-----------
358,262
-----------
Chemicals (0.90%)
Dow Chemical Co. 600 65,100
Praxair, Inc. 1,700 57,375
Solutia, Inc. 4,100 56,631
-----------
179,106
-----------
Computers (3.11%)
Compaq Computer Corp. 4,600 114,425
First Data Corp. 2,900 130,500
Hewlett-Packard Co. 1,300 174,850
International Business Machines Corp. 1,400 142,800
Intuit, Inc.* 1,100 57,750
-----------
620,325
-----------
Consumer Products Misc. (0.34%)
American Greetings Corp. (Class A) 4,000 69,000
-----------
Diversified Operations (3.30%)
Honeywell International, Inc. 6,000 288,750
Minnesota Mining & Manufacturing Co. 1,400 123,375
Monsanto Co. 2,300 89,269
Textron, Inc. 2,600 158,600
-----------
659,994
-----------
Electronics (3.27%)
LSI Logic Corp.* 1,000 64,063
Motorola, Inc. 2,200 375,100
SCI Systems, Inc* 2,200 88,550
Vishay Intertechnology, Inc.* 2,900 124,700
-----------
652,413
-----------
Finance (11.46%)
Associates First Capital Corp.
(Class A) 5,700 113,287
Charter One Financial, Inc. 7,500 118,125
Citigroup, Inc. 16,000 827,000
Fannie Mae 7,300 386,900
Golden West Financial Corp. 3,600 102,600
Household International, Inc. 2,000 63,875
Kansas City Southern Industries, Inc. 800 63,000
MBNA Corp. 7,300 166,075
Morgan Stanley Dean Witter & Co. 5,400 380,362
Washington Mutual, Inc. 3,100 68,588
-----------
2,289,812
-----------
Food (1.47%)
ConAgra, Inc. 5,800 94,975
Kellogg Co. 3,800 96,187
Quaker Oats Co. 1,900 102,481
-----------
293,643
-----------
Furniture (0.27%)
Leggett & Platt, Inc. 3,200 53,800
-----------
Insurance (6.51%)
American General Corp. 3,700 193,094
American International Group, Inc. 1,800 159,187
Aon Corp. 2,000 41,875
AXA Financial, Inc. 7,300 218,544
Hartford Financial Services
Group, Inc. (The) 3,400 106,250
Lincoln National Corp. 4,400 122,375
Marsh & McLennan Cos., Inc. 800 61,900
Torchmark Corp. 2,300 45,569
Travelers Property Casualty Corp.
(Class A) 4,700 148,637
XL Capital Ltd. (Class A) 5,000 202,187
-----------
1,299,618
-----------
Machinery (0.81%)
Ingersoll-Rand Co. 4,200 160,912
-----------
Media (3.94%)
AT&T Corp. - Liberty Media Group *
(Class A) 5,700 297,825
CBS Corp. 3,900 232,294
Clear Channel Communications, Inc.* 2,000 133,250
Gannett Co., Inc. 1,900 123,856
-----------
787,225
-----------
Medical (3.27%)
Abbott Laboratories 3,000 98,250
American Home Products Corp. 1,100 47,850
Baxter International, Inc. 2,600 141,700
Bristol-Myers Squibb Co. 1,500 85,219
Cardinal Health, Inc. 2,000 82,500
Johnson & Johnson 500 35,875
Pall Corp. 2,600 51,350
Pharmacia & Upjohn, Inc. 2,300 109,537
-----------
652,281
-----------
Metal (2.27%)
Alcoa, Inc. 1,600 109,600
Illinois Tool Works, Inc. 4,400 227,425
Reynolds Metals Co. 1,100 69,850
Worthington Industries, Inc. 3,500 46,375
-----------
453,250
-----------
Office (1.05%)
Avery Dennison Corp. 2,000 121,375
Pitney Bowes, Inc. 1,800 89,100
-----------
210,475
-----------
Oil & Gas (11.60%)
Anadarko Petroleum Corp. 2,100 64,575
Atlantic Richfield Co. 3,600 255,600
Chevron Corp. 4,100 306,219
Conoco, Inc. (Class A) 3,100 59,481
El Paso Energy Corp. 2,100 77,831
Exxon Mobil Corp. 15,000 1,129,687
Kerr-McGee Corp. 2,900 129,775
Royal Dutch Petroleum Co.
(Netherlands) 1,900 99,750
Texaco, Inc. 1,200 56,925
USX - Marathon Group 6,300 136,237
-----------
2,316,080
-----------
Paper & Paper Products (2.36%)
Boise Cascade Corp. 2,500 74,531
Champion International Corp. 1,800 93,150
International Paper Co. 5,100 187,744
Kimberly-Clark Corp. 1,600 82,700
Smurfit-Stone Container Corp.* 2,400 32,700
-----------
470,825
-----------
Printing - Commercial (0.33%)
Donnelley (R.R.) & Sons Co. 3,400 65,025
-----------
Retail (3.11%)
Brinker International, Inc. 6,100 132,675
Circuit City Stores-Circuit City Group 1,900 76,713
Federated Department Stores, Inc.* 2,400 88,050
Limited, Inc. (The) 1,500 51,000
Outback Steakhouse, Inc.* 2,400 62,700
Target Corp. 1,100 64,900
TJX Cos., Inc. 9,100 145,031
-----------
621,069
-----------
Steel (0.40%)
Nucor Corp. 1,200 59,625
Ryerson Tull, Inc. 1,600 21,200
-----------
80,825
-----------
Telecommunications (7.71%)
AT&T Corp. 11,500 568,531
Bell Atlantic Corp. 4,200 205,537
MCI WorldCom, Inc.* 6,750 301,219
Sprint Corp. (FON Group) 4,400 268,400
Sprint Corp. (PCS Group) 3,800 196,650
-----------
1,540,337
-----------
Tobacco (0.86%)
Philip Morris Cos., Inc. 4,600 92,287
UST, Inc. 4,100 79,181
-----------
171,468
-----------
Transportation (2.06%)
Burlington Northern Santa Fe Corp. 5,700 112,219
CNF Transportation, Inc. 2,200 70,538
UAL Corp.* 2,900 141,375
Union Pacific Corp. 2,300 87,400
-----------
411,532
-----------
Utilities (10.85%)
Ameren Corp. 4,000 120,000
BellSouth Corp. 6,900 281,175
Cinergy Corp. 1,500 32,063
Constellation Energy Group 1,900 56,525
Dominion Resources, Inc. 1,000 36,688
Duke Energy Corp. 2,100 101,850
Edison International 5,100 134,194
Entergy Corp. 4,800 97,200
Florida Progress Corp. 1,900 80,988
FPL Group, Inc. 1,500 57,938
GTE Corp. 3,300 194,700
OGE Energy Corp. 3,500 60,156
PECO Energy Co. 2,800 104,475
Pinnacle West Capital Corp. 1,200 33,150
Reliant Energy, Inc. 6,400 131,600
SBC Communications, Inc. 10,900 414,200
Southern Co. 7,000 155,312
Telephone and Data Systems, Inc. 700 73,850
-----------
2,166,064
-----------
TOTAL COMMON STOCKS
(Cost $21,715,707) (99.05%) 19,780,288
------- -----------
INTEREST PAR VALUE
@ RATE (000S OMITTED)
@ -------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.07%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 02-29-00,
due 03-01-00 (Secured by U.S.
Treasury Bonds, 7.50% thru
10.00% due 05-15-10 thru
02-15-25, and U.S. Treasury
Notes, 5.125% thru 6.25%
due 07-31-00 thru 08-15-07) -
Note A 5.790% $214 214,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.65% 54
-----------
TOTAL SHORT-TERM INVESTMENTS (1.07%) 214,054
------- -----------
TOTAL INVESTMENTS (100.12%) 19,994,342
------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.12%) (23,604)
------- -----------
TOTAL NET ASSETS (100.00%) $19,970,738
======= ===========
* 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
NOTE A -
ACCOUNTING POLICIES
John Hancock Institutional Series Trust (the "Trust") is an open-end
management investment company registered under the Investment Company
Act of 1940. The Trust, organized as a Massachusetts business trust in
1994, consists of eleven series portfolios: John Hancock Core Value
Fund ("the Fund"), John Hancock Active Bond Fund, John Hancock Dividend
Performers Fund, John Hancock Medium Capitalization Growth Fund, John
Hancock Small Capitalization Growth Fund, John Hancock Small
Capitalization Value Fund, John Hancock International Equity Fund, John
Hancock Independence Balanced Fund, John Hancock Core Growth Fund, John
Hancock Independence Diversified Core Equity Fund II and John Hancock
Independence Medium Capitalization Fund. Prior to July 1, 1999, John
Hancock Core Value Fund was known as John Hancock Independence Value
Fund, John Hancock Core Growth Fund was known as John Hancock
Independence Growth Fund and John Hancock Medium Capitalization Growth
Fund was known as John Hancock Multi-Sector Growth Fund. The other ten
series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to seek above-average total return.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B, Class C and Class I
shares. Effective July 1, 1999, the Fund, which had previously only
been sold to institutional investors, also became available for sale to
individual investors. Existing shares of the Fund were designated Class
A shares, and Class B, Class C and Class I shares commenced operations.
The shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulation of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class, which bears distribution and service expenses under terms of a
distribution plan, have exclusive right to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund portfolio are valued on
the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value. All portfolio transactions initially
expressed in terms of foreign currencies have been translated into U.S.
dollars as described in "Foreign Currency Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of
The Berkeley Financial Group, Inc., may participate in a joint
repurchase agreement transaction. Aggregate cash balances are invested
in one or more repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to
foreign taxes and are accrued as applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required.
DIVIDENDS, 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 identified the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles. Dividends paid by
the Fund with respect to each class of shares will be calculated in the
same manner, at the same time and will be in the same amount, except
for the effect of expenses that may be applied differently to each
class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the Fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution and service fees, if any, are
calculated daily at the class level based on the appropriate net assets
of each class and the specific expense rate(s) applicable to each
class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security, as required by the Internal Revenue Code.
EXPENSES The majority of the expenses of the Trust were directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund will be allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporated
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Fund. Actual results
could have differed from these estimates.
ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to
the Funds' 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 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 year
ended February 29, 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 to the securities 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 February 29, 2000, there were no
outstanding security loans.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 P.M.,
London time, on the date of any determination of the net asset value of
the Fund. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of the
first $500,000,000 of the Fund's average daily net asset value and (b)
0.75% of the Fund's average daily net asset value in excess of
$500,000,000.
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of Independence
Investment Associates, Inc. (the "Sub-Adviser"). The Adviser has a
sub-investment management contract with the Sub-Adviser, under which
the Sub-Adviser, subject to the review of the Trustees and the overall
supervision of the Adviser, provides the Fund with investment services
and advice with respect to investment transactions, for which the
Adviser pays the Sub-Adviser 55% of the advisory fee payable on the
Fund's average daily net assets. Effective July 1, 1995, the
Sub-Adviser has waived its fees until further notice.
The Adviser has agreed to limit the Fund's expenses further to the
extent required to prevent expenses (not including 12b-1 fee and
transfer agent fees) from exceeding 0.90% of the Funds average daily
net assets. Accordingly, for the year ended February 29, 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 $82,643. 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 year
ended February 29, 2000, net sales charges received with regard to
sales of Class A shares amounted to $86,872. Out of this amount, $3,652
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $41,623 was paid as sales commissions to
unrelated broker-dealers and $41,597 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 5.0% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares
being redeemed. Proceeds from the CDSC are paid to JH Funds and are
used in whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale
of Class B shares. For the year ended February 29, 2000, contingent
deferred sales charges paid to JH Funds amounted to $8,515.
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 year ended February 29, 2000,
contingent deferred sales charges paid to JH Funds amounted to $165.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly, the
Fund will make payments to JH Funds for distribution and service
expenses at an annual rate not to exceed 0.30% of Class A average daily
net assets and 1.00% of Class B and Class C average daily net assets to
reimburse JH Funds for its distribution and service costs. The
Distributor has agreed not to impose the Fund's Class A 12b-1 fee until
July 1, 2000, which as of February 29, 1999, amounted to $20,435. 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 a monthly
transfer agent fee equivalent, on an annual basis, to 0.05% of its
average daily net assets, plus certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, Ms. Anne C. Hodsdon and Mr.
Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this
compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock
funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any
income earned by the investment as well as any unrealized gains or
losses. The investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended February 29, 2000, aggregated $25,410,087 and
$9,755,198, respectively.
The cost of investments owned at February 29, 2000 (excluding the
corporate savings account) for federal income tax purposes was
$21,983,777. Gross unrealized appreciation and depreciation of
investments aggregated $1,124,283 and $3,113,772, respectively,
resulting in net unrealized depreciation of $1,989,489.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended February 29, 2000, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized gain on
investments of $54,971, an increase in undistributed net investment
income of $303 and an increase in capital paid-in of $54,668. This
represents the amount necessary to report balances on a tax basis,
excluding certain temporary differences, as of February 29, 2000.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to certain differences in the
computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles, and the Fund's
use of the tax accounting practice known as equalization. The
calculation of net investment income per share in the financial
highlights excludes these adjustments.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
John Hancock Institutional Series Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of John Hancock Core Value Fund
(the "Fund") as of February 29, 2000, the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the four years in the period then
ended, and the period from the commencement of operations to February
29, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
February 29, 2000 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Fund at February 29, 2000, the results of its operations, the changes
in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund for the fiscal
year ended February 29, 2000.
The Fund has designated distributions to shareholders of $448,228 as a
long-term capital gain dividend. These amounts were reported on the
1999 U.S. Treasury Department Form 1099-DIV.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended February 29, 2000, 94.99% of the dividends qualify for the corporate
dividends received deduction.
SHAREHOLDER MEETING (UNAUDITED)
On June 16, 1999, a special meeting of John Hancock Core Value Fund was
held. The shareholders approved the following proposal (votes in
parentheses):
To adopt a distribution plan providing for payments to John Hancock
Funds, Inc. ("JH Funds") to provide certain services to the Fund's
shareholders and to reimburse JH Funds for its expenses in connection
with the sale of fund shares (401,584 FOR, 87,668 AGAINST and 18,165
ABSTAINING).
NOTES
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NOTES
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8800A 2/00
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