UNITED STATES
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)
101 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-375-1513
Date of fiscal year end: October 31
Date of reporting period: April 30, 2005
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Growth
Trends Fund
4.30.2005
Semiannual Report
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of James A. Shepherdson, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 15
For more information
page 29
Dear Fellow Shareholders,
After advancing for a second straight year in 2004, the stock market
pulled back in the first four months of 2005. For much of 2004 the market
had been in the doldrums as investors fretted about rising oil prices,
higher interest rates, the war in Iraq and a closely contested
presidential race. But the year ended on a high note with a sharp rally
sparked by a definitive end to the U.S. presidential election and
moderating oil prices.
Investors were brought back down to earth in January, however, as the
market declined in three of the four weeks and produced negative results
for the month in a broad-based move downward. Rising oil prices and
interest rates, and concerns about less robust corporate earnings growth
were among the culprits that kept investors on the sidelines. Investors
began to re-enter the market in February, reversing January's decline. But
as the month progressed into March and April investors again grew
concerned about further spikes in oil prices and rising interest rates. As
a result, the first four months of 2005 ended with the major indexes in
the red. By the end of April, the Dow Jones Industrial Average had
returned -4.81%, the S&P 500 Index returned -4.00%, while the Nasdaq
Composite Index fell by 11.67%. Bonds performed slightly better, managing
to produce positive results, with the Lehman Brothers Aggregate Bond Index
returning 0.87%.
In October, you may recall we requested your vote on a proposal regarding
the election of your fund's Board of Trustees. We are pleased to report
that shareholders overwhelmingly approved the proposal, which became
effective January 1, 2005. As a result, all open-end John Hancock funds
now have the same Board of Trustees, comprised of ten members -- nine of
them, including the Chairman, are independent Trustees with no direct or
indirect interest in John Hancock Advisers, LLC, your fund's investment
adviser. We believe this move is a way to improve the effectiveness of the
Trustees' oversight of the funds, and we are grateful for your support.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2005. 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 stock market produced modest results, as rising interest rates and
surging oil prices took the wind out of the market's sails in the first
four months of 2005.
* Of the Fund's three sectors, health care fared the best, outperforming
the market, while financials were flat and technology was negative.
* Because of the Fund's mandate regarding sectors, it was unable to
participate in the good results in the industrial and energy sectors.
[Bar chart with heading "John Hancock Growth Trends Fund." Under the
heading is a note that reads "Fund performance for the six months ended
April 30, 2005." The chart is scaled in increments of 1% with -1% at the
bottom and 1% at the top. The first bar represents the -0.18% total return
for Class A. The second bar represents the -0.54% total return for Class B.
The third bar represents the -0.54% total return for Class C. A note below
the chart reads "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 Health Care Technology
8.9% State Street Corp. 6.2% Celgene 18.2% Microsoft
8.4% American Express Co. 5.3% Abbott Laboratories 11.0% IBM
7.7% Citigroup 5.0% Gilead Sciences 9.5% Cisco Systems
7.3% Goldman Sachs 4.5% Shire Pharmaceuticals 7.1% Intel
6.7% Wells Fargo 4.3% Medtronic 5.8% Applied Materials
As a percentage of Financial Services, Health Care and Technology net
assets, respectively, on 4-30-05.
1
MANAGERS'
REPORT
JOHN HANCOCK
Growth Trends Fund
Stocks turned in only modestly positive results during the six month
period that ended April 30, 2005. The market posted a strong rally in the
first two months of the period, fueled by solid economic growth and low
inflation. But from January 2005 through the end of April, stocks declined
in response to concerns about potentially slowing economic conditions,
higher inflation and the skyrocketing price of oil. Against that backdrop,
John Hancock Growth Trends Fund's Class A, Class B and Class C shares
posted total returns of -0.18%, -0.54% and -0.54%, respectively, at net
asset value. That compared with the 3.00% return of the average multi-cap
core fund, according to Lipper, Inc.1
The Fund lagged its Lipper peer group average because our mandate to
invest one third of the Fund's assets in each of three sectors -- health
care, technology and financials -- prevented us from participating in the
stronger-performing energy sector and naturally positioned us to more
fully feel the effects of the lagging technology sector.
"Financial stocks were essentially
flat during the period, lagging the
overall market primarily
due to the rising interest rate
environment..."
FINANCIALS By James K. Schmidt, CFA
Financial stocks were essentially flat during the period, lagging the
overall market primarily due to the rising interest rate environment and
by a flattening yield curve, as short-term rates rose faster than those at
the longer end. Worries about a squeeze on mortgage companies' and banks'
net interest margins put downward pressure on their stocks.
Investment banks and other market- sensitive companies fared better with
the market's late-year rally in 2004 and heightened underwriting and
merger and acquisition activity. That boosted the stocks of Goldman Sachs
and Lehman Brothers -- two of our better performers. Life and health
insurance companies also turned in solid results because they were viewed
as safe havens and had no taint of scandal.
2
This period was unusual in that it was characterized by a wide divergence
in financial stocks' performance and significant underperformance from
some individual companies. Names in this category were the financial
portfolio's and the Fund's worst performers, including American
International Group, which had numerous accounting issues at the same time
it was named in a bid-rigging investigation launched by New York Attorney
General Eliot Spitzer. Another was Fannie Mae, which continued to deal
with accounting issues. Other detractors had earnings disappointments or
lowered guidance on future earnings. This group included Fund holdings
Ambac, MBNA, Bank of New York, Fifth Third Bancorp. and JPMorgan Chase.
During the period we reduced our stake in bank stocks on the belief that
their valuations were stretched, and this underweighting served us well,
as banks were hit by the higher rates and flat yield curve plus a near
dry-up in mergers. We also increased our exposure to the market-sensitive
investment bankers and asset managers, which turned in strong results.
We remain optimistic about the prospects for financial stocks. Despite a
difficult time recently, fundamentals remain sound and the trend of
consolidation of U.S. banks remains intact. We continue to favor the
larger-cap names as their valuations are more attractive after lagging the
small caps for several years.
HEALTH CARE By Robert C. Junkin, CPA
In April 2005, Robert Junkin, a vice president and portfolio manager of
John Hancock Advisers, assumed portfolio management responsibility for the
health care portfolio, replacing Linda Miller. Mr. Junkin also manages
John Hancock Health Sciences Fund and John Hancock Large Cap Equity Fund.
"Despite some regulatory and legal
headwinds, health care stocks out
paced the broader stock market..."
Despite some regulatory and legal headwinds, health care stocks outpaced
the broader stock market during the period. Some of our biotech holdings
turned out to be some of the best performers in the health care portion of
the Fund. A good example was Genentech, which reported strong profit and
revenue growth, as sales of its new cancer drug Avastin continued to
expand. Celegene's stock price rose
3
in response to strong sales of its drug Thalomid, which is approved to
treat leprosy, but is most often used as a cancer treatment. Hospital
operator Triad Hospitals scored well as it continued to produce strong
revenue and earnings growth. Managed care company WellPoint Inc. also did
well, benefiting from rising earnings generated partly by higher
health-care premium hikes they passed onto their customers amid moderating
medical cost trends.
[Table at top left-hand side of page entitled "Sector distribution 2." The
first listing is Financials - 31%, the second is Health care - 38% and the
third is Information technology - 29%.]
Among our worst performers were other biotech companies, including Biogen
Idec, which suffered losses in response to news that the company was
suspending sales of its multiple sclerosis treatment. Boston Scientific
also disappointed, primarily due to concerns that it could lose sales of
its cardiovascular stent to rival Johnson & Johnson.
In our view, health care stocks may continue to be subject to the risks of
increased regulatory and legal scrutiny throughout 2005; however, we
remain quite optimistic about them over the long term because we believe
that demographics and product innovation continue to be favorable to the
industry.
[Pie chart at just below middle of page with heading "Portfolio allocation
2." The chart is divided into two sections (from top to right): Common
stocks 98% and Short-term investments & other 2%. ]
TECHNOLOGY By Anurag Pandit, CFA
After soaring in the final two months of 2004, technology stocks suffered
steep declines in the first four months of 2005, resulting in
disappointing returns for the sector during the period. Our focus on
large-cap stocks toward the end of the period provided some protection in
a tough market for tech stocks. While large-cap tech stocks have done
relatively well recently, they were among the sector's laggards in the
final two months of 2004 when smaller cap and speculative tech issues
posted their strongest gains for the period.
4
[Table at top of page entitled "Scorecard." The header for the left column
is "Investment" and the header for the right column is "Period's
performance...and what's behind the numbers." The first listing is Goldman
Sachs followed by an up arrow with the phrase "Strong merger and
acquisition activity." The second listing is Genentech followed by an up
arrow with the phrase "Investors cheer positive news on company's cancer
drugs." The third listing is IBM followed by a down arrow with the phrase
"Earnings disappointment prompts stock sell-off."]
Throughout the period, we continued to emphasize segments of the tech
sector that stood to gain the most from a rebound in corporate spending on
technology. As a result, we focused on software companies, which posted
good results during the period. For example, our best performer was
Digital Insight, which makes software for the expanding business of
Internet banking. Another winner was software company Macromedia, which
performed well in response to stronger orders for its software for mobile
devices, which convinced investors that the company had strong growth
prospects over the next several years. In contrast, IBM disappointed due
to lower-than-expected earnings. The stock price of Macrovision, maker of
piracy protection software, also declined because investors feared its
anticipated growth rate would not be realized in the near term.
"After soaring in the final two months
of 2004, technology stocks suffered
steep declines in the first four months
of 2005..."
Overall, we believe that the outlook for tech stocks over the next year or
so is neutral. We see no "killer application" on the near-term horizon
that will substantially boost corporate and consumer tech spending. That
said, there are a number of subsectors within technology that we believe
continue to offer good prospects for growth, and we will continue to
emphasize those.
This commentary reflects the views of the managers through the end of the
Fund's 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.
1 Figures from Lipper, 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 4-30-05.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2005
Class A Class B Class C
Inception date 9-22-00 9-22-00 9-22-00
Average annual returns with maximum sales charge (POP)
One year -5.35% -6.03% -2.07%
Since inception -12.59 -12.63 -12.25
Cumulative total returns with maximum sales charge (POP)
Six months -5.19 -5.52 -1.54
One year -5.35 -6.03 -2.07
Since inception -46.16 -46.30 -45.20
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge 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 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 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.
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 Fund's 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 Fund's 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 Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable.
6
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the Standard & Poor's 500 Index.
[Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the Standard & Poor's 500 Index and
is equal to $8,596 as of April 30, 2005. The second line represents the
value of the hypothetical $10,000 investment made in the John Hancock
Growth Trends Fund, before sales charge, and is equal to $5,670 as of April
30, 2005. The third line represents the value of the same hypothetical
investment made in the John Hancock Growth Trends Fund, after sales charge,
and is equal to $5,384 as of April 30, 2005.]
Class B Class C 1
Period beginning 9-22-00 9-22-00
Without sales charge $5,480 $5,480
With maximum sales charge 5,370 5,480
Index 8,596 8,596
Assuming all distributions were reinvested for the period indicated, the
table above shows the value of a $10,000 investment in the Fund's Class B
and Class C shares, respectively, as of April 30, 2005. 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 & Poor's 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 and would be lower if they did.
1 No contingent deferred sales charge applicable.
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 fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on October 31, 2004, with the same
investment held until April 30, 2005.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $998.20 $8.17
Class B 994.60 11.62
Class C 994.60 11.62
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, 2005 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:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each
class's actual expense ratio and an assumed 5% annual return before
expenses (which is not your fund's actual return). It assumes an account
value of $1,000.00 on October 31, 2004, with the same investment held
until April 30, 2005. Look in any other fund shareholder report to find
its hypothetical example and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,016.61 $8.25
Class B 1,013.14 11.73
Class C 1,013.14 11.73
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 Fund's annualized expense ratio of 1.65%,
2.35% and 2.35% 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).
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2005
(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 Fund's cash position,
are listed last.
Issuer Shares Value
Common stocks 97.71% $138,384,643
(Cost $125,015,842)
Application Software 2.03% 2,878,206
Cadence Design Systems, Inc. (I)(L) 112,600 1,576,400
Hyperion Solutions Corp. (I)(L) 16,650 677,156
Intuit, Inc. (I) 15,500 624,650
Asset Management & Custody Banks 6.43% 9,102,543
Bank of New York Co., Inc. (The) 100,000 2,794,000
Franklin Resources, Inc. 8,000 549,440
Legg Mason, Inc. 15,550 1,101,873
Northern Trust Corp. 10,000 450,300
State Street Corp. 91,000 4,206,930
Biotechnology 11.05% 15,653,087
Abgenix, Inc. (I) 150,000 1,045,500
Amgen, Inc. (I) 34,700 2,019,887
Celgene Corp. (I) 90,000 3,411,900
Charles River Laboratories International, Inc. (I) 40,000 1,894,800
Genentech, Inc. (I) 25,000 1,773,500
Gilead Sciences, Inc. (I) 75,000 2,782,500
Lexicon Genetics, Inc. (I) 94,000 411,720
Neurocrine Biosciences, Inc. (I) 43,000 1,503,280
Telik, Inc. (I) 50,000 810,000
Communications Equipment 5.91% 8,365,196
Cisco Systems, Inc. (I) 215,450 3,722,976
Motorola, Inc. 92,659 1,421,389
QUALCOMM, Inc. 42,150 1,470,614
Tekelec (I) 76,300 1,038,443
VeriSign, Inc. (I)(L) 26,900 711,774
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Computer Hardware 3.81% $5,397,983
Hewlett-Packard Co. 52,715 1,079,076
International Business Machines Corp. 56,545 4,318,907
Computer Storage & Peripherals 2.02% 2,861,894
EMC Corp. (I) 132,336 1,736,248
Lexmark International, Inc. (Class A) (I) 16,208 1,125,646
Consumer Finance 3.01% 4,265,225
American Express Co. 75,500 3,978,850
MBNA Corp. 14,500 286,375
Data Processing & Outsourced Services 1.05% 1,487,560
eFunds Corp. (I) 10,900 238,274
First Data Corp. 32,850 1,249,286
Diversified Banks 6.44% 9,127,483
Bank of America Corp. 63,212 2,847,068
Wachovia Corp. 60,875 3,115,583
Wells Fargo & Co. 52,800 3,164,832
Diversified Financial Services 3.80% 5,381,448
Citigroup, Inc. 77,150 3,622,964
JPMorgan Chase & Co. 34,000 1,206,660
National Financial Partners Corp. 2,910 111,278
Wright Express Corp. (I) 26,380 440,546
Health Care Equipment 8.24% 11,676,632
Biomet, Inc. 17,500 677,075
Boston Scientific Corp. (I) 55,000 1,626,900
Hospira, Inc. (I) 55,600 1,865,380
Integra LifeSciences Holdings (I) 25,000 885,750
Kinetic Concepts, Inc. (I) 30,000 1,843,500
Medtronic, Inc. 45,000 2,371,500
Stryker Corp. 11,000 534,050
Varian Medical Systems, Inc. (I) 45,000 1,518,300
Zimmer Holdings, Inc. (I) 4,350 354,177
Health Care Facilities 2.09% 2,961,000
Manor Care, Inc. (I) 35,000 1,167,250
Triad Hospitals, Inc. (I) 35,000 1,793,750
Health Care Services 2.40% 3,396,750
Caremark Rx, Inc. (I) 35,000 1,401,750
WebMD Corp. (I) 210,000 1,995,000
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Issuer Shares Value
Health Care Supplies 0.88% $1,241,600
Alcon, Inc. (Switzerland) 12,800 1,241,600
Insurance Brokers 0.50% 702,450
Willis Group Holdings Ltd. (Bermuda) 21,000 702,450
Internet Software & Services 1.33% 1,878,616
Digital Insight Corp. (I) 89,050 1,787,233
Epicor Software Corp. (I) 8,300 91,383
Investment Banking & Brokerage 4.14% 5,857,975
Goldman Sachs Group, Inc. (The) 32,500 3,470,675
Lehman Brothers Holdings, Inc. 9,000 825,480
Merrill Lynch & Co., Inc. 13,300 717,269
Morgan Stanley 16,050 844,551
Life & Health Insurance 1.14% 1,609,540
AFLAC, Inc. 8,300 337,395
Conseco, Inc. (I) 29,480 567,195
Genworth Financial, Inc. 3,800 106,210
Scottish Re Group Ltd. (Cayman Islands) 25,500 598,740
Managed Health Care 2.62% 3,713,928
Aetna, Inc. 16,000 1,173,920
PacifiCare Health Systems, Inc. (I) 8,300 496,008
WellPoint, Inc. (I) 16,000 2,044,000
Multi-Line Insurance 3.65% 5,165,244
American International Group, Inc. 55,900 2,842,515
Assurant, Inc. 3,250 107,542
Hartford Financial Services Group, Inc. (The) 6,450 466,787
PartnerRe Ltd. (Bermuda) 30,000 1,748,400
Pharmaceuticals 10.30% 14,586,983
Abbot Laboratories 60,000 2,949,600
Cubist Pharmaceuticals, Inc. (I) 125,000 1,131,250
Cypress Bioscience, Inc. (I) 37,085 381,975
IVAX Corp. (I) 44,100 833,490
Johnson & Johnson 25,000 1,715,750
MGI Pharma, Inc. (I) 23,000 507,150
Pfizer, Inc. 60,000 1,630,200
Rigel Pharmaceuticals, Inc. (I) 80,000 1,372,000
Roche Holding AG (Switzerland) 13,000 1,579,168
Shire Pharmaceuticals Group Plc, American Depositary
Receipt (ADR) (United Kingdom) 80,000 2,486,400
See notes to
financial statements.
12
FINANCIAL STATEMENTS
Issuer Shares Value
Property & Casualty Insurance 0.30% $424,497
Ambac Financial Group, Inc. 6,350 424,497
Regional Banks 1.17% 1,664,700
Fifth Third Bancorp. 24,000 1,044,000
M&T Bank Corp. 6,000 620,700
Reinsurance 0.35% 490,232
RenaissanceRe Holdings Ltd. (Bermuda) 10,950 490,232
Semiconductor Equipment 2.11% 2,992,150
Applied Materials, Inc. (L) 153,200 2,278,084
KLA-Tencor Corp. (I)(L) 18,300 714,066
Semiconductors 4.09% 5,794,333
Intel Corp. (L) 117,800 2,770,656
Power Integrations, Inc. (I) 35,800 778,650
Texas Instruments, Inc. (L) 89,945 2,245,027
Specialized Finance 0.21% 302,100
CIT Group, Inc. 7,500 302,100
Systems Software 6.43% 9,108,563
Macrovision Corp. (I) 96,650 1,976,493
Microsoft Corp. 281,900 7,132,070
Thrifts & Mortgage Finance 0.21% 296,725
Fannie Mae 5,500 296,725
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 8.90% $12,606,008
(Cost $12,606,008)
Joint Repurchase Agreement 2.77% 3,921,000
Investment in a joint repurchase agreement transaction
with Bank of America Corp. -- Dated 4-29-05
due 5-2-05 (secured by U.S. Treasury STRIPS
due 11-15-10 thru 8-15-25) 2.85% $3,921 3,921,000
Shares
Cash Equivalents 6.13% 8,685,008
AIM Cash Investment Trust (T) 8,685,008 8,685,008
See notes to
financial statements.
13
Total investments 106.61% $150,990,651
Other assets and liabilities, net (6.61%) ($9,366,061)
Total net assets 100.00% $141,624,590
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of April 30, 2005.
(T) Represents investment of securities lending collateral.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
14
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2005
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
Assets
Investments, at value (cost $137,621,850)
including $8,514,978 of securities loaned $150,990,651
Receivable for investments sold 150,516
Receivable for shares sold 33,861
Dividends and interest receivable 116,826
Other assets 10,840
Total assets 151,302,694
Liabilities
Due to custodian 292,804
Payable for investments purchased 28,813
Payable for shares repurchased 442,842
Payable upon return of securities loaned 8,685,008
Payable to affiliates
Management fees 88,459
Distribution and service fees 11,585
Other 60,861
Other payables and accrued expenses 67,732
Total liabilities 9,678,104
Net assets
Capital paid-in 343,616,531
Accumulated net realized loss on investments
and foreign currency transactions (215,440,745)
Net unrealized appreciation of investments
and translation of assets and liabilities in foreign currencies 13,369,598
Accumulated net investment income 79,206
Net assets $141,624,590
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 ($48,249,140 [DIV] 8,525,836 shares) $5.66
Class B ($69,330,797 [DIV] 12,646,825 shares) $5.48
Class C ($24,044,653 [DIV] 4,386,071 shares) $5.48
Maximum offering price per share
Class A 1 ($5.66 [DIV] 95%) $5.96
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.
15
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2005
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends (net of foreign withholding taxes of $3,056) $1,719,856
Interest 60,653
Securities lending 9,260
Total investment income 1,789,769
Expenses
Investment management fees 807,341
Class A distribution and service fees 81,242
Class B distribution and service fees 395,691
Class C distribution and service fees 140,843
Transfer agent fees 359,940
Printing 43,558
Custodian fees 42,431
Miscellaneous 22,608
Registration and filing fees 17,882
Accounting and legal services fees 16,038
Professional fees 13,052
Interest 7,846
Trustees' fees 2,690
Securities lending fees 444
Total expenses 1,951,606
Less expense reductions (243,919)
Net expenses 1,707,687
Net investment income 82,082
Realized and unrealized gain (loss)
Net realized gain (loss) on
Investments 7,840,278
Foreign currency transactions (458)
Change in net unrealized appreciation (depreciation) of
Investments (7,481,156)
Translation of assets and liabilities in foreign currencies (540)
Net realized and unrealized gain 358,124
Increase in net assets from operations $440,206
1 Semiannual period from 11-1-04 through 4-30-05.
See notes to
financial statements.
16
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's 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
10-31-04 4-30-05 1
Increase (decrease) in net assets
From operations
Net investment income (loss) ($2,179,314) $82,082
Net realized gain 1,013,874 7,839,820
Change in net unrealized
appreciation (depreciation) 6,287,307 (7,481,696)
Increase in net assets
resulting from operations 5,121,867 440,206
From Fund share transactions (44,394,938) (32,807,094)
Net assets
Beginning of period 213,264,549 173,991,478
End of period 2 $173,991,478 $141,624,590
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
2 Includes accumulated net investment income (loss) of ($2,876) and
$79,206, respectively.
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 2
Per share operating performance
Net asset value,
beginning of period $10.00 $9.54 $5.87 $4.49 $5.51 $5.67
Net investment income (loss) 3 0.01 (0.05) (0.05) (0.03) (0.04) 0.02
Net realized and unrealized
gain (loss) on investments (0.47) (3.61) (1.33) 1.05 0.20 (0.03)
Total from
investment operations (0.46) (3.66) (1.38) 1.02 0.16 (0.01)
Less distributions
From net investment income -- (0.01) -- -- -- --
Net asset value, end of period $9.54 $5.87 $4.49 $5.51 $5.67 $5.66
Total return 4,5 (%) (4.60) 6 (38.37) (23.51) 22.72 2.90 (0.18) 6
Ratios and supplemental data
Net assets, end of period
(in millions) $86 $99 $65 $69 $58 $48
Ratio of expenses
to average net assets (%) 1.65 7 1.65 1.65 1.65 1.65 1.65 7
Ratio of adjusted expenses
to average net assets 8 (%) 1.75 7 1.85 1.88 2.02 1.86 1.95 7
Ratio of net investment income (loss)
to average net assets (%) 0.57 7 (0.70) (0.91) (0.64) (0.62) 0.55 7
Portfolio turnover (%) 11 116 68 76 40 18
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 2
Per share operating performance
Net asset value,
beginning of period $10.00 $9.54 $5.83 $4.42 $5.40 $5.51
Net investment loss 3 -- 9 (0.10) (0.09) (0.06) (0.07) -- 9
Net realized and unrealized
gain (loss) on investments (0.46) (3.61) (1.32) 1.04 0.18 (0.03)
Total from
investment operations (0.46) (3.71) (1.41) 0.98 0.11 (0.03)
Net asset value, end of period $9.54 $5.83 $4.42 $5.40 $5.51 $5.48
Total return 4,5 (%) (4.60) 6 (38.89) (24.19) 22.17 2.04 (0.54) 6
Ratios and supplemental data
Net assets, end of period
(in millions) $125 $161 $102 $104 $85 $69
Ratio of expenses
to average net assets (%) 2.34 7 2.35 2.35 2.35 2.35 2.35 7
Ratio of adjusted expenses
to average net assets 8 (%) 2.44 7 2.55 2.58 2.72 2.56 2.65 7
Ratio of net investment loss
to average net assets (%) (0.13) 7 (1.40) (1.61) (1.34) (1.32) (0.13) 7
Portfolio turnover (%) 11 116 68 76 40 18
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 2
Per share operating performance
Net asset value,
beginning of period $10.00 $9.54 $5.83 $4.42 $5.40 $5.51
Net investment loss 3 -- 9 (0.10) (0.09) (0.06) (0.07) -- 9
Net realized and unrealized
gain (loss) on investments (0.46) (3.61) (1.32) 1.04 0.18 (0.03)
Total from
investment operations (0.46) (3.71) (1.41) 0.98 0.11 (0.03)
Net asset value, end of period $9.54 $5.83 $4.42 $5.40 $5.51 $5.48
Total return 4,5 (%) (4.60) 6 (38.89) (24.19) 22.17 2.04 (0.54) 6
Ratios and supplemental data
Net assets, end of period
(in millions) $53 $69 $42 $41 $31 $24
Ratio of expenses
to average net assets (%) 2.34 7 2.35 2.35 2.35 2.35 2.35 7
Ratio of adjusted expenses
to average net assets 8 (%) 2.44 7 2.55 2.58 2.72 2.56 2.65 7
Ratio of net investment loss
to average net assets (%) (0.13) 7 (1.40) (1.61) (1.34) (1.32) (0.11) 7
Portfolio turnover (%) 11 116 68 76 40 18
1 Class A, Class B and Class C shares began operations on 9-22-00.
2 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
3 Based on the average of the shares outstanding.
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 periods shown.
6 Not annualized.
7 Annualized.
8 Does not take into consideration expense reductions during the periods
shown.
9 Less than $0.01 per share.
See notes to
financial statements.
20
NOTES TO
STATEMENTS
Unaudited
Note A
Accounting policies
John Hancock Growth Trends Fund (the "Fund") is a diversified series of
John Hancock Equity Trust, an open-end management investment company
registered under the Investment Company Act of 1940. The investment
objective of the Fund 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 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.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the close 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 AIM Cash Investment Trust 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 Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of John Hancock Financial Services,
Inc., may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the Fund's
behalf. The Adviser is responsible for ensuring that the agreement
21
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.
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 Fund's 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 recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, 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.
Distrib ution 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 syndicated line of credit agreement with various banks. This
agreement enables the Fund to participate, with other funds managed by the
Adviser, in an unsecured line of credit with banks, which permits
borrowings of up to $250 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, 2005.
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, 2005, the Fund
22
loaned securities having a market value of $8,514,978 collateralized by
cash in the amount of $8,685,008. The cash collateral was invested in a
short-term instrument. Securities lending expenses are paid by the Fund to
the Adviser.
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 Fund's 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
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 Fund's 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, 2005.
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 $222,780,511 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 -- $83,769,657, October
31, 2010 -- $87,616,374 and October 31, 2011 -- $51,394,480.
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. Distri bu tions
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
Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted
23
in the United States of America, incorporates estimates made by management
in determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
Note B
Management fee
and transactions with
affiliates and others
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to
the Adviser at an annual rate of 1.00% of the Fund's average daily net
asset value.
The Adviser has agreed to limit the Fund's management fee to 0.75% of the
Fund's average daily net assets, at least until February 28, 2006.
Accordingly, the expense reductions related to management fee limitation
amounted to $201,835 for the period ended April 30, 2005. The Adviser
reserves the right to terminate this limitation in the future.
The Adviser has agreed to limit the Fund's total expenses, excluding
distribution and service fees, to 1.35% of the Fund's average daily net
asset value, on an annual basis, at least until February 28, 2006. There
were no expense reductions related to the total expense limitation for the
period ended April 30, 2005. The Adviser reserves the right to terminate
this limitation in the future.
The Fund has Distribution Plans 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 Investment Company Act of 1940 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% of Class A average daily net asset value and 1.00% of
Class B and Class C average daily net asset value. A maximum of 0.25% of
such payments may be service fees, as defined by the Conduct Rules of the
National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.
Class A shares are assessed up-front sales charges. During the period
ended April 30, 2005, JH Funds received net up-front sales charges of
$35,720 with regard to sales of Class A shares. Of this amount, $5,219 was
retained and used for printing prospectuses, advertising, sales literature
and other purposes, $24,523 was paid as sales commissions to unrelated
broker-dealers and $5,978 was paid as sales commissions to sales personnel
of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance
Company ("JHLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares 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, 2005, CDSCs
received by JH Funds amounted to $243,518 for Class B shares and $1,089
for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of
24
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 class's 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.
Signature Services agreed to voluntarily reduce the Fund's asset-based
portion of the transfer agent fee if the total transfer agent fee exceeds
the Lipper, Inc. median transfer agency fee for comparable mutual funds by
0.05%. Accordingly, the transfer agent expense for Class A, Class B and
Class C shares was reduced by $42,084 for the period ended April 30, 2005.
Signature Services reserves the right to terminate this limitation at any
time.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $16,038. The Fund also paid the Adviser the amount of
$119 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and officer of the Adviser, as well
as affiliated Trustee of the Fund, and is compensated by the Adviser. 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 Compen
sa tion Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the
investments, as well as any unrealized gains or losses. The Deferred
Compensation Plan investments had no impact on the operations of the Fund.
Note C
Fund share transactions
This listing illustrates the number of Fund shares sold and repurchased
during the last two periods, along with the corresponding dollar value.
Year ended 10-31-04 Period ended 4-30-05 1
Shares Amount Shares Amount
Class A shares
Sold 1,425,444 $8,093,762 530,649 $3,088,934
Repurchased (3,710,781) (21,104,062) (2,187,910) (12,763,930)
Net decrease (2,285,337) ($13,010,300) (1,657,261) ($9,674,996)
Class B shares
Sold 1,183,795 $6,544,677 267,701 $1,514,885
Repurchased (4,953,899) (27,393,331) (3,124,408) (17,703,299)
Net decrease (3,770,104) ($20,848,654) (2,856,707) ($16,188,414)
Class C shares
Sold 425,690 $2,372,094 98,389 $557,247
Repurchased (2,324,764) (12,908,078) (1,323,072) (7,500,931)
Net decrease (1,899,074) ($10,535,984) (1,224,683) ($6,943,684)
Net decrease (7,954,515) ($44,394,938) (5,738,651) ($32,807,094)
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
25
Note D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, other than
short-term securities and obligations of the U.S. government, during the
period ended April 30, 2005, aggregated $27,606,256 and $58,640,652,
respectively.
The cost of investments owned on April 30, 2005, including short-term
investments, for federal income tax purposes, was $138,121,904. Gross
unrealized appreciation and depreciation of investments aggregated
$20,513,538 and $7,644,791, respectively, resulting in net unrealized
appreciation of $12,868,747. 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.
Note E
Shareholder meeting
On December 1, 2004, a Special Meeting of shareholders of the Fund was held
to elect nine Trustees effective December 1, 2004.
Proxies covering 29,005,568 shares of beneficial interest were voted at the
meeting.
The shareholders elected the following Trustees to serve until their
respective successors are duly elected and qualified, with the votes
tabulated as follows:
WITHHELD
FOR AUTHORITY
- -----------------------------------------------------------------
James F. Carlin 28,112,871 892,697
Richard P. Chapman, Jr. 28,106,008 899,560
William H. Cunningham 28,116,711 888,857
Ronald R. Dion 28,117,513 888,055
Charles L. Ladner 28,084,683 920,885
Dr. John A. Moore 28,111,292 894,276
Patti McGill Peterson 28,073,112 932,456
Steven R. Pruchansky 28,092,842 912,726
James A. Shepherdson 28,118,087 887,481
26
OUR FAMILY
OF FUNDS
- -------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Greater China Opportunities Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- -------------------------------------------------------
Sector Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- -------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Fund
Investment Grade Bond Fund
Strategic Income Fund
- -------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- -------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
A fund's 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 our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
27
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DELIVERY
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28
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Trustees
Charles L. Ladner, Chairman*
James F. Carlin
Richard P. Chapman, Jr.*
William H. Cunningham
Ronald R. Dion
Dr. John A. Moore*
Patti McGill Peterson*
Steven R. Pruchansky
James A. Shepherdson
Lt. Gen. Norman H. Smith,
USMC (Ret.)
*Members of the Audit Committee
Officers
James A. Shepherdson
President and
Chief Executive Officer
William H. King
Vice President and Treasurer
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
The Fund's investment objective, 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 Fund's Web site at www.jhfunds.com. Please
read the prospectus carefully before investing or sending money.
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 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 Securities and Exchange
Commission's Web site, www.sec.gov.
29
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
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 4/05
6/05
JOHN HANCOCK
Small Cap Fund
4.30.2005
Semiannual Report
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of James A. Shepherdson, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 14
For more information
page 29
Dear Fellow Shareholders,
After advancing for a second straight year in 2004, the stock market
pulled back in the first four months of 2005. For much of 2004 the market
had been in the doldrums as investors fretted about rising oil prices,
higher interest rates, the war in Iraq and a closely contested
presidential race. But the year ended on a high note with a sharp rally
sparked by a definitive end to the U.S. presidential election and
moderating oil prices.
Investors were brought back down to earth in January, however, as the
market declined in three of the four weeks and produced negative results
for the month in a broad-based move downward. Rising oil prices and
interest rates, and concerns about less robust corporate earnings growth
were among the culprits that kept investors on the sidelines. Investors
began to re-enter the market in February, reversing January's decline. But
as the month progressed into March and April investors again grew
concerned about further spikes in oil prices and rising interest rates. As
a result, the first four months of 2005 ended with the major indexes in
the red. By the end of April, the Dow Jones Industrial Average had
returned -4.81%, the S&P 500 Index returned -4.00%, while the Nasdaq
Composite Index fell by 11.67%. Bonds performed slightly better, managing
to produce positive results, with the Lehman Brothers Aggregate Bond Index
returning 0.87%.
In October, you may recall we requested your vote on a proposal regarding
the election of your fund's Board of Trustees. We are pleased to report
that shareholders overwhelmingly approved the proposal, which became
effective January 1, 2005. As a result, all open-end John Hancock funds
now have the same Board of Trustees, comprised of ten members -- nine of
them, including the Chairman, are independent Trustees with no direct or
indirect interest in John Hancock Advisers, LLC, your fund's investment
adviser. We believe this move is a way to improve the effectiveness of the
Trustees' oversight of the funds, and we are grateful for your support.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2005. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
capital appreciation
by normally invest
ing at least 80% of
its assets in equity
securities of small-
capitalization
companies (compa-
nies with market
capitalizations
under $2 billion).
Over the last six months
* The small-cap market's early gains were largely offset by falling share
prices late in the period, as concerns about slowing economic growth and
worsening inflation intensified.
* The Federal Reserve Board hiked short-term interest rates by 0.25% four
times, raising the target federal funds rate to 2.75%.
* Strong stock picking in the health care sector enabled the Fund to
finish ahead of its peer group average and the Russell 2000 Index, while
slightly underperforming the S&P SmallCap 600 Index.
[Bar chart with heading "John Hancock Small Cap Fund." Under the heading is
a note that reads "Fund performance for the six months ended April 30,
2005." The chart is scaled in increments of 10% with -10% at the bottom and
10% at the top. The first bar represents the 2.26% total return for Class
A. The second bar represents the -7.23%* total return for Class B. The
third bar represents the -7.23%* total return for Class C. The fourth bar
represents the -6.96%* total return for Class I. A note below the chart
reads "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
3.8% Gaylord Entertainment Co.
3.7% Cantel Medical Corp.
3.4% Philadelphia Consolidated Holding Corp.
3.3% Hologic, Inc.
3.1% Playtex Products, Inc.
3.0% Placer Sierra Bancshares
2.9% Warnaco Group, Inc. (The)
2.4% Trimble Navigation Ltd.
2.4% Avocent Corp.
2.4% Scottish Re Group Ltd.
As a percentage of net assets on April 30, 2005.
1
BY CHARLES S. GLOVSKY, CFA AND STEPHEN A. LANZENDORF, CFA
MANAGERS'
REPORT
JOHN HANCOCK
Small Cap Fund
On December 3, 2004, Independence Small Cap Portfolio merged into John
Hancock Small Cap Fund. Independence Investment LLC will continue to
manage the Fund under a sub-advisory agreement.
Small-cap stocks ended the period little changed from where they began it,
as initial optimism about the economy, the conclusion of the presidential
election and falling oil prices gave way to concerns about rising interest
rates and a possible return of stagflation -- a condition marked by
sluggish economic growth and high inflation. After rallying in November
and December, the market's advance stalled in the first two months of
2005, and the final two months exhibited a clear downtrend, erasing most
of the prior gains.
"Small-cap stocks ended the
period little changed from where
they began it..."
Heading the list of investors' worries was the price of crude oil, which
touched a new high around $57 per barrel near the beginning of April. For
its part, the Federal Reserve Board raised short-term interest rates four
times, boosting the target federal funds rate to 2.75%. The Fed also
indicated that more hikes were in the cards. Meanwhile, the Commerce
Department's initial reading on first-quarter gross domestic product, a
broad measure of the nation's economic activity, came in at an annual rate
of 3.1%, down substantially from the previous quarter's 3.8% rate.
Large-cap stocks outperformed small-caps, reversing the trend of small-cap
outperformance in evidence for most of the past five years. As investors
became increasingly concerned about a decelerating U.S. economy, they
viewed the greater economic sensitivity of small caps as a liability.
Moreover, after so many quarters of outperformance, small-cap valuations
were no longer cheap. An additional headwind for the Fund was the
underperformance of growth relative to value, which occurred across all
capitalization groups. The growing consensus that the economy might slow
further made defensive, value-oriented stocks more attractive to
investors.
2
Looking at performance
For the six months ended April 30, 2005, John Hancock Small Cap Fund's
Class A shares returned 2.26% at net asset value. By comparison, the
average small-cap core fund returned 1.87%, according to Lipper, Inc. 1
while the Russell 2000 Index finished with a -0.15% return and the
Standard & Poor's SmallCap 600 Index returned 2.58%. From their inception
on December 6, 2004 through April 30, 2005, the Fund's Class B, Class C
and Class I shares posted total returns of -7.23%, -7.23% and -6.96%,
respectively, at net asset value. 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.
[Photos of Charles Glovsky and Stephen Lanzendorf, flush right next to
first paragraph.]
Strategy explained
As is typical for the Fund, stock selection, not sector weightings, was
the primary determinant of relative performance. While we pay attention to
sector weightings, we won't buy a stock unless it passes our quantitative
and fundamentals screens, and meets our requirement of buying only
undervalued stocks of companies with improving fundamentals. We thoroughly
research each stock that passes our rigorous screening process, paying
particular attention to independent, non-management sources of
information, such as customers, suppliers, trade representatives and
competitors. Especially in the small-cap arena, where analyst coverage of
most stocks is less thorough than in the large-cap universe, diligent
research can pay off in the discovery of attractive bargains.
"Health care provided the largest
boost to relative performance..."
Health care adds value
Health care provided the largest boost to relative performance, in large
part due to strong gains by Cantel Medical Corp. and Hologic, Inc. The
former, a provider of a diverse line of medical equipment and supplies,
almost doubled during the period, as the company made an important
acquisition and reported better-than-expected earnings for its fiscal
second quarter ending January 31, 2005. Similarly, Hologic, a maker of
diagnostic and digital imaging systems for medical applications, bettered
earnings estimates for its fiscal second
3
quarter ending March 31, 2005. Robust sales of the company's Selenia
digital mammography system and its bone densitometry equipment drove
Hologic's strong results.
[Table at top left-hand side of page entitled "Sector distribution2." The
first listing is Consumer discretionary - 18%, the second is Information
technology - 16%, the third is Health care - 16%, the fourth is Financials
- - 16%, the fifth is Industrials - 9%, the sixth is Energy - 6%, the seventh
is Materials - 5%, the eighth is Consumer staples - 4%, the ninth is
Utilities - 2% and the tenth is Telecommunication services - 1%.]
In consumer services, the stock of hotel company Gaylord Enter tainment,
which operates the Grand Ole Opry and other facilities catering to large
meeting and event planners, performed well. Among other developments, the
company narrowed its fourth-quarter loss to 22 cents a share from 40 cents
per share the previous year. In consumer non-cyclicals, Playtex turned in
a strong perform ance. We saw value in Playtex Products, Inc. because of
its new management and the company's progress on its restructuring
initiatives.
[Pie chart just below the middle of page with heading "Portfolio
diversification2." The chart is divided into two sections (from top to
right): Common stocks 93% and Short-term investments & other 7%.]
Some disappointments
Retail was the Fund's poorest-performing group both in absolute terms and
compared with the Russell index. The share price of upscale women's
apparel retailer Cache lost ground in April when the company lowered its
estimates for first-quarter sales and earnings, and trimmed forecasts for
all of 2005. Disappointing sales growth also hampered the stock of
specialty retailer Sharper Image Corp.
In the technology sector, the Fund was hurt by its position in Avocent
Corp., a maker of analog and digital switching systems used to manage
multiple servers. The stock faltered, in part, because the company
mispriced one of its new products. In financial services, Dollar Financial
struggled, as the Federal Deposit Insurance Corporation (FDIC) issued new
regulations that investors feared might limit the company's payday lending
activities. We maintained our positions in all of these detractors because
we viewed their problems as short-term and fixable.
4
[Table at top of page entitled "Scorecard." The header for the left column
is "Investment" and the header for the right column is "Period's
performance...and what's behind the numbers." The first listing is Cantel
Medical followed by an up arrow with the phrase "Favorable acquisition
boosts earnings." The second listing is Hologic followed by an up arrow
with the phrase "New digital mammography technology." The third listing is
Cache followed by a down arrow with the phrase "Disappointing sales
growth."]
Outlook
While small-cap stocks have enjoyed strong appreciation during the past
few years and are no longer the bargains they used to be, we believe
valuations are not excessively high and the cycle of outperformance
relative to large caps could continue for a while. We continue to find
promising growth candidates in a variety of sectors, including health care
and technology. The aging U.S. population, improving Medicare
reimbursement rates and healthy increases in equipment spending by
hospitals and physicians are some factors aiding the outlook for health
care stocks. In technology, unpredictable spending for information
technology products and services remains a challenge, leading us to focus
on companies that either have made acquisitions we like or have promising
new product cycles that could serve as a catalyst for the stock. However,
we are open to investment ideas from any sector, provided that a stock
passes our initial screens and its growth prospects are confirmed by
further analysis and our independent information sources.
"We continue to find promising
growth candidates in a variety
of sectors..."
This commentary reflects the views of the portfolio managers through the
end of the Fund's 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.
See the prospectus for the risks of investing in small-cap stocks.
1 Figures from Lipper, 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 4-30-05.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2005
Class A 1 Class B Class C Class I 2
Inception date 12-16-98 12-6-04 12-6-04 12-6-04
Average annual returns with maximum sales charge (POP)
One year 0.03% -- -- --
Five years 7.27 -- -- --
Since inception 9.80 -- -- --
Cumulative total returns with maximum sales charge (POP)
Six months -2.86 -- -- --
One year 0.03 -- -- --
Five years 42.02 -- -- --
Since inception 81.36 -11.86 -8.15 -6.96
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge 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
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 Fund's 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 Fund's 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 Fund's 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 Fund's Class I share
prospectus.
6
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in two separate indexes.
[Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents Standard & Poor's SmallCap 600 Index and
is equal to $19,783 as of April 30, 2005. The second line represents the
value of the hypothetical $10,000 investment made in the John Hancock Small
Cap Fund, before sales charge, and is equal to $19,090 as of April 30,
2005. The third line represents the same value of the hypothetical $10,000
investment made in the John Hancock Small Cap Growth Fund, after sales
charge, and is equal to $18,136 as of April 30, 2005. The fourth line
represents Russell 2000 Index and is equal to $16,135 as of April 30,
2005.]
Class B Class C Class I 1
Period beginning 12-6-04 12-6-04 12-6-04
Without sales charge $9,277 $9,277 $9,304
With maximum sales charge 8,814 9,185 9,304
Index 1 9,112 9,112 9,112
Index 2 9,450 9,450 9,450
Assuming all distributions were reinvested for the period indicated, the
table above shows the value of a $10,000 investment in the Fund's Class B,
Class C and Class I shares, respectively, as of April 30, 2005.
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 & Poor's 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 and would be lower if they did.
1 For certain types of investors as described in the Fund's Class I share
prospectus.
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 fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on October 31, 2004, with the same
investment held until April 30, 2005.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,022.60 $8.39
Class B 2 927.70 8.96
Class C 2 927.70 8.96
Class I 2 930.40 4.22
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, 2005 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:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each
class's actual expense ratio and an assumed 5% annual return before
expenses (which is not your fund's actual return). It assumes an account
value of $1,000.00 on October 31, 2004, with the same investment held
until April 30, 2005. Look in any other fund shareholder report to find
its hypothetical example and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,016.50 $8.37
Class B 2 1,010.60 9.35
Class C 2 1,010.60 9.35
Class I 2 1,015.49 4.40
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 Fund's annualized expense ratio of 1.67%,
2.35%, 2.35% and 1.10% 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).
2 Class B, Class C and Class I shares began operations on 12-6-04. Ending
values and expenses paid during the period are calculated for the period
from 12-6-04 through 4-30-05.
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2005
(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 Fund's cash position,
are listed last.
Issuer Shares Value
Common stocks 93.05% $100,605,630
(Cost $103,762,213)
Apparel Retail 1.92% 2,080,576
Cache, Inc. (I) 185,600 2,080,576
Apparel, Accessories & Luxury Goods 4.75% 5,134,439
Quiksilver, Inc. (I) 71,500 1,969,825
Warnaco Group, Inc. (The) (I) 140,900 3,164,614
Application Software 2.30% 2,489,004
Hyperion Solutions Corp. (I) 61,200 2,489,004
Auto Parts & Equipment 1.17% 1,268,820
LKQ Corp. (I) 63,000 1,268,820
Communications Equipment 2.41% 2,607,018
Avocent Corp. (I) 103,700 2,607,018
Consumer Finance 1.24% 1,341,522
Dollar Financial Corp. (I) 132,300 1,341,522
Diversified Commercial Services 1.95% 2,103,423
Source Interlink Cos., Inc. (I) 200,900 2,103,423
Diversified Metals & Mining 2.06% 2,230,302
Arch Coal, Inc. (L) 50,300 2,230,302
Electronic Equipment Manufacturers 4.44% 4,803,958
Daktronics, Inc. (I) 93,600 1,905,696
Excel Technology, Inc. (I) 78,200 1,641,418
X-Rite, Inc. 121,200 1,256,844
Electronic Manufacturing Services 2.45% 2,643,456
Trimble Navigation Ltd. (I) 76,800 2,643,456
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Health Care Equipment 9.06% $9,789,747
Candela Corp. (I) 245,400 2,223,324
Cantel Medical Corp. (I) 149,700 3,983,517
Hologic, Inc. (I)(L) 100,700 3,582,906
Health Care Facilities 2.23% 2,404,745
LifePoint Hospitals, Inc. (I) 54,100 2,404,745
Health Care Services 2.29% 2,474,160
SFBC International, Inc. (I) 79,300 2,474,160
Health Care Supplies 2.23% 2,405,476
Inverness Medical Innovations, Inc. (I) 102,100 2,405,476
Home Entertainment Software 1.69% 1,828,281
Take-Two Interactive Software, Inc. (I) 77,700 1,828,281
Hotels, Resorts & Cruise Lines 3.76% 4,064,000
Gaylord Entertainment Co. (I) 101,600 4,064,000
Industrial Machinery 1.63% 1,761,228
CLACOR, Inc. 34,800 1,761,228
Integrated Telecommunication Services 0.92% 990,564
Aspect Communications Corp. (I) 116,400 990,564
Internet Software & Services 3.14% 3,397,125
Lionbridge Technologies, Inc. (I) 265,200 1,127,100
Secure Computing Corp. (I) 256,500 2,270,025
Leisure Products 0.96% 1,037,151
Manning (Greg) Auctions, Inc. (I)(L) 107,700 1,037,151
Life & Health Insurance 2.37% 2,564,016
Scottish Re Group Ltd. (Cayman Islands) 109,200 2,564,016
Oil & Gas Equipment & Services 2.08% 2,250,440
Grant Prideco, Inc. (I) 101,600 2,250,440
Oil & Gas Exploration & Production 3.45% 3,732,454
Forest Oil Corp. (I) 55,000 2,119,150
Spinnaker Exploration Co. (I) 50,400 1,613,304
Packaged Foods & Meats 0.96% 1,034,825
Hain Celestial Group, Inc. (The) (I) 58,300 1,034,825
Personal Products 5.30% 5,733,220
Inter Parfums, Inc. (L) 161,100 2,327,895
Playtex Products, Inc. (I)(L) 335,500 3,405,325
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Issuer Shares Value
Property & Casualty Insurance 4.04% $4,369,020
National Interstate Corp. (I) 46,800 709,020
Philadelphia Consolidated Holding Corp. (I) 48,800 3,660,000
Publishing 1.74% 1,882,908
Courier Corp. 38,600 1,882,908
Railroads 3.49% 3,777,760
Genesee & Wyoming, Inc. (Class A)(I) 79,600 1,908,808
RailAmerica, Inc. (I) 181,100 1,868,952
Regional Banks 8.01% 8,656,890
Boston Private Financial Holdings, Inc. 85,500 1,910,070
EuroBancshares, Inc. (Puerto Rico) (I) 115,900 1,629,554
Fidelity Southern Corp. 19,700 311,260
First Community Bancorp. 36,600 1,513,410
Placer Sierra Bancshares 141,800 3,292,596
Specialty Chemicals 3.01% 3,259,082
Arch Chemicals, Inc. 61,300 1,580,314
Cytec Industries, Inc. 36,400 1,678,768
Specialty Stores 2.92% 3,152,622
Cost Plus, Inc. (I)(L) 65,100 1,509,669
Sharper Image Corp. (I)(L) 122,700 1,642,953
Trucking 1.01% 1,097,268
Overnite Corp. 36,600 1,097,268
Water Utilities 2.07% 2,240,130
Aqua America, Inc. (L) 83,900 2,240,130
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 15.01% $16,229,694
(Cost $16,229,694)
Joint Repurchase Agreement 4.93% 5,327,000
Investment in a joint repurchase agreement transaction with
Bank of America Corp. -- Dated 04-29-05 due 05-02-05
(secured by U.S. Treasury STRIPS due 11-15-10 thru 08-15-25) 2.850% $5,327 5,327,000
Cash Equivalents 10.08% 10,902,694
AIM Cash Investment Trust (T) 10,902,694 10,902,694
See notes to
financial statements.
12
FINANCIAL STATEMENTS
Total investments 108.06% $116,835,324
Other assets and liabilities, net (8.06%) ($8,713,443)
Total net assets 100.00% $108,121,881
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of April 30, 2005.
(T) Represents investment of securities lending collateral.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
13
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2005
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
Assets
Investments, at value (cost $119,991,907)
including $10,688,916 of securities loaned $116,835,324
Cash 436
Receivable for shares sold 2,288,903
Dividends and interest receivable 11,040
Receivable from affiliates 42,467
Other assets 28,291
Total assets 119,206,461
Liabilities
Payable for shares repurchased 65,909
Payable upon receipt of securities loaned 10,902,694
Payable to affiliates
Management fees 78,299
Distribution and service fees 4,275
Other 32,766
Other payables and accrued expenses 637
Total liabilities 11,084,580
Net assets
Capital paid-in 111,775,092
Accumulated net realized loss on investments (142,896)
Net unrealized depreciation of investments (3,156,583)
Accumulated net investment loss (353,732)
Net assets $108,121,881
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 ($63,818,937 [DIV] 6,123,636 shares) $10.42
Class B ($5,289,195 [DIV] 508,715 shares) $10.40
Class C ($15,488,072 [DIV] 1,489,515 shares) $10.40
Class I ($23,525,677 [DIV] 2,254,585 shares) $10.43
Maximum offering price per share
Class A 1 ($10.42 [DIV] 95%) $10.97
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.
14
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2005
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends (net of foreign withholding taxes of $324) $81,953
Interest 51,866
Securities lending 4,823
Total investment income 138,642
Expenses
Investment management fees 265,887
Class A distribution and service fees 56,740
Class B distribution and service fees 8,738
Class C distribution and service fees 23,611
Class A, B and C transfer agent fees 76,344
Class I transfer agent fees 2,342
Registration and filing fees 53,351
Custodian fees 14,013
Administration fees 11,302
Professional fees 10,379
Printing 8,246
Accounting and legal services fees 6,708
Miscellaneous 2,081
Trustees' fees 263
Securities lending fees 254
Total expenses 540,259
Less expense reductions (47,885)
Net expenses 492,374
Net investment loss (353,732)
Realized and unrealized gain (loss)
Net realized gain on investments 138,009
Change in net unrealized appreciation (depreciation)
of investments (5,112,754)
Net realized and unrealized loss (4,974,745)
Decrease in net assets from operations ($5,328,477)
1 Semiannual period from 11-1-04 through 4-30-05.
See notes to
financial statements.
15
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's 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
10-31-04 4-30-05 1
Increase (decrease) in net assets
From operations
Net investment loss ($155,042) ($353,732)
Net realized gain 3,645,067 138,009
Change in net unrealized
appreciation (depreciation) (1,085,980) (5,112,754)
Increase (decrease) in net assets
resulting from operations 2,404,045 (5,328,477)
Distributions to shareholders
From net realized gain
Class A (205,033) (3,749,244)
From Fund share transactions 10,117,443 89,174,273
Net assets
Beginning of period 15,708,874 28,025,329
End of period 2 $28,025,329 $108,121,881
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
2 Includes accumulated net investment loss of none and $353,732,
respectively.
See notes to
financial statements.
16
FINANCIAL HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
Period ended 10-31-00 10-31-01 10-31-02 1 10-31-03 10-31-04 4-30-05 2,3
Per share operating performance
Net asset value,
beginning of period $9.44 $14.64 $12.99 $8.22 $10.06 $11.44
Net investment loss 4 (0.12) (0.29) (0.16) (0.05) (0.09) (0.07)
Net realized and unrealized
gain (loss) on investments 5.32 (1.17) 0.36 5 2.22 1.61 0.43
Total from
investment operations 5.20 (1.46) 0.20 2.17 1.52 0.36
Less distributions
From net realized gain -- (0.19) (4.97) (0.33) (0.14) (1.38)
Net asset value, end of period $14.64 $12.99 $8.22 $10.06 $11.44 $10.42
Total return 6,7 (%) 55.08 (9.92) (3.59) 27.41 15.25 2.26 8
Ratios and supplemental data
Net assets, end of period
(in millions) $24 $10 $11 $16 $28 $64
Ratio of expenses
to average net assets (%) 1.39 1.97 2.28 1.18 1.23 1.67 9
Ratio of adjusted expenses
to average net assets 10 (%) 1.49 2.07 2.69 2.60 2.23 1.85 9
Ratio of net investment loss
to average net assets (%) (0.95) (1.54) (1.92) (0.57) (0.80) (1.20) 9
Portfolio turnover (%) 84 65 92 79 129 76
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 4-30-05 3,11
Per share operating performance
Net asset value,
beginning of period $11.21
Net investment loss 4 (0.08)
Net realized and unrealized
loss on investments (0.73)
Total from
investment operations (0.81)
Net asset value, end of period $10.40
Total return 6,7 (%) (7.23) 8
Ratios and supplemental data
Net assets, end of period
(in millions) $5
Ratio of expenses
to average net assets (%) 2.35 9
Ratio of adjusted expenses
to average net assets 10 (%) 2.53 9
Ratio of net investment loss
to average net assets (%) (1.89) 9
Portfolio turnover (%) 76
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 4-30-05 3,11
Per share operating performance
Net asset value,
beginning of period $11.21
Net investment loss 4 (0.08)
Net realized and unrealized
loss on investments (0.73)
Total from
investment operations (0.81)
Net asset value, end of period $10.40
Total return 6,7 (%) (7.23) 8
Ratios and supplemental data
Net assets, end of period
(in millions) $15
Ratio of expenses
to average net assets (%) 2.35 9
Ratio of adjusted expenses
to average net assets 10 (%) 2.53 9
Ratio of net investment loss
to average net assets (%) (1.90) 9
Portfolio turnover (%) 76
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
CLASS I SHARES
Period ended 4-30-05 3,11
Per share operating performance
Net asset value,
beginning of period $11.21
Net investment loss 4 (0.03)
Net realized and unrealized
loss on investments (0.75)
Total from
investment operations (0.78)
Net asset value, end of period $10.43
Total return 6,7 (%) (6.96) 8
Ratios and supplemental data
Net assets, end of period
(in millions) $24
Ratio of expenses
to average net assets (%) 1.10 9
Ratio of adjusted expenses
to average net assets 10 (%) 1.28 9
Ratio of net investment loss
to average net assets (%) (0.68) 9
Portfolio turnover (%) 76
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 rom 11-1-04 through 4-30-05. 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 Fund's 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.
20
NOTES TO
STATEMENTS
Unaudited
Note A
Accounting policies
John Hancock Small Cap Fund (the "Fund") is a diversified series of John
Hancock Equity Trust, an open-end management investment company registered
under the Investment Company Act of 1940. The investment objective of the
Fund 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 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.
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 Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at fair
value as determined in good faith in accordance with procedures approved
by the Trustees. Short-term debt investments which have a remaining
maturity of 60 days or less may be valued at amortized cost, which
approximates market value. Investments in AIM Cash Investment Trust are
valued at net asset value each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of John Hancock Financial Services,
Inc., may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the Fund's
behalf. The Adviser is responsible
21
for ensuring that the agreement is fully collateralized at all times.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
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. Distri
bution 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 syndicated line of credit agreement with various banks. This
agreement enables the Fund to participate, with other funds managed by the
Adviser, in an unsecured line of credit with banks, which permits
borrowings of up to $250 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, 2005.
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, 2005, the Fund loaned securities having a
market value of $10,688,916 collateralized by cash in the amount of $
10,902,694. The cash collateral was invested in a short-term instrument.
Security lending expenses are paid by the Fund to the Adviser.
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.
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. During the year
ended October 31, 2004, the tax character of distributions paid was as
follows: long-term capital gain of $205,033. 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
22
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
Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of America,
incorporates estimates made by management in determining the reported
amount of assets, liabilities, revenues and expenses of the Fund. Actual
results could differ from these estimates.
Note B
Management fee and
transactions with
affiliates and others
The Fund 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 0.90% of the Fund's average daily net
asset value. The Adviser has a subadvisory agreement with Inde pendence
Investments, LLC ("Independence"). The Fund is not responsible for payment
of the subadvisory fees. Prior to December 3, 2004, Independence provided
the Fund with investment management services, for which the Fund paid a
fee at an annual rate of 0.85% of the Fund's average daily net asset
value.
Effective December 3, 2004, the Adviser has agreed to limit the Fund's
total expenses, excluding distribution and service fees, and transfer
agent fees, to 1.05% of the Fund's average daily net asset value, with
respect to Class A, Class B and Class C shares, on an annual basis, Class
A total expenses to 1.65% of Class A average daily net asset value, and
Class I total expenses to 1.10% of Class I average net asset value, at
least until February 28, 2006. Prior to December 3, 2004, Independence had
agreed to limit the Fund's total expenses to 1.85% of the Fund's average
daily net asset value. Accordingly, the expense reductions related to the
Fund's total expense limitations amounted to $47,885 for the period ended
April 30, 2005. The Adviser reserves the right to terminate this
limitation in the future.
The Fund has Distribution Plans 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 Investment Company Act of 1940, 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% of Class A average daily net asset value and 1.00% of
Class B and Class C average daily net asset value. A maximum of 0.25% of
such payments may be service fees, as defined by the Conduct Rules of the
National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances. Prior to December 3, 2004, SEI Investments
Distribution Co. was the distributor for the Fund and received no
compensation for its distribution services.
Class A shares are assessed up-front sales charges. During the period
ended April 30, 2005, JH Funds received net up-front sales charges of
$391,787 with regard to sales of Class A shares. Of this amount, $60,777
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $327,267 was paid as sales commissions to
unrelated broker-dealers and $3,743 was paid as sales commissions to sales
personnel of Signator Investors, Inc. ("Signator
23
Investors"), a related broker-dealer. The Adviser's indirect parent, John
Hancock Life Insur ance 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, 2005, CDSCs
received by JH Funds amounted to $1,445 for Class B shares and $1,066 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 class's 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. The Adviser has agreed
to limit transfer agent fees on Class A, Class B and Class C shares to
0.30% of each class's average daily net asset value, at least until
February 28, 2006. There were no transfer agent fee reductions during the
period ended April 30, 2005. Signature Services has also agreed to
voluntarily reduce the Fund's asset-based portion of the transfer agent
fee if the total transfer agent fee exceeds the Lipper, Inc. median
transfer agency fee for comparable mutual funds by 0.05%. Signature
Services reserves the right to terminate these limitations in the future.
Prior to December 3, 2004, DST Systems, Inc. served as the Fund's transfer
agent.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $6,708. The Fund also paid the Adviser the amount of
$1,911 for certain publishing services, included in the printing fees.
Prior to December 3, 2004, SEI Investments Global Funds Services served as
administrator of the Fund and was paid a fee of 0.65% of the Fund's
average daily net assets, which amounted to $11,302 during the period from
October 31, 2004 to December 3, 2004.
Mr. James A. Shepherdson is a director and officer of the Adviser, as well
as affiliated Trustee of the Fund, and is compensated by the Adviser. 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 Compen
sation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the
investments, as well as any unrealized gains or losses. The Deferred
Compensation Plan investments had no impact on the operations of the Fund.
24
Note C
Fund share transactions
This listing illustrates the number of Fund's shares sold, reinvested and
repurchased during the last two periods, along with the corresponding
dollar value.
Year ended 10-31-04 Period ended 4-30-05 1
Shares Amount Shares Amount
Class A shares
Sold 1,421,739 $15,880,583 4,628,018 $52,004,998
Distributions reinvested 20,274 204,967 -- --
Repurchased (553,670) (5,968,107) (953,725) (10,890,957)
Net increase 888,343 $10,117,443 3,674,293 $41,114,041
Class B shares 2
Sold -- -- 536,611 $5,977,289
Repurchased -- -- (27,896) (304,371)
Net increase -- -- 508,715 $5,672,918
Class C shares 2
Sold -- -- 1,502,066 $16,728,111
Repurchased -- -- (12,551) (140,575)
Net increase -- -- 1,489,515 $16,587,536
Class I shares 2
Sold -- -- 2,446,874 $27,952,876
Repurchased -- -- (192,289) (2,153,098)
Net increase -- -- 2,254,585 $25,799,778
Net increase 888,343 $10,117,443 7,927,108 $89,174,273
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
2 Class B, Class C and Class I shares began operations on 12-6-04.
Note D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, other than
short-term securities and obligations of the U.S. government, during the
period ended April 30, 2005, aggregated $122,018,612 and $43,355,577
respectively.
The cost of investments owned on April 30, 2005, including short-term
investments, for federal income tax purposes, was $119,991,907. Gross
unrealized appreciation and depreciation of investments aggregated
$4,581,862 and $7,738,445, respectively, resulting in net unrealized
depreciation of $3,156,583.
Note E
Acquisition
On December 3, 2004, the Fund acquired substantially all of the assets and
liabilities of the former Independence Small Cap Portfolio in exchange
solely for Class A shares of the Fund. The acquisition was accounted for
as a tax-free exchange of 3,077,385 Class A shares of the Fund for the net
assets of the former Independence Small Cap Portfolio, which amounted to
$34,820,978, including $5,042,523 of unrealized appreciation, after the
close of business on December 3, 2004. Accounting and performance history
of the former Independence Small Cap Portfolio was redesignated as that of
Class A of John Hancock Small Cap Fund.
25
OUR FAMILY
OF FUNDS
- --------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Greater China Opportunities Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- --------------------------------------------------------
Sector Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- --------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Fund
Investment Grade Bond Fund
Strategic Income Fund
- --------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- --------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
- ---------------------------------------------------------
A fund's 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 our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
26
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DELIVERY
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the U.S. mail, we'll notify you by e-mail when these documents are
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Sign up for electronic delivery today at www.jhfunds.com/edelivery
27
OUR WEB SITE
A wealth of information --
www.jhfunds.com
View the latest information for your account.
- ------------------------------------------------
Transfer money from one account to another.
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financial goals.
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28
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Trustees
Charles L. Ladner, Chairman*
James F. Carlin
Richard P. Chapman, Jr.*
William H. Cunningham
Ronald R. Dion
Dr. John A. Moore*
Patti McGill Peterson*
Steven R. Pruchansky
James A. Shepherdson
Lt. Gen. Norman H. Smith,
USMC (Ret.)
*Members of the Audit Committee
Officers
James A. Shepherdson
President and
Chief Executive Officer
William H. King
Vice President and Treasurer
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Subadviser
Independence Investment
LLC
53 State Street
Boston, MA 02109
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
The Fund's investment objective, 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 Fund's Web site at www.jhfunds.com. Please
read the prospectus carefully before investing or sending money.
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 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 Securities and Exchange
Commission's Web site, www.sec.gov.
29
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
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This report is for the information of
the shareholders of John Hancock
Small Cap Fund.
820SA 4/05
6/05
ITEM 2. CODE OF ETHICS.
As of the end of the period, April 30, 2005, 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.
The code of ethics was amended effective February 1, 2005 to address new
Rule 204A-1 under the Investment Advisers Act of 1940 and to make other
related changes.
The most significant amendments were:
(a) Broadening of the General Principles of the code to cover compliance
with all federal securities laws.
(b) Eliminating the interim requirements (since the first quarter of 2004)
for access persons to preclear their personal trades of John Hancock mutual
funds. This was replaced by post-trade reporting and a 30 day hold
requirement for all employees.
(c) A new requirement for "heightened preclearance" with investment
supervisors by any access person trading in a personal position worth
$100,000 or more.
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.
The registrant has adopted procedures by which shareholders may recommend
nominees to the registrant's Board of Trustees. A copy of the procedures
is filed as an exhibit to this Form
N-CSR. See attached "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 - Administration Committee Charter" and "John
Hancock Funds - Governance Committee Charter".
(c)(2) 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:
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James A. Shepherdson
President and Chief Executive Officer
Date: June 30, 2005
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:
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James A. Shepherdson
President and Chief Executive Officer
Date: June 30, 2005
By:
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William H. King
Vice President and Treasurer
Date: June 30, 2005