---------------------------
The latest report from your
Fund's management team
---------------------------
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Real Estate
Fund
JUNE 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-----------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
HArold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
-----------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements for all mission-critical systems are done
and successfully compliance tested. The rest of 1999 will be spent completing
the few remaining non mission-critical systems, testing with our business
partners and continuing to participate in industry testing. We have also
established additional contingency plans beyond our regular ones to prepare for
any challenges that the Year 2000 might present. In the end, John Hancock will
spend approximately $90-$95 million to ensure we make a successful transition to
the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/s/Edward J. Boudreau, Jr.
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By James K. Schmidt, CFA, Portfolio Management Team Leader,
Thomas Finucane and Thomas Goggins, Portfolio Managers, and
Jay McKelvey, Assistant Portfolio Manager
John Hancock
Real Estate Fund
REITs rebound in April on favorable news
----------------------------------------
After being hammered by global economic turmoil last year, the stock market's
late-year rebound continued over the last six months, lifted by a
stronger-than-expected U.S. economy and news of solid corporate earnings growth.
Fears of a spreading "Asian contagion" never materialized and investors regained
confidence after interest-rate cuts by the Federal Reserve and central banks
worldwide calmed world markets and sent stocks soaring in the last quarter of
1998.
This turnaround in sentiment also caused investors to begin turning in
April to long-overlooked sectors of the market, including real estate investment
trusts (REITs) - one of the Fund's target groups. Their prices had fallen to
20-year lows last year amid recession fears and the market's intense focus on
large-company growth stocks. More importantly, two sector-specific events turned
the tide for REITs, including several takeover announcements and respected value
investor Warren Buffett's purchase in April of significant stakes in two REITs.
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Real
Estate Fund. Caption below reads "Fund management team members. Standing (l-r):
"Jay McKelvey, Tom Goggings and Tom Finucane. Seated (l-r): Lisa Welch, Jim
Schmidt and Patricia Ouimet."]
- --------------------------------------------------------------------------------
"...two sector-specific events turned the tide for REITs..."
3
<PAGE>
================================================================================
John Hancock Funds - Real Estate Fund
"Office REITs ...are benefiting from low vacancy rates and good supply/demand
characteristics."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Equity Residential Properties Trust 4.2%, the second is Equity Office
Properties Trust 4.1%, the third Simon Property Group 3.1%, the fourth Vornado
Realty Trust 3.0% and the fifth Public Storage 2.6%. A note below the table
reads "As a percentage of net assets on June 30, 1999."]
- --------------------------------------------------------------------------------
Fund performance
For the six months ended June 30, 1999, John Hancock Real Estate Fund's Class A
shares posted a total return of 8.30% at net asset value, compared to the 6.64%
return of the average real estate fund, according to Lipper, Inc.1
Strategy review
The Fund seeks long-term growth of capital with income as a secondary goal by
investing in securities of real estate and real-estate related companies. Our
primary focus is on REITs, which are companies that own, operate and develop
real estate and are specifically structured to pass all the income from property
operations on to shareholders, thereby qualifying them for special tax
treatment. At the period's end, REITs comprised 87% of the Fund's net assets.
We maintain specific criteria for portfolio candidates. We look for companies
whose stocks are undervalued compared to their growth prospects, those that
could benefit from merger and acquisition activity and those in areas of the
country with good real estate supply/demand characteristics. Most importantly,
we are targeting companies with managements that understand how to generate both
real estate profits and value for shareholders.
Offices, hotels lead; retail lags
Our holdings in Tower Realty and Berkshire Realty played well into the takeover
game. Reckson Associates Realty Corp. acquired Tower Realty, and Berkshire
Realty's management is in the process of taking the company private. If market
values stay well below intrinsic values, as has been the case, we would hope to
see more companies acquired.
Office REITs, our largest REIT group at 28% of the Fund's net assets, are
benefiting from low vacancy rates and good supply/demand characteristics. Hotel
REITs, which underperformed dramatically in 1998, performed well with the
prospects for a stronger economy. Starwood Hotel & Resorts Worldwide, our
largest hotel holding, was up 35% over the last six months. With their
short-term "leases," hotels are the most sensitive to changes in the economic
picture.
Despite solid fundamentals, retail REITs were hit by a few retailer
bankruptcies, as well as concerns that Internet commerce would take a toll on
traditional storefront business. We believe the market's concerns are overblown
in the near term, especially given the decline in retail space and the strength
in retail sales per square foot. Therefore, we added to our positions in retail
REITs when their prices were cheap. One individual stock that disappointed was
our holding in Prison Realty Trust, which fell 52% due to financing and
merger-related issues.
4
<PAGE>
================================================================================
John Hancock Funds - Real Estate Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended June 30, 1999." The chart
is scaled in increments of 2% with 0% at the bottom and 10% at the top. The
first bar represents the 8.30% total return for John Hancock Real Estate Fund.
The second bar represents the 6.64% total return for Average real estate fund. A
note below the chart reads "The total return for John Hancock Real Estate Fund
is at net asset value with all distributions reinvested. The average real estate
fund is tracked by Lipper, Inc.1 See the following two pages for historical
performance information."]
- --------------------------------------------------------------------------------
Outlook
We are encouraged about the prospects for REITs, especially in this environment
of robust economic growth and strong supply/demand real-estate characteristics.
What's more, even with their recent surge, REIT stock valuations remain
attractive, as do their dividend yields. We will continue to maintain a diverse
grouping of real estate-related stocks and REITs across all subsectors. We will
also target companies that are focused as much on their shareholders, and
increasing their stock price, as they are on their real estate. That means they
need to grow through solid management of their existing assets, rather than
through raising more capital (consequently diluting the stock price) to buy more
property.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
Sector investing is subject to greater risks than the market as a whole.
1Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
"...REIT stock valuations remain attractive, as do their dividend yields."
5
<PAGE>
================================================================================
John Hancock Funds - Real Estate Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The table on the right shows the cumulative total return and the average annual
total return for the John Hancock Real Estate Fund. Total return measures the
change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include the maximum applicable sales
charge of 5%.
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended June 30, 1999
SINCE
INCEPTION
(9/30/98)
--------
Cumulative Total Return 3.35%
Average Annual Total Return(1,2) 3.35%
Notes to Performance
(1) Not annualized.
(2) The Adviser has agreed to limit the Fund's expenses to 1.35% (not including
12b-1 fee) of the Fund's daily average net assets. Without the limitation of
expenses, the cumulative total return for the period since inception would
have been (3.15%).
6
<PAGE>
================================================================================
John Hancock Funds - Real Estate Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The chart on the right shows how much a $10,000 investment in the John Hancock
Real Estate Fund would be worth, assuming all distributions were reinvested for
the period indicated. For comparison, we've shown the same $10,000 investment in
the Standard & Poor's 500 Stock Index and the Morgan Stanley Real Estate
Investment Trust Index.The Standard & Poor's 500 Stock Index is an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. The Morgan Stanley REIT Index is an
unmanaged index consisting of the most actively traded real estate investment
trusts. It is designed to be a measure of real estate equity performance. Past
performance is not indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Real Estate Fund Class A, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are four lines. The first line represents the Standard & Poor's
500 Stock Index and is equal to $13,629 as of June 30, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Real Estate Fund on September 30, 1998, before sales charge, and is
equal to $10,881 as of June 30, 1999. The third line represents the value of the
same hypothetical investment made in the John Hancock Real Estate Fund, after
sales charge, and is equal to $10,335 as of June 30, 1999. The fourth line
represents the Morgan Stanley REIT Index and is equal to $10,240 as of June 30,
1999.
- --------------------------------------------------------------------------------
7
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Real Estate Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on June 30, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $1,001,734) ............................. $1,024,641
Corporate savings account ..................................... 31,769
------------
1,056,410
Receivable for investments sold ............................... 70,202
Receivable from John Hancock Advisers, Inc. and
affiliates - Note B .......................................... 57,832
Dividends receivable .......................................... 6,794
Other assets .................................................. 7
------------
Total Assets ............................. 1,191,245
--------------------------------------------------------
Liabilities:
Payable for investments purchased ............................. 60,171
Accounts payable and accrued expenses ......................... 70,349
------------
Total Liabilities ........................ 130,520
--------------------------------------------------------
Net Assets:
Capital paid-in ............................................... 1,010,833
Accumulated net realized gain on investments .................. 25,824
Net unrealized appreciation of investments .................... 22,907
Undistributed net investment income ........................... 1,161
------------
Net Assets ............................... $1,060,725
========================================================
Net Asset Value Per Share:
(Based on net asset value and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $1,060,725/101,110 .................................. $10.49
=============================================================================
Maximum Offering Price Per Share*
($10.49 x 105.26%) ............................................. $11.04
=============================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
The Statement of 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.
Statement of Operations
Six months ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends ..................................................... $30,919
Interest ...................................................... 1,026
------------
31,945
------------
Expenses:
Custodian fee ................................................. 35,704
Auditing fee .................................................. 9,918
Investment management fee - Note B ............................ 4,056
Distribution and service fee - Note B ......................... 1,521
Legal fees .................................................... 1,041
Printing ...................................................... 625
Transfer agent fee - Note B ................................... 595
Miscellaneous ................................................. 78
Accounting and legal services fee - Note B .................... 73
Trustees' fees ................................................ 54
------------
Total Expenses ........................... 53,665
--------------------------------------------------------
Less Expense Reductions -
Note B ................................... (45,292)
--------------------------------------------------------
Net Expenses ............................. 8,373
--------------------------------------------------------
Net Investment Income .................... 23,572
--------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ......................... 31,987
Change in net unrealized appreciation/depreciation
of investments ............................................... 26,730
------------
Net Realized and Unrealized
Gain on Investments ...................... 58,717
--------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................ $82,289
========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Real Estate Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 30, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
------------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income............................................................. $14,369 $23,572
Net realized gain (loss) on investments sold ..................................... (6,163) 31,987
Change in net unrealized appreciation/depreciation of investments ................ (3,823) 26,730
----------- ------------
Net Increase in Net Assets Resulting from Operations ............................ 4,383 82,289
----------- ------------
Distributions to Shareholders:
Distributions from net investment income
Class A - ($0.1173 and $0.2452 per share, respectively) ......................... (11,880) (24,900)
----------- ------------
From Fund Share Transactions - Net:* .............................................. 1,013,211 (2,378)
----------- ------------
Net Assets:
Beginning of period .............................................................. - 1,005,714
----------- ------------
End of period (including undistributed net investment income
$2,489 and $1,161, respectively) ................................................ $1,005,714 $1,060,725
=========== ============
* Analysis of Fund Share Transactions:
FOR THE PERIOD FROM
SEPTEMBER 30, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- --------- ---------
CLASS A
Shares sold ..................................................... 102,524 $1,025,004 269 $2,686
Shares issued to shareholders in reinvestment of distributions - - 38 377
---------- ----------- -------- ---------
102,524 1,025,004 307 3,063
Less shares repurchased ......................................... (1,199) (11,793) (522) (5,441)
---------- ----------- -------- ---------
Net increase (decrease) ......................................... 101,325 $1,013,211 (215) ($2,378)
========== =========== ======== =========
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders and any increase or decrease in money shareholders invested in the
Fund. The footnote illustrates the number of Fund shares sold, reinvested and
repurchased during the period, along with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Real Estate Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM
SEPTEMBER 30, 1998 SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) JUNE 30, 1999
TO DECEMBER 31, 1998 (UNAUDITED)
-------------------- ----------------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period............................... $10.00 $9.93
------- -------
Net Investment Income(1) .......................................... 0.14 0.23
Net Realized and Unrealized Gain (Loss) on Investments ............ (0.09) 0.58
------- -------
Total From Investment Operations .............................. 0.05 0.81
------- -------
Less Distributions:
Dividends from Net Investment Income ............................. (0.12) (0.25)
------- -------
Net Asset Value, End of Period .................................... $9.93 $10.49
======= =======
Total Investment Return at Net Asset Value (2) .................... 0.47%(5) 8.30%(5)
Total Adjusted Investment Return at Net Asset Value (2,3) ......... (1.60%)(5) 3.87%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .......................... $1,006 $1,061
Ratio of Expenses to Average Net Assets ........................... 1.65%(6) 1.65%(6)
Ratio of Adjusted Expenses to Average Net Assets (4) .............. 9.85%(6) 10.58%(6)
Ratio of Net Investment Income to Average Net Assets .............. 5.72%(6) 4.65%(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets (4) ... (2.48%)(6) (4.28%)(6)
Portfolio Turnover Rate ........................................... 109% 181%
Fee Reduction Per Share (1) ....................................... $0.20 $0.45
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation which does not take into consideration
fee reductions by the Adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Not annualized.
(6) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANACIAL STATEMENTS.
10
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Real Estate Fund
Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Real Estate Fund on June 30, 1999. It's divided into two main categories: common
stocks and short-term investments. The stocks are further broken down by
industry groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Banks - United States (0.81%)
North Fork Bancorp., Inc. .................. 200 $4,263
Wells Fargo Co. ............................ 100 4,275
----------
8,538
----------
Finance (6.59%)
Associates First Capital Corp. (Class A) ... 300 13,294
Astoria Financial Corp. .................... 200 8,787
Charter One Financial, Inc. ................ 200 5,562
CIT Group, Inc. (The) (Class A) ............ 300 8,662
Commercial Federal Corp. ................... 100 2,319
Dime Bancorp., Inc. ....................... 100 2,013
DVI, Inc.* ................................. 250 4,281
GreenPoint Financial Corp. ................. 100 3,281
Heller Financial, Inc. ..................... 200 5,562
MBNA Corp. ................................. 100 3,063
Metris Cos., Inc. .......................... 100 4,075
Richmond County Financial Corp. ............ 100 1,925
Washington Mutual, Inc. .................... 200 7,075
----------
69,899
----------
Mortgage Banking (2.34%)
Countrywide Credit Industries, Inc. ........ 100 4,275
Fannie Mae ................................. 300 20,512
----------
24,787
----------
Real Estate - Operations (0.15%)
Trammell Crow Co.* ......................... 100 1,644
----------
REIT Equity - Apartments (15.92%)
Apartment Investment & Management Co.
(Class A) ................................. 600 25,650
Archstone Communities Trust ................ 1,200 26,325
Associates Estates Realty Corp. ............ 100 1,181
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
REIT Equity - Apartments (continued)
Avalonbay Communities, Inc. ................ 500 $18,500
Berkshire Realty Co., Inc. ................. 1,100 12,719
BRE Properties, Inc. (Class A) ............. 300 7,781
Cornerstone Realty Income Trust, Inc. ...... 200 2,150
Equity Residential Properties Trust ........ 1,000 45,062
Essex Property Trust, Inc. ................. 100 3,434
Home Properties of New York, Inc. .......... 400 11,050
Post Properties, Inc. ...................... 200 8,200
Smith (Charles E.) Residential Realty, Inc. 200 6,788
----------
168,840
----------
REIT Equity - Diversified (5.46%)
Capital Automotive REIT .................... 200 2,650
Catellus Development Corp.* ................ 100 1,550
Colonial Properties Trust .................. 600 16,950
Entertainment Properties Trust ............. 100 1,763
Franchise Finance Corp. of America ......... 500 11,000
Glenborough Realty Trust, Inc. ............. 700 12,250
National Golf Properties, Inc. ............. 200 4,863
Prison Realty Trust, Inc. .................. 700 6,869
----------
57,895
----------
REIT Equity - Health Care (0.37%)
Meditrust Cos. ............................. 300 3,919
----------
REIT Equity - Hotel/Restaurant (4.74%)
FelCor Lodging Trust, Inc. ................. 100 2,075
Hospitality Properties Trust ............... 200 5,425
Host Marriott Corp. ........................ 1,200 14,250
Innkeepers USA Trust ....................... 400 4,000
Starwood Hotels & Resorts Worldwide,
Inc.* ...................................... 700 21,394
Wyndham International, Inc. (Class A)* ..... 700 3,150
----------
50,294
----------
REIT Equity - Office Property (28.35%)
Alexandria Real Estate Equities, Inc. ...... 200 6,250
Arden Realty, Inc. ......................... 400 9,850
Bedford Property Investors, Inc. ........... 200 3,575
Boston Properties, Inc. .................... 400 14,350
Brandywine Realty Trust .................... 1,100 21,794
Cadillac Fairview Corp. (Canada)* .......... 100 1,888
CarrAmerica Realty Corp. ................... 600 15,000
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Real Estate Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
REIT Equity - Office Property (continued)
Cornerstone Properties, Inc. ............... 200 $3,175
Corporate Office Properties Trust, Inc. .... 1,000 8,187
Cousins Properties, Inc. ................... 300 10,144
Crescent Real Estate Equities Co. .......... 1,100 26,125
Duke Realty Investments, Inc. .............. 700 15,794
Equity Office Properties Trust ............. 1,700 43,562
Great Lakes REIT, Inc. ..................... 100 1,625
Highwood Properties, Inc. .................. 600 16,462
Kilroy Realty Corp. ........................ 200 4,875
Koger Equity, Inc. ......................... 100 1,844
Mack-Cali Realty Corp. ..................... 600 18,562
Prentiss Properties Trust .................. 700 16,450
Prime Group Realty Trust ................... 400 6,875
Reckson Associates Realty Corp. ............ 500 11,750
SL Green Realty Corp. ...................... 800 16,350
Spieker Properties, Inc. ................... 500 19,437
Trinet Corporate Realty Trust, Inc. ........ 100 2,769
TrizecHahn Corp. (Canada) .................. 200 4,075
----------
300,768
----------
REIT Equity - Regional Mall (9.44%)
CBL & Associates Properties, Inc. .......... 300 7,913
General Growth Properties, Inc. ............ 600 21,300
Macerich Co. (The) ......................... 300 7,875
Rouse Co. (The) ............................ 800 20,300
Simon Property Group, Inc. ................. 1,300 32,987
Taubman Centers, Inc. ...................... 500 6,594
Urban Shopping Centers, Inc. ............... 100 3,150
----------
100,119
----------
REIT Equity - Shopping Centers (12.21%)
Developers Diversified Realty Corp. ........ 1,500 24,937
First Washington Realty Trust, Inc. ........ 300 7,013
JDN Realty Corp. ........................... 400 8,950
Kimco Realty Corp. ......................... 600 23,475
New Plan Excel Realty Trust ................ 600 10,800
Realty Income Corp. ........................ 600 14,250
Vornado Realty Trust ....................... 900 31,781
Weingarten Realty Investors ................ 200 8,350
----------
129,556
----------
REIT Equity - Storage (4.44%)
PS Business Parkes, Inc. (Class A) ......... 300 7,312
Public Storage, Inc. ....................... 1,000 28,000
Shurgard Storage Centers, Inc. ............. 100 2,713
Sovran Self Storage, Inc. .................. 100 2,694
Storage USA, Inc. .......................... 200 6,375
----------
47,094
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
REIT Equity - Warehouse/Industries (5.78%)
AMB Property Corp. ......................... 400 $9,400
Cabot Industrial Trust ..................... 200 4,250
CenterPoint Properties Corp. ............... 100 3,663
EastGroup Properties, Inc. ................. 100 2,006
First Industrial Realty Trust, Inc. ........ 100 2,744
Liberty Property Trust ..................... 600 14,925
ProLogis Trust ............................. 1,200 24,300
----------
61,288
----------
TOTAL COMMON STOCKS
(Cost $1,001,734) (96.60%) 1,024,641
-------- ----------
SHORT-TERM INVESTMENTS
Corporate Savings Account
Brown Brothers Harriman Trust Co., Ltd.
Daily Interest Savings Account
Current Rate 4.25%......................... 31,769
----------
TOTAL SHORT-TERM INVESTMENTS (2.99%) 31,769
-------- ----------
TOTAL INVESTMENTS (99.59%) 1,056,410
-------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.41%) 4,315
-------- ----------
TOTAL NET ASSETS (100.00%) $1,060,725
======== ==========
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of four series portfolios: John Hancock Real Estate Fund (the "Fund"), John
Hancock Large Cap Value Fund, John Hancock Balanced Fund and John Hancock
Sovereign Investors Fund. Prior to May 1, 1999, John Hancock Large Cap Value
Fund was known as John Hancock Growth and Income Fund and John Hancock Balanced
Fund was known as John Hancock Sovereign Balanced Fund. The other three series
of the Trust are reported in separate financial statements. The investment
objective is to seek long-term growth of capital through investing in equity
securities of real estate companies.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A and Class B shares. No Class B shares were
issued as of June 30, 1999. The shares of each class represent an interest in
the same portfolio of investments of the Fund and have equal rights to voting,
redemptions, dividends and liquidation, except that certain expenses, subject to
the approval of the Trustees, may be applied differently to each class of shares
in accordance with current regulations of the Securities and Exchange Commission
and the Internal Revenue Service. Shareholders of a class which bears
distribution and service expenses under terms of a distribution plan have
exclusive 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 sources
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days or
less are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more 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 is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the
13
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
respective classes. Distribution and service fees, if any, are calculated daily
at the class level based on the appropriate net assets of each class and the
specific expense rate (s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not identifiable to a specific fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowings. In
addition, a commitment fee is charged based on the average daily unused portion
of the line of credit and is allocated among the participating funds. The Fund
had no borrowing activity for the period ended June 30, 1999.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities, other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
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 assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the 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 transaction.
There were no open forward foreign currency contracts at June 30, 1999.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
interest rates and other market conditions. Buying futures tends to increase the
Fund's exposure to the underlying instrument. Selling futures tends to decrease
the Fund's exposure to the underlying instrument or hedge other Fund
instruments. At the time the Fund enters into a financial futures contract, it
is required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain percentage
of the value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange on which it trades. Subsequent payments,
known as "variation margin," to and from the broker are made on a daily basis as
the market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the may not correlate
with changes in the value of the underlying securities. In addition, the Fund
could be prevented from opening or realizing the benefits of closing out futures
positions because of position limits or limits on daily price fluctuation
imposed by an exchange.
For federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At June 30, 1999, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the written option.
The Fund may use options contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure to
the underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options have
minimal credit risk as the exchanges act as counterparties to each transaction,
and only present liquidity risk in highly unusual market conditions. To minimize
credit risk and liquidity risks in over-the-counter option contracts, the Fund
will continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended June 30,
1999.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of 0.80% of the Fund's average daily net asset
value.
The Adviser has agreed to limit the Fund's expenses on Class A shares
to 1.35% (not including the 12b-1 fees) of the Fund's daily average net assets.
Accordingly, the reduction in the Adviser's fee amounted to $ 45,292 for the
period ended June 30, 1999. This limitation may not be discontinued until at
least May 1, 2000.
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. There were no net sales
charges received with regard to sales of Class A shares for the period ended
June 30, 1999.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan with
respect to Class A pursuant to Rule 12b-1 under the Investment Company Act of
1940. Accordingly, the Fund will make payments to JH Funds at an annual rate not
to exceed 0.30% of Class A average daily net assets to reimburse JH Funds for
its distribution and service costs. Up to a maximum of 0.25% of these payments
may be service fees as defined by the amended Rules of Fair Practice of the
National Association of Securities Dealers. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of John Hancock
Mutual Life Insurance Company ("JHMLICo"). The Fund pays transfer agent fees
based on the number of shareholder accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the year was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon
and Mr. Richard S. Scipione are directors and/or officers of the Adviser, and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect
to defer, for tax purposes, their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover 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
investment as well as any unrealized gains or losses. The investment had no
impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended June 30, 1999, aggregated $1,798,022 and
$1,760,635, respectively. There were no purchases or sales of obligations of the
U.S. government and its agencies during the period ended June 30, 1999.
The cost of investments owned at June 30, 1999 (excluding the corporate
savings account) for federal income tax purposes was $1,003,840. Gross
unrealized appreciation and depreciation of investments aggregated $42,359 and
$21,558, respectively, resulting in net unrealized appreciation of $20,801.
16
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Real Estate Fund
17
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Real Estate Fund
18
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Real Estate Fund
19
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS ------------------
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------------------
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This report is for the information of shareholders of the John Hancock
Real Estate Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[LOGO] Printed on Recycled Paper 050SA 6/99
8/99
