N-CSR 1 equity.txt JH EQUITY TRUST February 17, 2004 EDGAR United States Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Form N-CSR John Hancock Equity Trust (the "Registrant") on behalf of: John Hancock Large Cap Spectrum Fund File Nos. 2-92548; 811-4079 Ladies and Gentlemen: Enclosed herewith for filing pursuant to the Investment Company Act of 1940 and the Securities Exchange Act of 1934 is the Registrant's Form N-CSR filing containing the final report for John Hancock Large Cap Spectrum Fund (the "Fund") for the period ending December 17, 2003. On December 19, 2003, the Fund transferred all of its assets and liabilities to John Hancock Sovereign Investors Fund ("Sovereign Investors Fund"), a series of John Hancock Investment Trust, in exchange for shares of Sovereign Investors Fund pursuant to an Agreement and Plan of Reorganization. After this transaction and as of the close of business on December 19, 2003, the Fund was terminated. The financial statements presented herein reflect the position of the Fund prior to the exchange of net assets and termination of the Fund. If you have any questions or comments regarding this filing, please contact the undersigned at (617) 375-1722. Sincerely, /s/Brian E. Langenfeld Brian E. Langenfeld Attorney and Assistant Secretary ITEM 1. REPORT TO STOCKHOLDERS. -------------------------------------------------------------------------------- FINAL REPORT John Hancock Large Cap Spectrum Fund December 19, 2003 -------------------------------------------------------------------------------- John Hancock Large Cap Spectrum Fund Schedule of Investments December 19, 2003 (Unaudited) ------------------------------------
NUMBER OF ISSUER, DESCRIPTION SHARES VALUE ------------------------------------ --------- --------- COMMON STOCKS (Cost $15,443,647) Advertising (0.29%) Omnicom Group, Inc. 600 $50,874 ------------------------- Automobiles/Trucks (1.37%) Lear Corp.* 1,400 85,092 Magna International, Inc. (Class A) (Canada) 1,900 152,798 ------------------------- 237,890 --------- Banks - United States (6.16%) Bank of America Corp. 3,800 300,200 FleetBoston Financial Corp. 1,600 68,400 Mellon Financial Corp. 2,100 66,843 National City Corp. 3,000 100,320 State Street Corp. 1,350 68,431 U.S. Bancorp 3,400 98,294 Wachovia Corp. 3,000 137,850 Wells Fargo & Co. 3,900 226,512 ------------------------- 1,066,850 --------- Beverages (1.32%) Coca-Cola Co. (The) 1,350 67,635 PepsiCo, Inc. 3,400 160,378 ------------------------- 228,013 --------- Broker Services (3.93%) Goldman Sachs Group, Inc. (The) 3,100 298,778 Lehman Brothers Holdings, Inc. 2,200 162,800 Merrill Lynch & Co., Inc. 1,050 59,745 Morgan Stanley 2,850 159,628 ------------------------- 680,951 --------- Building (0.26%) Georgia-Pacific Corp. 1,500 44,550 ------------------------- Computers (10.66%) BEA Systems, Inc.* 5,900 71,685 Cisco Systems, Inc.* 6,400 152,320 Dell, Inc.* 8,100 269,082 Electronic Arts, Inc.* 1,000 46,140 Hewlett-Packard Co. 12,900 286,122 International Business Machines Corp. 1,700 158,338 Lexmark International, Inc.* 1,650 125,284 Microsoft Corp. 20,950 573,192 SAP A.G., American Depositary Receipt (ADR) (Germany) 113,260 VERITAS Software Corp.* 1,400 50,904 ------------------------- 1,846,327 --------- Consumer Products - Misc. (0.52%) Clorox Co. (The) 1,900 89,965 -------------------------
1 See notes to financial statements.
NUMBER OF ISSUER, DESCRIPTION SHARES VALUE ------------------------------------ --------- --------- Cosmetics & Personal Care (1.97%) Avon Products, Inc. 1,000 $66,690 Colgate-Palmolive Co. 1,050 51,649 Gillette Co. (The) 2,150 77,357 Procter & Gamble Co. (The) 1,500 146,280 ------------------------- 341,976 --------- Diversified Operations (4.80%) 3M Co. 1,050 88,273 eBay, Inc.* 800 49,112 General Electric Co. 16,100 497,329 SPX Corp.* 1,200 68,400 Tyco International Ltd. 5,100 128,214 ------------------------- 831,328 --------- Electronics (6.95%) Analog Devices, Inc.* 1,800 79,830 ASML Holding N.V. (New York Reg Shares) (Netherlands)* 71,250 Avnet, Inc.* 3,700 79,180 Flextronics International Ltd. (Singapore)* 4,800 71,472 Intel Corp. 12,900 395,127 KLA-Tencor Corp.* 2,200 122,584 Maxim Integrated Products, Inc. 900 43,749 Parker-Hannifin Corp. 1,800 105,948 Solectron Corp.* 11,500 67,620 Taiwan Semiconductor Manufacturing Co. Ltd., ADR (Taiwan)* 89,249 Texas Instruments, Inc. 2,700 76,518 ------------------------- 1,202,527 --------- Finance (8.02%) American Express Co. 1,850 87,338 Citigroup, Inc. 13,850 668,540 Golden West Financial Corp. 2,000 202,700 MBNA Corp. 10,650 264,014 Sovereign Bancorp., Inc. 1,850 43,642 Washington Mutual, Inc. 3,100 121,892 ------------------------- 1,388,126 --------- Food (0.27%) Dean Foods Co.* 1,450 47,154 ------------------------- Insurance (4.16%) American International Group, Inc. 5,900 380,963 Chubb Corp. (The) 1,900 125,229 Hartford Financial Services Group, Inc. (The) 1,200 69,564 Progressive Corp. (The) 700 58,205 Travelers Property Casualty Corp. (Class A) 5,324 85,663 ------------------------- 719,624 --------- Machinery (1.22%) Caterpiller, Inc. 1,400 118,650 Cooper Industries, Ltd. (Class A) 1,600 92,480 ------------------------- 211,130 ---------
2 See notes to financial statements.
NUMBER OF ISSUER, DESCRIPTION SHARES VALUE ------------------------------------ --------- --------- Media (4.65%) Comcast Corp. (Class A)* 2,800 $89,152 Comcast Corp. (Special Class A)* 11,600 352,756 Time Warner, Inc.* 5,450 98,645 Viacom, Inc. (Class B)* 6,200 265,050 ------------------------- 805,603 --------- Medical (14.05%) Aetna, Inc. 1,700 109,446 Amgen, Inc.* 3,700 229,030 Bard (C.R.), Inc. 1,250 101,400 Biogen Idec, Inc.* 3,200 119,872 Forest Laboratories, Inc.* 1,000 62,510 GlaxoSmithKline Plc, ADR (United Kingdom) 2,400 108,000 Johnson & Johnson 4,550 227,955 McKesson Corp. 2,850 89,461 Medtronic, Inc. 3,700 180,042 Millennium Pharmaceuticals, Inc.* 5,150 91,413 Pfizer, Inc. 18,150 622,000 Shire Pharmaceuticals Group Plc, ADR (United Kingdom)* 75,876 St. Jude Medical, Inc.* 1,700 102,085 UnitedHealth Group, Inc. 4,000 224,200 Valeant Pharmaceuticals International 1,677 41,573 Wyeth 1,150 47,150 ------------------------- 2,432,013 --------- Metal (1.27%) Newmont Mining Corp. 2,600 118,820 Phelps Dodge Corp.* 1,350 101,790 ------------------------- 220,610 --------- Mortgage Banking (1.12%) Fannie Mae 2,750 194,205 ------------------------- Oil & Gas (6.59%) ChevronTexaco Corp. 1,150 95,761 ConocoPhillips 4,400 279,092 ENSCO International, Inc. 2,400 65,232 Nabors Industries, Ltd. (Barbados)* 2,200 91,674 Occidental Petroleum Corp. 3,500 144,025 Schlumberger Ltd. 1,900 100,947 Suncor Energy, Inc. (Canada) 4,600 109,342 Talisman Energy, Inc. (Canada) 1,600 88,208 Valero Energy Corp. 1,200 56,160 Weatherford International Ltd.* 3,050 110,105 ------------------------- 1,140,546 --------- Paper & Paper Products (1.40%) Bowater, Inc. 2,000 91,380 MeadWestvaco Corp. 5,200 151,424 ------------------------- 242,804 --------- Retail (7.82%) Best Buy Co., Inc. 2,500 129,050 Genuine Parts Co. 3,100 102,672 Home Depot, Inc. (The) 2,700 95,850 Kohl's Corp.* 1,100 49,566 Lowe's Cos., Inc. 2,900 160,457 McDonald's Corp. 4,700 114,210
3 See notes to financial statements.
NUMBER OF ISSUER, DESCRIPTION SHARES VALUE ------------------------------------ --------- --------- Retail - Continued Safeway, Inc.* 3,200 $66,528 Staples, Inc.* 2,450 64,067 Target Corp. 2,900 110,229 Walgreen Co. 2,300 81,213 Wal-Mart Stores, Inc. 7,250 379,538 ------------------------- 1,353,380 --------- Telecommunications (4.00%) BellSouth Corp. 3,350 92,829 Corning, Inc.* 5,500 57,365 General Motors Corp. (Class H)* 8,300 132,634 Nextel Communications, Inc. (Class A)* 3,300 85,866 Nortel Networks Corp. (Canada)* 17,200 71,896 Sprint Corp. 3,300 52,272 Sprint Corp. (PCS Group)* 3,900 19,734 Tellabs, Inc.* 11,300 88,705 Verizon Communications, Inc. 2,650 90,498 ------------------------- 691,799 --------- Tobacco (0.59%) Altria Group, Inc. 1,850 101,602 ------------------------- Transportation (2.45%) Burlington Northern Santa Fe Corp. 2,100 67,221 CSX Corp. 2,000 70,740 Norfolk Southern Corp. 12,100 285,439 ------------------------- 423,400 --------- Utilities (2.46%) American Electric Power Co., Inc. 5,400 161,352 Constellation Energy Group, Inc. 1,800 67,950 Entergy Corp. 1,600 90,240 PPL Corp. 2,500 106,825 ------------------------- 426,367 --------- TOTAL COMMON STOCKS (98.30%) 17,019,614 ------------------------- TOTAL INVESTMENTS (98.30%) 17,019,614 ------------------------- OTHER ASSETS AND LIABILITIES, NET (1.70%) 294,401 ------------------------- TOTAL NET ASSETS (100.00%) $17,314,015 -------------------------
* Non-income-producing security. Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer. The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. 4 See notes to financial statements. John Hancock Large Cap Spectrum Fund ----------------------- -------------------------------------------------------------------------------------------- ASSETS AND ASSETS ----------------------- -------------------------------------------------------------------------------------------- LIABILITIES Investments at value (cost -$15,443,647) $17,019,614 ----------------------- Cash 257,285 Final report Receivable for investments sold 68,302 December 19, 2003 * Receivable for shares sold 518 (unaudited) Dividends receivable 16,257 Receivable from affiliates 30,825 Other assets 438 Total assets 17,393,239 -------------------------------------------------------------------------------------------- LIABILITIES -------------------------------------------------------------------------------------------- Payable for shares repurchased 518 Payable to affiliates Management fee 21,372 Distribution and service fee 10,379 Other 11,444 Other payables and accrued expenses 35,511 Total liabilities 79,224 -------------------------------------------------------------------------------------------- NET ASSETS -------------------------------------------------------------------------------------------- Capital paid-in 20,821,489 Accumulated net realized loss on investments and foreign currency transactions (5,083,312) Net unrealized appreciation of investments and translation of assets and liabilities in foreign currencies 1,575,854 Accumulated net investment loss (16) Net assets $17,314,015 -------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE -------------------------------------------------------------------------------------------- Based on net asset values and shares outstanding Class A ($5,459,225 / 598,745 shares) $9.12 Class B ($7,546,036 / 837,696 shares) $9.01 Class C ($4,308,754 / 478,283 shares) $9.01 -------------------------------------------------------------------------------------------- MAXIMUM OFFERING PRICE PER SHARE -------------------------------------------------------------------------------------------- Class A(1) ($9.12 / 95%) $9.60 Class C ($9.01 / 99%) $9.10 (1) On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the offering price was reduced * The net assets of the Fund were merged into John Hancock Sovereign Investors Fund as of the close of business on December 19, 2003, and the Fund was subsequently terminated. The Statement of Assets and Liabilities reflects the Fund's position prior to the transfer of net assets and the termination of the Fund. See Note A to financial statements.
5 See notes to financial statements. John Hancock Large Cap Spectrum Fund
---------------------- ---------------------------------------------------------------------------------------------- OPERATIONS INVESTMENT INCOME ---------------------- ---------------------------------------------------------------------------------------------- Period from Dividends (net of foreign withholding taxes of $194) $36,762 November 1, 2003 to Interest (including securities lending income of $39) 182 December 19, 2003 * Total investment income 36,944 (unaudited) ---------------------------------------------------------------------------------------------- EXPENSES ---------------------------------------------------------------------------------------------- Investment management fee 19,955 Class A distribution and service fee 2,230 Class B distribution and service fee 10,232 Class C distribution and service fee 5,813 Transfer agent fee 12,725 Registration and filing fee 9,546 Custodian fee 3,540 Accounting and legal services fee 704 Total expenses 64,745 Less expense reductions (18,298) Net expenses 46,447 Net investment loss (9,503) ---------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ---------------------------------------------------------------------------------------------- Net realized loss on Investments (59,067) Foreign currency transactions (465) Change in net unrealized appreciation (depreciation) of Investments 441,562 Translation of assets and liabilities in foreign currencies (113) Net realized and unrealized gain 381,917 Increase in net assets from operations $372,414 * The net assets of the Fund were merged into John Hancock Sovereign Investors Fund as of the close of business on December 19, 2003, and the Fund was subsequently terminated. The Statement of Operations reflects the Fund's position prior to the transfer of net assets and the termination of the Fund. See Note A to financial statements.
6 See notes to financial statements. John Hancock Large Cap Spectrum Fund
PERIOD FROM 11-1-03 YEAR ENDED TO 12-19-03 * 10-31-03 (UNAUDITED) ----------------- ------------------------------------------------------------------------------------------------------- CHANGES IN INCREASE (DECREASE) IN NET ASSETS ----------------- ------------------------------------------------------------------------------------------------------- NET ASSETS From operations ----------------- Net investment loss ($58,915) ($9,503) Net realized loss (921,409) (59,532) Change in net unrealized appreciation (depreciation) 3,504,011 441,449 Increase in net assets resulting from operations 2,523,687 372,414 From Fund share transactions (4,572,427) (840,735) ------------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------------ Beginning of period 19,831,076 17,782,336 End of period 1 $17,782,336 $17,314,015 (1) Includes accumulated net investment loss of $16 and $16 respectively. * The net assets of the Fund were merged into John Hancock Sovereign Investors Fund as of the close of business on December 19, 2003, and the Fund was subsequently terminated. The Statement of Changes in Net Assets reflects the Fund's position prior to the transfer of net assets and the termination of the Fund. See Note A to financial statements.
7 See notes to financial statements. John Hancock Large Cap Spectrum Fund Financial Highlights CLASS A SHARES
PERIOD ENDED 10-31-02 (1) 10-31-03 12-19-03 (2) --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $7.67 $8.92 Net investment income (3) -4 0.01 -4 Net realized and unrealized gain (loss) on investments (2.33) 1.24 0.20 Total from investment operations (2.33) 1.25 0.20 Net asset value, end of period $7.67 $8.92 $9.12 (5) Total return 6,7 (%) (23.30) (8) 16.30 2.24 --------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $6 $6 $5 Ratio of expenses to average net assets (%) 1.50 (9) 1.50 1.50 Ratio of adjusted expenses to average net assets (10) (%) 2.40 (9) 2.33 2.28 Ratio of net investment income to average net assets (%) -- (9) 0.16 0.08 Portfolio turnover (%) 70 81 7
8 See notes to financial statements. John Hancock Large Cap Spectrum Fund Financial Highlights CLASS B SHARES
PERIOD ENDED 10-31-02 (1) 10-31-03 12-19-03 (2) --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $7.64 $8.82 Net investment loss 3 (0.04) (0.04) (0.01) Net realized and unrealized gain (loss) on investments (2.32) 1.22 0.20 Total from investment operations (2.36) 1.18 0.19 Net asset value, end of period $7.64 $8.82 $9.01 (5) Total return 6,7 (%) (23.60) (8) 15.45 2.15 --------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $8 $8 $8 Ratio of expenses to average net assets (%) 2.20 (9) 2.20 2.20 Ratio of adjusted expenses to average net assets 10 (%) 3.10 (9) 3.03 2.98 Ratio of net investment loss to average net assets (%) (0.69) (9) (0.54) (0.63) Portfolio turnover (%) 70 81 7
9 See notes to financial statements. John Hancock Large Cap Spectrum Fund Financial Highlights CLASS C SHARES
PERIOD ENDED 10-31-02 (1) 10-31-03 12-19-03 (2) --------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $7.64 $8.82 Net investment loss 3 (0.04) (0.04) (0.01) Net realized and unrealized gain (loss) on investments (2.32) 1.22 0.20 Total from investment operations (2.36) 1.18 0.19 Net asset value, end of period $7.64 $8.82 $9.01 (5) Total return 6,7 (%) (23.60) (8) 15.45 2.15 --------------------------------------------------------------------------------------------------------------------- RATIOS AND SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $6 $4 $4 Ratio of expenses to average net assets (%) 2.20 (9) 2.20 2.20 Ratio of adjusted expenses to average net assets 10 (%) 3.10 (9) 3.03 2.98 Ratio of net investment loss to average net assets (%) (0.69) (9) (0.54) (0.63) Portfolio turnover (%) 70 81 7
(1) Class A, Class B, and Class C shares began operations on 2-25-02. (2) Final period from 11-1-03 through 12-19-03. Unaudited. (3) Based on the average of the shares outstanding. (4) Less than $0.01 per share. (5) Net asset value per share before the merger to John Hancock Sovereign Investors Fund and the termination of the Fund. See Note A to financial statements. (6) Assumes dividend reinvestment and does not reflect the effect of sales charges. (7) Total returns would have been lower had certain expenses not been reduced during the periods shown. (8) Not annualized. (9) Annualized. (10) Does not take into consideration expense reductions during the periods shown. 10 See notes to financial statements. NOTES TO FINANCIAL STATEMENTS Unaudited NOTE A Accounting policies John Hancock Large Cap Spectrum Fund (the "Fund") was a non-diversified series of John Hancock Equity Trust, an open-end management investment company registered under the Investment Company Act of 1940. The investment objective of the Fund was to achieve long-term growth of capital. The Fund's assets were allocated among three investment styles: core, growth and value. The Trustees had authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B and Class C shares. The shares of each class represented an interest in the same portfolio of investments of the Fund and had equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may have been applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Shareholders of a class that bore distribution and service expenses under the terms of a distribution plan had exclusive voting rights to that distribution plan. On December 19, 2003, the shareholders of the Fund approved an Agreement and Plan of Reorganization, which provided for the transfer of substantially all of the assets and liabilities of the Fund to the John Hancock Sovereign Investors Fund (the "Acquiring Fund") in exchange solely for shares of beneficial interest of the Acquiring Fund. After this transaction and as of the close of business on December 19, 2003, the Fund will be terminated. The financial statements presented herein reflect the position of the Fund prior to the exchange of net assets and termination of the Fund. Significant accounting policies of the Fund were as follows: Valuation of investments Securities in the Fund's portfolio were 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 were valued at amortized cost, which approximated market value. Investments in AIM Cash Investment Trust were valued at their net asset value each business day. All portfolio transactions initially expressed in terms of foreign currencies were 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 Fund, along with other registered investment companies having a management contract with John Hancock Advisers, LLC (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC, may have participated in a joint repurchase agreement transaction. Aggregate cash balances were invested in one or more large repurchase agreements, whose underlying securities were obligations of the U.S. government and/or its agencies. The Fund's custodian bank received delivery of the underlying securities for the joint account on the Fund's behalf. The Adviser was responsible for ensuring that the agreement was fully collateralized at all times. Foreign currency translation All assets or liabilities initially expressed in terms of foreign currencies were translated into U.S. dollars based on London currency exchange quotations as of 4:00 P.M., London time, on the date of any determination of the net asset value of the Fund. Transactions affecting statement of 11 operations accounts and net realized gain (loss) on investments were translated at the rates prevailing on the dates of the transactions. The Fund did 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 were included with the net realized and unrealized gain or loss from investments. Reported net realized foreign currency exchange gains or losses arose 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 arose from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rates. Investment transactions Investment transactions were recorded as of the date of purchase, sale or maturity. Net realized gains and losses on sales of investments were determined on the identified cost basis. Class allocations Income, common expenses and realized and unrealized gains (losses) were determined at the fund level and allocated daily to each class of shares based on the appropriate net asset value of the respective classes. Distribution and service fees, if any, were calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class. Expenses The majority of the expenses were directly identifiable to an individual fund. Expenses that were not readily identifiable to a specific fund were 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. Bank borrowings The Fund was 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 had entered into a syndicated line of credit agreement with various banks. This agreement enabled the Fund to participate with other funds managed by the Adviser in an unsecured line of credit with banks, which permitted borrowings of up to $250 million, collectively. Interest was charged to each fund, based on its borrowing. In addition, a commitment fee was charged to each fund based on the average daily unused portion of the line of credit and was allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the period ended December 19, 2003. Securities lending The Fund may have lent securities to certain qualified brokers who paid the Fund negotiated lender fees. These fees were included in interest income. The loans were 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 would have borne the risk of delay of the loaned securities in recovery or even loss of rights in the collateral, should the borrower of the securities have failed financially. There were no securities loaned on December 19, 2003. Securities lending expenses, if any, were paid by the Fund to the Adviser. Federal income taxes The Fund qualified as a "regulated investment company" by complying with the applicable provisions of the Internal Revenue Code and was not subject to federal income tax on taxable 12 income that was distributed to shareholders. Therefore, no federal income tax provision was required as of December 19, 2003, the Fund's final tax year. As of December 19, 2003, for federal income tax purposes, the Fund had $4,966,704 of a capital loss carryforward expiring as follows: October 31, 2010 - $4,063,884, October 31, 2011 - $817,112 and December 19, 2011 - $85,708. The unused capital loss carryforward as of December 19, 2003 was transferred to the Acquiring Fund and will be available, to the extent provided by regulations, to offset net capital gains of the Acquiring Fund. Dividends, interest and distributions Dividend income on investment securities was 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 was recorded on the accrual basis. Foreign income may have been subject to foreign withholding taxes, which were accrued as applicable. The Fund recorded distributions to shareholders from net investment income and realized gains on the ex-dividend date. Distributions paid by the Fund with respect to each class of shares were calculated in the same manner, at the same time and were in the same amount, except for the effect of expenses that may have been applied differently to each class. As of December 19, 2003, there were no distributable earnings on a tax basis. Such distributions and distributable earnings, on a tax basis, were determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, were reported in the Fund's financial statements as a return of capital. Use of estimates The preparation of these financial statements, in accordance with accounting principles generally accepted in the United States of America, incorporates estimates made by management in determining the reported amount of assets, liabilities, revenues and expenses of the Fund. Actual results could differ from these estimates. NOTE B Management fee and transactions with affiliates and others The Fund had an investment management contract with the Adviser. Under the investment management contract, the Fund paid a monthly management fee to the Adviser at an annual rate of 0.85% of the Fund's average daily net asset value. The Adviser had a subadvisory agreement with Alliance Capital Management L.P. The Fund was not responsible for payment of the subadvisory fees. The Adviser had agreed to limit the Fund's total expenses, excluding the distribution and service fees, to 1.20% of the Fund's average daily net asset value. Accordingly, the expense reduction related to total expense limitation amounted to $18,298 for the period ended December 19, 2003. The Adviser reserved the right to terminate this limitation in the future. The Fund had Distribution Plans with John Hancock Funds, LLC ("JH Funds"), a wholly owned subsidiary of the Adviser. The Fund had adopted Distribution Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH Funds for the services it provided as distributor of shares of the Fund. Accordingly, the Fund made monthly payments to JH Funds at an annual rate not to exceed 0.30% of Class A average daily net asset value and 1.00% of Class B and Class C average daily net asset value. A maximum of 0.25% of such payments may have been 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 have occurred under certain circumstances. 13 Class A and Class C shares were assessed up-front sales charges. During the period ended December 19, 2003, JH Funds received net up-front sales charges of $1,239 with regard to sales of Class A shares. Of this amount, $65 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $205 was paid as sales commissions to unrelated broker-dealers and $969 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. During the period ended December 19, 2003, JH Funds received net up-front sales charges of $270 with regard to sales of Class C shares. Of this amount, $269 was paid as sales commissions to unrelated broker-dealers and $1 was paid as sales commissions to sales personnel of Signator Investors. Class B shares that were redeemed within six years of purchase were subject to a contingent deferred sales charge ("CDSC") at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that were redeemed within one year of purchase were 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 CDSCs were paid to JH Funds and were used in whole or in part to defray its expenses for providing distribution-related services to the Fund in connection with the sale of Class B and Class C shares. During the period ended December 19, 2003, CDSCs received by JH Funds amounted to $2,861 for Class B shares and $25 for Class C shares. The Fund had a transfer agent agreement with John Hancock Signature Services, Inc., an indirect subsidiary of JHLICo. The Fund paid a monthly transfer agent fee at an annual rate of 0.05% of the average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses. The Fund had 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 approximately 0.03% of the average net asset value of the Fund. Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio were directors and/or officers of the Adviser and/or its affiliates, as well as Trustees of the Fund. The compensation of unaffiliated Trustees was borne by the Fund. The unaffiliated Trustees may have elected to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund made investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund's deferred compensation liability were recorded on the Fund's books as an other asset. The deferred compensation liability and the related other asset were always equal and were marked to market on a periodic basis to reflect any income earned by the investments as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund. NOTE C Fund share transactions This listing illustrates the number of Fund shares sold and repurchased during the last two periods, along with the corresponding dollar value. The Fund had an unlimited number of shares authorized with no par value. 14
PERIOD FROM 11-1-03 TO 12-19-03 YEAR ENDED 10-31-03 (UNAUDITED) SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------------------- CLASS A SHARES ---------------------------------------------------------------------------------------------------------------------- Sold 141,090 $1,117,243 11,901 $106,018 Repurchased (297,409) (2,346,987) (44,069) (393,337) Net decrease (156,319) ($1,229,744) (32,168) ($287,319) ---------------------------------------------------------------------------------------------------------------------- CLASS B SHARES ---------------------------------------------------------------------------------------------------------------------- Sold 158,301 $1,247,849 2,855 $25,254 Repurchased (364,438) (2,826,826) (41,515) (368,633) Net decrease (206,137) ($1,578,977) (38,660) ($343,379) ---------------------------------------------------------------------------------------------------------------------- CLASS C SHARES ---------------------------------------------------------------------------------------------------------------------- Sold 76,638 $600,868 3,564 $31,404 Repurchased (297,805) (2,364,574) (27,402) (241,441) Net increase (decrease) (221,167) $1,763,706 (23,838) ($210,037) ---------------------------------------------------------------------------------------------------------------------- NET DECREASE (583,623) ($4,572,427) (94,666) ($840,735) ----------------------------------------------------------------------------------------------------------------------
NOTE D Investment transactions Purchases and proceeds from sales or maturities of securities, other than short-term securities and obligations of the U.S. government, during the period ended December 19, 2003, aggregated $1,264,828 and $2,271,381, respectively. The cost of investments owned on December 19, 2003, including short-term investments, for federal income tax purposes was $15,560,255. Gross unrealized appreciation and depreciation of investments aggregated $1,917,985 and $458,626, respectively, resulting in net unrealized appreciation of $1,459,359. The difference between book basis and tax basis net unrealized appreciation of investments was attributable primarily to the tax deferral of losses on certain sales of securities. NOTE E Reclassification of accounts During the period ended December 19, 2003, the Fund reclassified amounts to reflect a decrease in accumulated net realized loss on investments of $465, a decrease in accumulated net investment loss of $9,503 and a decrease in capital paid-in of $9,968. This represented the amounts necessary to report these balances on a tax basis, excluding certain temporary differences, as of December 19, 2003. These reclassifications, which had no impact on the net asset value of the Fund, were primarily attributable to certain differences in the computation of distributable income and capital gains under federal tax rules versus accounting principles generally accepted in the United States of America, and book and tax differences in accounting for certain foreign currency adjustments and net operating losses. The calculation of net investment loss per share in the Fund's Financial Highlights excluded these adjustments. 15 NOTE F Shareholders meeting On December 19, 2003, the shareholders of the Fund approved an Agreement and Plan of Reorganization between the Fund and the Acquiring Fund. The number of votes cast for and against and that abstained from voting were as follows: 923,333 FOR, 60,785 AGAINST and 71,807 ABSTAINED. The Agreement and Plan of Reorganization provided for the transfer of substantially all of the assets and liabilities of the Fund for shares of beneficial interest of the Acquiring Fund. After this transaction and as of the close of business on December 19, 2003, the Fund was terminated. The financial statements presented herein reflect the position of the Fund prior to the exchange of net assets and termination of the Fund. 16 John Hancock Large Cap Spectrum Fund Trustees Dennis S. Aronowitz Richard P. Chapman, Jr. William J. Cosgrove John M. DeCiccio Richard A. Farrell William F. Glavin Maureen Ford Goldfarb John A. Moore* Patti McGill Peterson* John W. Pratt * Members of the Audit Committee Officers Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Richard A. Brown Senior Vice President and Chief Financial Officer Susan S. Newton Senior Vice President and Secretary William H. King Vice President and Treasurer Thomas H. Connors Vice President and Compliance Officer Investment Adviser John Hancock Advisers, LLC 101 Huntington Avenue Boston, Massachusetts 02199-7603 Subadviser Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, New York 10105 Principal Distributor John Hancock Funds, LLC 101 Huntington Avenue Boston, Massachusetts 02199-7603 Transfer Agent John Hancock Signature Services, Inc. 1 John Hancock Way, Suite 1000 Boston, Massachusetts 02217-1000 Legal Counsel Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109-1803 Custodian The Bank of New York One Wall Street New York, New York 10286 ITEM 2. CODE OF ETHICS. As of the end of the period, December 19, 2003, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Senior Financial Officers"). A copy of the code of ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. William F. Glavin is the audit committee financial expert and is "independent", pursuant to general instructions on Form N-CSR Item 3. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. See attached Exhibit "Principal Accountant Fees and Services".
All other Audit fees Audit-related fees Tax fees fees 2002 2003 2002 2003 2002 2003 2002 2003 ---- ---- ---- ---- ---- ---- ---- ---- ------------- ------------- ------------ ------------- ------------- ---------- $18,500 $18,500 - - $1,500 $1,500 - - ------------- ------------- ------------ ------------- ------------- ----------
All services listed above were approved by the audit committee. See attachment "Approval of Audit, Audit-related, Tax and Other Services Provided by the Independent Auditor", with the Audit committee pre-approval policies and procedures. The Aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $32,050 for the fiscal year ended December 31, 2002, and $322,850 for the fiscal year ended December 31, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable at this time. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Code of Ethics for Senior Financial Officers is attached. (a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference. (c)(1) Contact person at the registrant SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: ------------------------------ Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Date: February 11, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: ------------------------------- Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Date: February 11, 2003 By: ----------------------- Richard A. Brown Senior Vice President and Chief Financial Officer Date: February 11, 2003