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UNITED STATES Registrant's telephone number, including area code: 617-663-4324 ITEM 1. REPORT TO SHAREHOLDERS. CEO corner To Our Shareholders, The U.S. financial markets produced solid results over the last six months. Positive economic news, stronger than expected corporate earnings and increased merger and acquisitions activity served to overcome concerns about inflation, energy costs and the troubled subprime mortgage markets potential to put the brakes on the economy. This environment also led the Federal Reserve Board to hold short-term interest rates steady. Even with a sharp decline in late February, the broad stock market returned 8.60% for the six months ended April 30, 2007. The Dow Jones Industrial Average punched through the 13,000 mark for the first time in April and posted a string of new highs as the period ended. Although the downturn lasted for less than a month before positive news stopped the fall, it was also a good occasion to bring to mind several important investment principles that we believe are at the foundation of successful investing. First, keep a long-term approach to investing, avoiding emotional reactions to daily market moves. Second, maintain a well-diversified portfolio that is appropriate for your goals, risk profile and time horizons. After the markets recent moves, we encourage investors to sit back, take stock and set some realistic expectations. While history bodes well for the U.S. market in 2007 (since 1939, the S&P 500 Index has always produced positive results in the third year of a presidential term), there are no guarantees, and opinions are divided on the future of this more-than-four-year-old bull market. The recent volatility could also be a wake-up call to contact your financial professional to determine whether changes are in order to your investment mix. Some asset groups have had long runs of outperformance. Others had truly outsized returns in 2006. These trends argue for a look to determine if these categories now represent a larger stake in your portfolios than prudent diversification would suggest they should. After all, we believe investors with a well-balanced portfolio and a marathon, not a sprint, approach to investing, stand a better chance of weathering the markets short-term twists and turns, and reaching their long-term goals. Sincerely, Keith F. Hartstein, This commentary reflects the CEOs views as of April 30, 2007. They are subject to change at any time. Your fund at a glance The Fund seeks capital appreciation by normally investing at least 80% of its assets in companies that the manager believes are, or have the potential to be, technology leaders. Over the last six months ► Technology stocks posted solid gains for the period, although they lagged the broader equity market. ► The Fund had positive results, but underperformed its benchmarks, primarily due to unfavorable stock selection. ► Earnings were a key driver of tech stock returns; the stocks of companies that surprised on the upside performed well, while those that disappointed generally declined. As a percentage of net assets on April 30, 2007. Managers report John Hancock Like the stock market overall, technology stocks were on a roller coaster ride during much of the six-month period ended April 30, 2007. Tech stocks got off to a decent start in the final two months of 2006, amid growing optimism that inflation was in check, the Federal Reserve Board was done raising interest rates and that the economy, while slowing, would sidestep a recession. Until the final weeks of February, major stock market averages continued to advance and set several new record highs, bolstered by hopes that the Fed would cut interest rates amid declines in oil prices and a downturn in the housing market. In late February, stocks plunged in a sell-off that was precipitated by a warning about a possible recession from former Fed Chairman Alan Greenspan and a sell-off in the Chinese stock market. And despite diminished hopes of an interest rate cut as inflationary pressures seemingly mounted, stocks resumed their climb in March and April, with strong corporate earnings reports continuing to be the main driver. Performance For the six months ended April 30, 2007, John Hancock Technology Leaders Funds Class A, Class B, Class C and Class I shares posted total returns of 4.33%, 3.85%, 4.06% and 4.61%, respectively, at net asset value. During the same six-month period, the Funds old benchmark index, the NASDAQ 100 Stock Index returned 8.10% . Going forward, SCORECARD 2 Portfolio Manager, MFC Global Investment Management (U.S.), LLC the Fund will compare itself to the Russell 3000 Technology Index, which, in addition to the Standard & Poors 500 Index, more accurately reflects the investment universe of the Fund. It returned 7.41% in the period, while the average Morningstar, Inc. specialty-technology fund returned 8.28% 1 and the Standard & Poors 500 Index returned 8.60% . Keep in mind that your net asset value return will be different from the Funds performance if you were not invested in the Fund for the entire period or did not reinvest all distributions. See pages six and seven for historical performance results. Like the stock market overall, Investment process refinements Beginning in early 2007, we instituted significant enhancements to our investment processes, incorporating both quantitative and fundamental tools to help guide our stock selection. We believe these changes will provide us with a more disciplined and consistent approach to portfolio management and ultimately could lead to more advantageous security selection over the longer term. During this six-month period, however, the main detractor from our performance relative to the index was stock selection. Laggards Leading the list of our most disappointing performers was Rackable Systems, which provides servers to companies such as Amazon.com, Yahoo! and Microsoft. Its stock lost considerable ground when the company did not meet consensus earnings estimates, due in large measure to brutal competition from bigger tech companies like Dell and IBM and the ensuing pressure for Rackable Systems to cut its prices. Given our view that competitive pressures will continue to trouble Rackable Systems, we eliminated our position in the company. We also lost ground with BEA Systems, Inc. The company makes service-oriented architecture software, Technology Leaders Fund 3 which enables customers to link different types of computer hardware and software together. Shares of BEA fell as its financial results fell short of expectations as competition heated up. Our holdings in iRobot Corp. also worked against us. The company, best known for a robot household vacuum called the Roomba, also provides robots to military customers, including PackBots, which perform dangerous tasks, such as battlefield reconnaissance. The market cooled on the stock after disappointing sales of the companys follow-up Scooba floor-washing robot and its ongoing commitment to plow back some of its earnings into marketing and research and development. We continued to hang onto the stock based on our view that the products it produces for the military in particular offer a strong path to growth in the future. Shares of RF Micro Devices, Inc., a maker of radio frequency components used in mobile devices, fell during the period based in large measure on the companys projection of weaker-than-expected financial results over the short term, attributable to problems at a key client, Motorola. We maintained our sta
ke in RF Micro Devices because we believe that the company will see better growth over the long term as it continues to gain market share. Standouts Among our best performers during the period was Force Protection, Inc. The defense contractor was buoyed in part by news it had landed a nearly half-billion-dollar deal to supply the U.S. military with 1,000 of its blast-resistant vehicles. These vehicles employ a unique technology to help them protect soldiers from mines, rocket-propelled grenades and improvised explosive devices. We also enjoyed strong gains from shares of MEMC Electronic Materials, which makes silicon wafers used in semiconductors. The company benefited from market share gains, strong demand and increasing prices for some of its products, particularly from the solar industry. Red Hat, Inc. was another winner, posting strong financial results amid solid demand for the open source software makers products. Other notable winners included Apple Computer, Inc.; Grant Prideco, Inc.; and Akamai Technology Leaders Fund 4 Technologies, Inc. Apple continued to be bolstered by the success of its Macintosh computers and iPod, as well as excitement over its upcoming iPhone. Grant Prideco, a maker of technologically advanced drill stems and bits for oil and gas rigs, benefited from strong profit and revenue growth. Akamai Technologies, a provider of technology used to stream video and multimedia content on the Web, was also helped by strong profit and revenue growth. Beginning in early 2007, Outlook We believe that after underperforming the broader stock market over the past three years or so, technology stocks could outperform the overall market during the second half of 2007. Expectations for the group have diminished, and we believe that technology companies overall have better growth potential than many other industries. Furthermore, tech stock valuations appear attractive in our view, both on a historical basis and relative to other industries. The biggest question going forward is the strength of demand. Strong corporate balance sheets and the desire to grow revenues and increase profit margins are all factors that we expect will lead companies to spend on technology-based capital improvements. And so far, end demand for consumer-based technology has remained resilient, despite the downturn in the housing market. As always, we believe that several long-term trends
1; including the explosive growth in use of video and cell phones could continue to favor technology stocks.
This commentary reflects the views of the portfolio manager through the end of the Funds period discussed in this report. The managers statements reflect his own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant. Sector investing is subject to greater risks than the market as a whole. International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Technology Leaders Fund 5 A look at performance For the periods ended April 30, 2007 Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charge on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The Class B shares CDSC declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charge is not applicable for Class I shares. The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Funds current performance may be higher or lower than the performance shown. For performance data current to the most recent month-end, please call 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com. The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Funds performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable. 1 For certain types of investors as described in the Funds Class I share prospectus. Technology Leaders Fund 6 Growth of $10,000 This chart shows what happened to a hypothetical $10,000 investment in Technology Leaders Fund Class A shares for the period indicated. For comparison, weve shown the same investment in three separate indexes. Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Funds Class B, Class C and Class I shares, respectively, as of April 30, 2007. 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. Russell 3000 Technology Index Index 1 is an unmanaged index of technology sector stocks in the Russell 3000 index, which represents the 3,000 largest u.s. companies based on total market capitalization. Standard & Poors 500 Index Index 2 is an unmanaged index that includes 500 widely traded common stocks. NASDAQ 100 Stock Index Index 3 is an unmanaged index that includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market based on market capitalization. It is not possible to invest directly in an index. Index figures do not reflect sales charges which would have resulted in lower values if they did. 1 NAV represents net asset value and POP represents public offering price. 3 Index 3 figure as of the closest month-end to inception date. Technology Leaders Fund 7 Your expenses These examples are intended to help you understand your ongoing operating expenses. Understanding fund expenses As a shareholder of the Fund, you incur two types of costs: We are going to present only your ongoing operating expenses here. Actual expenses/actual returns This example is intended to provide information about your funds actual ongoing operating expenses and is based on your funds actual return. It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007. Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at April 30, 2007, by $1,000.00, then multiply it by the expenses paid for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows: Technology Leaders Fund 8 Hypothetical example for comparison purposes This table allows you to compare your funds ongoing operating expenses with those of any other fund. It provides an example of the Funds hypothetical account values and hypothetical expenses based on each classs actual expense ratio and an assumed 5% annualized return before expenses (which is not your funds actual return). It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Remember, these examples do not include any transaction costs, such as sales charges; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs. 1 Expenses are equal to the Funds annualized expense ratio of 1.80%, 2.50%, 2.50% and 1.30% for Class A, Class B, Class C and Class I, respectively, multiplied by the average account value over the period, multiplied by number of days in most recent fiscal half-year/365 or 366 (to reflect the one-half year period). Technology Leaders Fund 9 Funds investments F I N A N C I A L S T A T E M E N T S Securities owned by the Fund on 4-30-07 (unaudited) This schedule is divided into two main categories: common stocks and short-term See notes to financial statements Technology Leaders Fund 10 F I N A N C I A L S T A T E M E N T S See notes to financial statements Technology Leaders Fund 11 F I N A N C I A L S T A T E M E N T S (I) Non-income-producing security. (K) Direct placement securities are restricted to resale. They have been fair valued in accordance with procedures approved by the Trustees after consideration of restrictions as to resale, financial condition and prospects of the issuer, general market conditions and pertinent information in accordance with the Funds bylaws and the Investment Company Act of 1940, as amended. The Fund has limited rights to registration under the Securities Act of 1933 with respect to these restricted securities. Additional Information on these securities is shown below: (L) All or a portion of this security is on loan as of April 30, 2007. (W) Issuer is an affiliate of John Hancock Advisers, LLC. 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 Technology Leaders Fund 12 Financial statements F I N A N C I A L S T A T E M E N T S Statement of assets and liabilities 4-30-07 (unaudited) This Statement of Assets and Liabilities is the Funds balance sheet. It shows the value 1 Net assets have been rounded for presentation purposes. The net asset value is as reported on April 30, 2007. See notes to financial statements Technology Leaders Fund 13 F I N A N C I A L S T A T E M E N T S Statement of operations For the period ended 4-30-07 (unaudited)1 This Statement of Operations summarizes the Funds investment income earned 1 Semiannual period from 11-1-06 through 4-30-07. See notes to financial statements Technology Leaders Fund 14 F I N A N C I A L S T A T E M E N T S Statement of changes in net assets These Statements of Changes in Net Assets show how the value of the Funds net assets 1 Semiannual period from 11-1-06 through 4-30-07. Unaudited. See notes to financial statements Technology Leaders Fund 15 F I N A N C I A L S T A T E M E N T S Financial highlights The Financial Highlights show how the Funds net asset value for a share has changed See notes to financial statements Technology Leaders Fund 16 F I N A N C I A L S T A T E M E N T S Financial highlights See notes to financial statements Technology Leaders Fund 17 F I N A N C I A L S T A T E M E N T S Financial highlights See notes to financial statements Technology Leaders Fund 18 F I N A N C I A L S T A T E M E N T S Financial highlights 1 Audited by previous auditor. See notes to financial statements Technology Leaders Fund 19
Notes to financial statements (unaudited)
Note 1
John Hancock Technology Leaders Fund (the Fund) is a diversified series of John Hancock Equity Trust (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended
(the 1940 Act). The investment objective of the Fund is to achieve long-term growth of capital.
The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B, Class C and Class I shares. The shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission (SEC) and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that
distribution plan. Class B shares will convert to Class A shares eight years after purchase.
The Fund is the accounting and performance successor to Light Revolution Fund (the Predecessor Fund), a diversified open-end management investment company organized as a Maryland corporation. On June 17, 2005, the Fund
acquired substantially all the assets and assumed the liabilities of the Predecessor Fund pursuant to an agreement and plan of reorganization, in exchange for Class A shares of the Fund.
Significant accounting policies of the Fund
Valuation of investments
Securities in the Funds portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or, if quotations are not readily available or the value has been materially affected
by events occurring after the closing of a foreign market, at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments which have a remaining maturity of 60 days or less may be valued
at amortized cost, which approximates market value. Investments in John Hancock Cash Investment Trust, an affiliate of John Hancock Advisers LLC (the Adviser), a wholly owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of
Manulife Financial Corporation (MFC), are valued at their net asset value each business day. 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 SEC, the Fund, along with other registered investment companies having a management contract with the Adviser, 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.
Foreign currency translation
All assets or liabilities initially expressed in terms of foreign currencies are translated
Technology Leaders Fund
20 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 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 currency 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 currency 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 rates. Investment transactions Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. 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, which are accrued as applicable. 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 asset value of the respective classes. Distribution and service fees, if any, and transfer agent fees for Class I shares are 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 expenses are directly identifiable to an individual fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 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 line of credit agreement with The Bank of New York (BNY), the Swing Line Lender and Administrative Agent. This agreement enables the Fund to participate, with other funds managed by the Adviser, in an unsecured line of credit with BNY, which permits borrowings of up to $100 million, collectively. Interest is charged to each fund based on its borrowing. In addition, a commitment fee is charged to each fund based on the average daily unused portion of the line of credit and is allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the period ended April 30, 2007. Securities lending The Fund may lend securities to certain qualified brokers who pay the Fund negotiated lender fees. 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 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 April 30, 2007, the Fund loaned securities having a market value of $179,305 collateralized by cash in the amount of $186,273. The cash collateral was invested in John Hancock Cash Investment Trust. Securities lending expenses are paid by the Fund to the lending agent. Technology Leaders Fund 21 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 that is distributed to shareholders. Therefore, no federal income tax provision is required. For federal income tax purposes, the Fund has $4,446,601 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforward expires as follows: October 31, 2009 $730,761, October 31, 2010 $3,278,640 and October 31, 2011 $437,200. New accounting pronouncements In June 2006, Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the Interpretation), was issued and is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return and requires certain expanded disclosures. Management is currently evaluating the application of the Interpretation to the Fund and has not at this time quantified the impact, if any, resulting from the adoption of this Interpretation on the Funds financial statements. The Fund will implement this pronouncement no later than April 30, 2008. In September 2006, FASB Standard No. 157, Fair Value Measurements (FAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishing a framework for measuring fair value and expands disclosure about fair value measurements. Management is currently evaluating the application of FAS 157 to the Fund and its impact, if any, resulting from the adoption of FAS 157 on the Funds financial statements. Dividends, interest and distributions Dividend income on investment securities is recorded on the ex-dividend date or, in the case of some foreign securities, on the date thereafter when the Fund identifies the dividend. Interest income on investment securities is recorded on the accrual basis. The Fund may place a security on non-accrual status and reduce related investment income by ceasing current accruals or writing off interest, or dividends receivable, when the collection of income has become doubtful. Foreign income may be subject to foreign withholding taxes, which are accrued as applicable. The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. There were no distributions during the year ended October 31, 2006. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. Such distribution on a tax basis is 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, are reported in the Funds 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 2 The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a daily management fee to the Adviser, at an annual rate of 1.00% of the Funds average daily net asset value. The Adviser has agreed to limit the Funds total expenses excluding distribution, service fees Technology Leaders Fund 22 and transfer agent fees to 1.25% of the Funds average daily net asset value, on an annual basis, and net operating expenses of Class A, Class B, Class C and Class I shares to 1.80%, 2.50%, 2.50% and 1.30% of each respective classs average daily net asset value, at least until February 29, 2008. Accordingly, the expense reductions related to this total expense limitation amounted to $55,134 for the period ended April 30, 2007. The Adviser reserves the right to terminate these limitations in the future. The Fund has a Distribution Agreement with John Hancock Funds, LLC (JH Funds), a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C, pursuant to Rule 12b-1 under the 1940 Act, to reimburse JH Funds for the services it provides as distributor of shares of the Fund. Accordingly, the Fund makes monthly payments to JH Funds at an annual rate not to exceed 0.30%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C, respectively. 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 Funds 12b-1 payments could occur under certain circumstances. Prior to June 17, 2005, Quasar Distributors, LLC, served as the Predecessor Funds principal underwriter and was compensated at an annual rate of 0.25% of the Predecessor Funds a
verage daily net asset value. Expenses under the agreements described above for the period ended April 30, 2007, were as follows: Class A shares are assessed up-front sales charges. During the period ended April 30, 2007, JH Funds received net up-front sales charges of $533 with regard to sales of Class A shares. Of this amount, $85 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $311 was paid as sales commissions to unrelated broker-dealers and $137 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. The Advisers indirect parent, John Hancock Life Insurance Company (JHLICO), is the indirect sole shareholder of Signator Investors. Class B shares that are redeemed within six years of purchase are 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 are redeemed within one year of purchase are 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 are paid to JH Funds and are 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 April 30, 2007, CDSCs received by JH Funds amounted to $1,202 for Class B shares and $1 for Class C shares. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of JHLICO. For Class A, Class B and Class C shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of each classs average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses, aggregated and allocated to each class on the basis of its relative net asset value. For Class I shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of the average daily net asset value. Signature Services has agreed to limit transfer agent fees on Class A, Class B and Class C shares to 0.25% of each class average daily net asset value, at least until February 29, 2008. There were no transfer agent fee reductions for the period ended April 30, 2007. The Fund has an agreement with the Adviser and affiliates to perform necessary tax, accounting and legal services for the Fund. The Technology Leaders Fund 23 compensation for the year amounted to $172. The Fund also reimbursed JHLICO for certain compliance costs, included in the Funds Statement of Operations. The Adviser and other subsidiaries of JHLICO owned 113 Class I shares of beneficial interest of the Fund on April 30, 2007. Mr. James R. Boyle is Chairman of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser and/or its affiliates. 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 its 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 investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund. Note 3 This listing illustrates the number of Fund shares sold and repurchased during the year ended October 31, 2006 and period ended April 30, 2007, along with the corresponding dollar value. 1 Semiannual period from 11-1-06 through 4-30-07. Unaudited. Technology Leaders Fund 24
Note 4
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 April 30, 2007, aggregated $1,613,589 and $1,553,236,
respectively.
The cost of investments owned on April 30, 2007, including short-term investments, for federal income tax purposes, was $2,555,100. Gross unrealized appreciation and depreciation of investments aggregated $357,970
and $72,438, respectively, resulting in net unrealized appreciation of $285,532. The difference between book basis and tax basis net unrealized appreciation of investments is attributable primarily to the tax deferral of losses on certain
sales of securities.
Technology Leaders Fund
25 Board Consideration of and The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Equity Trust (the Trust), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not interested persons of the Trust, as defined in the 1940 Act (the Independent Trustees), annually to review and consider the continuation of: (i) the investment advisory agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Adviser) and (ii) the investment subadvisory agreement (the Subadvisory Agreement) with MFC Global Investment Management (U.S.), LLC (the Subadviser) for the John Hancock Technology Leaders Fund (the Fund). The Advisory Agreement and the Subadvisory Agreement are collectively referred to as the Advisory Agreements. At meetings held on May 12 and June 56, 2006,1 the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the continuation of the Advisory Agreements. During such meetings, the Boards Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel. In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information requested for this purpose by the Independent Trustees, including: (i) the investment performance of the Fund relative to a category of relevant funds (the Category) and a peer group of comparable funds (the Peer Group) each selected by Morningstar, Inc. (Morningstar), an independent provider of investment company data, for a range of periods ended December 31, 2005; (ii) advisory and other fees incurred by, and the expense ratios of, the Fund relative to a Category and a Peer Group; (iii) the advisory fees of comparable portfolios of other clients of the Adviser and the Subadviser; (iv) the Advisers financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund; (v) breakpoints in the Funds and the
Peer Groups fees, and information about economies of scale; (vi) the Advisers and Subadvisers record of compliance with applicable laws and regulations, with the Funds investment policies and restrictions and with the applicable Code of Ethics, and the structure and responsibilities of the Advisers and Subadvisers compliance department; (vii) the background and experience of senior management and investment professionals; and (viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates and by the Subadviser. The Boards review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. It was based on performance and other information as of December 31, 2005; facts may have changed between that date and the date of this shareholders report. The key factors considered by the Board and the conclusions reached are described below. Nature, extent and quality of services The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of the Adviser and Subadviser. In addition, the Board took into account the administrative services provided to the Fund by the Adviser and its affiliates. Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Subadviser were sufficient to support renewal of the Advisory Agreements. Fund performance The Board considered the performance results for the Fund over various time periods 26 ended December 31, 2005. The Board also considered these results in comparison to the performance of the Category, as well as the Funds Peer Group and benchmark index. Morningstar determined the Category and the Peer Group for the Fund. The Board reviewed, with a representative of Morningstar, the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board noted the imperfect comparability of the Peer Group. The Board noted that the Funds performance during the one- and three-year periods was lower than the performance of the Peer Group and Category medians, and its benchmark index, the NYSE Arca Tech 100 Index. The Board also noted that Funds performance during the five-year period was higher than the performance of the Peer Group and Category medians, and lower than the performance of its benchmark index. The Adviser discussed with the Board factors that contributed to the Funds underperformance and described changes in investment personnel and processes which have been, and are being, implemented with the objective of improving performance. The Board evaluated the actions that had been taken and intends to continue to monitor the Funds performance trends to assess the effectiveness of these changes and whether other remedial changes are warranted. Investment advisory fee and subadvisory fee rates and expenses The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the Advisory Agreement Rate). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Peer Group and Category. The Board noted that the Advisory Agreement Rate was higher than the median rate of the Peer Group and Category. The Board received and considered expense information regarding the Funds various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board also considered peer-adjusted comparisons for the transfer agent fees. The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Funds total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the fee waiver arrangement applicable to the Advisory Agreement Rate into account (Net Expense Ratio). The Board received and considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of th
e Peer Group and Category medians. The Board noted that the Funds Gross and Net Expense Ratios were appreciably higher than the median of its Peer Group and Category. The Board favorably considered the impact of fee caps towards ultimately lowering the Funds total operating expense ratio. The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Funds plans to reduce the Funds overall expenses and plans for improving the Funds performance supported the re-approval of the Advisory Agreements. The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment subadvisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here. Profitability The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Subadviser. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable. Economies of scale The Board received and considered general information regarding economies of scale with respect to the management of the Fund, 27 including the Funds ability to appropriately benefit from economies of scale under the Funds fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Boards understanding that most of the Advisers costs are not specific to individual Funds, but rather are incurred across a variety of products and services. Information about services to other clients The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services. Other benefits to the Adviser The Board received information regarding potential fall-out or ancillary benefits received by the Adviser and its affiliates as a result of the Advisers relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates). The Board also considered the effectiveness of the Advisers, Subadvisers and Funds policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation. Other factors and broader review As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements. 1 The Board previously considered information about the Subadvisory Agreement at the September and December 2005 Board meetings in connection with the Advisers reorganization. 28 For more information The Funds proxy voting policies, procedures and records are available without charge, upon request: A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the SECs Web site, www.sec.gov. 32 J O H N H A N C O C K F A M I L Y O F F U N D S The Funds investment objectives, risks, charges and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Funds at 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com. Please read the prospectus carefully before investing or sending money. 1-800-225-5291 Now available: electronic delivery www.jhfunds. com/edelivery This report is for the information of the shareholders of John Hancock Technology Leaders Fund. 060SA 4/07 CEO corner To Our Shareholders, The U.S. financial markets produced solid results over the last six months. Positive economic news, stronger than expected corporate earnings and increased merger and acquisitions activity served to over come concerns about inflation, energy costs and the troubled subprime mortgage markets potential to put the brakes on the economy. This ronment also led the Federal Reserve Board to hold short-term interest rates steady. Even with a sharp decline in late February, the broad stock market returned 8.60% for the six months ended April 30, 2007. The Dow Jones Industrial Average punched through the 13,000 mark for first time in April and posted a string of new highs as the period ended After a remarkably long period of calm, the financial markets were rocked at the end of February by a dramatic sell-off in Chinas stock market, which had ripple effects on financial markets worldwide. It also shook investors out of their seemingly casual attitude toward risk and remind them of the simple fact that stock markets move in two directions down as well as up. Although the downturn lasted for less than a month before positive news stopped the fall, it was also a good occasion to bring to mind several important investment principles that we believe are at the foundation of successful investing. First, keep a long-term approach to investing, avoiding emotional reactions to daily market moves. Second, maintain a well-diversified portfolio that is appropriate for your goals, risk profile and time horizons. After the markets recent moves, we encourage investors to sit back, take stock and set some realistic expectations. While history bodes for the U.S. market in 2007 (since 1939, the S&P 500 Index has always produced positive results in the third year of a presidential term), there are no guarantees, and opinions are divided on the future of this more than-four-year-old bull market. The recent volatility could also be a wake-up call to contact your financial professional to determine whether changes are in order to your investment mix. Some asset groups have had long runs of outperformance. Others had truly outsized returns in 2006. These trends argue for a look to determine if these categories now represent a larger stake in your portfolios than prudent diversification would suggest they should. After all, we believe investors with a well-balanced portfolio and a marathon, not a sprint, approach to investing, stand a better chance of weathering the markets short-term twists and turns, and reaching their long-term goals. Sincerely,
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811- 4079
John Hancock Equity Trust
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Alfred P. Ouellette
Senior Counsel and Assistant Secretary
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Date of fiscal year end:
October 31
Date of reporting period:
April 30, 2007
TABLE OF CONTENTS
Your fund at a glance
page 1
Managers report
page 2
A look at performance
page 6
Your expenses
page 8
Funds investments
page 1 0
Financial statements
page 1 3
Notes to financial
statements
page 2 0
For more information
page 3 2
After a remarkably long period of calm, the financial markets were rocked at the end of February by a dramatic sell-off in Chinas stock market, which had ripple effects on financial markets worldwide. It also shook investors out of their seemingly casual attitude toward risk and remind them of the simple fact that stock markets move in two directions down as well as up.
President and Chief Executive Officer
Top 10 holdings
Hewlett-Packard Co.
8.0%
BEA Systems, Inc.
3.6%
Microsoft Corp.
5.4%
Comverse Technology, Inc.
3.5%
Cisco Systems, Inc.
5.4%
Apple Computer, Inc.
3.3%
NDS Group Plc
4.5%
RF Micro Devices, Inc.
3.3%
EMC Corp.
3.6%
Google, Inc.
2.9%
Technology Leaders Fund
INVESTMENT
PERIODS PERFORMANCE. . . AND WHATS BEHIND THE NUMBERS
Force Protection
▲
New orders for blast-resistant military vehicles boost price
BEA Systems
▼
Results below expectations in increasingly competitive environment
Rackable Systems
▼
Concerns over intensified competition
Thomas P. Norton, CFA
technology stocks were on a
roller coaster ride during much of
the six-month period
INDUSTRY DISTRIBUTION2
Communications
equipment
24%
Computer hardware
11%
Internet software &
services
9%
Computer storage &
peripherals
8%
Systems software
8%
Application software
6%
Semiconductors
5%
Wireless
telecommunication
services
3%
Data processing &
outsourced services
3%
Technology distributors
3%
Environmental & facilities
service
3%
Integrated
telecommunication
services
2%
Human resource &
employment services
2%
Oil & gas equipment &
services
2%
Movies & entertainment .
2%
Integrated oil & gas
2%
All others
6%
we instituted significant
enhancements to our investment
processes, incorporating both
quantitative and fundamental
tools to help guide our
stock selection.
1 Figures from Morningstar, Inc. include reinvested dividends and do not take into account sales charges. Actual load-adjusted performance is lower.
2 As a percentage of net assets on April 30, 2007.
Average annual returns
Cumulative total returns
with maximum sales charge (POP)
with maximum sales charge (POP)
Inception
Since
Since
Class
date
1-year
5-year
10-year
inception
6-month
1-year
5-year
10-year
inception
A
6-29-99
6.93%
3.18%
0.19%
0.89%
6.93%
16.93%
1.49%
B
6-20-05
7.59
4.75
1.15
7.59
9.01
C
6-20-05
3.60
6.85
3.06
3.60
13.12
I1
6-20-05
1.54
8.11
4.61
1.54
15.61
With
Period
Without
maximum
Class
beginning
sales charge
sales charge
Index 1
Index 2
Index 3
B2,3
6-20-05
$11,301
$10,901
$12,548
$12,617
$12,611
C2,3,4
6-20-05
11,312
11,312
12,548
12,617
12,611
I2,3,5
6-20-05
11,561
11,561
12,548
12,617
12,611
2 Index 1 figure as of the closest month-end to inception date.
4 No contingent deferred sales charge applicable.
5 For certain types of investors as described in the Funds Class I share prospectus.
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable) and other fund expenses.
Account value
Ending value
Expenses paid during period
on 11-1-06
on 4-30-07
ended 4-30-071
Class A
$1,000.00
$1,043.30
$9.12
Class B
1,000.00
1,038.50
12.61
Class C
1,000.00
1,040.60
12.64
Class I
1,000.00
1,046.10
6.59
Account value
Ending value
Expenses paid during period
on 11-1-06
on 4-30-07
ended 4-30-071
Class A
$1,000.00
$1,015.87
$9.00
Class B
1,000.00
1,012.42
12.38
Class C
1,000.00
1,012.40
12.47
Class I
1,000.00
1,018.35
6.55
investments. Common stocks are further broken down by industry group. Short-term
investments, which represent the Funds cash position, are listed last.
Issuer
Shares
Value
Common stocks 99.28%
$2,632,359
(Cost $2,305,129)
Application Software 5.58%
147,926
BEA Systems, Inc. (I)
8,060
95,027
Iona Technologies Plc, American Depositary Receipt (ADR) (Ireland) (I)
4,700
25,239
Synopsys, Inc. (I)
1,000
27,660
Communications Equipment 18.36%
486,740
Cisco Systems, Inc. (I)
5,340
142,792
Comverse Technology, Inc. (I)
4,075
92,421
Corning, Inc. (I)
2,600
61,672
Telefonaktiebolaget LM Ericsson (ADR) (Sweden)
1,500
57,255
Kongzhong Corp. (ADR) (China) (I)
5,470
36,485
Nokia Corp. (ADR) (Finland)
2,058
51,965
QUALCOMM, Inc.
1,008
44,150
Computer & Electronics Retail 1.32%
34,987
Best Buy Co., Inc.
750
34,987
Computer Hardware 11.26%
298,524
Apple Computer, Inc. (I)
880
87,824
Hewlett-Packard Co.
5,000
210,700
Computer Storage & Peripherals 8.27%
219,147
EMC Corp. (I)
6,350
96,393
Komag, Inc. (I)(L)
1,300
35,763
SanDisk Corp. (I)
700
30,415
Western Digital Corp. (I)
3,200
56,576
Data Processing & Outsourced Services 3.17%
84,173
Electronic Data Systems Corp.
1,450
42,398
Euronet Worldwide, Inc. (I)
1,500
41,775
Electrical Components & Equipment 1.26%
33,412
Color Kinetics, Inc. (I)(L)
1,650
33,412
Electronic Manufacturing Services 1.23%
32,620
Jabil Circuit, Inc. (I)
1,400
32,620
Environmental & Facilities Service 2.46%
65,100
Force Protection, Inc. (I)(K)
3,000
65,100
Issuer
Shares
Value
Household Appliances 1.14%
$30,115
iRobot Corp. (I)(L)
1,900
30,115
Human Resource & Employment Services 1.98%
52,563
Monster Worldwide, Inc. (I)
1,250
52,563
Integrated Oil & Gas 1.47%
38,885
Sasol Ltd. (ADR) (South Africa)
1,138
38,885
Integrated Telecommunication Services 2.17%
57,469
ADC Telecommunications, Inc. (I)
1,580
29,072
NTELOS Holdings Corp.
1,410
28,397
Internet Software & Services 14.31%
379,554
DivX, Inc. (I)(L)
1,020
20,563
Google, Inc. (Class A) (I)
160
75,421
Greenfield Online, Inc. (I)
1,750
28,630
Opsware, Inc. (I)
3,500
28,105
NDS Group Plc (ADR) (United Kingdom) (I)
2,300
118,611
United Online, Inc.
2,540
36,652
Vocus, Inc. (I)
1,200
26,988
Yahoo!, Inc. (I)
1,590
44,584
IT Consulting & Other Services 1.03%
27,370
Accenture Ltd. (Class A) (Bermuda)
700
27,370
Movies & Entertainment 1.57%
41,696
Disney (Walt) Co. (The)
1,192
41,696
Oil & Gas Equipment & Services 1.94%
51,540
Grant Prideco, Inc. (I)
1,000
51,540
Semiconductor Equipment 1.15%
30,383
Cymer, Inc. (I)
750
30,383
Semiconductors 5.24%
139,069
ASM International NV (Netherlands) (I)(L)
1,500
36,585
QuickLogic Corp. (I)
7,500
20,550
Trident Microsystems, Inc. (I)
2,550
54,137
Verigy Ltd. (Singapore) (I)
1,100
27,797
Systems Software 8.08%
214,198
Microsoft Corp.
4,800
143,712
Oracle Corp. (I)
2,350
44,180
Quality Systems, Inc. (I)(L)
650
26,306
Technology Distributors 3.04%
80,638
Arrow Electronics, Inc. (I)
700
27,664
Ingram Micro, Inc. (Class A) (I)
2,700
52,974
Wireless Telecommunication Services 3.25%
86,250
RF Micro Devices, Inc. (I)
13,800
86,250
Interest
Par value
Issuer, description, maturity date
rate
(000)
Value
Short-term investments 7.85%
$208,273
(Cost $208,273)
Joint Repurchase Agreement 0.83%
22,000
Investment in a joint repurchase agreement transaction with Bank
of America Corp. Dated 4-30-07, due 5-1-07 (Secured by
U.S. Treasury Inflation Indexed Notes 0.875%, due 4-15-10,
3.000%, due 7-15-12, 3.375%, due 1-15-12 and U.S. Treasury
STRIPS, due 5-15-21). Maturity value: $22,003
5.120%
$22
22,000
Shares
Cash Equivalents 7.02%
186,273
John Hancock Cash Investment Trust (T)(W)
186,273
186,273
Total investments (Cost $2,513,402) 107.13%
$2,840,632
Other assets and liabilities, net (7.13%)
($189,155)
Total net assets 100.00%
$2,651,477
Value as a
percentage
Acquisition
Acquisition
of Funds
Value as of
Issuer, description
date
cost
net assets
April 30, 2007
Force Protection, Inc. common stock
12-19-06
$35,250
2.46%
$65,100
(T) Represents investment of securities lending collateral.
of what the Fund owns, is due and owes. Youll also find the net asset value and the
maximum offering price per share.
Assets
Investments at value (cost $2,513,402) including $179,305 of securities loaned
$2,840,632
Cash
432
Receivable for investments sold
28,152
Receivable for shares sold
19,458
Dividends and interest receivable
989
Total assets
2,889,663
Liabilities
Payable for investments purchased
29,180
Payable upon return of securities loaned
186,273
Payable to affiliates
Management fees
4,338
Distribution and service fees
143
Other
161
Other payables and accrued expenses
18,091
Total liabilities
238,186
Net assets
Capital paid-in
6,725,120
Accumulated net realized loss on investments
(4,384,274)
Net unrealized appreciation of investments
327,230
Accumulated net investment loss
(16,599)
Net assets
$2,651,477
Net asset value per common share
Based on net asset values and shares outstanding the Fund has an
unlimited number of shares authorized with no par value
Class A ($2,251,870 ÷ 222,292 shares)
$10.13
Class B ($290,741 ÷ 29,093 shares)
$9.99
Class C ($107,709 ÷ 10,774 shares)
$10.00
Class I ($1,157 ÷ 113 shares)
$10.221
Maximum offering price per share
Class A2 ($10.13 ÷ 95%)
$10.66
2 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.
and expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Investment income
Dividends (net of foreign withholding taxes of $161)
$5,040
Interest
3,375
Securities lending
576
Total investment income
8,991
Expenses
Investment management fees (Note 2)
13,362
Distribution and service fees (Note 2)
5,547
Transfer agent fees (Note 2)
3,339
Accounting and legal services fees (Note 2)
172
Blue sky fees
30,046
Printing fees
12,670
Professional fees
8,145
Custodian fees
5,973
Trustees fees
181
Securities lending fees
22
Miscellaneous
1,267
Total expenses
80,724
Less expense reductions (Note 2)
(55,134)
Net expenses
25,590
Net investment loss
(16,599)
Realized and unrealized gain
Net realized gain on investments
116,347
Change in net unrealized appreciation (depreciation) of investments
4,035
Net realized and unrealized gain
120,382
Increase in net assets from operations
$103,783
has changed during the last two periods. The difference reflects earnings less expenses,
any investment gains and losses, distributions, if any, paid to shareholders and the net of
Fund share transactions.
Year
Period
ended
ended
10-31-06
4-30-071
Increase (decrease) in net assets
From operations
Net investment loss
($39,866)
($16,599)
Net realized gain
245,780
116,347
Change in net unrealized appreciation (depreciation)
(128,662)
4,035
Increase in net assets resulting from operations
77,252
103,783
From Fund share transactions
(959,728)
(127,134)
Net assets
Beginning of period
3,557,304
2,674,828
End of period
$2,674,828
$2,651,4772
2 Includes accumulated net investment loss of $16,599.
since the end of the previous period.
CLASS A SHARES
Period ended
10-31-021
10-31-031
10-31-041
10-31-052
10-31-06
4-30-073
Per share operating performance
Net asset value, beginning of period
$8.46
$6.32
$8.42
$8.47
$9.04
$9.71
Net investment loss4
(0.21)
(0.19)
(0.30)
(0.33)
(0.10)
(0.06)
Net realized and unrealized
gain (loss) on investments
(1.93)
2.29
0.35
0.90
0.77
0.48
Total from investment operations
(2.14)
2.10
0.05
0.57
0.67
0.42
Net asset value, end of period
$6.32
$8.42
$8.47
$9.04
$9.71
$10.13
Total return5 (%)
(25.30)6
33.236
0.59
6.736
7.416
4.336,7
Ratios and supplemental data
Net assets, end of period
(in millions)
$3
$4
$3
$3
$2
$2
Ratio of net expenses to average
net assets (%)
3.27
3.19
4.13
4.62
1.80
1.808
Ratio of gross expenses to average
net assets (%)
4.389
4.029
4.13
6.719
4.879
5.938,9
Ratio of net investment loss
to average net assets (%)
(2.66)
(2.63)
(3.56)
(3.74)
(1.04)
(1.13)8
Portfolio turnover (%)
73
109
54
59
104
617
CLASS B SHARES
Period ended
10-31-0510
10-31-06
4-30-073
Per share operating performance
Net asset value, beginning of period
$8.84
$9.01
$9.62
Net investment loss4
(0.06)
(0.17)
(0.09)
Net realized and unrealized
gain on investments
0.23
0.78
0.46
Total from investment operations
0.17
0.61
0.37
Net asset value, end of period
$9.01
$9.62
$9.99
Total return5,6 (%)
1.927
6.77
3.857
Ratios and supplemental data
Net assets, end of period
(in millions)
11
11
11
Ratio of net expenses to average
net assets (%)
2.508
2.50
2.508
Ratio of gross expenses to average
net assets9 (%)
8.318
5.57
6.638
Ratio of net investment loss
to average net assets (%)
(1.81)8
(1.76)
(1.81)8
Portfolio turnover (%)
597
104
617
CLASS C SHARES
Period ended
10-31-0510
10-31-06
4-30-073
Per share operating performance
Net asset value, beginning of period
$8.84
$9.01
$9.61
Net investment loss4
(0.06)
(0.17)
(0.09)
Net realized and unrealized
gain on investments
0.23
0.77
0.48
Total from investment operations
0.17
0.60
0.39
Net asset value, end of period
$9.01
$9.61
$10.00
Total return5,6 (%)
1.927
6.66
4.067
Ratios and supplemental data
Net assets, end of period
(in millions)
11
11
11
Ratio of net expenses to average
net assets (%)
2.508
2.50
2.508
Ratio of gross expenses to average
net assets9 (%)
8.318
5.57
6.638
Ratio of net investment loss
to average net assets (%)
(2.02)8
(1.73)
(1.82)8
Portfolio turnover (%)
597
104
617
CLASS I SHARES
Period ended
10-31-0510
10-31-06
4-30-073
Per share operating performance
Net asset value, beginning of period
$8.84
$9.05
$9.77
Net investment loss4
(0.01)
(0.05)
(0.03)
Net realized and unrealized
gain (loss) on investments
0.22
0.77
0.48
Total from investment operations
0.21
0.72
0.45
Net asset value, end of period
$9.05
$9.77
$10.22
Total return5,6 (%)
2.387
7.96
4.617
Ratios and supplemental data
Net assets, end of period (in millions)
11
11
11
Ratio of net expenses to average
net assets (%)
1.298
1.30
1.308
Ratio of gross expenses to average
net assets9 (%)
7.108
4.33
5.438
Ratio of net investment loss
to average net assets (%)
(0.46)8
(0.57)
(0.62)8
Portfolio turnover (%)
59 7
104
617
2 Effective 6-18-05, shareholders of the former Light Revolution Fund became owners of an equal number of full and fractional Class A shares of the John Hancock Technology Leaders Fund. Additionally, the accounting and performance history of the Light Revolution Fund was redesignated as that of Class A of John Hancock Technology Leaders Fund.
3 Semiannual period from 11-1-06 through 4-30-07. Unaudited.
4 Based on the average of the shares outstanding.
5 Assumes dividend reinvestment and does not reflect the effect of sales charges.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Annualized.
9 Does not take into consideration expense reductions during the periods shown.
10 Class B, Class C and Class I shares began operations on 6-20-05.
11 Less than $500,000.
Accounting policies
are as follows:
Management fee and transactions with
affiliates and others
Distribution and
Share class
service fees
Class A
$3,337
Class B
1,637
Class C
573
Total
$5,547
Fund share transactions
Year ended 10-31-06
Period ended 4-30-071
Shares
Amount
Shares
Amount
Class A shares
Sold
66,081
$649,223
37,312
$374,355
Repurchased
(212,206)
(1,894,208)
(39,251)
(388,431)
Net decrease
(146,125)
($1,244,985)
(1,939)
($14,076)
Class B shares
Sold
40,934
$400,503
19,619
$194,030
Repurchased
(20,388)
(191,374)
(30,277)
(296,217)
Net increase (decrease)
20,546
$209,129
(10,658)
($102,187)
Class C shares
Sold
8,695
$83,095
2,573
$25,517
Repurchased
(741)
(6,967)
(3,736)
(36,388)
Net increase (decrease)
7,954
$76,128
(1,163)
($10,871)
Class I shares
Sold
Repurchased
Net increase (decrease)
Net decrease
(117,625)
($959,728)
(13,760)
($127,134)
Investment transactions
Continuation of Investment Advisory
Agreement and Subadvisory
Agreement: John Hancock Technology
Leaders Fund
By phone
On the Funds Web site
On the SECs Web site
1-800-225-5291
www.jhfunds.com/proxy
www.sec.gov
Trustees
Charles A. Rizzo
Custodian
Ronald R. Dion, Chairman
Chief Financial Officer
The Bank of New York
James R. Boyle
Gordon M. Shone
One Wall Street
James F. Carlin
Treasurer
New York, NY 10286
William H. Cunningham
Charles L. Ladner*
John G. Vrysen
Transfer agent
Dr. John A. Moore*
Chief Operations Officer
John Hancock Signature
Patti McGill Peterson*
Services, Inc.
Steven R. Pruchansky
Investment adviser
One John Hancock Way,
*Members of the Audit Committee
John Hancock Advisers, LLC
Suite 1000
Non-Independent Trustee
601 Congress Street
Boston, MA 02217-1000
Boston, MA 02210-2805
Officers
Legal counsel
Keith F. Hartstein
Subadviser
Kirkpatrick & Lockhart
President and
MFC Global Investment
Preston Gates Ellis LLP
Chief Executive Officer
Management (U.S.), LLC
One Lincoln Street
101 Huntington Avenue
Boston, MA 02111-2950
Thomas Kinzler
Boston, MA 02199
Secretary and Chief Legal Officer
Principal distributor
Francis V. Knox, Jr.
John Hancock Funds, LLC
Chief Compliance Officer
601 Congress Street
Boston, MA 02210-2805
How to contact us
Internet
www.jhfunds.com
Mail
Regular mail:
Express mail:
John Hancock
John Hancock
Signature Services, Inc.
Signature Services, Inc.
One John Hancock Way, Suite 1000
Mutual Fund Image Operations
Boston, MA 02217-1000
380 Stuart Street
Boston, MA 02116
Phone
Customer service representatives
1-800-225-5291
EASI-Line
1-800-338-8080
TDD line
1-800-554-6713
EQUITY
INTERNATIONAL
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1-800-554-6713 TDD
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www.jhfunds. com
6/07
TABLE OF CONTENTS
Your fund at a glance
page 1
Managers report
page 2
A look at performance
page 6
Your expenses
page 8
Funds investments
page 10
Financial statements
page 15
Notes to financial
statements
page 21
For more information
page 32
Keith F. Hartstein,
President and Chief Executive Officer
This commentary reflects the CEOs views as of April 30, 2007. They are subject to change at any time.
Your fund at a glance
The Fund seeks long-term growth of capital by investing approximately one third of its assets in equity securities of U.S. and foreign companies in each of the following sectors: financial services, health care and technology.
Over the last six months
► The financial portfolio outperformed its benchmark thanks to positioning among capital market-related shares, such as asset managers, custody banks and investment bankers.
► The health care portfolio benefited from a focus on innovative biotechnology and pharmaceutical companies, but suffered from sharp downturns in a few names elsewhere.
► The technology portion of the Fund lagged its benchmark due primarily to unfavorable stock selection.
John Hancock Growth Trends Fund
Fund performance for the six months ended April 30, 2007.
Total returns for the Fund are at net asset value with all distributions reinvested. These returns do not reflect the deduction of the maximum sales charge, which would reduce the performance shown above.
Top holdings | |
Financial Services | |
| |
American International | |
Group, Inc. | 9.3% |
| |
Bank of America Corp. | 8.9% |
| |
Wachovia Corp. | 8.2% |
| |
American Express Co. | 6.1% |
| |
Citigroup, Inc. | 5.5% |
|
Health Care | |
| |
Shire Plc | 13.8% |
| |
Bayer AG | 6.8% |
| |
Inverness Medical | |
Innovations, Inc. | 5.1% |
| |
Gilead Sciences, Inc. | 4.1% |
| |
Hospira, Inc. | 4.0% |
|
Technology | |
| |
Microsoft Corp. | 13.7% |
| |
Hewlett-Packard Co. | 9.3% |
| |
Cisco Systems, Inc. | 5.7% |
| |
Mentor Graphics Corp. | 4.7% |
| |
Ingram Micro, Inc. | |
(Class A) | 4.3% |
|
As a percentage of Financial Services, Health Care and Technology net assets, respectively, on April 30, 2007.
1
Managers report
John Hancock
Growth Trends Fund
Despite a bumpy ride, stocks managed healthy returns during the six months ended April 30, 2007, as the broad S&P 500 Index returned 8.60% .
In this period, John Hancock Growth Trends Funds Class A, Class B and Class C shares posted total returns of 5.35%, 5.14% and 5.14%, respectively, at net asset value, compared with the average 7.81% return
of Morningstar, Inc.s large growth fund category.1 The Funds three sectors financials, technology and health care all produced positive results, but only one health care kept pace with the broader market. The Funds results were held back by the performance of its health care and technology portfolios, which lagged their benchmark indexes.
FINANCIALS by Roger C. Hamilton and Lisa A. Welch
On April 30, 2007, James K. Schmidt retired after more than 20 years of distinguished service at John Hancock Funds.
Financial shares underperformed the broader market, as the Standard & Poors 500 Financial Index returned 5.76% . Life and health insurance firms made up one of the best-performing industry segments. Financial groups whose revenues are tied to the market, such as investment banks, asset managers and custody banks, performed well thanks to continued robust capital markets and deal activity. At the other end of the spectrum, banking stocks saw their returns limited by worry about exposure to subprime loans. In addition, the interest rate environment continued
SCORECARD
INVESTMENT | PERIODS PERFORMANCE... AND WHATS BEHIND THE NUMBERS | |
Goldman Sachs | ▲ | Strong capital-markets activity |
Aveta | ▼ | Earnings below expectations |
BEA Systems | ▼ | Increased competition hurts results |
2
Portfolio Managers, MFC Global Investment Management (U.S.), LLC Roger C. Hamilton, Lisa A. Welch, Jon D. Stephenson, CFA, Thomas P. Norton, CFA |
to work against them the yield curve remained inverted throughout the period, hurting banks net interest margins.
Continuing a trend of recent years, the financial portfolios capital-market holdings were by far the biggest contributors to performance behind such names as Goldman Sachs Group, Inc., Bank of New York Co., Inc., Franklin Resources, Inc. and State Street Corp., among others. An underweight to regional banks also contributed to relative results. These companies faced credit issues relating to subprime loans, and saw their earnings growth limited by the interest rate environment.
Despite a bumpy ride, stocks |
managed healthy returns during |
the six months ended |
April 30, 2007 |
In a period when the portfolio outperformed the benchmark by a wide margin, the leading detractors were small, winning segments of the index (less than 1% each) to which the portfolio had no exposure, such as office and retail real estate investment trusts. At the individual security level, the leading detractors were Bank of America Corp. and HSBC Holdings Plc.
Were generally positive on the financials sector going forward, though the flat yield curve and current credit environment present some challenges in the near term. Nevertheless, we see many attractive investment candidates under our approach, which targets what we believe are good businesses selling with a margin of safety, a catalyst for growth and good revenue trends.
HEALTH CARE by Jon D. Stephenson, CFA
Effective March 14, 2007, Jon D. Stephenson took over management responsibilities for the portfolio, replacing Robert C. Junkin, CPA, who left the company.
Health care stocks did well for the six months ended April 30, 2007, with the Russell 3000 Healthcare Index gaining 8.50% . The Funds health
Growth Trends Fund
3
care portfolio benefited from a focus on innovative biotechnology and pharmaceutical companies, but suffered from sharp downturns in a few names elsewhere that caused it to lag the Russell index.
Among top performers were Theratechnologies, Inc., a Canadian biotech company, and Shire Plc, a British specialty pharma company. Theratechnologies surged after the release of positive test data for a new treatment it has for HIV lipo-atrophy, a condition that causes patients to lose volume in their faces. Shire, which focuses on treatments for Attention Deficit Hyperactivity Disorder (ADHD), benefited from a new product approval and robust pipeline. Bayer AG, a German company previously focused on chemicals, also rallied nicely after purchasing a pharmaceuticals company in 2006.
On the downside were Aveta, Inc. and Force Protection, Inc. Aveta is a privately held managed care company with a strong presence in Puerto Rico. The stock sank when fourth quarter earnings came in below expectations, triggering worries the company might default on its debt. A small investment outside the sector also proved costly. Force Protection, which makes armored military vehicles, declined early in 2007 after receiving disappointing news on a key contract. We sold the position to focus exclusively on health care.
Looking ahead, were excited about the sectors growth prospects. We believe challenges, such as payers concerns over cost containment, could create attractive opportunities to buy great companies whose stocks are trading below their intrinsic value and where there is a catalyst such as a planned new product launch or upcoming clinical data release that could help unlock that value.
SECTOR DISTRIBUTION2 | |
Financials | 29% |
Health care | 29% |
Information technology | 28% |
Energy | 3% |
Consumer discretionary | 2% |
Telecommunication | |
services | 2% |
Industrials | 1% |
Consumer staples | 1% |
Materials | 1% |
TECHNOLOGY by Thomas P. Norton, CFA
Like the stock market overall, technology stocks were on a roller coaster ride during much of the period and ended up lagging the overall market. The technology portion of the Fund also lagged its benchmark, due primarily to unfavorable stock selection. Leading the list of our most disappointing performers was BEA Systems, Inc., whose financial results fell short of expectations as competition heated up. Shares of RF Micro Devices, Inc., a maker of radio frequency components used in mobile devices,
Growth Trends Fund
4
fell during the period based in large measure on the companys projection of weaker-than-expected financial results over the short term, attributable to Motorola, a key client. Our holdings in iRobot Corp. also worked against us. The company, best known for the Roomba a robot household vacuum also provides robots to military customers, including PackBots, which perform dangerous tasks such as battlefield reconnaissance. The market cooled on the stock after disappointing sales of the companys follow-up Scooba floor-washing robot, and its ongoing commitment to plow back some of its earnings into marketing and research and development. Among our best performers during the period was MEMC Electronic Materials, which makes silicon wafers used in semiconductors. The company benefited from market share gains, strong demand and increasing prices for some of its products, particularly from the solar industry. Red Hat, Inc. was another winner, posting strong financial results amid solid demand for the open source software makers products. Another notable standout included Apple Computer, Inc., which continued to be bolstered by the success of its Macintosh computers and iPOD, as well as excitement over its upcoming iPhone.
The Funds three sectors |
financials, technology and health |
care all produced positive |
results, but only one health |
care kept pace with the |
broader market. |
We believe that after underperforming the broader stock market over the past three years or so, technology stocks could outperform the overall market during the second half of 2007. Expectations for the group have diminished, and we believe that technology companies as a group have better growth Delete all specs beforepotential than many other industries. Furthermore, tech stock valuations appear attractive in our view, both on a historical basis and relative to other industries.
This commentary reflects the views of the managers through the end of the Funds period discussed in this report. The managers statements reflect their own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Sector investing is subject to greater risks than the market as a whole.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting.
1 Figures from Morningstar, Inc. include reinvested dividends and do not take into account sales charges. Actual load-adjusted performance is lower.
2 As a percentage of net assets on April 30, 2007.
Growth Trends Fund
5
A look at performance
For the periods ended April 30, 2007
Average annual returns | Cumulative total returns | ||||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||||
Inception | Since | Since | |||||||||
Class | date | 1-year | 5-year | 10-year | inception | 6-month | 1-year | 5-year | 10-year | inception | |
| |||||||||||
A | 9-22-00 | 0.97% | 3.57% | | 5.41% | 0.14% | 0.97% | 19.15% | | 30.75% | |
| |||||||||||
B | 9-22-00 | 0.78 | 3.58 | | 5.34 | 0.14 | 0.78 | 19.25 | | 30.40 | |
| |||||||||||
C | 9-22-00 | 4.78 | 3.93 | | 5.34 | 4.14 | 4.78 | 21.25 | | 30.40 | |
|
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charge on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. The Class B shares CDSC declines annually between years 16 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Funds current performance may be higher or lower than the performance shown. For performance data current to the most recent month-end, please call 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Funds performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable.
Growth Trends Fund
6
Growth of $10,000
This chart shows what happened to a hypothetical $10,000 investment in Growth Trends Fund Class A shares for the period indicated. For comparison, weve shown the same investment in the Standard & Poors 500 Index.
Without | With maximum | |||
Class | Period beginning | sales charge | sales charge | Index |
| ||||
B2 | 9-22-00 | $6,960 | $6,960 | $11,432 |
| ||||
C2 | 9-22-00 | 6,960 | 6,960 | 11,432 |
|
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Funds Class B and Class C shares, respectively, as of April 30, 2007. The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. 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.
Standard & Poors 500 Index is an unmanaged index that includes 500 widely traded common stocks.
It is not possible to invest directly in an index. Index figures do not reflect sales charges which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 No contingent deferred sales charge applicable.
Growth Trends Fund
7
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your funds actual ongoing operating expenses, and is based on your funds actual return. It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007.
Account value | Ending value | Expenses paid during period | |
on 11-1-06 | on 4-30-07 | ended 4-30-071 | |
| |||
Class A | $1,000.00 | $1,053.50 | $7.60 |
| |||
Class B | 1,000.00 | 1,051.40 | 11.18 |
| |||
Class C | 1,000.00 | 1,051.40 | 11.18 |
|
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at April 30, 2007 by $1,000.00, then multiply it by the expenses paid for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Growth Trends Fund
8
Hypothetical example for comparison purposes
This table allows you to compare your funds ongoing operating expenses with those of any other fund. It provides an example of the Funds hypothetical account values and hypothetical expenses based on each classs actual expense ratio and an assumed 5% annualized return before expenses (which is not your funds actual return). It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during period | |
on 11-1-06 | on 4-30-07 | ended 4-30-071 | |
| |||
Class A | $1,000.00 | $1,017.40 | $7.46 |
| |||
Class B | 1,000.00 | 1,013.90 | 10.98 |
| |||
Class C | 1,000.00 | 1,013.90 | 10.98 |
|
Remember, these examples do not include any transaction costs, such as sales charges; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Funds annualized expense ratio of 1.50%, 2.20% and 2.20% for Class A, Class B and Class C, respectively, multiplied by the average account value over the period, multiplied by [number of days in most recent fiscal half-year/365 or 366] (to reflect the one-half year period).
Growth Trends Fund
9
F I N A N C I A L S T A T E M E N T S
Funds investments
Securities owned by the Fund on 4-30-07 (unaudited)
This schedule is 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 Funds cash position, are listed last.
Issuer | Shares | Value |
| ||
Common stocks 96.31% | $95,569,958 | |
(Cost $73,767,425) | ||
Agricultural Products 0.39% | 387,000 | |
| ||
Archer-Daniels-Midland Co. | 10,000 | 387,000 |
Application Software 2.61% | 2,587,713 | |
| ||
BEA Systems, Inc. (I) | 94,600 | 1,115,333 |
| ||
Mentor Graphics Corp. (I) | 91,000 | 1,472,380 |
Asset Management & Custody Banks 4.85% | 4,815,731 | |
| ||
Bank of New York Co., Inc. (The) | 37,620 | 1,522,858 |
| ||
Franklin Resources, Inc. | 8,300 | 1,089,873 |
| ||
MVC Capital, Inc. | 9,350 | 164,280 |
| ||
PennantPark Investment Corp. (I) | 9,870 | 147,853 |
| ||
State Street Corp. | 25,200 | 1,735,524 |
| ||
Tortoise Capital Resources Corp. (I) | 8,540 | 155,343 |
Biotechnology 4.37% | 4,338,488 | |
| ||
Altus Pharmaceuticals, Inc. (I) | 45,950 | 680,519 |
| ||
BioMarin Pharmaceuticals, Inc. (I) | 32,350 | 522,776 |
| ||
BioSphere Medical, Inc. (I) | 28,150 | 191,138 |
| ||
Exelixis, Inc. (I) | 26,750 | 287,295 |
| ||
Gilead Sciences, Inc. (I) | 18,000 | 1,470,960 |
| ||
Regeneration Technologies, Inc. (I) | 140,000 | 1,185,800 |
Communications Equipment 6.70% | 6,643,755 | |
| ||
Cisco Systems, Inc. (I) | 66,750 | 1,784,895 |
| ||
Comverse Technology, Inc. (I) | 46,700 | 1,059,156 |
| ||
Corning, Inc. (I) | 38,400 | 910,848 |
| ||
Telefonaktiebolaget LM Ericsson, American Depositary Receipt | ||
(ADR) (Sweden) | 17,700 | 675,609 |
| ||
NDS Group Plc (ADR) (United Kingdom) (I) | 20,500 | 1,057,185 |
| ||
Nokia Corp. (ADR) (Finland) | 26,530 | 669,882 |
| ||
QUALCOMM, Inc. | 11,100 | 486,180 |
Computer & Electronics Retail 0.46% | 454,837 | |
| ||
Best Buy Co., Inc. | 9,750 | 454,837 |
Computer Hardware 3.92% | 3,885,777 | |
| ||
Apple Computer, Inc. (I) | 9,900 | 988,020 |
| ||
Hewlett-Packard Co. | 68,765 | 2,897,757 |
See notes to financial statements
Growth Trends Fund
10
F I N A N C I A L S T A T E M E N T S
Issuer | Shares | Value |
| ||
Computer Storage & Peripherals 3.10% | $3,078,938 | |
| ||
EMC Corp. (I) | 80,950 | 1,228,821 |
| ||
Komag, Inc. (L) | 31,300 | 861,063 |
| ||
SanDisk Corp. (I) | 7,850 | 341,082 |
| ||
Western Digital Corp. (I) | 36,650 | 647,972 |
Consumer Finance 2.03% | 2,011,210 | |
| ||
American Express Co. | 33,150 | 2,011,210 |
Data Processing & Outsourced Services 0.49% | 483,198 | |
| ||
Euronet Worldwide, Inc. (I) | 17,350 | 483,198 |
Diversified Banks 7.30% | 7,244,559 | |
| ||
Bank of America Corp. | 57,674 | 2,935,607 |
| ||
HSBC Holdings Plc (ADR) (United Kingdom) (L) | 3,067 | 283,268 |
| ||
Kookmin Bank (ADR) (South Korea) | 6,570 | 590,117 |
| ||
Wachovia Corp. | 48,255 | 2,680,083 |
| ||
Wells Fargo & Co. | 21,050 | 755,484 |
Diversified Chemicals 2.42% | 2,405,508 | |
| ||
Bayer AG (Germany) (C) | 35,000 | 2,405,508 |
Diversified Financial Services 2.48% | 2,463,530 | |
| ||
Citigroup, Inc. | 33,750 | 1,809,675 |
| ||
JPMorgan Chase & Co. | 12,550 | 653,855 |
Electronic Manufacturing Services 0.47% | 463,670 | |
| ||
Jabil Circuit, Inc. | 19,900 | 463,670 |
Health Care Distributors 1.34% | 1,329,050 | |
| ||
Cardinal Health, Inc. | 19,000 | 1,329,050 |
Health Care Equipment 5.73% | 5,690,664 | |
| ||
Baxter International, Inc. | 15,000 | 849,450 |
| ||
Gen-Probe, Inc. (I) | 11,850 | 605,654 |
| ||
Hospira, Inc. (I) | 35,000 | 1,419,250 |
| ||
Micrus Endovascular Corp. (I) | 10,000 | 222,300 |
| ||
NMT Medical, Inc. (I) | 40,000 | 623,200 |
| ||
Northstar Neuroscience, Inc. (I) | 39,590 | 539,216 |
| ||
Stereotaxis, Inc. (I) | 41,400 | 430,974 |
| ||
Thoratec Corp. (I) | 51,000 | 1,000,620 |
Health Care Facilities 0.21% | 213,055 | |
| ||
Sun Healthcare Group, Inc. (I) | 16,990 | 213,055 |
Health Care Services 2.51% | 2,487,482 | |
| ||
Assisted Living Concepts, Inc. (I) | 20,000 | 245,000 |
| ||
Aveta, Inc. (I)(S) | 97,210 | 777,680 |
| ||
Capital Senior Living Corp. (I) | 20,000 | 232,200 |
| ||
Nektar Therapeutics (I) | 54,000 | 667,980 |
| ||
Sunrise Senior Living, Inc. (I) | 5,000 | 191,450 |
| ||
Systems Xcellence, Inc. (Canada) (I) | 16,360 | 373,172 |
See notes to financial statements
Growth Trends Fund
11
F I N A N C I A L S T A T E M E N T S
Issuer | Shares | Value |
| ||
Health Care Supplies 3.17% | $3,143,610 | |
| ||
Inverness Medical Innovations, Inc. (I) | 3,200 | 128,160 |
| ||
Inverness Medical Innovations, Inc. (I)(K) | 45,000 | 1,802,250 |
| ||
PolyMedica Corp. | 30,000 | 1,213,200 |
Household Appliances 0.35% | 350,285 | |
| ||
iRobot Corp. (I)(L) | 22,100 | 350,285 |
Human Resource & Employment Services 0.70% | 693,825 | |
| ||
Monster Worldwide, Inc. (I) | 16,500 | 693,825 |
Insurance Brokers 0.24% | 242,187 | |
| ||
Aon Corp. | 6,250 | 242,187 |
Integrated Oil & Gas 0.45% | 444,347 | |
| ||
Sasol Ltd. (ADR) (South Africa) | 13,004 | 444,347 |
Internet Software & Services 1.60% | 1,591,356 | |
| ||
Google, Inc. (Class A) (I) | 2,100 | 989,898 |
| ||
Yahoo!, Inc. (I) | 21,450 | 601,458 |
Investment Banking & Brokerage 4.89% | 4,854,561 | |
| ||
Goldman Sachs Group, Inc. (The) | 8,000 | 1,748,880 |
| ||
Legg Mason, Inc. | 10,550 | 1,046,454 |
| ||
Merrill Lynch & Co., Inc. | 6,500 | 586,495 |
| ||
Morgan Stanley | 12,200 | 1,024,922 |
| ||
UBS AG (Switzerland) | 6,900 | 447,810 |
IT Consulting & Other Services 1.28% | 1,269,447 | |
| ||
Accenture Ltd. (Class A) (Bermuda) | 8,100 | 316,710 |
| ||
CA, Inc. | 34,950 | 952,737 |
Life & Health Insurance 1.55% | 1,538,022 | |
| ||
Aflac, Inc. | 18,300 | 939,522 |
| ||
Prudential Financial, Inc. | 6,300 | 598,500 |
Marine 0.22% | 216,720 | |
| ||
Oceanfreight, Inc. (Greece) (I) | 11,200 | 216,720 |
Movies & Entertainment 0.47% | 468,732 | |
| ||
Disney (Walt) Co. (The) | 13,400 | 468,732 |
Multi-Line Insurance 4.72% | 4,684,426 | |
| ||
American International Group, Inc. | 43,850 | 3,065,554 |
| ||
Genworth Financial, Inc. (Class A) | 29,250 | 1,067,332 |
| ||
Hartford Financial Services Group, Inc. (The) | 5,450 | 551,540 |
Oil & Gas Equipment & Services 0.68% | 672,597 | |
| ||
Grant Prideco, Inc. (I) | 13,050 | 672,597 |
Pharmaceuticals 12.10% | 12,007,442 | |
| ||
Anesiva, Inc. (I) | 60,000 | 471,000 |
| ||
Auxilium Pharmaceuticals, Inc. (I) | 67,000 | 995,620 |
| ||
BioMimetic Therapeutics, Inc. (I) | 37,050 | 694,317 |
| ||
Cubist Pharmaceuticals, Inc. (I) | 55,000 | 1,179,750 |
| ||
Inspire Pharmaceuticals, Inc. (I) | 38,450 | 294,143 |
| ||
MGI Pharma, Inc. (I) | 20,000 | 440,400 |
See notes to financial statements
Growth Trends Fund
12
F I N A N C I A L S T A T E M E N T S
Issuer | Shares | Value |
| ||
Pharmaceuticals (continued) | ||
| ||
Novartis AG (ADR) (Switzerland) | 13,500 | $784,215 |
| ||
Roche Holding AG (Switzerland) | 7,000 | 1,319,297 |
| ||
Shire Plc (ADR) (United Kingdom) | 70,000 | 4,892,300 |
| ||
Spectrum Pharmaceuticals, Inc. (I) | 80,000 | 536,800 |
| ||
Wyeth | 7,200 | 399,600 |
Property & Casualty Insurance 0.85% | 839,970 | |
| ||
Ambac Financial Group, Inc. | 9,150 | 839,970 |
Reinsurance 1.50% | 1,493,088 | |
| ||
PartnerRe Ltd. (Bermuda) | 15,600 | 1,123,512 |
| ||
Platinum Underwriters Holdings Ltd. (Bermuda) | 10,800 | 369,576 |
Semiconductor Equipment 0.36% | 352,437 | |
| ||
Cymer, Inc. (I) | 8,700 | 352,437 |
Semiconductors 1.55% | 1,534,043 | |
| ||
RF Micro Devices, Inc. (I)(L) | 146,600 | 916,250 |
| ||
Trident Microsystems, Inc. (I)(L) | 29,100 | 617,793 |
Specialized Finance 0.96% | 954,716 | |
| ||
Nasdaq Stock Market, Inc. (I) | 19,960 | 649,898 |
| ||
Nymex Holdings, Inc. (I) | 2,350 | 304,818 |
Systems Software 4.96% | 4,926,817 | |
| ||
Microsoft Corp. | 143,050 | 4,282,917 |
| ||
Oracle Corp. (I) | 34,250 | 643,900 |
Technology Distributors 1.65% | 1,633,573 | |
| ||
Arrow Electronics, Inc. (I) | 7,750 | 306,280 |
| ||
Ingram Micro, Inc. (Class A) (I) | 67,650 | 1,327,293 |
Thrifts & Mortgage Finance 0.68% | 673,592 | |
| ||
Hudson City Bancorp., Inc. | 50,570 | 673,592 |
Interest | Par value | ||
Issuer, description, maturity date | rate | (000) | Value |
| |||
Short-term investments 6.09% | $6,048,762 | ||
(Cost $6,048,762) | |||
Joint Repurchase Agreement 3.70% | 3,678,000 | ||
| |||
Investment in a joint repurchase agreement transaction | |||
with Bank of America Corp. Dated 4-30-07, due | |||
5-1-07 (Secured by U.S. Treasury Inflation Indexed Notes | |||
0.875%, due 4-15-10, 3.000%, due 7-15-12, 3.375%, | |||
due 1-15-12 and U.S. Treasury STRIPS, due 5-15-21). | |||
Maturity value: $3,678,523 | 5.120% | $3,678 | 3,678,000 |
See notes to financial statements
Growth Trends Fund
13
F I N A N C I A L S T A T E M E N T S
Shares | ||
Cash Equivalents 2.39% | $2,370,762 | |
| ||
John Hancock Cash Investment Trust (T)(W) | 2,370,762 | 2,370,762 |
| ||
Total investments (Cost $79,816,187) 102.40% | $101,618,720 | |
| ||
Other assets and liabilities, net (2.40%) | ($2,386,066) | |
| ||
Total net assets 100.00% | $99,232,654 |
(C) Parenthetical disclosure of a country in the security description represents country of issuer; however, the security is euro-denominated.
(I) Non-income-producing security.
(K) Direct placement securities are restricted to resale. They have been fair valued in accordance with procedures approved by the Trustees after consideration of restrictions as to resale, financial condition and prospects of the issuer, general market conditions and pertinent information in accordance with the Funds bylaws and the Investment Company Act of 1940, as amended. The Fund has limited rights to registration under the Securities Act of 1933 with respect to these restricted securities.
Additional Information on these securities is as follows:
Value as a | ||||
percentage | ||||
Acquisition | Acquisition | of Funds | Value as of | |
Issuer, description | date | cost | net assets | April 30, 2007 |
| ||||
Inverness Medical Innovations, Inc. | 8-17-06 | $1,361,250 | 1.82% | $1,802,250 |
(L) All or a portion of this security is on loan as of April 30, 2007.
(T) Represents investment of securities lending collateral.
(W) Issuer is an affiliate of John Hancock Advisers, LLC.
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
Growth Trends Fund
14
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 4-30-07 (unaudited)
This Statement of Assets and Liabilities is the Funds balance sheet. It shows the value of what the Fund owns, is due and owes. Youll also find the net asset value and the maximum offering price per share.
Assets | |
| |
Investments at value (cost $79,816,187) including $2,299,200 of securities loaned | $101,618,720 |
Foreign currency at value (cost $37,688) | 37,688 |
Receivable for investments sold | 1,485,265 |
Receivable for shares sold | 61,103 |
Dividends and interest receivable | 52,690 |
Other assets | 9,578 |
Total assets | 103,265,044 |
Liabilities | |
| |
Due to custodian | 11,980 |
Payable for investments purchased | 1,016,247 |
Payable for shares repurchased | 329,378 |
Payable upon return of securities loaned | 2,370,762 |
Payable to affiliates | |
Management fees | 124,415 |
Distribution and service fees | 10,220 |
Other | 98,091 |
Other payables and accrued expenses | 71,297 |
Total liabilities | 4,032,390 |
Net assets | |
| |
Capital paid-in | 268,193,794 |
Accumulated net realized loss on investments and foreign currency transactions | (190,398,658) |
Net unrealized appreciation of investments and translation of assets and | |
liabilities in foreign currencies | 21,802,826 |
Accumulated net investment loss | (365,308) |
Net assets | $99,232,654 |
Net asset value per share | |
| |
Based on net asset values and shares outstanding the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($36,444,226 ÷ 5,004,744 shares) | $7.28 |
Class B ($46,052,150 ÷ 6,620,859 shares) | $6.96 |
Class C ($16,736,278 ÷ 2,406,237 shares) | $6.96 |
Maximum offering price per share | |
| |
Class A1 ($7.28 ÷ 95%) | $7.66 |
1 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
Growth Trends Fund
15
F I N A N C I A L S T A T E M E N T S
Statement of operations For the period ended 4-30-07 (unaudited)1
This Statement of Operations summarizes the Funds investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
Investment income | |
| |
Dividends | $576,466 |
Interest | 67,079 |
Securities lending | 10,978 |
Total investment income | 654,523 |
Expenses | |
| |
Investment management fees (Note 2) | 523,204 |
Distribution and service fees (Note 2) | 390,178 |
Transfer agent fees (Note 2) | 130,801 |
Accounting and legal services fees (Note 2) | 6,733 |
Compliance fees | 1,810 |
Custodian fees | 27,331 |
Printing fees | 23,892 |
Blue sky fees | 20,996 |
Professional fees | 10,679 |
Trustees fees | 3,439 |
Interest | 3,168 |
Securities lending fees | 381 |
Miscellaneous | 4,694 |
Total expenses | 1,147,306 |
Less expense reductions (Note 2) | (130,801) |
Net expenses | 1,016,505 |
Net investment loss | (361,982) |
Realized and unrealized gain (loss) | |
| |
Net realized gain (loss) on | |
Investments | 5,832,942 |
Foreign currency transactions | (7,548) |
Change in net unrealized appreciation (depreciation) of | |
Investments | (114,103) |
Translation of assets and liabilities in foreign currencies | 136 |
Net realized and unrealized gain | 5,711,427 |
Increase in net assets from operations | $5,349,445 |
1 Semiannual period from 11-1-06 through 4-30-07. |
See notes to financial statements
Growth Trends Fund
16
F I N A N C I A L S T A T E M E N T S
Statement of changes in net assets
These Statements of Changes in Net Assets show how the value of the Funds net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
Year | Period | |
ended | ended | |
10-31-06 | 4-30-071 | |
Increase (decrease) in net assets | ||
| ||
From operations | ||
Net investment loss | ($1,149,879) | ($361,982) |
Net realized gain | 15,195,862 | 5,825,394 |
Change in net unrealized appreciation (depreciation) | (2,615,259) | (113,967) |
Increase in net assets resulting from operations | 11,430,724 | 5,349,445 |
From Fund share transactions | (34,872,929) | (17,452,374) |
Net assets | ||
| ||
Beginning of period | 134,777,788 | 111,335,583 |
End of period2 | $111,335,583 | $99,232,654 |
1 Semiannual period from 11-1-06 through 4-30-07. Unaudited.
2 Includes accumulated net investment loss of $3,326 and $365,308, respectively.
See notes to financial statements
Growth Trends Fund
17
Financial highlights
The Financial Highlights show how the Funds net asset value for a share has changed since the end of the previous period.
CLASS A SHARES | ||||||
Period ended | 10-31-02 | 10-31-03 | 10-31-04 | 10-31-05 | 10-31-06 | 4-30-071 |
| ||||||
Per share operating performance | ||||||
Net asset value, beginning of period | $5.87 | $4.49 | $5.51 | $5.67 | $6.27 | $6.91 |
Net Investment Income (loss)2 | (0.05) | (0.03) | (0.04) | 3,9 | (0.03) | (0.01) |
Net realized and unrealized | ||||||
gain (loss) on investments | (1.33) | 1.05 | 0.20 | 0.60 | 0.67 | 0.38 |
Total from investment operations | (1.38) | 1.02 | 0.16 | 0.60 | 0.64 | 0.37 |
Less distributions | ||||||
Net asset value, end of period | $4.49 | $5.51 | $5.67 | $6.27 | $6.91 | $7.28 |
Total return4,5 (%) | (23.51) | 22.72 | 2.90 | 10.58 | 10.21 | 5.356 |
Ratios and supplemental data | ||||||
| ||||||
Net assets, end of period | ||||||
(in millions) | $65 | $69 | $58 | $46 | $40 | $36 |
Ratio of net expenses to average | ||||||
net assets (%) | 1.65 | 1.65 | 1.65 | 1.65 | 1.65 | 1.507 |
Ratio of gross expenses to average | ||||||
net assets8 (%) | 1.88 | 2.02 | 1.86 | 1.95 | 2.00 | 1.757 |
Ratio of net investment income | ||||||
(loss) to average net assets (%) | (0.91) | (0.64) | (0.62) | 0.019 | (0.48) | (0.25)7 |
Portfolio turnover (%) | 68 | 76 | 40 | 27 | 70 | 276 |
See notes to financial statements
Growth Trends Fund
18
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS B SHARES | ||||||
Period ended | 10-31-02 | 10-31-03 | 10-31-04 | 10-31-05 | 10-31-06 | 4-30-071 |
| ||||||
Per share operating performance | ||||||
Net asset value, beginning of period | $5.83 | $4.42 | $5.40 | $5.51 | $6.06 | $6.62 |
Net Investment loss2 | (0.09) | (0.06) | (0.07) | (0.04)9 | (0.07) | (0.03) |
Net realized and unrealized | ||||||
gain (loss) on investments | (1.32) | 1.04 | 0.18 | 0.59 | 0.63 | 0.37 |
Total from investment operations | (1.41) | 0.98 | 0.11 | 0.55 | 0.56 | 0.34 |
Net asset value, end of period | $4.42 | $5.40 | $5.51 | $6.06 | $6.62 | $6.96 |
Total return4,5 (%) | (24.19) | 22.17 | 2.04 | 9.98 | 9.24 | 5.146 |
Ratios and supplemental data | ||||||
| ||||||
Net assets, end of period | ||||||
(in millions) | $102 | $104 | $85 | $66 | $53 | $46 |
Ratio of net expenses to average | ||||||
net assets (%) | 2.35 | 2.35 | 2.35 | 2.35 | 2.35 | 2.207 |
Ratio of gross expenses to average | ||||||
net assets8(%) | 2.58 | 2.72 | 2.56 | 2.65 | 2.70 | 2.457 |
Ratio of net investment loss | ||||||
to average net assets (%) | (1.61) | (1.34) | (1.32) | (0.67)9 | (1.18) | (0.95)7 |
Portfolio turnover (%) | 68 | 76 | 40 | 27 | 70 | 276 |
See notes to financial statements
Growth Trends Fund
19
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS C SHARES | ||||||
Period ended | 10-31-02 | 10-31-03 | 10-31-04 | 10-31-05 | 10-31-06 | 4-30-071 |
| ||||||
Per share operating performance | ||||||
Net asset value, beginning of period | $5.83 | $4.42 | $5.40 | $5.51 | $6.06 | $6.62 |
Net Investment loss2 | (0.09) | (0.06) | (0.07) | (0.04)9 | (0.07) | (0.03) |
Net realized and unrealized | ||||||
gain (loss) on investments | (1.32) | 1.04 | 0.18 | 0.59 | 0.63 | 0.37 |
Total from investment operations | (1.41) | 0.98 | 0.11 | 0.55 | 0.56 | 0.34 |
Net asset value, end of period | $4.42 | $5.40 | $5.51 | $6.06 | $6.62 | $6.96 |
Total return4,5 (%) | (24.19) | 22.17 | 2.04 | 9.98 | 9.24 | 5.146 |
Ratios and supplemental data | ||||||
| ||||||
Net assets, end of period | ||||||
(in millions) | $42 | $41 | $31 | $23 | $19 | $17 |
Ratio of net expenses to average | ||||||
net assets (%) | 2.35 | 2.35 | 2.35 | 2.35 | 2.35 | 2.207 |
Ratio of gross expenses to average | ||||||
net assets8 (%) | 2.58 | 2.72 | 2.56 | 2.65 | 2.70 | 2.457 |
Ratio of net investment loss | ||||||
to average net assets (%) | (1.61) | (1.34) | (1.32) | (0.66)9 | (1.17) | (0.95)7 |
Portfolio turnover (%) | 68 | 76 | 40 | 27 | 70 | 276 |
1 Semiannual period from 11-1-06 through 4-30-07. Unaudited.
2 Based on the average of the shares outstanding.
3 Less than $0.01 per share.
4 Assumes dividend reinvestment and does not reflect the effect of sales charges.
5 Total returns would have been lower had certain expenses not been reduced during the period shown.
6 Not annualized.
7 Annualized.
8 Does not take into consideration expense reductions during the periods shown.
9 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflects a special dividend received by the Fund which amounted to the following amounts:
Percentage | ||
Per share | of net assets | |
| ||
Class A | $0.04 | 0.61% |
| ||
Class B | 0.04 | 0.62 |
| ||
Class C | 0.04 | 0.62 |
See notes to financial statements
Growth Trends Fund
20
Notes to financial statements (unaudited)
Note 1 Accounting policies
John Hancock Growth Trends Fund (the Fund) is a diversified series of John Hancock Equity Trust (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to achieve long-term growth of capital. The Fund will invest in a number of industry groups without concentration in any particular industry.
The Trustees have 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 represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission (SEC) and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B Shares will convert to Class A shares eight years after purchase.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Funds portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or, if quotations are not readily available, or the value has been materially affected by events occurring after the closing of a foreign market, at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short term debt investments which have a remaining maturity of 60 days or less may be valued at amortized cost, which approximates market value. Investments in John Hancock Cash Investment Trust, an affiliate of John Hancock Advisers, LLC (the Adviser), a wholly owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of Manulife Financial Corporation (MFC), are valued at their net asset value each business day. All portfolio transactions initially expressed in terms of foreign currencies have been translated into U.S. dollars as described in Fo reign currency translation below.
Joint repurchase agreement
Pursuant to an exemptive order issued by the SEC, the Fund, along with other registered investment companies having a management contract with the Adviser, 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.
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 4:00 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.
Growth Trends Fund |
Reported net realized foreign currency 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 currency 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 rates.
Investment transactions
Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. 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, which are accrued as applicable.
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 asset value of the respective classes. Distribution and service fees, if any, are 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 expenses are directly identifiable to an individual fund. Expenses that 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.
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 line of credit agreement with The Bank of New York (BNY), the Swing Line Lender and Administrative Agent. This agreement enables the Fund to participate, with other funds managed by the Adviser, in an unsecured line of credit with BNY, which permits borrowings of up to $100 million, collectively. Interest is charged to each fund based on its borrowing. In addition, a commitment fee is charged to each fund based on the average daily unused portion of the line of credit, and is allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the period ended April 30, 2007.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund negotiated lender fees. 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 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. On April 30, 2007, the Fund loaned securities having a market value of $2,299,200 collateralized by cash in the amount of $2,370,762. The cash collateral was invested in John Hancock Cash Investment Trust. Securities lending expenses are paid by the Fund to the lending agent.
Forward foreign currency exchange contracts
The 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 asset value. The Fund records realized gains and losses at the time the forward foreign currency exchange contracts are closed out. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of the contracts and from unanticipated
Growth Trends Fund
22
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 Fund 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 transactions.
The Fund had no open forward foreign currency exchange contracts on April 30, 2007.
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 that is distributed to shareholders. Therefore, no federal income tax provision is required. For federal income tax purposes, the Fund has $196,013,787 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforward expires as follows: October 31, 2009 $57,002,933, October 31, 2010 $87,616,374 and October 31, 2011 $51,394,480.
New accounting pronouncements
In June 2006, Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the Interpretation), was issued and is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management is currently evaluating the application of the Interpretation to the Fund and has not at this time quantified the impact, if any, resulting from the adoption of the Interpretation on the Funds financial statements. The Fund will implement this pronouncement no later than April 30, 2008.
In September 2006, FASB Standard No. 157, Fair Value Measurements (FAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishing a framework for measuring fair value and expands disclosure about fair value measurements. Management is currently evaluating the application of FAS 157 to the Fund and its impact, if any, resulting from the adoption of FAS 157 on the Funds financial statements.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend date or, in the case of some foreign securities, on the date thereafter when the Fund identifies the dividend. Interest income on investment securities is recorded on the accrual basis. Foreign income may be subject to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are 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, are reported in the Funds 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.
Growth Trends Fund
23
Note 2
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a monthly management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 1.00% of the first $2,400,000,000 of the Funds average daily net asset value and (b) 0.70% of the Funds average daily net asset value in excess of $2,400,000,000.
The Adviser has agreed to limit the Funds management fee to 0.75% of the Funds average daily net assets, at least until February 29, 2008. Accordingly, the expense reductions related to management fee limitation amounted to $130,801 for the period ended April 30, 2007. The Adviser reserves the right to terminate this limitation in the future.
The Adviser has agreed to limit the Funds total expenses, excluding distribution and service fees, to 1.35% of the Funds average daily net asset value, on an annual basis, at least until February 29, 2008. Pursuant to this agreement, there was no reimbursement for the period ended April 30, 2007. The Adviser reserves the right to terminate this limitation in the future.
The Fund has a Distribution Agreement with John Hancock Funds, LLC (JH Funds), a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the 1940 Act, to reimburse JH Funds for the services it provides as distributor of shares of the Fund. Accordingly, the Fund makes monthly payments to JH Funds at an annual rate not to exceed 0.30%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C, respectively. 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 Funds 12b-1 payments could occ ur under certain circumstances.
Expenses under the agreements described above for the period ended April 30, 2007 were as follows:
Distribution and | |
Share class | service fees |
| |
Class A | $57,011 |
Class B | 245,215 |
Class C | 87,952 |
Total | $390,178 |
Class A shares are assessed up-front sales charges. During the period ended April 30, 2007, JH Funds received net up-front sales charges of $19,556 with regard to sales of Class A shares. Of this amount, $2,987 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $13,294 was paid as sales commissions to unrelated broker-dealers and $3,275 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. The Advisers indirect parent, John Hancock Life Insurance Company (JHLICO), is the indirect sole shareholder of Signator Investors.
Class B shares that are redeemed within six years of purchase are 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 are redeemed within one year of purchase are 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 are paid to JH Funds and are 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 April 30, 2007, CDSCs received by JH Funds amounted to $35,946 for Class B shares and $684 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of JHLICO. The Fund pays a monthly transfer agent fee at an annual rate of 0.05% of each classs average daily
Growth Trends Fund
24net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses aggregated and allocated to each class on the basis of its relative net asset value. Effective July 1, 2006, Signature Services has contractually limited transfer agent fees by implementing a transfer agent fee cap of 0.25% until at least February 29, 2008. There were no transfer agent fee reductions during the period ended April 30, 2007. Signature Services reserves the right to terminate this reimbursement limitation at any time.
The Fund has an agreement with the Adviser and affiliates to perform necessary tax, accounting and legal services for the Fund. The compensation for the year amounted to $6,733. The Fund also reimbursed JHLICO for certain compliance costs, included in the Funds Statement of Operations.
Mr. James R. Boyle is Chairman of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser and/or its affiliates. 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 its 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 investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.
Note 3
Fund share transactions
This listing illustrates the number of Fund shares sold and repurchased during the year ended October 31, 2006 and the period ended April 30, 2007, along with the corresponding dollar value.
Year ended 10-31-06 | Period ended 4-30-071 | |||
Shares | Amount | Shares | Amount | |
| ||||
Class A shares | ||||
Sold | 608,065 | $4,037,541 | 207,804 | $1,476,406 |
Repurchased | (2,170,522) | (14,362,453) | (996,235) | (7,072,272) |
Net decrease | (1,562,457) | ($10,324,912) | (788,431) | ($5,595,866) |
| ||||
Class B shares | ||||
Sold | 383,374 | $2,452,637 | 114,360 | $777,538 |
Repurchased | (3,299,870) | (21,016,012) | (1,444,073) | (9,800,039) |
Net decrease | (2,916,496) | ($18,563,375) | (1,329,713) | ($9,022,501) |
| ||||
Class C shares | ||||
Sold | 116,717 | $749,987 | 60,382 | $411,361 |
Repurchased | (1,059,886) | (6,734,629) | (476,570) | (3,245,368) |
Net decrease | (943,169) | ($5,984,642) | (416,188) | ($2,834,007) |
| ||||
Net decrease | (5,422,122) | ($34,872,929) | (2,534,332) | ($17,452,374) |
Growth Trends Fund
25Note 4
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 April 30, 2007, aggregated $28,110,037 and $49,082,705, respectively.
The cost of investments owned on April 30, 2007, including short-term investments, for federal income tax purposes, was $80,022,256. Gross unrealized appreciation and depreciation of investments aggregated $24,168,609 and $2,572,145, respectively, resulting in net unrealized appreciation of $21,596,464. The difference between book basis and tax basis net unrealized appreciation of investments is attributable primarily to the tax deferral of losses certain sales of securities.
Growth Trends Fund
26Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement: John Hancock Growth Trends Fund
The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Equity Trust (the Trust), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not interested persons of the Trust, as defined in the 1940 Act (the Independent Trustees), annually to review and consider the continuation of: (i) the investment advisory agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Adviser) and (ii) the investment subadvisory agreement (the Subadvisory Agreement) with MFC Global Investment Management (U.S.), LLC (the Subadviser) for the John Hancock Growth Trends Fund (the Fund). The Advisory Agreement with the Adviser and the Subadvisory Agreement with the Subadviser are collectively referred to as the Advisory Agreements.
At meetings held on May 12 and June 56, 2006,1 the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the continuation of the Advisory Agreements. During such meetings, the Boards Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.
In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information requested for this purpose by the Independent Trustees, including: (i) the investment performance of the Fund relative to a category of relevant funds (the Category) and a peer group of comparable funds (the Peer Group) each selected by Morningstar Inc. (Morningstar), an independent provider of investment company data, for a range of periods ended December 31, 2005; (ii) advisory and other fees incurred by, and the expense ratios of, the Fund relative to a Category and a Peer Group; (iii) the advisory fees of comparable portfolios of other clients of the Adviser and the Subadviser; (iv) the Advisers financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund; (v) breakpoints in the Funds and the Peer Groups fees, and information about economies of scale; (vi) the Advisers and Subadvisers record of compliance with applicable laws and regulations, with the Funds investment policies and restrictions and with the applicable Code of Ethics, and the structure and responsibilities of the Advisers and Subadvisers compliance department; (vii) the background and experience of senior management and investment professionals and (viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates and by the Subadviser.
The Boards review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. It was based on performance and other information as of December 31, 2005; facts may have changed between that date and the date of this shareholders report. The key factors considered by the Board and the conclusions reached are described below.
Nature, extent and quality of services
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of the Adviser and Subadviser. In addition, the Board took into account the administrative services provided to the Fund by the Adviser and its affiliates.
Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Subadviser were sufficient to support renewal of the Advisory Agreements.
27
Fund performance
The Board considered the performance results for the Fund over various time periods ended December 31, 2005. The Board also considered these results in comparison to the performance of the Category, as well as the Funds Peer Group and benchmark index. Morningstar determined the Category and the Peer Group for the Fund. The Board reviewed with a representative of Morningstar the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board noted the imperfect comparability of the Peer Group.
The Board noted that the Funds performance during the five-year period was lower than the performance of the Peer Group and Category medians, and its benchmark index the Russell 1000 Growth Index. The Board also noted that the Funds performance during the three-year period was lower than the Peer Group and Category medians and higher than the performance of the benchmark index. The Board viewed favorably that the more recent performance of the Fund for the one-year period ended December 31, 2005 was higher than the performance of the Category median, and its benchmark index, and not appreciably lower than the performance of the Peer Group median.
Investment advisory fee and subadvisory fee rates and expenses
The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the Advisory Agreement Rate). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Peer Group and Category. The Board noted that the Advisory Agreement Rate was higher than the median rate of the Peer Group and Category.
The Board received and considered expense information regarding the Funds various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board also considered peer-adjusted comparisons for the transfer agent fees. The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Funds total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the fee waiver arrangement applicable to the Advisory Agreement Rate into account (Net Expense Ratio). The Board received and considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of th e Peer Group and Category medians. The Board noted that the Funds Gross and Net Expense Ratios were higher than the median of its Peer Group and Category. The Board favorably considered the impact of fee caps towards ultimately lowering the Funds total operating expense ratio.
The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Funds overall performance and expenses supported the re-approval of the Advisory Agreements.
The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment sub-advisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.
Profitability
The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Subadviser. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable.
Economies of scale
The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Funds ability to appropriately
28
benefit from economies of scale under the Funds fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Boards understanding that most of the Advisers costs are not specific to individual Funds, but rather are incurred across a variety of products and services.
To the extent the Board and the Adviser were able to identify actual or potential economies of scale from Fund-specific or allocated expenses, in order to ensure that any such economies continue to be reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.
Information about services to other clients
The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services.
Other benefits to the Adviser
The Board received information regarding potential fall-out or ancillary benefits received by the Adviser and its affiliates as a result of the Advisers relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).
The Board also considered the effectiveness of the Advisers, Subadvisers and Funds policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation.
Other factors and broader review
As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.
Information about services to other clients
The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser to its other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate was not unreasonable, taking into account fee rates offered to others by the Adviser and giving effect to differences in services covered by such fee rates.
Other benefits to the Adviser
The Board received information regarding potential fall-out or ancillary benefits received by the Adviser and its affiliates as a result of the Advisers relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).
29
The Board also considered the effectiveness of the Advisers and the Funds policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation.
Other factors and broader review
As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.
1 The Board previously considered information about the Subadvisory Agreement at the September and December 2005 Board meetings in connection with the Advisers reorganization.
30
For more information
The Funds proxy voting policies, procedures and records are available without charge, upon request:
By phone | On the Funds Web site | On the SECs Web site |
1-800-225-5291 | www.jhfunds.com/proxy | www.sec.gov |
| ||
Trustees | Charles A. Rizzo | Custodian |
Ronald R. Dion, Chairman | Chief Financial Officer | The Bank of New York |
James R. Boyle | One Wall Street | |
James F. Carlin | Gordon M. Shone | New York, NY 10286 |
William H. Cunningham | Treasurer | |
Charles L. Ladner* | ||
Dr. John A. Moore* | John G. Vrysen | Transfer agent |
Patti McGill Peterson* | Chief Operations Officer | John Hancock Signature |
Steven R. Pruchansky | Services, Inc. | |
*Members of the Audit Committee | Investment adviser | One John Hancock Way, |
Non-Independent Trustee | John Hancock Advisers, LLC | Suite 1000 |
601 Congress Street | Boston, MA 02217-1000 | |
Boston, MA 02210-2805 | ||
Legal counsel | ||
Officers | Subadviser | Kirkpatrick & Lockhart |
Keith F. Hartstein | MFC Global Investment | Preston Gates Ellis LLP |
President and | Management (U.S.), LLC | One Lincoln Street |
Chief Executive Officer | 101 Huntington Avenue | Boston, MA 02111-2950 |
Boston, MA 02199 | ||
Thomas Kinzler | ||
Secretary and | Principal distributor | |
Chief Legal Officer | John Hancock Funds, LLC | |
601 Congress Street | ||
Francis V. Knox, Jr. | Boston, MA 02210-2805 | |
Chief Compliance Officer |
How to contact us | ||
| ||
Internet | www.jhfunds.com | |
| ||
Regular mail: | Express mail: | |
John Hancock | John Hancock | |
Signature Services, Inc. | Signature Services, Inc. | |
One John Hancock Way, Suite 1000 | Mutual Fund Image Operations | |
Boston, MA 02217-1000 | 380 Stuart Street | |
Boston, MA 02116 | ||
| ||
Phone | Customer service representatives | 1-800-225-5291 |
EASI-Line | 1-800-338-8080 | |
TDD line | 1-800-554-6713 | |
|
A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the SECs Web site, www.sec.gov.
32
JOHN HANCOCK FAMILY OF FUNDS
EQUITY | INTERNATIONAL |
Balanced Fund | Greater China Opportunities Fund |
Classic Value Fund | International Allocation Portfolio |
Classic Value Fund II | International Classic Value Fund |
Classic Value Mega Cap Fund | International Core Fund |
Core Equity Fund | International Growth Fund |
Global Shareholder Yield Fund | |
Growth Fund | INCOME |
Growth Opportunities Fund | Bond Fund |
Growth Trends Fund | Government Income Fund |
Intrinsic Value Fund | High Yield Fund |
Large Cap Equity Fund | Investment Grade Bond Fund |
Large Cap Select Fund | Strategic Income Fund |
Mid Cap Equity Fund | |
Multi Cap Growth Fund | TAX-FREE INCOME |
Small Cap Equity Fund | California Tax-Free Income Fund |
Small Cap Fund | High Yield Municipal Bond Fund |
Small Cap Intrinsic Value Fund | Massachusetts Tax-Free Income Fund |
Sovereign Investors Fund | New York Tax-Free Income Fund |
U.S. Core Fund | Tax-Free Bond Fund |
U.S. Global Leaders Growth Fund | |
Value Opportunities Fund | MONEY MARKET |
Money Market Fund | |
ASSET ALLOCATION | U.S. Government Cash Reserve |
Allocation Core Portfolio | |
Allocation Growth + Value Portfolio | CLOSED-END |
Lifecycle 2010 Portfolio | Bank and Thrift Opportunity Fund |
Lifecycle 2015 Portfolio | Financial Trends Fund, Inc. |
Lifecycle 2020 Portfolio | Income Securities Trust |
Lifecycle 2025 Portfolio | Investors Trust |
Lifecycle 2030 Portfolio | Patriot Premium Dividend Fund II |
Lifecycle 2035 Portfolio | Patriot Select Dividend Trust |
Lifecycle 2040 Portfolio | Preferred Income Fund |
Lifecycle 2045 Portfolio | Preferred Income II Fund |
Lifecycle Retirement Portfolio | Preferred Income III Fund |
Lifestyle Aggressive Portfolio | Tax-Advantaged Dividend Income Fund |
Lifestyle Balanced Portfolio | |
Lifestyle Conservative Portfolio | |
Lifestyle Growth Portfolio | |
Lifestyle Moderate Portfolio | |
SECTOR | |
Financial Industries Fund | |
Health Sciences Fund | |
Real Estate Fund | |
Regional Bank Fund | |
Technology Fund | |
Technology Leaders Fund |
The Funds investment objectives, risks, charges and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Funds at 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com. Please read the prospectus carefully before investing or sending money.
1-800-225-5291 1-800-554-6713 TDD 1-800-338-8080 EASI-Line www.jhfunds.com |
Now available: electronic delivery www.jhfunds.com/edelivery |
This report is for the information of the shareholders of John Hancock Growth Trends Fund.
460SA 4/07 6/07 |
CEO corner
TABLE OF CONTENTS |
|
Your fund at a glance |
page 1 |
|
Managers report |
page 2 |
|
A look at performance |
page 6 |
|
Your expenses |
page 8 |
|
Funds investments |
page 10 |
|
Financial statements |
page 13 |
|
Notes to financial |
statements |
page 20 |
|
For more information |
page 32 |
|
To Our Shareholders, |
The U.S. financial markets produced solid results over the last six months. Positive economic news, stronger than expected corporate earnings and increased merger and acquisitions activity served to overcome concerns about inflation, energy costs and the troubled subprime mortgage markets potential to put the brakes on the economy. This environment also led the Federal Reserve Board to hold short-term interest rates steady. Even with a sharp decline in late February, the broad stock market returned 8.60% for the six months ended April 30, 2007. The Dow Jones Industrial Average punched through the 13,000 mark for the first time in April and posted a string of new highs as the period ended.
After a remarkably long period of calm, the financial markets were rocked at the end of February by a dramatic sell-off in Chinas stock market, which had ripple effects on financial markets worldwide. It also shook investors out of their seemingly casual attitude toward risk and remind them of the simple fact that stock markets move in two directions down as well as up.
Although the downturn lasted for less than a month before positive news stopped the fall, it was also a good occasion to bring to mind several important investment principles that we believe are at the foundation of successful investing. First, keep a long-term approach to investing, avoiding emotional reactions to daily market moves. Second, maintain a well-diversified portfolio that is appropriate for your goals, risk profile and time horizons.
After the markets recent moves, we encourage investors to sit back, take stock and set some realistic expectations. While history bodes well for the U.S. market in 2007 (since 1939, the S&P 500 Index has always produced positive results in the third year of a presidential term), there are no guarantees, and opinions are divided on the future of this more-than-four-year-old bull market.
The recent volatility could also be a wake-up call to contact your financial professional to determine whether changes are in order to your investment mix. Some asset groups have had long runs of outperformance. Others had truly outsized returns in 2006. These trends argue for a look to determine if these categories now represent a larger stake in your portfolios than prudent diversification would suggest they should. After all, we believe investors with a well-balanced portfolio and a marathon, not a sprint, approach to investing, stand a better chance of weathering the markets short-term twists and turns, and reaching their long-term goals.
Keith F. Hartstein,
President and Chief Executive Officer
This commentary reflects the CEOs views as of April 30, 2007. They are subject to change at any time.
Your fund at a glance |
The Fund seeks capital appreciation by normally investing at least 80% of its assets in equity securities of small-capitalization companies (which, for purposes of this fund, are companies with market capitalizations under $2 billion, or market capitalizations within the range of those companies in the Russell 2000 Index or the Standard & Poors SmallCap 600 Index.)
Over the last six months |
► Small caps turned in healthy gains but trailed mid caps and large caps, as the U.S. economy continued to slow.
► The Fund lagged the Russell 2000 Index, hampered by earnings shortfalls and other fundamental disappointments with a number of its holdings.
► The Fed kept short-term interest rates steady, as inflation concerns were roughly balanced by the central bank's desire to keep the economy on a path of moderate growth.
John Hancock Small Cap Fund |
Fund performance for the six months ended April 30, 2007.
Total returns for the Fund are at net asset value with all distributions reinvested. These returns do not reflect the deduction of the maximum sales charge, which would reduce the performance shown above.
Top 10 holdings | |
inVentiv Health, Inc. | 4.3% |
| |
SVB Financial Group | 4.3% |
| |
Transaction Systems Architects, Inc. | |
(Class A) | 3.8% |
| |
Gaylord Entertainment Co. | 3.6% |
| |
LKQ Corp. | 3.2% |
|
First Community Bancorp. (Class A) | 3.1% |
| |
Boston Private Financial | |
Holdings, Inc. | 3.1% |
| |
Daktronics, Inc. | 3.0% |
| |
Kendle International, Inc. | 3.0% |
| |
Inverness Medical Innovations, Inc. | 2.8% |
|
As a percentage of net assets on April 30, 2007.
1
Managers report
John Hancock
Small Cap Fund
The six-month review period ended April 30, 2007 witnessed another strong advance for small-cap stocks, with every month except February showing a gain in the Russell 2000 Index.
In February, a sharp drop of more than 3% near the end of the month triggered by volatility in overseas markets managed to turn a healthy month-to-date gain into a loss. However, the Russell 2000 Index wasted little time in steadying itself and pushing higher again, closing the period near all-time highs. Both value and growth stocks posted solid returns. Meanwhile, the small-cap segment trailed large caps and especially mid caps, which led the other size groups by a wide margin.
While investors remained concerned about a slowdown in economic growth, most of the weakness appeared limited to the housing and auto manufacturing groups. GDP, a measure of all goods and services produced in the United States, registered a 2.5% gain for the fourth quarter of 2006, a respectable, if unspectacular, result. Initial GDP estimates for the first quarter of 2007 were considerably lower, and many companies scaled back their forecasts for earnings growth as well. Against a backdrop of sharply lower expectations, many companies managed to beat their first-quarter earnings estimates, contributing to a strong finish for stock prices in the final month of the period.
Mergers and acquisitions continued to be a significant factor in the small-cap market, with many deals fueled by private equity funds.
SCORECARD
INVESTMENT | PERIODS PERFORMANCE... AND WHATS BEHIND THE NUMBERS | |
Witness Systems | ▲ | Accepted takeover bid |
Silicon Image | ▼ | Lowered sales guidance |
Arch Chemicals | ▼ | Higher raw material costs curbed profits |
2
Portfolio Manager, Independence Investments LLC Charles S. Glovsky, CFA |
Stock buybacks and efforts to take companies private also boosted stock prices by reducing the supply of shares on the market.
The six-month review period |
ending April 30, 2007 witnessed |
another strong advance for |
small-cap stocks |
Looking at performance
For the six months ended April 30, 2007, John Hancock Small Cap Funds Class A, Class B, Class C and Class I shares returned 3.40%, 2.97%, 2.97% and 3.69%, respectively, at net asset value. By comparison, the average small growth fund monitored by Morningstar, Inc. returned 8.80%, 1 while the Russell 2000 Index finished with a 6.86% return and the S&P SmallCap 600 Index returned 8.41% . Keep in mind that your returns will differ from those listed above if you were not invested in the Fund for the entire period or did not reinvest all distributions. Historical performance information can be found on pages six and seven.
The Funds performance was undermined by stock selection in a number of sectors, as a slowing economy resulted in many of our companies reporting weaker-than-expected first-quarter earnings or other fundamental disappointments. In most cases, we judged these problems to be temporary and held on to the position with the expectation of an improving longer-term picture. Nevertheless, our choices held back performance during the review period. Additionally, this Fund is more concentrated than most small-cap funds because every stock we buy has to meet a strict set of criteria. We look for improving fundamentals, an attractive valuation and catalysts that appear likely to move a stock up. Not a lot of stocks can clear all of those hurdles, especially in the current environment of relatively rich small-cap valuations. Over the long term, we believe our disciplined approach can yield above-market results,
Small Cap Fund
3 |
but when our stock picks encounter problems, the Fund tends to suffer more than a less concentrated portfolio would.
Information technology, materials and energy falter
Although technology was a sector where we found a number of attractive opportunities, reflected in the Funds fairly significant overweighting in that sector, it was also the sector that detracted most from performance. The share price of semiconductor maker Silicon Image, Inc. fell in February after the company announced lowered expectations for its sales of chips that are used for high-definition applications. Lionbridge Technologies, Inc., a provider of services that enable its clients to localize their enterprise content and technology applications globally, also struggled under the weight of disappointing fundamental news. Shares of Avocent Corp., a maker of switching systems, faltered because of uncertainty about the direction of the companys server-related business.
In materials, Arch Chemicals, Inc. detracted from performance. The specialty chemical manufacturer was hampered by higher raw material costs, which lowered profit margins. In the energy sector, drilling rig provider Hercules Offshore, Inc. saw its share price decline in response to falling prices for rigs in the Gulf of Mexico. We sold both Avocent and Hercules Offshore by the end of the review period.
INDUSTRY DISTRIBUTION2 | |
Health care | 24% |
Financials | 21% |
Information technology | 18% |
Consumer discretionary | 15% |
Industrials | 8% |
Energy | 6% |
Materials | 3% |
Consumer staples | 2% |
Utilities | 1% |
Financials add value
Financials merits mention as a sector that helped performance during the period. In that case, the Fund was aided by both favorable stock selection and a significant underweighting. Financials was the only sector in the benchmark to record a loss, which stemmed in large part from investors skittishness over the subprime mortgage markets well-publicized difficulties with increasing defaults and delinquencies. Not having any direct exposure to subprime mortgage lenders helped the Funds performance, as did underweighting the real estate investment trust (REIT) group, which unlike most other segments of the market failed to recover significantly following the late-February sell-off.
SVB Financial Group was one of our better financial holdings and also one of the Funds largest positions at the end of the review period. The stock was lifted in mid-April when the
Small Cap Fund
4
California-based bank upped its earnings guidance for the first quarter. Further helping our results was Placer Sierra Bancshares, also based in the Golden State. In January, Placer received a buyout offer from Wells Fargo, triggering an immediate jump in the formers stock price. Elsewhere, Witness Systems, Inc. was one of the Funds top contributors. The company, which provides software to optimize performance at customer service centers, agreed in February to be bought by Verint Systems, a subsidiary of Comverse Technology. Lastly, well mention inVentiv Health, Inc., a provider of contract sales services for pharmaceutical companies. While there was no single event to highlight, the company made progress at diversifying its core business into well-chosen areas of drug introduction and marketing.
The Funds performance was |
undermined by stock selection in |
a number of sectors |
Outlook
We view the rest of 2007 with a positive outlook. While the prospect of a slowing economy could dampen earnings growth at some companies and small-cap valuations overall are no longer cheap, we are still finding compelling growth opportunities at reasonable valuations in a variety of sectors. At present, we see no recession on the horizon and believe the Fed will be quick to lower interest rates if a recession appears imminent. Corporate balance sheets remain strong, with ample cash and minimal debt. Meanwhile, the mergers and acquisitions market continues to sizzle. We think these positive factors should outweigh any negatives for the time being.
This commentary reflects the views of the portfolio managers through the end of the Funds period discussed in this report. The managers statements reflect his own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
See the prospectus for the risks of investing in small-cap stocks.
1 Figures from Morningstar, Inc. include reinvested dividends and do not take into account sales charges. Actual load-adjusted performance is lower.
2 As a percentage of net assets on April 30, 2007.
Small Cap Fund
5
A look at performance
For the periods ended April 30, 2007
Average annual returns | Cumulative total returns | ||||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||||
Inception | Since | Since | |||||||||
Class | date | 1-year | 5-year | 10-year | inception | 6-month | 1-year | 5-year | 10-year | inception | |
| |||||||||||
A1 | 12-16-98 | 6.64% | 6.42% | | 10.36% | 1.77% | 6.64% | 36.52% | | 128.26% | |
| |||||||||||
B | 12-6-04 | 7.31 | | | 4.85 | 2.03 | 7.31 | | | 12.02 | |
| |||||||||||
C | 12-6-04 | 3.41 | | | 6.01 | 1.97 | 3.41 | | | 15.02 | |
| |||||||||||
I2 | 12-6-04 | 1.20 | | | 7.24 | 3.69 | 1.20 | | | 18.24 | |
|
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect a sales charge on Class A shares of 5% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The Class B shares CDSC declines annually between years 16 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charge is not applicable for Class I shares.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Funds current performance may be higher or lower than the performance shown. For performance data current to the most recent month-end, please call 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Funds performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable.
1 Effective December 3, 2004, shareholders of the former Independence Small Cap Portfolio became owners of that number of full and fractional shares of Class A shares of the John Hancock Small Cap Fund. Additionally, the accounting and performance history of the former Independence Small Cap Portfolio was redesignated as that of Class A of John Hancock Small Cap Fund.
2 For certain types of investors as described in the Funds Class I share prospectus.
Small Cap Fund
6
Growth of $10,000
This chart shows what happened to a hypothetical $10,000 investment in Small Cap Fund Class A shares for the period indicated. For comparison, weve shown the same investment in two separate indexes.
Without | With maximum | ||||
Class | Period beginning | sales charge | sales charge | Index 1 | Index 2 |
| |||||
B2 | 12-6-04 | $11,502 | $11,202 | $13,113 | $13,368 |
| |||||
C2,3 | 12-6-04 | 11,502 | 11,502 | 13,113 | 13,368 |
| |||||
I2,4 | 12-6-04 | 11,824 | 11,824 | 13,113 | 13,368 |
|
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Funds Class B, Class C and Class I shares, respectively, as of April 30, 2007. 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.
Russell 2000 Index Index 1 is an unmanaged index composed of 2,000 U.S. small-capitalization stocks.
Standard & Poors SmallCap 600 Index Index 2 is an unmanaged index of 600 domestic stocks of small-size companies.
It is not possible to invest directly in an index. Index figures do not reflect sales charges which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 Index 2 figure as of closest month end to inception date.
3 No contingent deferred sales charge applicable.
4 For certain types of investors as described in the Funds Class I share prospectus.
Small Cap Fund
7
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your funds actual ongoing operating expenses, and is based on your funds actual return. It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007.
Account value | Ending value | Expenses paid during period | |
on 11-1-06 | on 4-30-07 | ended 4-30-071 | |
| |||
Class A | $1,000.00 | $1,034.00 | $8.24 |
| |||
Class B | 1,000.00 | 1,029.70 | 11.77 |
| |||
Class C | 1,000.00 | 1,029.70 | 11.77 |
| |||
Class I | 1,000.00 | 1,036.90 | 5.30 |
|
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at April 30, 2007 by $1,000.00, then multiply it by the expenses paid for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Small Cap Fund
8
Hypothetical example for comparison purposes
This table allows you to compare your funds ongoing operating expenses with those of any other fund. It provides an example of the Funds hypothetical account values and hypothetical expenses based on each classs actual expense ratio and an assumed 5% annualized return before expenses (which is not your funds actual return). It assumes an account value of $1,000.00 on November 1, 2006, with the same investment held until April 30, 2007. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during period | |
on 11-1-06 | on 4-30-07 | ended 4-30-071 | |
| |||
Class A | $1,000.00 | $1,016.70 | $8.17 |
| |||
Class B | 1,000.00 | 1,013.20 | 11.68 |
| |||
Class C | 1,000.00 | 1,013.20 | 11.68 |
| |||
Class I | 1,000.00 | 1,019.59 | 5.25 |
|
Remember, these examples do not include any transaction costs, such as sales charges; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Funds annualized expense ratio of 1.63%, 2.33%, 2.33% and 1.06% for Class A, Class B, Class C and Class I, respectively, multiplied by the average account value over the period, multiplied by number of days in most recent fiscal half-year/365 or 366 (to reflect the one-half year period).
Small Cap Fund
9
F I N A N C I A L S T A T E M E N T S
Funds investments
Securities owned by the Fund on 4-30-07 (unaudited)
This schedule is 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 Funds cash position, are listed last.
Issuer | Shares | Value |
| ||
Common stocks 98.05% | $232,693,823 | |
(Cost $199,770,923) | ||
Apparel Retail 2.67% | 6,335,191 | |
| ||
Christopher & Banks Corp. | 328,100 | 5,679,411 |
| ||
New York & Co., Inc. (I) | 46,942 | 655,780 |
Apparel, Accessories & Luxury Goods 0.94% | 2,219,434 | |
| ||
Hartmarx Corp. (I) | 337,300 | 2,219,434 |
Application Software 5.04% | 11,965,813 | |
| ||
Transaction Systems Architects, Inc. (Class A) (I) | 284,500 | 9,027,185 |
| ||
Witness Systems, Inc. (I) | 107,800 | 2,938,628 |
Asset Management & Custody Banks 1.22% | 2,906,640 | |
| ||
iShares Russell 2000 Index Fund (L) | 36,000 | 2,906,640 |
Auto Parts & Equipment 3.16% | 7,487,528 | |
| ||
LKQ Corp. (I) | 331,600 | 7,487,528 |
Computer Storage & Peripherals 1.34% | 3,172,522 | |
| ||
Radiant Systems, Inc. (I) | 235,700 | 3,172,522 |
Diversified Chemicals 0.42% | 1,007,733 | |
| ||
ICO, Inc. (I) | 151,996 | 1,007,733 |
Diversified Commercial & Professional Services 2.45% | 5,826,168 | |
| ||
Gaiam, Inc. (Class A) (I) | 161,400 | 2,454,894 |
| ||
PeopleSupport, Inc. (I)(L) | 268,200 | 3,371,274 |
Electronic Equipment Manufacturers 3.01% | 7,139,252 | |
| ||
Daktronics, Inc. (L) | 313,400 | 7,139,252 |
Electronic Manufacturing Services 2.21% | 5,251,308 | |
| ||
Trimble Navigation Ltd. (I) | 183,100 | 5,251,308 |
Health Care Equipment 11.38% | 27,018,145 | |
| ||
Cantel Medical Corp. (I) | 223,500 | 4,094,520 |
| ||
Hologic, Inc. (I) | 52,500 | 3,021,375 |
| ||
Kensey Nash Corp. (I) | 225,600 | 5,802,432 |
| ||
Nighthawk Radiology Holdings, Inc. (I)(L) | 118,600 | 2,302,026 |
| ||
SurModics, Inc. (I)(L) | 133,100 | 5,407,853 |
| ||
Symmetry Medical, Inc. (I) | 376,100 | 6,389,939 |
See notes to financial statements
Small Cap Fund
10
F I N A N C I A L S T A T E M E N T S
Issuer | Shares | Value |
| ||
Health Care Services 6.76% | $16,051,117 | |
| ||
Air Methods Corp. (I) | 211,690 | 5,823,592 |
| ||
inVentiv Health, Inc. (I) | 269,500 | 10,227,525 |
Health Care Supplies 2.85% | 6,752,430 | |
| ||
Inverness Medical Innovations, Inc. (I) | 168,600 | 6,752,430 |
Hotels, Resorts & Cruise Lines 3.59% | 8,521,400 | |
| ||
Gaylord Entertainment Co. (I) | 155,500 | 8,521,400 |
Industrial Machinery 1.61% | 3,825,532 | |
| ||
Chart Industries, Inc. (I) | 202,946 | 3,825,532 |
Internet Software & Services 1.41% | 3,342,090 | |
| ||
TheStreet.com, Inc. | 330,900 | 3,342,090 |
Investment Banking & Brokerage 0.43% | 1,029,204 | |
| ||
SWS Group, Inc. | 39,600 | 1,029,204 |
IT Consulting & Other Services 1.15% | 2,719,832 | |
| ||
Lionbridge Technologies, Inc. (I) | 535,400 | 2,719,832 |
Life & Health Insurance 2.37% | 5,619,705 | |
| ||
American Equity Investment Life Holding Co. | 411,700 | 5,619,705 |
Life Sciences Tools & Services 2.98% | 7,071,600 | |
| ||
Kendle International, Inc. (I) | 207,500 | 7,071,600 |
Oil & Gas Equipment & Services 1.10% | 2,615,730 | |
| ||
Metretek Technologies, Inc. (I)(L) | 211,800 | 2,615,730 |
Oil & Gas Exploration & Production 4.79% | 11,365,435 | |
| ||
Goodrich Petroleum Corp. (I)(L) | 109,600 | 3,850,248 |
| ||
Mariner Energy, Inc. (I) | 139,700 | 3,150,235 |
| ||
PetroQuest Energy, Inc. (I) | 382,220 | 4,364,952 |
Personal Products 2.38% | 5,656,014 | |
| ||
Inter Parfums, Inc. | 245,700 | 5,656,014 |
Property & Casualty Insurance 4.52% | 10,724,627 | |
| ||
James River Group, Inc. | 85,960 | 2,667,339 |
| ||
National Interstate Corp. | 138,300 | 3,313,668 |
| ||
Philadelphia Consolidated Holding Corp. (I) | 109,300 | 4,743,620 |
Publishing 1.41% | 3,335,240 | |
| ||
Courier Corp. | 83,800 | 3,335,240 |
Railroads 1.48% | 3,515,667 | |
| ||
Genesee & Wyoming, Inc. (Class A) (I) | 129,300 | 3,515,667 |
Regional Banks 12.00% | 28,467,469 | |
| ||
Boston Private Financial Holdings, Inc. | 264,000 | 7,341,840 |
| ||
First Community Bancorp. (Class A) | 134,700 | 7,389,642 |
| ||
Placer Sierra Bancshares | 131,100 | 3,635,403 |
| ||
SVB Financial Group (I) | 197,200 | 10,100,584 |
Semiconductors 1.92% | 4,547,316 | |
| ||
Silicon Image, Inc. (I) | 519,100 | 4,547,316 |
See notes to financial statements
Small Cap Fund
11
F I N A N C I A L S T A T E M E N T S
Issuer | Shares | Value |
| ||
Specialized Consumer Services 1.10% | $2,601,168 | |
| ||
Flow International Corp. (I) | 223,468 | 2,601,168 |
Specialty Chemicals 2.35% | 5,587,678 | |
| ||
Arch Chemicals, Inc. | 184,900 | 5,587,678 |
Specialty Stores 2.44% | 5,800,054 | |
| ||
Tractor Supply Co. (I)(L) | 112,100 | 5,800,054 |
Systems Software 2.18% | 5,169,420 | |
| ||
Secure Computing Corp. (I) | 638,200 | 5,169,420 |
Trucking 1.96% | 4,660,320 | |
| ||
Pacer International, Inc. | 182,400 | 4,660,320 |
Water Utilities 1.43% | 3,385,041 | |
| ||
Aqua America, Inc. (L) | 153,100 | 3,385,041 |
Interest | Par value | ||
Issuer, description, maturity date | rate | (000) | Value |
| |||
Short-term investments 17.22% | $40,865,743 | ||
(Cost $40,865,743) | |||
Joint Repurchase Agreement 2.82% | 6,701,000 | ||
| |||
Investment in a joint repurchase agreement transaction with Bank | |||
of America Corp. Dated 4-30-07 due 5-1-07 (secured by U.S. | |||
STRIPS due 5-15-21 and U.S. Treasury Inflation Indexed Notes | |||
3.375% due 1-15-12, 10.875% due 4-15-10 and 3.000% | |||
due 7-15-12). | |||
Maturity value: $6,701,953 | 5.120% | $6,701 | 6,701,000 |
Shares | |||
Cash Equivalents 14.40% | 34,164,743 | ||
| |||
John Hancock Cash Investment Trust (T)(W) | 34,164,743 | 34,164,743 | |
| |||
Total investments (Cost $240,636,666) 115.27% | $273,559,566 | ||
| |||
Other assets and liabilities, net (15.27%) | ($36,232,444) | ||
| |||
Total net assets 100.00% | $237,327,122 |
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of April 30, 2007.
(T) Represents investment of securities lending collateral.
(W) Issuer is an affiliate of John Hancock Advisers, LLC.
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
Small Cap Fund
12
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 4-30-07 (unaudited)
This Statement of Assets and Liabilities is the Funds balance sheet. It shows the value of what the Fund owns, is due and owes. Youll also find the net asset value and the maximum offering price per share.
Assets | |
| |
Investments at value (cost $240,636,666) including $33,009,251 | |
of securities loaned | $273,559,566 |
Cash | 93 |
Receivable for investments sold | 2,172,659 |
Receivable for shares sold | 425,033 |
Dividends and interest receivable | 24,713 |
Other assets | 696 |
Total assets | 276,182,760 |
Liabilities | |
| |
Payable for investments purchased | 1,158,130 |
Payable for shares repurchased | 2,950,040 |
Payable upon return of securities loaned | 34,164,743 |
Payable to affiliates | |
Management fees | 366,824 |
Distribution and service fees | 14,302 |
Other | 141,066 |
Other payables and accrued expenses | 60,533 |
Total liabilities | 38,855,638 |
Net assets | |
| |
Capital paid-in | 202,398,475 |
Accumulated net realized gain on investments | 3,284,934 |
Net unrealized appreciation of investments | 32,922,900 |
Accumulated net investment loss | (1,279,187) |
Net assets | $237,327,122 |
Net asset value per common share | |
| |
Based on net asset values and shares outstanding the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($163,583,641 ÷ 12,529,441 shares) | $13.06 |
Class B ($10,148,992 ÷ 790,295 shares) | $12.84 |
Class C ($42,931,814 ÷ 3,342,771 shares) | $12.84 |
Class I ($20,662,675 ÷ 1,565,171 shares) | $13.20 |
Maximum offering price per share | |
| |
Class A1 ($13.06 ÷ 95%) | $13.75 |
1 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
Small Cap Fund
13
F I N A N C I A L S T A T E M E N T S
Statement of operations For the period ended 4-30-07 (unaudited)1
This Statement of Operations summarizes the Funds investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
Investment income | |
| |
Dividends | $432,282 |
Securities lending | 283,784 |
Interest | 171,603 |
Total investment income | 887,669 |
Expenses | |
| |
Investment management fees (Note 2) | 1,139,277 |
Distribution and service fees (Note 2) | 526,356 |
Class A, B and C transfer agent fees (Note 2) | 354,560 |
Class I transfer agent fees (Note 2) | 7,847 |
Accounting and legal services fees (Note 2) | 16,263 |
Compliance fees | 2,491 |
Blue sky fees | 38,865 |
Custodian fees | 28,042 |
Printing fees | 24,564 |
Securities lending fees | 11,434 |
Professional fees | 10,844 |
Trustees fees | 5,743 |
Miscellaneous | 564 |
Total expenses | 2,166,850 |
Net investment loss | (1,279,181) |
Realized and unrealized gain | |
| |
Net realized gain on investments | 7,286,811 |
Change in net unrealized appreciation (depreciation) of investments | 2,425,750 |
Net realized and unrealized gain | 9,712,561 |
Increase in net assets from operations | $8,433,380 |
1 Semiannual period from 11-1-06 through 4-30-07.
See notes to financial statements
Small Cap Fund
14
F I N A N C I A L S T A T E M E N T S
Statement of changes in net assets
These Statements of Changes in Net Assets show how the value of the Funds net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
Year | Period | |
ended | ended | |
10-31-06 | 4-30-071 | |
Increase (decrease) in net assets | ||
| ||
From operations | ||
Net investment loss | ($2,449,649) | ($1,279,181) |
Net realized gain (loss) | (3,242,650) | 7,286,811 |
Change in net unrealized appreciation (depreciation) | 22,459,623 | 2,425,750 |
Increase in net assets resulting from operations | 16,767,324 | 8,433,380 |
Distributions to shareholders | ||
From net realized gain | ||
Class A | (472,311) | |
Class B | (40,294) | |
Class C | (142,287) | |
Class I | (152,976) | |
(807,868) | | |
From Fund share transactions | 60,516,796 | (27,294,848) |
Net assets | ||
| ||
Beginning of period | 179,712,338 | 256,188,590 |
End of period2 | $256,188,590 | $237,327,122 |
1 Semiannual period from 11-1-06 through 4-30-07. Unaudited.
2 Includes accumulated net investment loss of $6 and $1,279,187, respectively.
See notes to financial statements
Small Cap Fund
15
F I N A N C I A L S T A T E M E N T S
Financial highlights
The Financial Highlights show how the Funds net asset value for a share has changed since the end of the previous period.
CLASS A SHARES | ||||||
Period ended | 10-31-021 | 10-31-03 | 10-31-04 | 10-31-052 | 10-31-06 | 4-30-073 |
| ||||||
Per share operating performance | ||||||
Net asset value, beginning of period | $12.99 | $8.22 | $10.06 | $11.44 | $11.56 | $12.63 |
Net investment loss4 | (0.16) | (0.05) | (0.09) | (0.11) | (0.12) | (0.06) |
Net realized and unrealized | ||||||
gain on investments | 0.365 | 2.22 | 1.61 | 1.61 | 1.24 | 0.49 |
Total from investment operations | 0.20 | 2.17 | 1.52 | 1.50 | 1.12 | 0.43 |
Less distributions | ||||||
From net realized gain | (4.97) | (0.33) | (0.14) | (1.38) | (0.05) | |
Net asset value, end of period | $8.22 | $10.06 | $11.44 | $11.56 | $12.63 | $13.06 |
Total return6 (%) | (3.59)7 | 27.417 | 15.257 | 13.447 | 9.717 | 3.408 |
| ||||||
Ratios and supplemental data | ||||||
Net assets, end of period | ||||||
(in millions) | $11 | $16 | $28 | $105 | $162 | $164 |
Ratio of net expenses to average | ||||||
net assets (%) | 2.28 | 1.18 | 1.23 | 1.57 | 1.59 | 1.639 |
Ratio of gross expenses to average | ||||||
net assets (%) | 2.6910 | 2.6010 | 2.2310 | 1.6510 | 1.6010 | 1.639 |
Ratio of net investment loss | ||||||
to average net assets (%) | (1.92) | (0.57) | (0.80) | (0.99) | (0.98) | (0.93)9 |
Portfolio turnover (%) | 92 | 79 | 129 | 145 | 74 | 508 |
See notes to financial statements
Small Cap Fund
16
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS B SHARES | |||
Period ended | 10-31-052,11 | 10-31-06 | 4-30-073 |
Per share operating performance | |||
| |||
Net asset value, beginning of period | $11.21 | $11.49 | $12.47 |
Net investment loss4 | (0.17) | (0.20) | (0.10) |
Net realized and unrealized | |||
gain on investments | 0.45 | 1.23 | 0.47 |
Total from investment operations | 0.28 | 1.03 | 0.37 |
Less distributions | |||
From net realized gain | | (0.05) | |
Net asset value, end of period | $11.49 | $12.47 | $12.84 |
Total return6 (%) | 2.507,8 | 8.997 | 2.978 |
Ratios and supplemental data | |||
| |||
Net assets, end of period | |||
(in millions) | $9 | $11 | $10 |
Ratio of net expenses to average | |||
net assets (%) | 2.279 | 2.29 | 2.339 |
Ratio of gross expenses to average | |||
net assets (%) | 2.359,10 | 2.3010 | 2.339 |
Ratio of net investment loss | |||
to average net assets (%) | (1.67)9 | (1.67) | (1.63)9 |
Portfolio turnover (%) | 1458 | 74 | 508 |
See notes to financial statements
Small Cap Fund
17
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS C SHARES | |||
Period ended | 10-31-052,11 | 10-31-06 | 4-30-073 |
Per share operating performance | |||
| |||
Net asset value, beginning of period | $11.21 | $11.49 | $12.47 |
Net investment loss4 | (0.17) | (0.20) | (0.10) |
Net realized and unrealized | |||
gain on investments | 0.45 | 1.23 | 0.47 |
Total from investment operations | 0.28 | 1.03 | 0.37 |
Less distributions | |||
From net realized gain | | (0.05) | |
Net asset value, end of period | $11.49 | $12.47 | $12.84 |
Total return6 (%) | 2.507,8 | 8.997 | 2.978 |
Ratios and supplemental data | |||
| |||
Net assets, end of period | |||
(in millions) | $31 | $44 | $43 |
Ratio of net expenses to average | |||
net assets (%) | 2.279 | 2.29 | 2.339 |
Ratio of gross expenses to average | |||
net assets (%) | 2.359,10 | 2.3010 | 2.339 |
Ratio of net investment loss | |||
to average net assets (%) | (1.67)9 | (1.68) | (1.63)9 |
Portfolio turnover (%) | 1458 | 74 | 508 |
See notes to financial statements
Small Cap Fund
18
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS I SHARES | |||
Period ended | 10-31-052,11 | 10-31-06 | 4-30-073 |
Per share operating performance | |||
| |||
Net asset value, beginning of period | $11.21 | $11.60 | $12.73 |
Net investment loss4 | (0.05) | (0.06) | (0.02) |
Net realized and unrealized | |||
gain on investments | 0.44 | 1.24 | 0.49 |
Total from investment operations | 0.39 | 1.18 | 0.47 |
Less distributions | |||
From net realized gain | | (0.05) | |
Net asset value, end of period | $11.60 | $12.73 | $13.20 |
Total return6 (%) | 3.487,8 | 10.20 | 3.698 |
Ratios and supplemental data | |||
| |||
Net assets, end of period | |||
(in millions) | $34 | $40 | $21 |
Ratio of net expenses to average | |||
net assets (%) | 1.109 | 1.08 | 1.069 |
Ratio of gross expenses to average | |||
net assets (%) | 1.189,10 | 1.08 | 1.069 |
Ratio of net investment loss | |||
to average net assets (%) | (0.53)9 | (0.47) | (0.37)9 |
Portfolio turnover (%) | 1458 | 74 | 508 |
1 On 6-24-02, the Advisors Inner Circle Fund Independence Small Cap Portfolio acquired the assets and liabilities of the UAM Independence Small Cap Portfolio, a series of the UAM Funds, Inc. The operations of the Advisers Inner Circle Fund Independence Small Cap Portfolio prior to the acquisition were those of the predecessor fund, the UAM Independence Small Cap Portfolio.
2 Effective 12-3-04, shareholders of the former Independence Small Cap Portfolio became owners of an equal number of full and fractional Class A shares of the John Hancock Small Cap Fund. Additionally, the accounting and performance history of the Independence Small Cap Portfolio was redesignated as that of Class A of John Hancock Small Cap Fund.
3 Semiannual period from 11-01-06 through 4-30-07. Unaudited.
4 Based on the average of the shares outstanding.
5 The per share amount does not accord with the aggregate net losses on investments because of the sales and repurchase of the Funds shares in relation to fluctuating market value of the investments in the Fund.
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.
11 Class B, Class C and Class I shares began operations on 12-6-04.
See notes to financial statements
Small Cap Fund
19
Notes to financial statements (unaudited)
Note 1 Accounting policies
John Hancock Small Cap Fund (the Fund) is a diversified series of John Hancock Equity Trust (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek capital appreciation.
The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B, Class C and Class I shares. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission (SEC) and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B shares will convert to Class A shares eight years after purchase.
The Fund is the accounting and performance successor to Independence Small Cap Portfolio, a diversified open-end management investment company organized as a Massachusetts business trust. On December 3, 2004, the Fund acquired substantially all the assets and assumed the liabilities of the former Independence Small Cap Portfolio pursuant to an agreement and plan of reorganization, in exchange for Class A shares of the Fund.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Funds portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments which have a remaining maturity of 60 days or less may be valued at amortized cost, which approximates market value. Investments in John Hancock Cash Investment Trust, an affiliate of John Hancock Advisers, LLC (the Adviser), a wholly owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of Manulife Financial Corporation (MFC), are valued at their net asset value each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the SEC, the Fund, along with other registered investment companies having a management contract with the Adviser, 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 accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Net realized gains and losses on sales of investments are determined on the identified cost basis.
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 asset value of the respective classes. Distribution and service fees, if any, and transfer agent fees for Class I shares are calculated daily at the class
Small Cap Fund
20level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative size of the funds.
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 The Bank of New York (BNY), the Swing Line Lender and Administrative Agent. This agreement enables the Fund to participate, with other funds managed by the Adviser, in an unsecured line of credit with BNY, which permits borrowings of up to $100 million, collectively. Interest is charged to each fund based on its borrowing. In addition, a commitment fee is charged to each fund based on the average daily unused portion of the line of credit and is allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the period ended April 30, 2007.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund negotiated lender fees. 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 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 April 30, 2007, the Fund loaned securities having a market value of $33,009,251 collateralized by cash in the amount of $34,164,743. The cash collateral was invested in John Hancock Cash Investment Trust. Securities lending expenses are paid by the Fund to the lending agent.
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 that is distributed to shareholders.
Therefore, no federal income tax provision is required. For federal income tax purposes, the Fund has $3,318,724 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The entire amount of the loss carryforward expires October 31, 2014.
New accounting pronouncements
In June 2006, Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the Interpretation), was issued and is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management is currently evaluating the application of this Interpretation of the Fund and has not at this time quantified the impact, if any, resulting from adoption of the Interpretation on the Funds financial statements. The fund will implement this pronouncement no later than April 30, 2008.
In September 2006, FASB Standard No. 157, Fair Value Measurements (FAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishing a framework for measuring fair value and expands disclosure about fair value measurements. Management is currently evaluating the application of FAS 157 to the Fund and its impact, if any, resulting from the adoption of FAS 157 on the Funds financial statements.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend date. Interest income on investment securities is recorded on the accrual basis.
Small Cap Fund |
The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. During the year ended October 31, 2006, the tax character of distributions paid was as follows: ordinary income $62,230 and long-term capital gain $745,638. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are 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, are reported in the Funds 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 2
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a monthly management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.90% of the first $1,000,000,000 of the Funds average daily net asset value and (b) 0.85% of the Funds average daily net asset value in excess of $1,000,000,000. The Adviser has a subadvisory agreement with Independence Investments LLC, which effective June 1, 2006 became an affiliate of Convergent Capital Management LLC (Convergent) and changed its name from Independence Investment LLC. Convergents parent company is City National Corporation. Formerly, the Subadviser was a wholly owned indirect subsidiary of the John Hancock Life Insurance Company (JHLICO) and was named Independence Investment Associates, Inc. The Fund is not responsible for payment of the subadvisory fees.
The Subadviser was a wholly owned indirect subsidiary of JHLICO and an indirect wholly owned subsidiary of Manulife Financial Corporation (MFC). MFC sold the assets of the Subadviser to a subsidiary of City National Corp. The closing took place on May 31, 2006. The Board of Trustees has approved a new sub-advisory agreement with the successor to the Subadvisers business and an interim subadvisory agreement pending shareholder approval.
The Adviser has agreed to limit the Funds expenses, excluding distribution, and service fees and transfer agent fees, to not exceed 1.05% of the Funds average daily net assets with respect to Class A, Class B and Class C shares and net operating expenses to 1.65%, 2.35%, 2.35% and 1.10% of the average daily net asset value of Class A, Class B, Class C and Class I shares, respectively, until February 29, 2008. There were no fee reductions during the period ended April 30, 2007. The Adviser reserves the right to terminate this limitation in the future.
The Fund has a Distribution Agreement with John Hancock Funds, LLC (JH Funds), a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C, pursuant to Rule 12b-1 under the 1940 Act, to reimburse JH Funds for the services it provides as distributor of shares of the Fund. Accordingly, the Fund makes monthly payments to JH Funds at an annual rate not to exceed 0.30%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C, respectively. 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 Funds 12b-1 payments could occur under certain circumstances.
Expenses under the agreement described above for the period ended April 30, 2007 were as follows:
Small Cap Fund
22Distribution and | |
Share class | service fees |
| |
Class A | $249,674 |
Class B | 53,065 |
Class C | 223,617 |
Total | $526,356 |
Class A shares are assessed up-front sales charges. During the period ended April 30, 2007, JH Funds received net up-front sales charges of $106,803 with regard to sales of Class A shares. Of this amount, $15,108 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $90,312 was paid as sales commissions to unrelated broker-dealers and $1,383 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. The Advisers indirect parent, JHLICO is the indirect sole shareholder of Signator Investors.
Class B shares that are redeemed within six years of purchase are 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 are redeemed within one year of purchase are 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 are paid to JH Funds and are 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 April 30, 2007, CDSCs received by JH Funds amounted to $16,218 for Class B shares and $6,598 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of JHLICO. For Class A, Class B and Class C shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of each classs average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of pocket expenses, aggregated and allocated to each class on the basis of its relative net asset value. For Class I shares, the Fund pays a monthly transfer agent fee at a total annual rate of 0.05% of Class I average daily net asset value. Signature Services agreed to limit transfer agent fees on Class A, Class B and Class C shares to 0.30% of each classs average daily net asset value, at least until February 29, 2008. There were no transfer agent fee reductions during the period ended April 30, 2007.
The Fund has an agreement with the Adviser and affiliates to perform necessary tax, accounting and legal services for the Fund. The compensation for the period amounted to $16,263. The Fund also reimbursed JHLICO for certain compliance costs, included in the Funds Statement of Operations.
The Adviser and other subsidiaries of JHLICO owned 89 Class A, 89 Class B, 89 Class C and 89 Class I shares of beneficial interest of the Fund on April 30, 2007.
Mr. James R. Boyle is Chairman of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser and/or its affiliates. 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 its liability for the deferred compensation. Investments to cover the Funds deferred compensation liability are recorded on the Funds books as another asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.
Small Cap Fund
23Note 3
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and repurchased during the year ended October 31, 2006 and the period ended April 30, 2007, along with the corresponding dollar value.
Year ended 10-31-06 | Period ended 4-30-071 | |||
Shares | Amount | Shares | Amount | |
| ||||
Class A shares | ||||
Sold | 7,213,368 | $90,180,663 | 2,081,662 | $27,384,542 |
Distributions reinvested | 36,036 | 433,506 | | |
Repurchased | (3,536,982) | (43,450,941) | (2,386,964) | (31,244,051) |
Net increase (decrease) | 3,712,422 | $47,163,228 | (305,302) | ($3,859,509) |
| ||||
Class B shares | ||||
Sold | 368,860 | $4,601,372 | 92,576 | $1,198,753 |
Distributions reinvested | 3,184 | 38,048 | | |
Repurchased | (319,849) | (3,855,544) | (146,456) | (1,906,898) |
Net increase (decrease) | 52,195 | $783,876 | (53,880) | ($708,145) |
| ||||
Class C shares | ||||
Sold | 1,601,647 | $19,839,715 | 392,267 | $5,077,690 |
Distributions reinvested | 11,360 | 135,754 | | |
Repurchased | (846,776) | (10,158,283) | (551,902) | (7,138,466) |
Net increase (decrease) | 766,231 | $9,817,186 | (159,635) | ($2,060,776) |
| ||||
Class I shares | ||||
Sold | 1,453,384 | $17,845,858 | 437,431 | $5,752,302 |
Distributions reinvested | 12,549 | 151,472 | | |
Repurchased | (1,234,513) | (15,244,824) | (2,006,313) | (26,418,720) |
Net increase (decrease) | 231,420 | $2,752,506 | (1,568,882) | ($20,666,418) |
| ||||
Net increase (decrease) | 4,762,268 | $60,516,796 | (2,087,699) | ($27,294,848) |
1 Semiannual period from 11-1-06 through 4-30-07. Unaudited.
Note 4
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 April 30, 2007, aggregated $122,477,193 and $150,395,792, respectively.
The cost of investments owned on April 30, 2007, including short-term investments, for federal income tax purposes, was $241,093,163. Gross unrealized appreciation and depreciation of investments aggregated $36,298,600 and $3,832,197, respectively, resulting in net unrealized appreciation of $32,466,403. The difference between book basis and tax basis net unrealized appreciation of investments is attributable primarily to the tax deferral of losses on certain sales of securities.
Small Cap Fund |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement: John Hancock Small Cap Fund
The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Equity Trust (the Trust), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not interested persons of the Trust, as defined in the 1940 Act (the Independent Trustees), annually to review and consider the continuation of the investment advisory agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Adviser) for the John Hancock Small Cap Fund (the Fund). The Board also considered the continuation of an interim investment subadvisory agreement (the Subadvisory Agreement) with Independence Investment LLC (the Subadviser) and a proposed investment subadvisory agreement (the New Subadvisory Agreement) with a newly formed subsidiary of Convergent Capital Management (New Independence). The Advisory Agreement with the Adviser and the Subadvisory Agreement with the Subadvis er are collectively referred to as the Advisory Agreements.
At meetings held on May 12 and June 56, 2006,1 the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the continuation of the Advisory Agreements. The Board also considered factors and reached the conclusions described below relating to the selection of New Independence and the approval of the New Subadvisory Agreement. During such meetings, the Boards Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.
In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information requested for this purpose by the Independent Trustees, including: (i) the investment performance of the Fund relative to a category of relevant funds (the Category) and a peer group of comparable funds (the Peer Group) each selected by Morningstar, Inc. (Morningstar), an independent provider of investment company data, for a range of periods ended December 31, 2005; (ii) advisory and other fees incurred by, and the expense ratios of, the Fund relative to a Category and a Peer Group; (iii) the advisory fees of comparable portfolios of other clients of the Adviser and the Subadviser; (iv) the Advisers financial results and condition, including its and certain of its affiliates profitability from services performed for the Fund; (v) breakpoints in the Funds and the Peer Groups fees, and information about economies of scale; (vi) the Advisers and Subadvisers record of compliance with applicable laws and regulations, with the Funds investment policies and restrictions and with the applicable Code of Ethics, and the structure and responsibilities of the Advisers and Subadvisers compliance department; (vii) the background and experience of senior management and investment professionals; and (viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates and by the Subadviser.
In evaluating the New Subadvisory Agreement, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information provided to the Independent Trustees, including: (i) the description of the transaction in which New Independence would be formed as a subsidiary of Convergent Capital Management (the Transaction), (ii) a description of Convergent Capital Management, (iii) the nature and quality of services rendered to the Fund, (iv) the subadvisory fee payable to New Independence by the Adviser, (v) the qualifications and background of New Independence, as well as the qualifications of its personnel, and (vi) possible conflicts of interest that may result from or be reflected in the terms of the Transaction.
The Boards review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. It was based on performance and other information as of December 31, 2005; facts may have changed between that date and the date of this shareholders report. The key factors considered by the Board and the conclusions reached are described below.
25
Nature, extent and quality of services
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. The Board further considered the compliance programs and compliance records of the Adviser and Subadviser. In addition, the Board took into account the administrative services provided to the Fund by the Adviser and its affiliates.
Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Subadviser were sufficient to support renewal of the Advisory Agreements.
Fund performance
The Board considered the performance results for the Fund over various time periods ended December 31, 2005. The Board also considered these results in comparison to the performance of the Category, as well as the Funds Peer Group and benchmark index. Morningstar determined the Category and the Peer Group for the Fund. The Board reviewed with a representative of Morningstar the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board noted the imperfect comparability of the Peer Group.
The Board noted that the Funds performance during the periods under review was generally competitive with the performance of the Peer Group and Category medians, and its benchmark index, the Russell 2000 Growth Index. The Board noted that the Funds performance during the five-year period was appreciably higher than the performance of the Peer Group and Category medians, and its benchmark index. The Board also noted that, during the three-year period under review, the Funds performance was equal to or not appreciably lower than the Peer Group and Category medians, and its benchmark index. The Board noted that, during the one-year period under review, the Funds performance was higher than its benchmark index and lower than the Peer Group and Category medians.
Investment advisory fee and subadvisory fee rates and expenses
The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the Advisory Agreement Rate). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Peer Group and Category. The Board noted that the Advisory Agreement Rate was equal to the median rate of the Peer Group and Category.
The Board received and considered expense information regarding the Funds various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board also considered peer-adjusted comparisons for the transfer agent fees. The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Funds total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the fee waiver arrangement applicable to the Advisory Agreement Rate into account (Net Expense Ratio). The Board received and considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group and Category medians. The Board noted that the Funds Gross and Net Expense Ratios were higher than the median of its Category. The Board also noted that the Funds Gross and Net Expense Ratios were equal to or not appreciably higher than the median of its Peer Group.
The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Funds overall performance and expenses supported the re-approval of the Advisory Agreements.
The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment subadvisory services. The Board concluded that the Subadvisory
26
Agreement Rate was fair and equitable, based on its consideration of the factors described here.
Profitability
The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Subadviser. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable.
Economies of scale
The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Funds ability to appropriately benefit from economies of scale under the Funds fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Boards understanding that most of the Advisers costs are not specific to individual Funds, but rather are incurred across a variety of products and services.
To the extent the Board and the Adviser were able to identify actual or potential economies of scale from Fund-specific or allocated expenses, in order to ensure that any such economies continue to be reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.
Information about services to other clients
The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services.
Other benefits to the Adviser
The Board received information regarding potential fall-out or ancillary benefits received by the Adviser and its affiliates as a result of the Advisers relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).
The Board also considered the effectiveness of the Advisers, Subadvisers and Funds policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation.
Other factors and broader review
As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.
New subadvisory agreement with New Independence
In evaluating the New Subadvisory Agreement, the Board considered that the employees of the Subadviser would be offered employment with New Independence. The Board also considered the Subadvisers belief that most of its employees, including the portfolio managers and analysts responsible for the Fund and the executives responsible for the management of the Subadviser, would become employees of
27
New Independence. The Board considered that no material changes in the investment process or resources were anticipated to occur as a result of the Transaction. The Board strongly considered that the subadvisory fees payable under the New Subadvisory Agreement would be borne by the Adviser and not the Fund, and that the proposed Transaction would not have any effect on the fees paid by the Fund to the Adviser or the consideration paid to New Independence by the Adviser. The Board also considered that subadvisory fees to be paid by the Adviser to New Independence were identical to the fees under the existing Subadvisory Agreement.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the New Subadvisory Agreement for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved, and voted to recommend to shareholders that the Fund adopt, the New Subadvisory Agreement.
1 The Board considered additional information about the New Subadvisory Agreement and New Independence at the March 2006 Board meetings. The New Subadvisory Agreement became effective August 4, 2006 after shareholder approval.
28
For more information
The Funds proxy voting policies, procedures and records are available without charge, upon request:
By phone | On the Funds Web site | On the SECs Web site |
1-800-225-5291 | www.jhfunds.com/proxy | www.sec.gov |
| ||
Trustees | Charles A. Rizzo | Custodian |
Ronald R. Dion, Chairman | Chief Financial Officer | The Bank of New York |
James R. Boyle | One Wall Street | |
James F. Carlin | Gordon M. Shone | New York, NY 10286 |
William H. Cunningham | Treasurer | |
Charles L. Ladner* | Transfer agent | |
Dr. John A. Moore* | John G. Vrysen | John Hancock Signature |
Patti McGill Peterson* | Chief Operations Officer | |
Steven R. Pruchansky | Services, Inc. | |
*Members of the Audit Committee | Investment adviser | One John Hancock Way, |
Non-Independent Trustee | John Hancock Advisers, LLC | Suite 1000 |
601 Congress Street | Boston, MA 02217-1000 | |
Officers | Boston, MA 02210-2805 | |
Keith F. Hartstein | Legal counsel | |
President and | Subadviser | Kirkpatrick & Lockhart |
Chief Executive Officer | Independence Investments | Preston Gates Ellis LLP |
LLC | One Lincoln Street | |
Thomas Kinzler | 160 Federal Street | Boston, MA 02111-2950 |
Secretary and Chief Legal Officer | Boston, MA 02110 | |
Francis V. Knox, Jr. | Principal distributor | |
Chief Compliance Officer | John Hancock Funds, LLC | |
601 Congress Street | ||
Boston, MA 02210-2805 |
How to contact us | ||
| ||
Internet | www.jhfunds.com | |
| ||
Regular mail: | Express mail: | |
John Hancock | John Hancock | |
Signature Services, Inc. | Signature Services, Inc. | |
One John Hancock Way, Suite 1000 | Mutual Fund Image Operations | |
Boston, MA 02217-1000 | 380 Stuart Street | |
Boston, MA 02116 | ||
| ||
Phone | Customer service representatives | 1-800-225-5291 |
EASI-Line | 1-800-338-8080 | |
TDD line | 1-800-554-6713 | |
|
A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the SECs Web site, www.sec.gov.
32
JOHN HANCOCK FAMILY OF FUNDS
EQUITY | INTERNATIONAL |
Balanced Fund | Greater China Opportunities Fund |
Classic Value Fund | International Allocation Portfolio |
Classic Value Fund II | International Classic Value Fund |
Classic Value Mega Cap Fund | International Core Fund |
Core Equity Fund | International Growth Fund |
Global Shareholder Yield Fund | |
Growth Fund | INCOME |
Growth Opportunities Fund | Bond Fund |
Growth Trends Fund | Government Income Fund |
Intrinsic Value Fund | High Yield Fund |
Large Cap Equity Fund | Investment Grade Bond Fund |
Large Cap Select Fund | Strategic Income Fund |
Mid Cap Equity Fund | |
Multi Cap Growth Fund | TAX-FREE INCOME |
Small Cap Equity Fund | California Tax-Free Income Fund |
Small Cap Fund | High Yield Municipal Bond Fund |
Small Cap Intrinsic Value Fund | Massachusetts Tax-Free Income Fund |
Sovereign Investors Fund | New York Tax-Free Income Fund |
U.S. Core Fund | Tax-Free Bond Fund |
U.S. Global Leaders Growth Fund | |
Value Opportunities Fund | MONEY MARKET |
Money Market Fund | |
ASSET ALLOCATION | U.S. Government Cash Reserve |
Allocation Core Portfolio | |
Allocation Growth + Value Portfolio | CLOSED-END |
Lifecycle 2010 Portfolio | Bank and Thrift Opportunity Fund |
Lifecycle 2015 Portfolio | Financial Trends Fund, Inc. |
Lifecycle 2020 Portfolio | Income Securities Trust |
Lifecycle 2025 Portfolio | Investors Trust |
Lifecycle 2030 Portfolio | Patriot Premium Dividend Fund II |
Lifecycle 2035 Portfolio | Patriot Select Dividend Trust |
Lifecycle 2040 Portfolio | Preferred Income Fund |
Lifecycle 2045 Portfolio | Preferred Income II Fund |
Lifecycle Retirement Portfolio | Preferred Income III Fund |
Lifestyle Aggressive Portfolio | Tax-Advantaged Dividend Income Fund |
Lifestyle Balanced Portfolio | |
Lifestyle Conservative Portfolio | |
Lifestyle Growth Portfolio | |
Lifestyle Moderate Portfolio | |
SECTOR | |
Financial Industries Fund | |
Health Sciences Fund | |
Real Estate Fund | |
Regional Bank Fund | |
Technology Fund | |
Technology Leaders Fund |
The Funds investment objectives, risks, charges and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Funds at 1-800-225-5291 or visit the Funds Web site at www.jhfunds.com. Please read the prospectus carefully before investing or sending money.
1-800-225-5291 1-800-554-6713 TDD 1-800-338-8080 EASI-Line www.jhfunds.com |
Now available: electronic delivery www.jhfunds.com/edelivery |
This report is for the information of the shareholders of John Hancock Small Cap Fund.
820SA 4/07
6/07
ITEM 2. CODE OF ETHICS. |
As of the end of the period, April 30, 2007, 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.
Not applicable at this time. |
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time. ITEM 6. SCHEDULE OF INVESTMENTS. |
Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. |
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. |
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable. |
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds - Administration Committee Charter and John Hancock Funds Governance Committee Charter.
ITEM 11. 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 12. 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) 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) Submission of Matters to a Vote of Security Holders is attached. See attached John Hancock Funds Governance Committee Charter.
(c)(2) Proxy Voting Policies and Procedures are attached.
(c)(3) 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.
John Hancock Equity Trust |
By: /s/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Date: June 29, 2007 |
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: /s/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Date: June 29, 2007 |
By: /s/ Charles A. Rizzo ------------------------------------- Charles A. Rizzo Chief Financial Officer Date: June 29, 2007 |
CERTIFICATION I, Keith F. Hartstein, certify that: |
1. I have reviewed this report on Form N-CSR of the John Hancock Equity Trust (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By: /s/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Date: June 29, 2007 |
CERTIFICATION I, Charles A. Rizzo, certify that: |
1. I have reviewed this report on Form N-CSR of the John Hancock Equity Trust (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By: /s/ Charles A. Rizzo ------------------------------------- Charles A. Rizzo Chief Financial Officer Date: June 29, 2007 |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
In connection with the attached Report of John Hancock Equity Trust (the registrant) on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report.
/s/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Dated: June 29, 2007 |
/s/ Charles A. Rizzo ------------------------------------- Charles A. Rizzo Chief Financial Officer Dated: June 29, 2007 |
A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
JOHN HANCOCK FUNDS
CODE OF ETHICS
This is the code of ethics of:
John Hancock Advisers, LLC MFC Global Investment Management (U.S.), LLC (formerly known as Sovereign Asset Management LLC) each open-end and closed-end fund advised by John Hancock Advisers, LLC John Hancock Funds, LLC |
(together, called "John Hancock Funds" or "JHF")
1. General Principles
Each person within the John Hancock Funds organization is responsible for maintaining the very highest ethical standards when conducting our business.
This means that:
You have a fiduciary duty at all times to place the interests of our clients and fund investors first.
All of your personal securities transactions must be conducted consistent with the provisions of this code of ethics that apply to you and in such a manner as to avoid any actual or potential conflict of interest or other abuse of your position of trust and responsibility.
You should not take inappropriate advantage of your position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to our clients' accounts or fund investors.
You must treat as confidential any information concerning the identity of security holdings and financial circumstances of clients or fund investors.
You must comply with all applicable federal securities laws.
You must promptly report any violation of this code of ethics that comes to your attention to the Chief Compliance Officer of your company -see Appendix F.
The General Principles discussed above govern all conduct, whether or not
The General Principles discussed above govern all conduct, whether or not the conduct is also covered by more specific standards and procedures in this code of ethics. As described below under the heading "Interpretation and Enforcement", failure to comply with the code of ethics may result in disciplinary action, including termination of employment.
2. To Whom Does This Code Apply?
This code of ethics applies to you if you are a director, officer or employee of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC, John Hancock Funds, LLC or a John Hancock open-end or closed-end fund registered under the Investment Company Act of 1940 (the "'40 Act") and advised by John Hancock Advisers, LLC ("John Hancock funds"). It also applies to you if you are trustee of the John Hancock Financial Trends Fund, Inc. or an employee of Manulife Financial Corporation or its subsidiaries who participates in making recommendations for, or receives information about, portfolio trades or holdings of the John Hancock funds or accounts. However, notwithstanding anything herein to the contrary, it does not apply to any trustees/directors of any open-end or closed-end funds advised by John Hancock Advisers, LLC who are not "interested persons" of such funds as defined in Section 2(a)(19) of the '40 Act, so long as they are subject to a separate Code of Ethics (each, an "Excluded Independent Director"). Also, in some cases only a limited number of provisions will apply to you, based on your access category. For example, only a limited number of provisions apply to directors of the John Hancock open-end funds and closed-end funds who are not Excluded Independent Directors-- see Appendix C for more information.
Please note that if a policy described below applies to you, it also applies to all accounts over which you have a beneficial interest. Normally, you will be deemed to have a beneficial interest in your personal accounts, those of a spouse, "significant other," minor children or family members sharing a household, as well as all accounts over which you have discretion or give advice or information. "Significant others" are defined for these purposes as two people who (1) share the same primary residence; (2) share living expenses; and (3) are in a committed relationship and intend to remain in the relationship indefinitely.
There are three main categories for persons covered by this code of ethics, taking into account their positions, duties and access to information regarding fund portfolio trades. You have been notified about which of these categories applies to you, based on the JHF Investment Compliance Department's understanding of your current role. If you have a level of investment access beyond your assigned category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to notify the Chief Compliance Officer of your company.
The basic definitions of the three main categories, with examples, are provided below. The more detailed definitions of each category are attached as Appendix A.
Investment Access person | Regular Access person | Non-Access person | ||||||||
A person who regularly has access | ||||||||||
to (1) fund portfolio trades or (2) | A person who does not regularly | |||||||||
A person who regularly participates | non-public information regarding | participate in a funds investment | ||||||||
in a funds investment process or | holdings or securities | process or obtain information | ||||||||
makes securities recommendations | recommendations to clients. | regarding fund portfolio trades | ||||||||
to clients. | ||||||||||
examples: | examples: | |||||||||
examples: | ||||||||||
| personnel in Investment | | wholesalers | |||||||
| portfolio managers | Operations or Compliance | ||||||||
| inside wholesalers who | |||||||||
| analysts | | most FFM personnel | dont attend investment | ||||||
morning meetings | ||||||||||
| traders | | Technology personnel with | |||||||
access to investment | | certain administrative | ||||||||
systems | personnel | |||||||||
| attorneys and some legal | |||||||||
administration personnel | ||||||||||
| investment admin. | |||||||||
personnel | ||||||||||
|
3. Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions?
If this code of ethics describes "Personal Trading Requirements" (i.e. John Hancock Mutual Fund reporting requirement and holding period, the preclearance requirement, the ban on short-term profits, the ban on IPOs, the disclosure of private placement conflicts and the reporting requirements) that apply to your access category as described above, then the requirements apply to trades for any account in which you have a beneficial interest. Normally, this includes your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. This includes all brokerage accounts that contain securities (including brokerage accounts that only contain securities exempt from reporting). Accounts over which you have no direct or indirect influence or control are exempt. To prevent potential violations of this code of ethics, you are strongly encouraged to request clarification for any accounts that are in question.
These personal trading requirements do not apply to the following securities:
Direct obligations of the U.S. government (e.g., treasury securities);
Bankers' acceptances, bank certificates of deposit, commercial paper, and high quality short-term debt obligations, including repurchase agreements;
Shares of open-end mutual funds registered under the '40 Act that are not advised or sub-advised by John Hancock Advisers, John Hancock Investment Management Services or another Manulife entity;
Shares issued by money market funds; and
Securities in accounts over which you have no direct or indirect influence or control.
Except as noted above, the Personal Trading Requirements apply to all securities, including:
Stocks;
Bonds;
Government securities that are not direct obligations of the U.S. government, such as Fannie Mae or municipal securities;
Closed-end funds;
Options on securities, on indexes, and on currencies;
Limited partnerships;
Domestic unit investment trusts;
Exchange traded funds;
Non-US unit investment trusts and Non-US mutual funds;
Private investment funds and hedge funds; and
Futures, investment contracts or any other instrument that is considered a "security" under the Investment Advisers Act.
Different requirements apply to shares of open-end mutual funds that are advised or sub-advised by John Hancock Advisers, LLC or another Manulife entity--see the section below titled "John Hancock Mutual Funds Reporting Requirement and Holding Period".
4. Overview of Policies
Investment Access | Regular Access | Non-Access Person | ||||
Person | Person | |||||
| ||||||
General principles | yes | yes | yes | |||
| ||||||
Policies outside the code | ||||||
| ||||||
Conflict of interest policy | yes | yes | yes | |||
| ||||||
Inside information policy | yes | yes | yes | |||
| ||||||
Policy regarding dissemination of mutual fund | yes | yes | yes | |||
portfolio information | ||||||
|
Policies in the code | ||||||
| ||||||
Restriction on gifts | yes | yes | yes | |||
| ||||||
John Hancock mutual funds reporting | yes | yes | yes | |||
requirement and holding period | ||||||
| ||||||
Pre-clearance requirement | yes | yes | Limited | |||
| ||||||
Heightened preclearance of securities | yes | yes | no | |||
transactions for Significant Personal | ||||||
Positions | ||||||
| ||||||
Ban on short-term profits | yes | no | no | |||
| ||||||
Ban on IPOs | yes | no | no | |||
| ||||||
Disclosure of private placement conflicts | yes | no | no | |||
| ||||||
Seven day blackout period | yes | no | no | |||
| ||||||
Reports and other disclosures outside the code | ||||||
| ||||||
Broker letter/duplicate confirms | yes | yes | yes | |||
| ||||||
Reports and other disclosures in the code | ||||||
| ||||||
Annual recertification form | yes | yes | yes | |||
| ||||||
Initial/annual holdings reports | yes | yes | no | |||
| ||||||
Quarterly transaction reports | yes | yes | no | |||
|
5. Policies Outside of the Code of Ethics
John Hancock Funds have certain policies that are not part of the code of ethics, but are equally important. The two most important of these policies are (1) the Company Conflict and Business Practice Policy; and (2) the Inside Information Policy.
>> Company Conflict & Business Practice Policy
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
This Policy covers a number of important issues for officers and employees of John Hancock Funds. For example, you cannot serve as a director of any company without first obtaining the required written executive approval.
This Policy includes significant requirements to be followed if your personal securities holdings overlap with John Hancock funds investment activity. For example, if you or a member of your family own:
a 5% or greater interest in a company, John Hancock Funds and its affiliates may not make any investment in that company;
a 1% or greater interest in a company, you cannot participate in any decision by John Hancock Funds and its affiliates to buy or sell that company's securities;
ANY interest in a company, you cannot recommend or participate in a decision by John Hancock Funds and its affiliates to buy or sell that company's securities unless your personal interest is fully disclosed at all stages of the investment decision.
(This is just a summary of these requirements--please read Section IV of the Company Conflict and Business Practices Policy for more detailed information.)
Other important issues in this Policy include:
personal investments or business relationships
misuse of inside information
receiving or giving of gifts, entertainment or favors
misuse or misrepresentation of your corporate position
disclosure of confidential or proprietary information
antitrust activities
political campaign contributions and expenditures on public officials
>> Inside Information Policy and Procedures
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
The antifraud provisions of the federal securities laws generally prohibit persons with material non-public information from trading on or communicating the information to others. Sanctions for violations can include civil injunctions, permanent bars from the securities industry, civil penalties up to three times the profits made or losses avoided, criminal fines and jail sentences. While Investment Access persons are most likely to come in contact with material non-public information, the rules (and sanctions) in this area apply to all John Hancock Funds personnel and extend to activities both related and unrelated to your job duties.
The Inside Information Policy and Procedures covers a number of important issues, such as:
The misuse of material non-public information
The information barrier procedure
The "restricted list" and the "watch list"
broker letters and duplicate confirmation statements (see section 7 of this code of ethics)
>> Policy Regarding Dissemination of Mutual Fund Portfolio Information
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
Information about securities held in a mutual fund cannot be disclosed except in accordance with this Policy, which generally requires time delays of approximately one month and public posting of the information to ensure that it uniformly enters the public domain.
6. Policies in the Code of Ethics
>> Restriction on Gifts
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
You and your family cannot accept preferential treatment or favors (for example, gifts) from securities brokers or dealers or other organizations with which John Hancock Funds might transact business, except in accordance with the Company Conflict and Business Practice Policy. For the protection of both you and John Hancock Funds, the appearance of a possible conflict of interest must be avoided. You should exercise caution in any
instance in which business travel and lodging are paid for by someone other than John Hancock Funds. The purpose of this policy is to minimize the basis for any charge that you used your John Hancock Funds position to obtain for yourself opportunities which otherwise would not be offered to you. Please see the Company Conflict and Business Practice Policy's "Compensation and Gifts" section for additional details regarding restrictions on gifts and exceptions for "nominal value" gifts.
>> John Hancock Mutual Funds Reporting Requirement and Holding Period
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
You must follow the reporting requirement and the holding period requirement specified below if you purchase either:
a "John Hancock Mutual Fund" (i.e. a '40 Act mutual fund that is advised by John Hancock Advisers, LLC, John Hancock Investment Management Services LLC or by another Manulife entity); or
a "John Hancock Variable Product" (i.e. contracts funded by insurance company separate accounts that use one or more portfolios of John Hancock Trust). The John Hancock Mutual Funds reporting requirement and the holding period requirement are excluded for the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal and/or other program trades.
Reporting Requirement: You must report your holdings and your trades in a John Hancock Mutual Fund or a John Hancock Variable Product. This is not a preclearance requirement--you can report your holdings after you trade by submitting duplicate confirmation statements to the JHF Investment Compliance Department. If you are an Investment Access Person or a Regular Access Person, you must also make sure that your holdings in a John Hancock fund or a John Hancock variable product are included in your Initial Holdings Report (upon hire) and Annual Holdings Report (each year end).
If you purchase a John Hancock Variable Product, you must notify the JHF Investment Compliance Department. The JHF Investment Compliance Department will then obtain directly from the contract administrators the personal trade and holdings information regarding the portfolios underlying the Manulife or John Hancock variable insurance contracts.
The JHF Investment Compliance Department will obtain personal securities trades and holdings information in the 401(k) plan for John Hancock funds directly from the plan administrators.
Holding Requirement: You cannot profit from the purchase and sale of a John Hancock Mutual Fund within 30 calendar days. The purpose of this policy is to address the risk, real or perceived, of manipulative market timing or other abusive practices involving short-term personal trading in the John Hancock Mutual Funds. Any profits realized on short-term trades must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity, upon determination by the Compliance and Business Practices Committee. If you donate or gift a security, it is considered a sale. You may request an exemption from this policy for involuntary sales due to unforeseen corporate activity (such as a merger), or for sales due to hardship reasons (such as unexpected medical expenses) by sending an e-mail to the Chief Compliance Officer of your company.
>> Preclearance of Securities Transactions
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Also, for a limited category of trades: ------------------------------------ Non-Access Persons -------------------------------------------------------------------------------- |
Limited Category of Trades for Non-Access Persons: If you are a Non-Access person, you must preclear transactions in securities of any closed-end funds advised by John Hancock Advisers, LLC. A Non-Access person is not required to preclear other trades. However, please keep in mind that a Non-Access person is required to report securities transactions after every trade (even those that are not required to be precleared) by requiring your broker to submit duplicate confirmation statements, as described in section 7 of this code of ethics.
Investment Access persons and Regular Access persons: If you are an Investment Access person or Regular Access person, you must "preclear" (i.e.: receive advance approval of) any personal securities transactions in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". Due to this preclearance requirement, participation in investment clubs is prohibited.
Preclearance of private placements requires some special considerations--the decision will take into account whether, for example: (1) the investment opportunity should be reserved for John Hancock Funds clients; and (2) it is being offered to you because of your position with John Hancock Funds.
How to preclear: You preclear a trade by following the steps outlined in the preclearance procedures, which are attached as Appendix B. Please note that:
You may not trade until clearance is received.
Clearance approval is valid only for the date granted (i.e. the preclearance date and the trade date should be the same).
A separate procedure should be followed for requesting preclearance of a private placement or a derivative, as detailed in Appendix B. The JHF Investment Compliance Department must maintain a five-year record of all clearances of private placement purchases by Investment Access persons, and the reasons supporting the clearances.
The preclearance policy is designed to proactively identify potential "problem trades" that raise front-running, manipulative market timing or other conflict of interest concerns (example: when an Investment Access person trades a security on the same day as a John Hancock fund).
Certain transactions in securities that would normally require pre-clearance are exempt from the pre-clearance requirement in the following situations; (1) shares are being purchased as part of an automatic investment plan; (2) shares are being purchased as part of a dividend reinvestment plan; or (3) transactions are being made in an account over which you have designated a third party as having discretion to trade (you must have approval from the Chief Compliance Officer to establish a discretionary account).
>> Heightened Preclearance of Securities Transactions for "Significant Personal Positions"
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons -------------------------------------------------------------------------------- |
If you are an Investment Access person or Regular Access person with a personal securities position that is worth $100,000 or more, this is deemed to be a "Significant Personal Position". This applies to any personal securities positions in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". Before you make personal trades to establish, increase or decrease a Significant Personal Position, you must notify either the Chief Fixed Income Officer or the Chief Equity Officer that (1) you intend to trade in a Significant Personal Position and (2) confirm that you are not aware of any clients for whom related trades should be completed first. You must receive their pre-approval to proceed--their approval will be based on their conclusion that your personal trade in a Significant Personal Position will not "front-run" any action that John Hancock Funds should take for a client. This Heightened Preclearance requirement is in addition to, not in place of, the regular preclearance requirement described above--you must also receive the regular preclearance before you trade.
>> Ban on Short-Term Profits |
--------------------------------------------------------------------------------
Applies to: Investment Access Persons
--------------------------------------------------------------------------------
If you are an Investment Access person, you cannot profit from the purchase and sale (or sale and purchase) of the same (or equivalent) securities within 60 calendar days. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions".
You may invest in derivatives or sell short provided the transaction period exceeds the 60-day holding period (30 days for '40 Act mutual funds advised by John Hancock Advisers, LLC, John Hancock Investment Management Services LLC or another Manulife entity). If you donate or gift a security, it is considered a sale.
The purpose of this policy is to address the risk, real or perceived, of front-running, manipulative market timing or other abusive practices involving short-term personal trading. Any profits realized on short-term trades must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity, upon determination by the Compliance and Business Practices Committee.
You may request an exemption from this policy for involuntary sales due to unforeseen corporate activity (such as a merger), or for sales due to hardship reasons (such as unexpected medical expenses) from the JHF Investment Compliance Department.
>> Ban on IPOs |
--------------------------------------------------------------------------------
Applies to: Investment Access Persons
--------------------------------------------------------------------------------
If you are an Investment Access person, you may not acquire securities in an initial public offering (IPO). You may not purchase any newly-issued securities until the next business (trading) day after the offering date. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions".
There are two main reasons for this prohibition: (1) these purchases may suggest that persons have taken inappropriate advantage of their positions for personal profit; and (2) these purchases may create at least the appearance that an investment opportunity that should have been available to the John Hancock funds was diverted to the personal benefit of an individual employee.
You may request an exemption for certain investments that do not create a potential conflict of interest, such as: (1) securities of a mutual bank or mutual insurance company received as compensation in a demutualization and other similar non-voluntary stock acquisitions; (2) fixed rights offerings; or (3) a family member's participation as a form of employment compensation in their employer's IPO.
>> Disclosure of Private Placement Conflicts
--------------------------------------------------------------------------------
Applies
to: Investment Access Persons
--------------------------------------------------------------------------------
If you are an Investment Access person and you own securities purchased in a private placement, you must disclose that holding when you participate in a decision to purchase or sell that same issuer's securities for a John Hancock fund. This applies to any private placement holdings in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". Private placements are securities exempt from SEC registration under section 4(2), section 4(6) or rules 504 -506 of the Securities Act of 1933.
The investment decision must be subject to an independent review by investment personnel with no personal interest in the issuer.
The purpose of this policy is to provide appropriate scrutiny in situations in which there is a potential conflict of interest.
>> Seven Day Blackout
Period |
--------------------------------------------------------------------------------
Applies
to: Investment Access Persons
--------------------------------------------------------------------------------
If you are a portfolio manager (or were identified to the JHF Investment Compliance Department as part of a portfolio management team) you are prohibited from buying or selling a security within seven calendar days before and after that security is traded for a fund that you manage unless no conflict of interest exists in relation to that security (as determined by the Compliance and Ethics Committee).
In addition, all investment access persons are prohibited from knowingly buying or selling a security within seven calendar days before and after that security is traded for a John Hancock fund unless no conflict of interest exists in relation to that security. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". If a John Hancock fund trades in a security within seven calendar days before or after you trade in that security, you may be required to demonstrate that you did not know that the trade was being considered for that John Hancock fund.
You will be required to sell any security purchased in violation of this policy unless it is determined that no conflict of interest exists in relation to that security (as determined by the Compliance and Ethics Committee). Any profits realized on trades determined by the Compliance and Ethics Committee to be in violation of this policy must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity.
7. Reports and Other Disclosures Outside the Code of Ethics
>> Broker Letter/Duplicate Confirm Statements
--------------------------------------------------------------------------------
Applies
to: Investment Access Persons
Regular Access Persons
Non-Access Persons
--------------------------------------------------------------------------------
As required by the Inside Information Policy, you must inform your stockbroker that you are employed by an investment adviser or broker. Your broker is subject to certain rules designed to prevent favoritism toward your accounts. You may not accept negotiated commission rates that you believe may be more favorable than the broker grants to accounts with similar characteristics.
When a brokerage account is opened for which you have a beneficial interest, before any trades are made, you must:
Notify the broker-dealer with which you are opening an account that you are a registered associate of John Hancock Funds;
Ask the firm in writing to have duplicate written confirmations of any trade, as well as statements or other information concerning the account, sent to the John Hancock Funds Investment Compliance Department (contact: Fred Spring), 8th Floor, 101 Huntington Avenue, Boston, MA 02199; and
Notify the JHF Investment Compliance Department, in writing, that you have an account before you place any trades.
This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions" as well as trades in John Hancock Mutual Funds and John Hancock Variable Products. The JHF Investment Compliance Department may rely on information submitted by your broker as part of your reporting requirements under this code of ethics.
8. Reports and Other Disclosures In the Code of Ethics
>> Initial Holdings Report and Annual Holdings Report
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons -------------------------------------------------------------------------------- |
You must file an initial holdings report within 10 calendar days after becoming an Investment Access person or a Regular Access person. The information must be current as of a date no more than 45 days prior to your becoming an Investment Access person or a Regular Access person.
You must also file an annual holdings report (as of December 31st) within 45 calendar days after the calendar year end. This applies to any personal securities holdings in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions" as well as holdings in John Hancock Mutual Funds and John Hancock Variable Products.
Your reports must include:
the title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security;
the name of any broker, dealer or bank with which you maintain an account; and
the date that you submit the report.
>> Quarterly Transaction Certification
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons -------------------------------------------------------------------------------- |
On a quarterly basis, Investment Access Persons and Regular Access persons are required to certify transactions in their brokerage accounts and the John Hancock Funds 401(k) Plan. Within 30 calendar days after the end of each calendar quarter you will be asked to log into the John Hancock Personal Trading and Reporting System to verify that the system has captured accurately all transactions for the preceding calendar quarter for accounts and trades which are required to be reported pursuant to the above noted section entitled "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". Even if you have no transactions to report you will be asked to complete the certification.
For each transaction you must report the following information:
the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;
the nature of the transaction (i.e. purchase, sale or any other type of acquisition or disposition);
the price at which the transaction was effected;
the name of the broker, dealer or bank with or through which the transaction was effected; and
>> Quarterly Brokerage Account Certification
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons -------------------------------------------------------------------------------- |
Each quarter, all Investment Access Persons, Regular Access Persons and Non-Access Persons will be required to provide a complete list of all brokerage accounts as described above in the section entitled "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". This includes all brokerage accounts, including brokerage accounts that only contain securities exempt from reporting.
You will be asked to log into the John Hancock Personal Trading and Reporting System and verify that all brokerage accounts are listed and the following information is accurate:
Account number; Account registration; Brokerage firm |
>> Annual Certification
-------------------------------------------------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons Limited Access Persons -------------------------------------------------------------------------------- |
At least annually (or additionally when the code of ethics has been significantly changed), you must provide a certification at a date designated by the Investment Compliance Department that:
(1) you have read and understood this code of ethics;
(2) you recognize that you are subject to its policies; and
(3) you have complied with its requirements.
You are required to make this certification to demonstrate that you understand the importance of these policies and your responsibilities under the code of ethics.
9. Limited Access Persons
There is an additional category of persons called "Limited Access" persons. This category consists only of directors of John Hancock Advisers, LLC, trustees of the John Hancock Financial Trends Fund, Inc. or an "interested person" of the John Hancock funds who:
(a) are not also officers of John Hancock Advisers, LLC; and
(b) do not ordinarily obtain information about fund portfolio trades
An "interested person" of the John Hancock funds has the meaning given to the term in Section 2(a)(19) of the '40 Act.
A more detailed definition of Limited Access persons, and a list of the policies that apply to them, is attached as Appendix C.
10. Subadvisers
A subadviser to a John Hancock fund has a number of code of ethics responsibilities, as described in Appendix D.
11. Reporting Violations
If you know of any violation of our code of ethics, you have a responsibility to promptly report it to the Chief Compliance Officer of your company. You should also report any deviations from the controls and procedures that safeguard John Hancock Funds and the assets of our clients. You can request confidential treatment of your reporting action.
12. Interpretation and Enforcement
This code of ethics cannot anticipate every situation in which personal interests may be in conflict with the interests of our clients and fund investors. You should be responsive to the spirit and intent of this code of ethics as well as its specific provisions.
When any doubt exists regarding any code of ethics provision or whether a conflict of interest with clients or fund investors might exist, you should
discuss the situation in advance with the Chief Compliance Officer of your company. The code of ethics is designed to detect and prevent fraud against clients and fund investors, and to avoid the appearance of impropriety. If you feel inequitably burdened by any policy, you should feel free to contact your Chief Compliance Officer or the Compliance and Business Practices Committee. Exceptions may be granted where warranted by applicable facts and circumstances. For example, exemption from some Personal Trading Requirements may be granted for transactions effected pursuant to an automatic investment plan.
To provide assurance that policies are effective, the JHF Investment Compliance Department will monitor and check personal securities transaction reports and certifications against fund portfolio transactions. Additional administration and recordkeeping procedures are described in Appendix E.
The Chief Compliance Officer of your company has general administrative responsibility for this code of ethics as it applies to the access persons of your company; an appropriate Compliance Department will administer procedures to review personal trading reports. The Compliance and Business Practices Committee of John Hancock Funds approves amendments to the code of ethics and dispenses employee/officer sanctions for violations of the code of ethics. The Boards of Trustees/Directors of the open-end mutual funds and closed-end funds also approve amendments to the code of ethics and dispenses sanctions for access persons of the Funds who are not employees/officers. Accordingly, the Investment Compliance Department will refer violations to the Compliance and Business Practices Committee and/or the Boards of Trustees/Directors of the John Hancock '40 Act funds, respectively, for review and appropriate action. The following factors will be considered when determining a fine or other disciplinary action:
the person's position and function (senior personnel may be held to a higher standard);
the amount of the trade;
whether the funds or accounts hold the security and were trading the same day;
whether the violation was by a family member.
whether the person has had a prior violation and which policy was involved.
whether the employee self-reported the violation.
You can request reconsideration of any disciplinary action by submitting a written request.
No less frequently than annually, a written report of all material violations and sanctions, significant conflicts of interest and other related issues will be submitted to the boards of directors of the John
Hancock funds for their review. Sanctions for violations could include (but are not limited to) fines, limitation of personal trading activity, suspension or termination of the violator's position with John Hancock Funds and/or a report to the appropriate regulatory authority.
13. Education of Employees
The JHF Investment Compliance Department will provide a paper copy or electronic version of the Code of Ethics (and any amendments) to each person subject to this Code of Ethics. The JHF Investment Compliance Department will also administer training of employees on the principles and procedures of the code of ethics.
Appendix A: Categories of Personnel
You have been notified about which of these categories applies to you, based on the JHF Investment Compliance Department's understanding of your current role. If you have a level of investment access beyond that category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to immediately notify the Chief Compliance Officer of your company.
1) Investment Access person: You are an Investment Access person if you are an employee of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC, a John Hancock fund, or Manulife Financial Corporation or its subsidiaries who, in connection with your regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by a John Hancock fund.
(examples: portfolio managers, analysts, traders)
2) Regular Access person: You are a Regular Access person if you do not fit the definition of Investment Access Person, but you do fit one of the following two sub-categories:
You are an officer (vice president and higher) or director of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC or a John Hancock fund, unless you qualify as a Limited Access person--please see Appendix C for this definition.)
You are an employee of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC, a John Hancock fund or Manulife Financial Corporation or its subsidiaries , or a director, officer (vice president and higher) or employee of John Hancock Funds, LLC who has access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund or who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic.
(examples: Investment Operations personnel, Investment Compliance Department personnel, most Fund Financial Management personnel, investment administrative personnel, Technology Resources personnel with access to investment systems, attorneys and some legal administration personnel)
3) Non-Access person: You are a non-access person if you are an employee of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC, John Hancock Funds, LLC or a John Hancock fund who does not fit the definitions of any of the other three categories (Investment Access Person, Regular Access Person or Limited Access Person). To be a non-access person, you must not have access to information regarding the purchase or sale of securities by a John Hancock fund or nonpublic information regarding the portfolio holdings in connection with your regular functions or duties.
(examples: wholesalers, inside wholesalers, certain administrative staff)
4) Limited Access Person: Please see Appendix C for this definition.
Appendix B: Preclearance Procedures
You should read the Code of Ethics to determine whether you must obtain a preclearance before you enter into a securities transaction. If you are required to obtain a preclearance, you should follow the procedures detailed below.
1. Pre-clearance for Public Securities including Derivatives, Futures, Options and Selling Short:
A request to pre-clear should be entered into the John Hancock Personal Trading & Reporting System.
The John Hancock Personal Trading & Reporting System is located under your Start Menu on your Desktop. It can be accessed by going to Programs/Personal Trading & Reporting/ Personal Trading & Reporting and by entering your Web Security Services user id and password.
If the John Hancock Personal Trading & Reporting System is not on your Desktop, please contact the HELP Desk at (617) 572-6950 for assistance.
The Trade Request Screen:
At times you may receive a message like "System is currently unavailable". The system is scheduled to be offline from 8:00 PM until 7:00 AM each night.
[GRAPHIC: Trade Request Screen]
Ticker/Security Cusip: Fill in either the ticker, cusip or security name with the proper information of the security you want to buy or sell. Then
click the [Lookup] button. Select one of the hyperlinks for the desired security, and the system will populate the proper fields Ticker, Security Cusip, Security Name and Security Type automatically on the Trade Request Screen.
If You Don't Know the Ticker, Cusip, or Security Name:
If you do not know the full ticker, you may type in the first few letters followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Intel, but all you can remember of the ticker is that it begins with int, so you enter int* for Ticker. If any tickers beginning with int are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will populate Security Cusip, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the full cusip, you may type in the first few numbers followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Microsoft, but all you can remember of the cusip is that it begins with 594918, so you enter 594918* for Ticker. If any cusips beginning with 594918 are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will fill in Ticker, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the Ticker but have an idea of what the Security Name is, you may type in an asterisk, a few letters of the name and an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of American Brands, so you enter *amer* for Security Name. Any securities whose names have amer in them are displayed on a new screen, where you are asked to select the hyperlink of the one you want, and the system will fill in Ticker, Cusip and Security Type automatically on the Trade Request Screen.
Other Items on the Trade Request Screen:
Brokerage Account: Click on the dropdown arrow to the right of the Brokerage Account field to choose the account to be used for the trade.
Transaction Type: Choose one of the values displayed when you click the dropdown arrow to the right of this field.
Trade Date: You may only submit trade requests for the current date.
Note: One or more of these fields may not appear on the Request Entry screen if the information is not required. Required fields are determined by the Investment Compliance Department.
Click the [Submit Request] button to send the trade request to your Investment Compliance department.
Once you click the [Submit Request] button, you will be asked to confirm the values you have entered. Review the information and click the [Confirm] button if all the information is correct. After which, you will receive
immediate feedback in your web browser. (Note: We suggest that you print out this confirmation and keep it as a record of the trade you have made). After this, you can either submit another trade request or logout.
Attention Investment Access Persons: If the system identifies a potential violation of the Ban on Short Term Profits Rule, your request will be sent to the Investment Compliance Department for review and you will receive feedback via the e-mail system.
Starting Over:
To clear everything on the screen and start over, click the [Clear Screen] button.
Exiting Without Submitting the Trade Request:
If you decide not to submit the trade request before clicking the [Submit Request] button, simply exit from the browser by clicking the [X] button on the upper right or by pressing [Alt+F4], or by clicking the Logout hyperlink on the lower left side of the screen.
Ticker/Security Name Lookup Screen:
You arrive at this screen from the Trade Request Screen, where you've clicked the [Lookup] button (see above, "If You Don't Know the Ticker, Cusip, or Security Name"). If you see the security you want to trade, you simply select its corresponding hyperlink, and you will automatically return to the Trade Request Screen, where you finish making your trade request. If the security you want to trade is not shown, that means that it is not recognized by the system under the criteria you used to look it up. Keep searching under other names (click the [Return to Request] button) until you are sure that the security is not in the system. If you determine that the desired security is not in the system, please contact a member of the Investment Compliance department to add the security for you. Contacts are listed below:
Fred Spring (617) 375-4987
Adding Brokerage Accounts:
To access this functionality, click on the Add Brokerage Account hyperlink on the left frame of your browser screen. You will be prompted to enter the Brokerage Account Number, Brokerage Account Name, Date Opened, and Broker. When you click the [Create New Brokerage Account] button, you will receive a message that informs you whether the account was successfully created.
[GRAPHIC: Add Brokerage Account screen]
3. Pre-clearance for Private Placements and Initial Public Offerings:
You may request a preclearance of private placement securities or an Initial Public Offering by contacting Fred Spring via email (please "cc." Frank Knox on all such requests). Please keep in mind that the code of ethics prohibits Investment Access persons from purchasing securities in an initial public offering.
The request must include:
|_| the associate's name;
|_| the associate's John Hancock Funds' company;
|_| the complete name of the security;
|_| the seller (i.e the selling party if identified and/or the broker-dealer or placement agent) and whether or not the associate does business with those individuals or entities on a regular basis;
|_| the basis upon which the associate is being offered this investment opportunity;
|_| any potential conflict, present or future, with fund trading activity and whether the security might be offered as inducement to later recommend publicly traded securities for any fund or to trade through a particular broker-dealer or placement agent; and
|_| the date of the request.
Clearance of private placements or initial public offerings may be denied for any appropriate reason, such as if the transaction could create the appearance of impropriety. Clearance of initial public offerings will also be denied if the transaction is prohibited for a person due to his or her access category under the code of ethics.
Appendix C: Limited Access Persons
There are three types of Limited Access Persons--(1) Certain directors of the Adviser and (2) the trustees of the John Hancock Financial Trends Fund, Inc. and (3) the directors of the John Hancock open-end funds and closed-end funds who are not Excluded Independent Directors
(1) Certain Directors of the Adviser:
You are a Limited Access person if you are a director of John Hancock Advisers, LLC or MFC Global Investment Management (U.S.), LLC and you meet the three following criteria:
(a) you are not also an officer of John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC or a John Hancock fund;
(b) you do not have access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any John Hancock fund or account; and
(c) you are not involved in making securities recommendations to clients and do not have access to such recommendations that are nonpublic.
(examples: directors of John Hancock Advisers, LLC or MFC Global Investment Management (U.S.), LLC who are not involved in the daily operations of the adviser)
If you are a Limited Access Person who fits this definition, the following policies apply to your category. These policies are described in detail in the code of ethics.
General principles
Inside information policy and procedures
Broker letter/Duplicate Confirms*
Initial/annual holdings reports*
Quarterly transaction reports*
Annual recertification
Preclearance requirement LIMITED: You only need to preclear any direct or indirect acquisition of beneficial ownership in any security in an initial public offering (an IPO) or in a limited offering (i.e. a private placement). To request preclearance of these securities, contact
Fredrick Spring at fspring@jhancock.com and/or Frank Knox at Frank_Knox@manulifeusa.com.
--------------------------------------------------------------------------------
*A Limited Access Person may complete
this requirement under the code of
ethics of another Manulife/John Hancock
adviser or fund by the applicable
regulatory deadlines and arrange for
copies of the required information to
be sent to the John Hancock Funds
Compliance Department.
--------------------------------------------------------------------------------
(2) The Independent Directors of the Funds: If you are a trustee of the John Hancock Financial Trends Fund, Inc. or a director to a John Hancock fund and an "interested person" of the fund within the meaning of the Investment Company Act of 1940, the following policies apply to your category. These policies are described in detail in the code of ethics.
General principles
Annual recertification
Quarterly transaction report, but only if you knew (or should have known) that during the 15 calendar days before or after you trade a security, either:
(i) a John Hancock fund purchased or sold the same security, or
(ii) a John Hancock fund or John Hancock Advisers, LLC considered purchasing or selling the same security.
This policy applies to holdings in your personal accounts, those of a spouse, "significant other" or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. If this situation occurs, it is your responsibility to contact the Chief Compliance Officer of your company and he will assist you with the requirements of the quarterly transaction report.
This means that the independent directors of the funds will not usually be required to file a quarterly transaction report--they are only required to file in the situation described above and only if they are not Excluded Independent Directors.
Appendix D: Subadvisers
Each subadviser to a John Hancock fund is subject to its own code of ethics, which must meet the requirements of Rule 17j-1 and Rule 204A-1.
Approval of Code of Ethics
Each subadviser to a John Hancock fund must provide a copy of its code of ethics to the trustees of the relevant John Hancock funds for approval initially and within 60 calendar days of any material amendment. The trustees will give their approval if they determine that the code:
contains provisions reasonably necessary to prevent the subadviser's Access Persons (as defined in Rule 17j-1) from engaging in any conduct prohibited by Rule 17j-1;
requires the subadviser's Access Persons to make reports to at least the extent required in Rule 17j-1(d);
requires the subadviser to institute appropriate procedures for review of these reports by management or compliance personnel (as contemplated by Rule 17j-1(d)(3));
provides for notification of the subadviser's Access Persons in accordance with Rule 17j-1(d)(4); and
requires the subadviser's Access Persons who are Investment Personnel to obtain the pre-clearances required by Rule 17j-1(e);
Reports and Certifications
Each subadviser must provide an annual report and certification to John Hancock Advisers, LLC and the fund's trustees in accordance with Rule 17j-1(c)(2)(ii). The subadviser must also provide other reports or information that John Hancock Advisers, LLC may reasonably request.
Recordkeeping Requirements
The subadviser must maintain all records for its Access Persons as required by Rule 17j-1(f).
Appendix E: Administration and Recordkeeping
Adoption and Approval
The trustees of a John Hancock fund must approve the code of ethics of an adviser, subadviser or affiliated principal underwriter before initially retaining its services.
Any material change to a code of ethics of a John Hancock fund, John Hancock Funds, LLC, John Hancock Advisers, LLC or a subadviser to a fund must be approved by the trustees of the John Hancock funds, including a majority of trustees who are not interested persons, no later than six months after adoption of the material change.
Administration
No less frequently than annually, John Hancock Funds, LLC, John Hancock Advisers, LLC, each subadviser and each John Hancock fund will furnish to the trustees of each John Hancock fund a written report that:
describes issues that arose during the previous year under the code of ethics or the related procedures, including, but not limited to, information about material code or procedure violations, and
certifies that each entity has adopted procedures reasonably necessary to prevent its access persons from violating its code of ethics.
Recordkeeping
The Investment Compliance Department will maintain:
a copy of the current code of ethics for John Hancock Funds, LLC, John Hancock Advisers, LLC, MFC Global Investment Management (U.S.), LLC, and each John Hancock fund, and a copy of each code of ethics in effect at any time within the past five years.
a record of any violation of the code of ethics, and of any action taken as a result of the violation, for six years.
a copy of each report made by an Access person under the code of ethics, for six years (the first two years in a readily accessible place).
a record of all persons, currently or within the past five years, who are or were required to make reports under the code of ethics. This record will also indicate who was responsible for reviewing these reports.
a copy of each code of ethics report to the trustees, for six years (the first two years in a readily accessible place).
a record of any decision, and the reasons supporting the decision, to approve the acquisition by an Investment Access person of initial public offering securities or private placement securities, for six years.
Appendix F: Chief Compliance Officers
Entity | Chief Compliance Officer | |
| ||
John Hancock Advisers, LLC | Frank Knox | |
| ||
MFC Global Investment Management (U.S.), LLC | Frank Knox | |
| ||
Each open-end and closed-end fund advised | Frank Knox | |
by John Hancock Advisers, LLC | ||
| ||
John Hancock Funds, LLC | Michael Mahoney | |
|
JOHN HANCOCK
FUNDS |
GOVERNANCE COMMITTEE CHARTER
A. Composition. The Governance Committee shall be composed entirely of Trustees who are "independent" as defined in the rules of the New York Stock Exchange ("NYSE") and the NASDAQ Stock Market, Inc. ("NASDAQ") or any other exchange, as applicable, and are not "interested persons" as defined in the Investment Company Act of 1940 of any of the funds, or of any fund's investment adviser or principal underwriter (the "Independent Trustees") who are designated for membership from time to time by the Board of Trustees. The Chairman of the Board shall be a member of the Governance Committee.
B. Overview. The overall charter of the Governance Committee is to make recommendations to the Board on issues related to corporate governance applicable to the Independent Trustees and to the composition and operation of the Board, and to assume duties, responsibilities and functions to recommend nominees to the Board, together with such additional duties, responsibilities and functions as are delegated to it from time to time.
C. Specific Responsibilities. The Governance Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall deem necessary or appropriate:
1. Except where the funds are legally required to nominate individuals recommended by others, to recommend to the Board of Trustees individuals for nomination to serve as Trustees.
2. To consider, as it deems necessary or appropriate, the criteria for persons to fill existing or newly created Trustee vacancies. The Governance Committee shall use the criteria and principles set forth in Annex A to guide its Trustee selection process.
3. To consider and recommend the amount of compensation to be paid by the funds to the Independent Trustees, including incremental amounts, if any, payable to Committee Chairmen, and to address compensation-related matters.
4. To consider and recommend the duties and compensation of the Chairman of the Board.
5. To consider and recommend changes to the Board regarding the size, structure, and composition of the Board.
6. To evaluate, from time to time, the retirement policies for the Independent Trustees.
7. To develop and recommend to the Board guidelines for corporate governance ("Corporate Governance Guidelines") for the funds that take into account the rules of the NYSE and any applicable law or regulation, and to periodically review and assess the Corporate Governance Guidelines and recommend any proposed changes to the Board for approval.
8. To monitor all expenditures of the Board or the Committees or the Independent Trustees not otherwise incurred and/or monitored by a particular Committee, including, but not limited to: legal, consulting, and D&O insurance costs; association dues, including Investment Company Institute membership dues; meeting expenditures and policies relating to
reimbursement of travel expenses and expenses associated with offsite meetings; expenses associated with Trustee attendance at educational or informational conferences; and publication expenses.
9. To consider, evaluate and make recommendations and necessary findings regarding independent legal counsel and any other advisers, experts or consultants, that may be engaged by the Board of Trustees, by the Trustees who are not "interested persons" as defined in the Investment Company Act of 1940 of any of the funds or any fund's investment adviser or principal underwriter, or by the Governance Committee, from time to time, other than as may be engaged directly by another Committee.
10. To periodically review the Board's committee structure and the charters of the Board's committees, and recommend to the Board of Trustees changes to the committee structure and charters as it deems appropriate.
11. To coordinate and administer an annual self-evaluation of the Board, which will include, at a minimum, a review of its effectiveness in overseeing the number of funds in the fund complex and the effectiveness of its committee structure.
12. To report its activities to Board of Trustees and to make such recommendations with respect to the matters described above and other matters as the Governance Committee may deem necessary or appropriate.
D. Additional Responsibilities. The Committee will also perform other tasks assigned to it from time to time by the Chairman of the Board or by the Board of Trustees, and will report findings and recommendations to the Board of Trustees, as appropriate.
E. Governance. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, and making reports to the Board of Trustees, as appropriate.
F. Miscellaneous. The Committee shall meet as often as it deems appropriate, with or without management, as circumstances require. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain special counsel and other advisers, experts or consultants, at the funds' expense, as it determines necessary to carry out its duties. The Committee shall have direct access to such officers of and service providers to the funds as it deems desirable.
G. Review. The Committee shall review this Charter periodically and recommend such changes to the Board of Trustees as it deems desirable.
ANNEX A General Criteria |
1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards.
2. Nominees should have demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the funds and should be willing and able to contribute positively to the decision-making process of the funds.
3. Nominees should have a commitment to understand the funds, and the responsibilities of a trustee/director of an investment company and to regularly attend and participate in meetings of the Board and its committees.
4. Nominees should have the ability to understand the sometimes conflicting interests of the various constituencies of the funds, including shareholders and the management company, and to act in the interests of all shareholders.
5. Nominees should not have, nor appear to have, a conflict of interest that would impair their ability to represent the interests of all the shareholders and to fulfill the responsibilities of a director/trustee.
Application of Criteria to Existing Trustees
The renomination of existing Trustees should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above. In addition, the Governance Committee shall consider the existing Trustee's performance on the Board and any committee.
Review of Shareholder Nominations |
Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934 in order to be considered by the Governance Committee. In evaluating a nominee recommended by a shareholder, the Governance Committee, in addition to the criteria discussed above, may consider the objectives of the shareholder in submitting that nomination and whether such objectives are consistent with the interests of all shareholders. If the Board determines to include a shareholder's candidate among the slate of its designated nominees, the candidate's name will be placed on the funds' proxy card. If the Board determines not to include such candidate among its designated nominees, and the shareholder has satisfied the requirements of Rule 14a-8, the shareholder's candidate will be treated as a nominee of the shareholder who originally nominated the candidate. In that case, the candidate will not be named on the proxy card distributed with the funds' proxy statement.
As long as an existing Independent Trustee continues, in the opinion of the Governance Committee, to satisfy the criteria listed above, the Committee generally would favor the re-nomination of an existing Trustee rather than a new candidate. Consequently, while the Governance Committee will consider nominees recommended by shareholders to serve as trustees, the Governance Committee may only act upon such recommendations if there is a vacancy on the Board, or the Governance Committee determines that the selection of a new or additional Trustee is in the best interests of the fund. In the event that a vacancy arises or a change in Board membership is determined to be advisable, the Governance Committee will, in addition to any shareholder recommendations, consider candidates identified by other means, including candidates proposed by members of the Governance Committee. The Governance Committee may retain a consultant to assist the Committee in a search for a qualified candidate.
JOHN HANCOCK FUNDS
PROXY VOTING POLICIES
John Hancock Advisers, LLC MFC Global Investment Management (U.S.), LLC (formerly known as Sovereign Asset Management LLC) Proxy Voting Guidelines |
We believe in placing our clients' interests first. Before we invest in a particular stock or bond, our team of portfolio managers and research analysts look closely at the company by examining its earnings history, its management team and its place in the market. Once we invest, we monitor all our clients' holdings, to ensure that they maintain their potential to produce results for investors.
As part of our active investment management strategy, we keep a close eye on each company we invest in. Routinely, companies issue proxies by which they ask investors like us to vote for or against a change, such as a new management team, a new business procedure or an acquisition. We base our decisions on how to vote these proxies with the goal of maximizing the value of our clients' investments.
Currently, John Hancock Advisers, LLC ("JHA") and MFC Global Investment Management (U.S.), LLC ("MFC") manage open-end funds, closed-end funds and portfolios for institutions and high-net-worth investors. Occasionally, we utilize the expertise of an outside asset manager by means of a subadvisory agreement. In all cases, JHA or MFC makes the final decision as to how to vote our clients' proxies. There is one exception, however, and that pertains to our international accounts. The investment management team for international investments votes the proxies for the accounts they manage. Unless voting is specifically retained by the named fiduciary of the client, JHA and MFC will vote proxies for ERISA clients.
In order to ensure a consistent, balanced approach across all our investment teams, we have established a proxy oversight group comprised of associates from our investment, operations and legal teams. The group has developed a set of policies and procedures that detail the standards for how JHA and MFC vote proxies. The guidelines of JHA have been approved and adopted by each fund client's board of trustees who have voted to delegate proxy voting authority to their investment adviser, JHA. JHA and MFC's other clients have granted us the authority to vote proxies in our advisory contracts or comparable documents.
JHA and MFC have hired a third party proxy voting service which has been instructed to vote all proxies in accordance with our established guidelines except as otherwise instructed.
In evaluating proxy issues, our proxy oversight group may consider information
from many sources, including the portfolio manager, management of a company presenting a proposal, shareholder groups, and independent proxy research services. Proxies for securities on loan through securities lending programs will generally not be voted, however a decision may be made to recall a security for voting purposes if the issue is material.
Below are the guidelines we adhere to when voting proxies. Please keep in mind that these are purely guidelines. Our actual votes will be driven by the particular circumstances of each proxy. From time to time votes may ultimately be cast on a case-by-case basis, taking into consideration relevant facts and circumstances at the time of the vote. Decisions on these matters (case-by-case, abstention, recall) will normally be made by a portfolio manager under the supervision of the chief investment officer and the proxy oversight group. We may abstain from voting a proxy if we conclude that the effect on our clients' economic interests or the value of the portfolio holding is indeterminable or insignificant.
Proxy Voting Guidelines
Board of Directors
We believe good corporate governance evolves from an independent board.
We support the election of uncontested director nominees, but will withhold our vote for any nominee attending less than 75% of the board and committee meetings during the previous fiscal year. Contested elections will be considered on a case by case basis by the proxy oversight group, taking into account the nominee's qualifications. We will support management's ability to set the size of the board of directors and to fill vacancies without shareholder approval but will not support a board that has fewer than 3 directors or allows for the removal of a director without cause.
We will support declassification of a board and block efforts to adopt a classified board structure. This structure typically divides the board into classes with each class serving a staggered term.
In addition, we support proposals for board indemnification and limitation of director liability, as long as they are consistent with corporate law and shareholders' interests. We believe that this is necessary to attract qualified board members.
Selection of Auditors
We believe an independent audit committee can best determine an auditor's qualifications.
We will vote for management proposals to ratify the board's selection of auditors, and for proposals to increase the independence of audit committees.
Capitalization
We will vote for a proposal to increase or decrease authorized common or preferred stock and the issuance of common stock, but will vote against a proposal to issue or convert preferred or multiple classes of stock if the board has unlimited rights to set the terms and conditions of the shares, or if the shares have voting rights inferior or superior to those of other shareholders.
In addition, we will support a management proposal to: create or restore preemptive rights; approve a stock repurchase program; approve a stock split or reverse stock split; and, approve the issuance or exercise of stock warrants
Acquisitions, mergers and corporate restructuring
Proposals to merge with or acquire another company will be voted on a case-by-case basis, as will proposals for recapitalization, restructuring, leveraged buyout, sale of assets, bankruptcy or liquidation. We will vote against a reincorporation proposal if it would reduce shareholder rights. We will vote against a management proposal to ratify or adopt a poison pill or to establish a supermajority voting provision to approve a merger or other business combination. We would however support a management proposal to opt out of a state takeover statutory provision, to spin-off certain operations or divisions and to establish a fair price provision.
Corporate Structure and Shareholder Rights
In general, we support proposals that foster good corporate governance procedures and that provide shareholders with voting power equal to their equity interest in the company.
To preserve shareholder rights, we will vote against a management proposal to restrict shareholders' right to: call a special meeting and to eliminate a shareholders' right to act by written consent. In addition, we will not support a management proposal to adopt a supermajority vote requirement to change certain by-law or charter provisions or a non-technical amendment to by-laws or a charter that reduces shareholder rights.
Equity-based compensation
Equity-based compensation is designed to attract, retain and motivate talented executives and independent directors, but should not be so significant as to materially dilute shareholders' interests.
We will vote against the adoption or amendment of a stock option plan if the:
plan dilution is more than 10% of outstanding common stock,
plan allows for non-qualified options to be priced at less than 85% of the fair market value on the grant date,
company allows or has allowed the re-pricing or replacement of underwater options in the past fiscal year (or the exchange of underwater options).
With respect to the adoption or amendment of employee stock purchase plans or a stock award plan, we will vote against management if:
the plan allows stock to be purchased at less than 85% of fair market value;
this plan dilutes outstanding common equity greater than 10%;
all stock purchase plans, including the proposed plan, exceed 15% of outstanding common equity.
Other Business
For routine business matters which are the subject of many proxy related questions, we will vote with management proposals to:
change the company name;
approve other business;
adjourn meetings;
make technical amendments to the by-laws or charters;
approve financial statements;
approve an employment agreement or contract.
Shareholder Proposals
Shareholders are permitted per SEC regulations to submit proposals for inclusion in a company's proxy statement. We will generally vote against shareholder proposals and in accordance with the recommendation of management except as
follows where we will vote for proposals:;
calling for shareholder ratification of auditors;
calling for auditors to attend annual meetings;
seeking to increase board independence;
requiring minimum stock ownership by directors;
seeking to create a nominating committee or to increase the independence of the nominating committee;
seeking to increase the independence of the audit committee.
Corporate and social policy issues
We believe that "ordinary business matters" are primarily the responsibility of management and should be approved solely by the corporation's board of directors.
Proposals in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices. We generally vote against business practice proposals and abstain on social policy issues, though we may make exceptions in certain instances where we believe a proposal has substantial economic implications.
John Hancock Advisers,
LLC MFC Global Investment Management (U.S.), LLC (formerly known as Sovereign Asset Management LLC) Proxy Voting Procedures |
The role of the proxy voting service
John Hancock Advisers, LLC ("JHA") and MFC Global Investment Management (U.S.), LLC ("MFC") have hired a proxy voting service to assist with the voting of client proxies. The proxy service coordinates with client custodians to ensure that proxies are received for securities held in client accounts and acted on in a timely manner. The proxy service votes all proxies received in accordance with the proxy voting guidelines established and adopted by JHA and MFC. When it is unclear how to apply a particular proxy voting guideline or when a particular proposal is not covered by the guidelines, the proxy voting service will contact the proxy oversight group coordinator for a resolution.
The role of the proxy oversight group and coordinator
The coordinator will interact directly with the proxy voting service to resolve any issues the proxy voting service brings to the attention of JHA or MFC. When a question arises regarding how a proxy should be voted the coordinator contacts the firm's investment professionals and the proxy oversight group for a resolution. In addition the coordinator ensures that the proxy voting service receives responses in a timely manner. Also, the coordinator is responsible for identifying whether, when a voting issue arises, there is a potential conflict of interest situation and then escalating the issue to the firm's Executive Committee. For securities out on loan as part of a securities lending program, if a decision is made to vote a proxy, the coordinator will manage the return/recall of the securities so the proxy can be voted.
The role of mutual fund trustees |
The boards of trustees of our mutual fund clients have reviewed and adopted the proxy voting guidelines of the funds' investment adviser, JHA. The trustees will periodically review the proxy voting guidelines and suggest changes they deem advisable.
Conflicts of interest |
Conflicts of interest are resolved in the best interest of clients.
With respect to potential conflicts of interest, proxies will be voted in accordance with JHA's or MFC's predetermined policies. If application of the predetermined policy is unclear or does not address a particular proposal, a special internal review by the JHA Executive Committee or MFC Executive Committee will determine the vote. After voting, a report will be made to the client (in the case of an investment company, to the fund's board of trustees), if requested. An example of a conflict of interest created with respect to a proxy solicitation is when JHA or MFC must vote the proxies of companies that they provide investment advice to or are currently seeking to provide investment advice to, such as to pension plans.
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