ANNUAL REPORT
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[GRAPHIC OMITTED]
Emerging
Growth Fund
OCTOBER 31, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
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TRUSTEES
EDWARD J. BOUDREAU, JR.
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
ROBERT G. FREEDMAN
Vice Chairman and
Chief Investment Officer
ANNE C. HODSDON
President and Chief Operating Officer
JAMES B. LITTLE
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
INVESTORS BANK AND TRUST COMPANY
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116-5072
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
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116-5072
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===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
An often-used analogy for stock market performance over the short term is a
roller coaster. That is because, while long-term history suggests the market's
general direction is up, its swings over the short term can be dramatic and, at
times, violent. This year, the market has given us several stark examples of
this phenomenon. From the new highs set in mid-July, the major indices plunged
by 19% through the end of August. It was the worst such fall since 1990. For the
first time in a number of years, some bonds and bond mutual funds outperformed
stocks and stock mutual funds. Seeking safety in a world of global economic
uncertainties, investors everywhere converged on U.S. Treasury bonds and pushed
their yields to historic lows.
Then in early October, the market staged a remarkable rebound that was
sparked by the Federal Reserve's two cuts in interest rates. The major indices
regained all their previously lost ground and the S&P 500 Stock Index ended
October actually up by 15% year-to-date.
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[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
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Investors have been understandably shaken by these dramatic twists and
turns, but we are pleased to report that most individual investors did not
panic, and we hope that means they've taken our words to heart. Over the long
term, markets do not move up or down in a straight line. That's why after
watching the market charge ahead almost uninterrupted for so many years, we have
been striking a more cautionary stance in this space over the last several
months.
Analysts are still pondering the implications of global turmoil and the
potential for slower U.S. economic and corporate earnings growth. While we don't
make a practice of opining on what the market will do next, we continue to
believe it would be wise for investors to set more realistic expectations. Over
the long term, the market's historical results have been more in the 10% per
year range, which is still a solid result, considering it has been produced
despite wars, depressions and other social upheavals along the way.
There is no doubt, however, that the market's heightened volatility and
recent dramatic moves have been cause for concern. In these uncertain times, it
becomes even harder to remember to "stay the course" and stick to your long-term
investment plan. But this remains the essential tenet of successful investing.
Now could also be a good time to review your asset allocation with your
investment professional, keeping in mind that the last six months' divergence in
performance of stocks and high-quality bonds is a perfect example of why all
your eggs shouldn't be in one basket.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
LAURA ALLEN, CFA, AND ANURAG PANDIT, CFA, PORTFOLIO MANAGERS
John Hancock Emerging
Growth Fund
Early-year uncertainty marks small-cap stocks;
late-period comeback breeds optimism
Small-company growth stocks posted significant losses during much of the past
year, although they staged a dramatic comeback in the final weeks of the period.
Initially, they were beset by worries that the U.S. economy and corporate
earnings would be damaged by economic and currency turmoil in Asia. As the
period wore on, problems in Russia and Latin America exerted renewed pressure on
small-company stocks. The small-cap market's most widely watched barometer --
the Russell 2000 Index -- fell roughly 28% from its peak in April through the
end of September.
The winds shifted in favor of small-company stocks, however, in early
October. The Federal Reserve provided early relief by cutting interest rates on
September 29. That rate cut, in combination with resurgent optimism about
corporate earnings and a second rate cut in mid-October, helped set the stage
for an impressive small-cap rally. The Russell 2000 Growth Index, which measures
the performance of faster-growing small companies such as those the Fund
targets, rose 22% from October 8 through October 31 as these companies handily
outpaced their larger-company counterparts.
Performance and strategy review
Although we were disappointed that the small-cap market's nearly year-long
struggle prevented us from posting positive returns over the past
"The winds shifted in favor of small-company stocks, however, in early October."
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[A 3" x 2" photo at bottom right side of page of John Hancock Emerging Growth
Fund. Caption below reads "Fund management team members (l-r): "Anurag Pandit,
Bernice Behar and Laura Allen."]
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3
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John Hancock Funds - Emerging Growth Fund
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[Table at top left hand column entitled "Top Five Common Stock Holdings." The
first listing is Cognizant Technology Solutions 1.2%, the second is Metromedia
Fiber Network 1.2%, the third Network Appliance 1.1%, the fourth Adelphia
Communications 1.0% and the fifth Metzler Group 1.0%. A note below the table
reads "As a percentage of net assets on October 31, 1998."]
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year, we take comfort from the fact that the Fund outpaced its benchmark and was
able to perform in line with its peers during such a rocky period. For the year
ended October 31, 1998, John Hancock Emerging Growth Fund's Class A and Class B
shares posted total returns of -14.14% and -14.80%, respectively, at net asset
value. Class C shares, which were launched on June 1, 1998, returned -12.83%
from inception through October 31, 1998. The Fund's annual performance was only
slightly behind the average small-cap fund's -13.76% for the year ended October
31, 1998, according to Lipper Analytical Services, Inc.,(1) while the Russell
2000 Growth Index returned -15.86%. Keep in mind that your net asset value
return will be different from the Fund's performance if you were not invested in
the Fund for the entire period and did not reinvest all distributions. Please
see pages six and seven for historical performance information.
Throughout the small-cap market's turmoil, we stuck to our investment
discipline by focusing on companies with strong and sustainable revenue and
earnings growth, dominant market share and proven and effective management. This
strategy has rewarded us in the past and we continue to believe it will do so
over the longer term. Our adherence to this strategy means we'll occasionally
hold on to the stock of a company with good long-term prospects even after it
has suffered a short-term setback. That was the case with Premier Parks, the
country's largest theme park operator. Attendance at the company's recently
acquired Six Flags theme parks decreased early in the season, which company
officials attributed to poor marketing by the previous owners. However,
performance rebounded after attendance picked up at the Six Flags parks through
the remainder of the season. Furthermore, the company is benefiting from the
conversion of all its parks to the Six Flags brand. We were rewarded for our
patience, as the stock has recently rebounded with the turn in business
fundamentals.
Technology shifts
Our continued emphasis on fast-growing, well-managed market leaders has often
led us to the technology sector. Initially our focus in the period was on
computer hardware companies. But given the uncertain outlook for computer demand
in light of a potentially slowing global economy, we shifted our technology
focus to software and service companies. Our belief was that they would benefit
from growing demand driven by corporations increasingly looking to them to help
enhance productivity. Two of our favorites are Aspect Development, which
provides software that allows manufacturers to manage relationships with
suppliers, and Advent Software, which makes programs for financial analysis and
other
"...we were able to buy very high-quality, once-big companies at bargain
prices..."
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[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Linens 'N
Things followed by an up arrow with the phrase "Expansion, strong consumer
spending." The second listing is CBT Group followed by a down arrow with the
phrase "Worse-than-expected earnings." The third listing is Novellus Systems
followed by an up arrow with the phrase "Semiconductor demand firms." A note
below the table reads "See 'Schedule of Investments.' Investment holdings are
subject to change."]
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4
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John Hancock Funds - Emerging Growth Fund
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[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the year ended October 31, 1998." The chart is
scaled in increments of 3% with -15% at the bottom and 0% at the top. The first
bar represents the -14.14% Total return for John Hancock Emerging Growth Fund
Class A. The second bar represents the -14.80% total return for John Hancock
Emerging Growth Fund Class B. The third bar represents the -12.83%* total return
for John Hancock Emerging Growth Fund Class C and the fourth bar represents the
- -13.76% total return for the Average small-cap fund. A note below the chart
reads "Total returns for John Hancock Emerging Growth Fund are at net asset
value with all distributions reinvested. The average small-cap fund is tracked
by Lipper Analytical Services, Inc. See the following two pages for historical
performance information. *From inception June 1, 1998 through October 31,
1998."]
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applications. While those and other software holdings proved to be our best
performers, another, CBT Group, was punished when it failed to beat Wall Street
analysts' third-quarter earnings expectations, and we sold the stock. More
recently, we again have added some hardware semiconductor companies, because we
believe that the worst case scenario has already been factored into their
prices. Our strategic moves among various technology sub-sectors throughout the
year generally proved advantageous for the Fund's performance.
We also remained committed to our retail holdings, which were quite strong
during much of the year, helped along by consumer confidence that continued to
hover near historic highs. Small-town retailer Hibbett Sporting Goods and
houseware chain Linens `N Things were two of the Fund's best performers.
Recent additions
After the summer's market downturn, we were presented with an unusual
opportunity: Many stocks that earlier in the year were considered large stocks
had gotten beaten up so much by the end of the summer that they slid back into
the small-cap category. As a result, we were able to buy very high-quality,
once-big companies at bargain prices, such as natural food supermarket chain
Whole Foods Market and semiconductor-equipment company Novellus Systems. We also
added to our stake in business services companies, which we believe will prosper
as companies continue to outsource many services that require a large amount of
internal company resources. This group includes our largest holding, Cognizant
Technology Solutions, which provides outsourcing of software development.
Outlook
We're upbeat about the prospects for small-company stocks. Lower interest rates
should be a positive because small companies tend to depend on borrowed money to
fund their future growth. Second, small-cap companies are offering growth rates
well in excess of large companies. Not only do small caps provide better
earnings growth rates, but they also remain relatively cheap in comparison to
their large-company peers even after their recent run-up. We think these factors
have contributed to the recent period of small-cap leadership. Although
small-company stocks could still experience market volatility, we think they may
be poised to outpace large companies for several years to come.
"...small-cap companies are offering growth rates well in excess of large
companies."
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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.
(1) Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance is
lower.
5
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John Hancock Funds - Emerging Growth Fund
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A LOOK AT PERFORMANCE
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The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Emerging Growth Fund. Total return measures
the change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. (Prior to May 15, 1995, the maximum applicable sales charge for
Class A shares was 5.75%.) Class B performance reflects a maximum contingent
deferred sales charge (maximum 5% and declining to 0% over six years). Class C
performance includes a contingent deferred sales charge (1% declining to 0%
after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus before you invest or send money.
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CLASS A
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For the period ended September 30, 1998
SINCE
ONE FIVE INCEPTION
YEAR YEARS (8/22/91)
---- ----- ---------
Cumulative Total Returns (27.94%) 52.76% 116.71%
Average Annual Total Returns (27.94%) 8.84% 11.50%
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CLASS B
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For the period ended September 30, 1998
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
Cumulative Total Returns (25.42%) 54.51% 292.57%
Average Annual Total Returns (25.42%) 9.09% 14.65%
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CLASS C
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For the period ended September 30, 1998
SINCE
INCEPTION
(6/1/98)
--------
Cumulative Total Return (17.79%)
Average Annual Total Return (17.79%)(1)
Notes on Performance
(1) Not annualized.
6
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John Hancock Funds - Emerging Growth Fund
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WHAT HAPPENED TO A $10,000 INVESTMENT...
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The charts on the right show how much a $10,000 investment in the John Hancock
Emerging Growth Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in both the Russell 2000 Index and the Russell 2000 Growth Index. The
Russell 2000 Index is an unmanaged, small-cap index that is comprised of 2,000
stocks of U.S.-domiciled companies whose common stocks trade in the United
States on the New York Stock Exchange, American Stock Exchange and NASDAQ. The
Russell 2000 Growth Index is an unmanaged index that contains those securities
from the Russell 2000 Index with a greater-than-average growth orientation. Past
performance is not indicative of future results.
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Line chart with the heading John Hancock Emerging Growth 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 Russell
2000 Index and is equal to $24,386 as of October 31, 1998. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Emerging Growth Fund on September 22, 1991, before sales charge, and is
equal to $23,976 as of October 31, 1998. The third line represents the value of
the same hypothetical investment made in the John Hancock Emerging Growth Fund,
after sales charge, and is equal to $22,781 as of October 31, 1998. The fourth
line represents the Russell 2000 Growth Index and is equal to $19,407 as of
October 31, 1998.
Line chart with the heading John Hancock Emerging Growth Fund Class B*,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the value
of the hypothetical $10,000 investment made in the John Hancock Emerging Growth
Fund on October 31, 1988, before sales charge, and is equal to $41,601 as of
October 31, 1998. The second line represents the value of the Russell 2000 Index
and is equal to $30,316 as of October 31, 1998. The third line represents the
Russell 2000 Growth Index and is equal to $25,576 as of October 31, 1998.
Line chart with the heading John Hancock Emerging Growth Fund Class C,
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 value
of the hypothetical $10,000 investment made in the John Hancock Emerging Growth
Fund on June 1, 1998, before sales charge, and is equal to $8,717 as of October
31, 1998. The second line represents the value of the same hypothetical
investment made in the John Hancock Emerging Growth Fund, after sales charge,
and is equal to $8,629 as of October 31, 1998. The third line represents the
Russell 2000 Index and is equal to $8,329 as of October 31, 1998. The fourth
line represents the Russell 2000 Growth Index and is equal to $8,252 as of
October 31, 1998.
*No contingent deferred sales charge applicable.
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7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth 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 October 31, 1998. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 1998
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Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $413,249,572) .................................... $521,561,043
Joint repurchase agreement (cost - $17,511,000) ........... 17,511,000
Corporate savings account ................................. 825
--------------
539,072,868
Receivable for investments sold ............................ 4,927,747
Receivable for shares sold ................................. 253,422
Dividends receivable ....................................... 14,775
Interest receivable ........................................ 5,267
Other assets ............................................... 109,790
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Total Assets ................................... 544,383,869
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Liabilities:
Payable for investments purchased .......................... 1,261,428
Payable for shares repurchased ............................. 299,152
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................. 533,314
Accounts payable and accrued expenses ...................... 130,134
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Total Liabilities .............................. 2,224,028
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Net Assets:
Capital paid-in ............................................ 418,795,300
Accumulated realized gain on investments and
foreign currency transactions ............................. 15,098,024
Net unrealized appreciation of investments ................. 108,316,447
Accumulated net investment loss ............................ (49,930)
--------------
Net Assets ..................................... $542,159,841
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Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $179,699,949/21,378,203 .......................... $8.41
==============================================================================
Class B - $361,992,293/46,363,294 .......................... $7.81
==============================================================================
Class C* - $467,599/59,895 ................................. $7.81
==============================================================================
Maximum Offering Price Per Share**
Class A - ($8.41 x105.26%) ................................. $8.85
==============================================================================
* Class C shares commenced operations on June 1, 1998.
** 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
Year ended October 31, 1998
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Investment Income:
Dividends (net of foreign withholding tax of $3,117) ....... $1,724,979
Interest ................................................... 380,350
--------------
2,105,329
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Expenses:
Investment management fee - Note B ........................ 4,728,134
Distribution and service fee - Note B
Class A .................................................. 495,114
Class B .................................................. 4,156,923
Class C .................................................. 1,158
Transfer agent fee - Note B ............................... 1,486,014
Custodian fee ............................................. 268,172
Registration and filing fees .............................. 136,863
Financial services fee - Note B ........................... 105,162
Printing .................................................. 71,143
Interest expense .......................................... 55,650
Trustees' fees ............................................ 51,884
Auditing fee .............................................. 42,919
Miscellaneous ............................................. 15,983
Legal fees ................................................ 13,847
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Total Expenses ................................. 11,628,966
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Net Investment Loss ............................ (9,523,637)
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Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold
and foreign currency transactions ......................... 39,776,156
Change in net unrealized appreciation/depreciation
of investments ............................................ (124,158,701)
--------------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions .................. (84,382,545)
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Net Decrease in Net Assets
Resulting from Operations ...................... ($93,906,182)
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SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ..................................... ($7,209,751) ($9,523,637)
Net realized gain on investments sold and
foreign currency transactions ......................... 228,690,007 39,776,156
Change in net unrealized appreciation/depreciation
of investments ........................................ (79,546,089) (124,158,701)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting
from Operations ..................................... 141,934,167 (93,906,182)
------------- -------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A - ($0.2114 and $2.5153 per share, respectively) (4,419,042) (43,296,619)
Class B - ($0.2114 and $2.5153 per share, respectively) (9,530,032) (101,891,134)
------------- -------------
Total Distributions to Shareholders ................... (13,949,074) (145,187,753)
------------- -------------
From Fund Share Transactions - Net: * ...................... (115,772,143) 99,275,929
------------- -------------
Net Assets:
Beginning of period ..................................... 669,764,897 681,977,847
------------- -------------
End of period (including accumulated net investment
loss of $56,172 and $49,930, respectively) ............ $681,977,847 $542,159,841
============= =============
</TABLE>
*Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1997 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ..................................... 50,428,036 $533,787,513 43,183,651 $418,398,045
Shares issued to shareholders in reinvestment
of distributions .............................. 366,196 3,727,865 947,975 36,568,238
------------- ------------- ------------- -------------
50,794,232 537,515,378 44,131,626 454,966,283
Less shares repurchased ......................... (55,220,616) (590,533,419) (26,992,214) (414,680,052)
------------- ------------- ------------- -------------
Net increase (decrease) ......................... (4,426,384) ($53,018,041) 17,139,412 $40,286,231
============= ============= ============= =============
CLASS B
Shares sold ..................................... 27,622,260 $276,160,925 57,762,132 $618,597,893
Shares issued to shareholders in reinvestment
of distributions .............................. 685,312 6,664,519 2,001,611 72,238,099
------------- ------------- ------------- -------------
28,307,572 282,825,444 59,763,743 690,835,992
Less shares repurchased ......................... (34,130,340) (345,579,546) (23,478,705) (632,351,276)
------------- ------------- ------------- -------------
Net increase (decrease) ......................... (5,822,768) ($62,754,102) 36,285,038 $58,484,716
============= ============= ============= =============
CLASS C**
Shares sold ..................................... -- -- 60,595 $510,679
Less shares repurchased ......................... -- -- (700) (5,697)
------------- ------------- ------------- -------------
Net increase .................................... -- -- 59,895 $504,982
============= ============= ============= =============
</TABLE>
** Class C shares commenced operations on June 1, 1998.
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 year. The difference reflects
earnings less expenses, any investment and foreign currency 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 and repurchased during the last two periods, along with the
corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth 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:
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<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
1994 1995(1) 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A(7)
Per Share Operating Performance
Net Asset Value, Beginning of Period .................... $6.47 $6.71 $9.02 $10.22 $12.35
-------- -------- -------- -------- --------
Net Investment Loss(2) .................................. (0.04) (0.07) (0.09) (0.07) (0.08)
Net Realized and Unrealized Gain (Loss) on Investments .. 0.28 2.38 1.29 2.41 (1.34)
-------- -------- -------- -------- --------
Total from Investment Operations ....................... 0.24 2.31 1.20 2.34 (1.42)
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold .................................................. -- -- -- (0.21) (2.52)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $6.71 $9.02 $10.22 $12.35 $8.41
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(3) ........... 3.59% 34.56% 13.27% 23.35% (14.14%)
Ratios and Supplemental Data
Net Assets, End of Period (000s Omitted) ................ $131,053 $179,481 $218,497 $209,384 $179,700
Ratio of Expenses to Average Net Assets ................. 1.44% 1.38% 1.32% 1.29%(4) 1.36%(4)
Ratio of Net Investment Loss to Average Net Assets ...... (0.71%) (0.83%) (0.86%) (0.57%) (1.02%)
Portfolio Turnover Rate ................................. 25% 23% 44% 96% 103%
CLASS B(7)
Per Share Operating Performance
Net Asset Value, Beginning of Period .................... $6.33 $6.51 $8.70 $9.78 $11.72
-------- -------- -------- -------- --------
Net Investment Loss(2) .................................. (0.09) (0.11) (0.15) (0.14) (0.15)
Net Realized and Unrealized Gain (Loss) on
Investments ........................................... 0.27 2.30 1.23 2.29 (1.24)
-------- -------- -------- -------- --------
Total from Investment Operations ....................... 0.18 2.19 1.08 2.15 (1.39)
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold .................................................. -- -- -- (0.21) (2.52)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $6.51 $8.70 $9.78 $11.72 $7.81
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(3) ........... 2.80% 33.60% 12.48% 22.44% (14.80%)
Ratios and Supplemental Data
Net Assets, End of Period (000s Omitted) ................ $283,435 $393,478 $451,268 $472,594 $361,992
Ratio of Expenses to Average Net Assets ................. 2.19% 2.11% 2.05% 2.02%(4) 2.07%(4)
Ratio of Net Investment Loss to Average Net Assets ...... (1.46%) (1.55%) (1.59%) (1.30%) (1.73%)
Portfolio Turnover Rate ................................. 25% 23% 44% 96% 103%
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indi cated: income, expenses, distributions and
gains (losses) 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 rela
tionships between some items presented in the financial statements are expressed
in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD FROM
JUNE 1, 1998
(COMMENCEMENT OF
OPERATIONS) to
OCTOBER 31, 1998
----------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $8.96
-------
Net Investment Loss(2) ..................................... (0.03)
Net Realized and Unrealized Loss on Investments ............ (1.12)
-------
Total from Investment Operations ........................... (1.15)
-------
Net Asset Value, End of Period ............................. $7.81
=======
Total Investment Return at Net Asset Value(3) .............. (12.83%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s Omitted) ................... $468
Ratio of Expenses to Average Net Assets .................... 2.11%(4,6)
Ratio of Net Investment Loss to Average Net Assets ......... (1.86%)(6)
Portfolio Turnover Rate .................................... 103%
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(4) Expense ratios do not include interest expense due to bank loans, which
amounted to less than $0.01 per share.
(5) Not annualized.
(6) Annualized.
(7) All per share amounts and net asset values have been restated to reflect
the four-for-one stock split effective May 1, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
Schedule of Investments
October 31, 1998
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Emerging Growth Fund on October 31, 1998. It's divided into three main
categories: common stocks, preferred stock and short-term investments. Common
and preferred stocks are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Advertising (0.48%)
Getty Images, Inc* ............................. 212,300 $2,613,944
------------
Aerospace (0.51%)
AAR Corp. ...................................... 119,700 2,768,062
------------
Automobile/Trucks (1.14%)
Gentex Corp.* .................................. 183,400 2,693,687
United Rentals, Inc.* .......................... 129,000 3,466,875
------------
6,160,562
------------
Beverages (0.25%)
Beringer Wine Estates Holdings, Inc.
(Class B)* ................................... 29,500 1,338,563
------------
Broker Services (0.66%)
Raymond James Financial, Inc. .................. 156,087 3,580,246
------------
Building (0.86%)
Crossmann Communities, Inc.* ................... 107,300 2,441,075
D. R. Horton, Inc. ............................. 140,800 2,235,200
------------
4,676,275
------------
Business Services - Misc (14.91%)
Abacus Direct Corp.* ........................... 77,500 3,778,125
AnswerThink Consulting Group, Inc.* ............ 200,000 3,862,500
Boron, LePore & Associates, Inc.* .............. 50,500 1,363,500
Charles River Associates, Inc.* ................ 181,800 4,545,000
Cognizant Technology Solutions Corp.* .......... 298,800 6,666,975
First Consulting Group, Inc* ................... 181,200 2,978,475
Forrester Research, Inc.* ...................... 127,300 4,105,425
Hagler Bailly, Inc.* ........................... 151,800 3,567,300
Information Management Resources,
Inc.* ........................................ 76,600 1,800,100
INSpire Insurance Solutions, Inc.* ............. 150,000 3,750,000
Interim Services, Inc. * ....................... 174,300 3,703,875
Lason, Inc.* ................................... 69,900 3,827,025
Mac-Gray Corp.* ................................ 34,800 348,000
MAXIMUS, Inc.* ................................. 51,700 1,499,300
MedQuist, Inc.* ................................ 108,300 2,917,331
META Group, Inc. * ............................. 210,800 5,059,200
Metamor Worldwide, Inc.* ....................... 80,000 2,055,000
Metzler Group, Inc. (The)* ..................... 131,550 5,525,100
On Assignment, Inc.* ........................... 145,900 4,960,600
ProBusiness Services, Inc.* .................... 115,000 4,204,688
Professional Detailing, Inc.* .................. 102,300 2,391,263
Profit Recovery Group International, Inc.
(The)* ....................................... 104,200 3,197,638
Whittman-Hart, Inc.* ........................... 239,000 4,750,125
------------
80,856,545
------------
Computers (21.09%)
Advent Software, Inc.* ......................... 130,600 4,538,350
ARIS Corp.* .................................... 216,100 3,403,575
Aspect Development, Inc.* ...................... 165,000 5,212,977
BARRA, Inc.* ................................... 108,900 2,872,238
Beyond.com* .................................... 388,300 3,591,775
BindView Development Corp.* .................... 152,500 2,745,000
BMC Software, Inc.* ........................... 39,000 1,874,437
Concentric Network Corp. * ..................... 145,900 3,538,075
Dell Computer Corp.* ........................... 30,000 1,968,750
Dendrite International, Inc.* .................. 164,100 3,384,562
Digital River, Inc.* ........................... 83,400 917,400
E*TRADE Group, Inc.* ........................... 200,000 3,600,000
EarthLink Network, Inc.* ....................... 68,900 2,652,650
Entrust Technologies, Inc.* .................... 148,800 2,473,800
Exodus Communications, Inc.* ................... 124,200 3,943,350
Fundtech, Ltd.* ................................ 277,800 3,785,025
HNC Software, Inc.* ........................... 80,000 2,690,000
Hyperion Solutions Corp.* ...................... 90,820 2,724,600
IDX Systems Corp.* ............................. 81,400 3,449,325
Infoseek Corp.* ................................ 59,600 1,761,925
International Integration, Inc.* ............... 20,600 309,000
International Network Services, Inc.* .......... 109,000 4,632,500
Manhattan Associates, Inc. * ................... 129,500 2,072,000
MicroStrategy Inc. (Class A)* .................. 34,000 828,750
National Computer Systems, Inc. ................ 158,000 4,424,000
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Computers (continued)
National Instruments Corp.* ................... 126,050 $3,450,619
Network Appliance, Inc.* ...................... 111,800 6,121,050
PeopleSoft, Inc.* ............................. 40,000 847,500
PSINet, Inc.* ................................. 100,000 1,443,750
RealNetworks, Inc.* .......................... 108,200 3,644,988
SCM Microsystems, Inc.* ....................... 79,100 3,757,250
SEI Investments Co. ........................... 17,000 1,408,875
SOFTWORKS, Inc.* .............................. 272,300 1,191,313
Sterling Commerce, Inc.* ...................... 46,323 1,632,886
Symantec Corp.* ............................... 150,700 2,411,200
Verio, Inc.* ................................. 180,800 2,508,600
VeriSign, Inc.* ............................... 168,200 5,161,638
Visio Corp.* .................................. 102,500 2,729,063
Wind River Systems, Inc.* ..................... 106,100 4,648,506
------------
114,351,302
------------
Containers (0.16%)
Ivex Packaging Corp.* ......................... 50,000 884,375
------------
Electronics (6.36%)
ATMI, Inc.* ................................... 220,900 3,037,375
DuPont Photomasks, Inc.* ...................... 60,000 2,175,000
Flextronics International, Ltd.* .............. 97,500 5,063,906
KLA-Tencor Corp.* ............................. 50,000 1,843,750
L-3 Communications Holdings, Inc.* ............ 21,400 920,200
Level One Communications, Inc.* ............... 180,225 4,742,168
Micrel, Inc.* ................................. 70,900 2,330,838
Novellus Systems, Inc.* ....................... 103,900 4,032,619
PMC-Sierra, Inc. (Canada)* .................... 78,800 3,536,150
Rambus, Inc.* ................................. 66,000 4,316,816
Semtech Corp.* ................................ 103,600 2,466,975
------------
34,465,797
------------
Finance (2.17%)
AmeriCredit Corp.* ............................ 150,200 2,008,925
Financial Federal Corp.* ...................... 131,000 3,053,938
Medallion Financial Corp. ..................... 270,800 4,806,700
Price (T. Rowe) Associates, Inc. .............. 39,500 1,404,719
TeleBanc Financial Corp.* ..................... 27,800 507,350
------------
11,781,632
------------
Food (0.69%)
American Italian Pasta Co. (Class A)* ......... 163,200 3,753,600
------------
Funeral Services & Related (0.65%)
Carriage Services, Inc. (Class A)* ............ 152,100 3,555,337
------------
Insurance (2.00%)
Ace, Ltd. (Bermuda) .......................... 37,800 1,280,475
Capital Re Corp. .............................. 133,600 2,446,550
Executive Risk, Inc. .......................... 61,500 2,921,250
Hartford Life, Inc. (Class A) ................. 30,600 1,415,250
Horace Mann Educators Corp. ................... 96,800 2,770,900
------------
10,834,425
------------
Leasing Companies (0.55%)
Rollins Truck Leasing Corp. ................... 254,450 2,957,981
------------
Leisure (3.71%)
Cinar Films, Inc. (Class B) (Canada)* ......... 256,400 5,416,450
Family Golf Centers, Inc.* .................... 112,600 2,371,638
Premier Parks, Inc.* .......................... 189,800 4,211,188
Silverleaf Resorts, Inc.* ..................... 135,300 1,598,231
Steiner Leisure, Ltd.* ........................ 169,100 4,121,813
Travel Services International, Inc.* .......... 117,000 2,369,250
------------
20,088,570
------------
Linen Supply & Related (0.42%)
G & K Services, Inc. (Class A) ................ 50,000 2,287,500
------------
Machinery (0.64%)
Applied Power, Inc. (Class A) ................. 126,800 3,494,925
------------
Media (3.74%)
Adelphia Communications Corp.
(Class A)* .................................. 149,400 5,621,175
Clear Channel Communications, Inc.* ........... 56,414 2,570,363
Harte-Hanks, Inc. ............................. 141,800 3,447,512
Heftel Broadcasting Corp. (Class A)* .......... 73,000 3,002,125
Network Event Theater, Inc.* .................. 685,200 2,954,925
Petersen Cos., Inc. (The) (Class A)* .......... 100,000 2,656,250
------------
20,252,350
------------
Medical (7.40%)
Alkermes, Inc.* ............................... 106,100 2,068,950
American Healthcorp, Inc.* .................... 88,100 869,987
Elan Corp., PLC American Depositary
Receipts (Ireland)* ......................... 30,000 2,101,875
Gilead Sciences, Inc.* ........................ 70,600 2,003,275
Hanger Orthopedic Group, Inc.* ................ 180,700 3,568,825
HCR Manor Care, Inc.* ......................... 50,950 1,655,875
Health Management Associates, Inc.
(Class A)* .................................. 82,428 1,468,249
Human Genome Sciences, Inc.* .................. 51,000 1,765,875
IDEC Pharmaceuticals Corp.* ................... 96,700 2,888,912
IMPATH, Inc.* ................................. 101,100 3,096,187
MiniMed, Inc.* ................................ 59,000 3,274,500
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Medical (continued)
Ocular Sciences, Inc.* ........................ 115,300 $2,896,913
PAREXEL International Corp.* .................. 103,400 2,281,263
Perclose, Inc.* ............................... 75,000 1,790,625
Renal Care Group, Inc.* ....................... 112,200 3,267,825
Res-Care, Inc.* ............................... 166,550 3,684,919
Ventana Medical Systems, Inc.* ................ 77,200 1,428,200
------------
40,112,255
------------
Metal (0.54%)
CompX International, Inc.* .................... 119,600 2,302,300
NCI Building Systems, Inc.* ................... 28,400 614,150
------------
2,916,450
------------
Oil & Gas (3.59%)
Core Laboratories N.V. (Netherlands)* ......... 156,800 3,537,800
Cross Timbers Oil Co. ......................... 57,600 828,000
Dril-Quip, Inc.* .............................. 89,900 1,887,900
J. Ray McDermott, S.A. * ...................... 46,700 1,465,213
National-Oilwell, Inc.* ....................... 146,500 2,325,687
Newfield Exploration Co.* ..................... 75,200 1,828,300
Stone Energy Corp.* .......................... 108,700 3,491,988
Tuboscope, Inc.* .............................. 136,200 1,685,475
Veritas DGC, Inc.* ............................ 129,000 2,402,625
------------
19,452,988
------------
Pollution Control (1.07%)
Eastern Environmental Services, Inc.* ......... 154,000 4,273,500
Newpark Resources, Inc.* ...................... 161,200 1,521,325
------------
5,794,825
------------
Printing - Commercial (0.91%)
Consolidated Graphics, Inc.* .................. 55,000 2,609,062
Mail-Well, Inc.* .............................. 178,800 2,335,575
------------
4,944,637
------------
Real Estate Operations (0.55%)
Central Parking Corp. ......................... 70,500 2,956,594
------------
Retail (11.53%)
99 Cents Only Stores* ......................... 96,250 4,451,562
Abercrombie & Fitch Co. (Class A)* ............ 68,200 2,706,687
Buckle, Inc. (The)* .......................... 114,900 2,082,562
CSK Auto Corp.* ............................... 143,000 3,726,937
CVS Corp. ..................................... 60,000 2,741,250
Dominick's Supermarkets, Inc.* ................ 91,600 4,471,225
Duane Reade, Inc.* ............................ 103,000 3,978,375
Eagle Hardware & Garden, Inc.* ................ 168,500 3,917,625
Ethan Allen Interiors, Inc. ................... 77,500 2,664,062
Furniture Brands International, Inc.* ......... 116,800 2,511,200
Garden Fresh Restaurant Corp.* ................ 85,300 1,370,131
Genovese Drug Stores, Inc. (Class A) .......... 140,280 3,103,695
Hibbett Sporting Goods, Inc.* ................. 161,300 4,365,181
Linens `N Things, Inc.* ....................... 145,000 4,485,938
O'Reilly Automotive, Inc.* .................... 80,000 3,130,000
Saks, Inc.* ................................... 125,600 2,857,400
Stage Stores, Inc.* .......................... 155,700 2,063,025
Starbucks Corp.* .............................. 53,300 2,311,888
Whole Foods Market, Inc.* ..................... 55,000 2,203,438
Wild Oats Markets, Inc.* ...................... 137,600 3,388,400
------------
62,530,581
------------
Schools/Education (0.61%)
Strayer Education, Inc. ....................... 96,750 3,289,500
------------
Telecommunications (4.73%)
Carrier Access Corp.* ......................... 130,000 2,502,500
Crown Castle International Corp.* ............. 163,700 2,107,637
Global TeleSystems Group, Inc.* ............... 79,100 3,168,944
ICG Communications, Inc.* ..................... 87,200 1,803,950
Metromedia Fiber Network, Inc.
(Class A)* .................................. 164,400 6,226,650
NEXTLINK Communications, Inc.
(Class A)* .................................. 73,600 1,886,000
Qwest Communications International,
Inc.* ....................................... 45,089 1,764,107
Tellabs, Inc.* ................................ 45,000 2,475,000
Transaction Network Services, Inc.* ........... 40,000 1,095,000
WinStar Communications, Inc.* ................. 97,800 2,640,600
------------
25,670,388
------------
Textile (0.82%)
Cutter & Buck, Inc.* .......................... 170,200 4,425,200
------------
Transport (2.08%)
ASA Holdings, Inc. ............................ 61,500 2,206,312
Carey International, Inc.* .................... 121,600 2,173,600
MotivePower Industries, Inc.* ................. 166,200 4,227,712
Westinghouse Air Brake Co. .................... 125,400 2,696,100
------------
11,303,724
------------
Waste Disposal Service & Equip (1.16%)
Allied Waste Industries, Inc.* ................ 168,560 3,645,110
Waste Connections, Inc.* ...................... 139,100 2,642,900
------------
6,288,010
------------
TOTAL COMMON STOCKS
(Cost $412,643,832) (95.98%) 520,387,143
--------- ------------
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Emerging Growth Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
PREFERRED STOCK
Oil & Gas (0.22%)
Cross Timbers Oil Co. ......................... 34,400 $1,173,900
------------
TOTAL PREFERRED STOCK
(Cost $605,740) (0.22%) 1,173,900
------------ ------------
TOTAL COMMON STOCKS
AND PREFERRED STOCK
(Cost $413,249,572) (96.20%) 521,561,043
------------ ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
---- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.23%)
Investment in a joint repurchase
agreement transaction with
HSBC Securities, Inc. -
Dated 10-30-98, due 11-02-98
(Secured by U.S. Treasury Bond,
7.125%, due 02-15-23 and
U.S. Treasury Notes, 6.25%,
due 01-31-02 thru 02-28-02)
-- Note A......................... 5.38% $17,511 17,511,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.35% 825
------------
TOTAL SHORT-TERM INVESTMENTS (3.23%) 17,511,825
------- ------------
TOTAL INVESTMENTS (99.43%) 539,072,868
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.57%) 3,086,973
------- ------------
TOTAL NET ASSETS (100.00%) $542,159,841
======= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer; however, security is U.S. dollar
denominated.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Emerging Growth Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock Series Trust (the "Trust") is a diversified open-end management
investment company registered under the Investment Company Act of 1940. The
Trust consists of two series portfolios: John Hancock Emerging Growth Fund (the
"Fund") and John Hancock Global Technology Fund. The other series of the Trust
is reported in separate financial statements. The investment objective of the
Fund is to seek long-term growth of capital through investing in emerging
companies (market capitalization of less than $1 billion).
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The Trustees have authorized
the issuance of Class C shares effective June 1, 1998. 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.
On March 10, 1998 the Board of Trustees of the Fund voted to split the
shares four for one, effective May 1, 1998. All per share amounts and net asset
values have been restated to reflect the stock split.
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 maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the 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. Aggregate cash balances
are invested in one or more repurchase agreements, whose underlying securities
are obligations of the U.S. government and/or its agencies. The Fund's custodian
bank receives delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or in the case of some foreign securities,
on the date thereafter when the Fund is made aware of 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 appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class level
based on the appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not readily
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Emerging Growth Fund
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.
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. These agreements enable
the Fund to participate with other Funds managed by the Adviser in unsecured
lines of credit with banks which permit borrowings up to $800 million,
collectively. Interest is charged to each Fund, based on its borrowing, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at
rates ranging from 0.070% to 0.075% per annum based on the average daily unused
portion of the line of credit, is allocated among the participating Funds. The
maximum loan balance outstanding during the year amounted to $23,451,606. The
interest rate was in the range of 5.94% thru 6.25%. At October 31, 1998, there
were no outstanding borrowings.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the 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 or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of 0.75% of Fund's average daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1998, net sales charges received with regard to sales of Class A shares
amounted to $405,078. Out of this amount, $61,937 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$232,353 was paid as sales commissions to unrelated broker-dealers and $110,788
was paid as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), a related broker-dealer. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Distributors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the year ended October 31, 1998,
contingent deferred sales charges paid to JH Funds amounted to $920,000.
Class C shares which are redeemed within one year of purchase will be
subject to a contingent deferred sales charge ("CDSC") at a rate of 1.0% of the
lesser of the current market value at the time of
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Emerging Growth Fund
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class C shares. For the year ended October 31, 1998,
there was no contingent deferred sales charges paid to JH Funds.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not to exceed
0.25% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets to reimburse JH Funds for its distribution and service
costs. Up to a maximum of 0.25% of such 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 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 and
financial management services for the Funds. The compensation for the year was
at an annual rate of less than 0.02% of the average net assets of each Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are trustees 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. At October 31, 1998, the Fund's investments to cover the deferred
compensation liability had an unrealized appreciation of $4,976.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1998, aggregated $637,184,044 and $704,507,982, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1998.
The cost of investments owned at October 31, 1998 (excluding the corporate
savings account) for federal income tax purposes was $431,089,387. Gross
unrealized appreciation and depreciation of investments aggregated $142,879,430
and $34,896,774, respectively, resulting in net unrealized appreciation of
$107,982,656.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1998, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments and foreign
currency transactions of $23,844,404, a decrease in accumulated net investment
loss of $9,529,879 and an increase in capital paid-in of $14,314,525. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 1998. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to the treatment of net operating losses in the
computation of distributable income and capital gains under federal tax rules
versus generally accepted accounting principles, and the fund's use of the the
tax accounting practice known as equalization. The calculation of net investment
income per share in the financial highlights excludes these adjustments.
18
<PAGE>
================================================================================
John Hancock Funds - Emerging Growth Fund
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Series Trust --
John Hancock Emerging Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock Emerging Growth Fund (the
"Fund"), one of the portfolios constituting John Hancock Series Trust, as of
October 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and brokers, and other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
John Hancock Emerging Growth Fund portfolio of John Hancock Series Trust at
October 31, 1998, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 12, 1998
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1998.
The Fund has designated distributions to shareholders of $168,931,911 as a
capital gain dividend.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1998 U.S. Treasury Department Form 1099-DIV
in January of 1999. This will reflect the total of all distributions which are
taxable for calendar year 1998.
19
<PAGE>
================================================================================
----------------
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 Randolph, MA
1-800-225-5291 1-800-554-6713 (TDD) Permit No. 75
INTERNET: www.jhancock.com/funds ----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Emerging Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[Recycle Logo] Printed on Recycled Paper 6000A 10/98
12/98
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below reads
"A Global Investment Management Firm." A recycled logo in lower left hand corner
with caption "Printed on Recycled Paper."]
<PAGE>
ANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Global
Technology Fund
OCTOBER 31, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-------------------------------------
TRUSTEES
EDWARD J. BOUDREAU, JR.
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
ROBERT G. FREEDMAN
Vice Chairman and
Chief Investment Officer
ANNE C. HODSDON
President and Chief Operating Officer
BARRY J. GORDON
President
JAMES B. LITTLE
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
INVESTORS BANK AND TRUST COMPANY
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116-5072
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
SUB-INVESTMENT ADVISER
AMERICAN FUND ADVISORS, INC.
1415 KELLUM PLACE
GARDEN CITY, NY 11530
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
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116-5072
-------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
An often-used analogy for stock market performance over the short term is a
roller coaster. That is because, while long-term history suggests the market's
general direction is up, its swings over the short term can be dramatic and, at
times, violent. This year, the market has given us several stark examples of
this phenomenon. From the new highs set in mid-July, the major indices plunged
by 19% through the end of August. It was the worst such fall since 1990. For the
first time in a number of years, some bonds and bond mutual funds outperformed
stocks and stock mutual funds. Seeking safety in a world of global economic
uncertainties, investors everywhere converged on U.S. Treasury bonds and pushed
their yields to historic lows.
Then in early October, the market staged a remarkable rebound that was
sparked by the Federal Reserve's two cuts in interest rates. The major indices
regained all their previously lost ground and the S&P 500 Stock Index ended
October actually up by 15% year-to-date.
- --------------------------------------------------------------------------------
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
Investors have been understandably shaken by these dramatic twists and
turns, but we are pleased to report that most individual investors did not
panic, and we hope that means they've taken our words to heart. Over the long
term, markets do not move up or down in a straight line. That's why after
watching the market charge ahead almost uninterrupted for so many years, we have
been striking a more cautionary stance in this space over the last several
months.
Analysts are still pondering the implications of global turmoil and the
potential for slower U.S. economic and corporate earnings growth. While we don't
make a practice of opining on what the market will do next, we continue to
believe it would be wise for investors to set more realistic expectations. Over
the long term, the market's historical results have been more in the 10% per
year range, which is still a solid result, considering it has been produced
despite wars, depressions and other social upheavals along the way.
There is no doubt, however, that the market's heightened volatility and
recent dramatic moves have been cause for concern. In these uncertain times, it
becomes even harder to remember to "stay the course" and stick to your long-term
investment plan. But this remains the essential tenet of successful investing.
Now could also be a good time to review your asset allocation with your
investment professional, keeping in mind that the last six months' divergence in
performance of stocks and high-quality bonds is a perfect example of why all
your eggs shouldn't be in one basket.
Sincerely,
/s/ Edward J. Boudreau
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY BARRY GORDON AND MARC KLEE, PORTFOLIO MANAGERS
John Hancock
Global Technology Fund
Weakening global economy hurts technology stocks;
late rally signals renewed optimism
It was a volatile 12 months for most technology stocks, although they showed
dramatic improvement at the end of the period. A sense of unease lingered over
the group from the outset last November, not only because of continued economic
turmoil in Asia, but because of concerns that the region's weakness could spread
throughout the world. As multinational concerns with a fair amount of their
revenues generated abroad, some technology companies proved vulnerable to
slowing global economic growth and were among the market's worst performers
throughout much of the year. Added to concerns about Asia were other global
worries, including the near-collapse of Russia, hedge fund losses, ongoing
currency and fiscal policy problems in Brazil and a potential U.S. recession. A
few technology stocks -- namely the very large and the Internet-related -- were
able to shrug off the malaise for quite some time, although even many of those
eventually succumbed in the summer to all the clouds that hung over the group.
During the final month of the Fund's fiscal year, however, conditions turned
decidedly more favorable. When the Federal Reserve Board cut interest rates for
the second time in three weeks on October 15, the market's mood shifted
dramatically and investors started buying tech stocks at what were viewed as
bargain prices. Later, large technology companies such as IBM, Intel and
Microsoft reported better-than-expected third-quarter earnings, which provided
further steam for the tech stock rally.
"...some technology companies proved vulnerable to slowing global economic
growth..."
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Global
Technology Fund. Caption below reads "Fund management team members (l-r): "Barry
Gordan, Marc Klee and Alan Loewenstein."]
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
John Hancock Funds - Global Technology Fund
"We saw solid performance from our computer hardware holdings..."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Common Stock Holdings." The
first listing is First America Online 6.3%, the second is Microsoft 5.2%, the
third Cisco Systems 5.0%, the fourth EMC Corp. 4.9% and the fifth Dell Computer
4.5%. A note below the table reads "As a percentage of net assets on October 31,
1998."]
- --------------------------------------------------------------------------------
Performance review
For the year ended October 31, 1998, John Hancock Global Technology Fund's Class
A and Class B shares posted total returns of 3.95% and 3.20%, respectively, at
net asset value. For the same period, the average science and technology fund
returned 10.01%, according to Lipper Analytical Services, Inc.1 Keep in mind
that your net asset value return will be different from the Fund's performance
if you were not invested in the Fund for the entire period and did not reinvest
all distributions. Historical performance information can be found on pages six
and seven.
The main reason for the Fund's lag was our smaller-than-average stake in
Internet-related stocks. Although America Online proved to be a terrific winner
for us during the year -- as well as being our top holding -- we had previously
sold or avoided most other Internet companies. That's because we felt that they
had reached prices that were too high given their current earnings stream.
What's more, Internet stocks have a high degree of volatility relative to other
segments of the technology group, so we thought they would be hurt more than
other sectors during a market downturn. Befuddling as it was, that proved not to
be the case and investors kept up their love affair with Internet stocks despite
the rest of the sector's sell-off.
Leaders and laggards
We saw solid performance from our computer hardware holdings during the past
year, with many coming on particularly strong during the final months of the
period. In contrast to the first half of the year, when personal computer
inventory was excessive, the second half was marked by declining inventories and
firm PC sales. That helped boost the price of Dell Computer, which posted record
sales and revenues. Another of our best performers was Compaq Computer, in which
we re-initiated a position due to its ability to better manage inventory and
react more nimbly to falling computer component prices. We had sold out of
Compaq entirely last fall due to our concerns about the company's increased
inventory backlog. But in addition to working on its inventory problems,
Compaq's partnership with Tandy and its acquisition of Digital Equipment
Corporation should help position it as a strong competitor, as customers move
toward one-stop shopping of computers and related equipment. EMC Corp. was
buoyed by a number of factors, including the growing realization of the
importance of storage producers in solving problems connected to the year 2000.
Also, investors recognized the company's evolution from a strictly hardware
storage company to a combination hardware/software provider. This was a
significant shift, because software carries higher profit margins and has more
predictable recurring sales.
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is America
Online followed by an up arrow with the phrase "Ad sales, membership climb." The
second listing is EMC Corp. followed by an up arrow with the phrase "Growing
revenues from software." The third listing is Computer Associates International
followed by a down arrow with the phrase "Software sales slow." A note below the
table reads "See 'Schedule of Investments.' Investment holdings are subject to
change."]
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
John Hancock Funds - Global Technology Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the year ended October 31, 1998." The chart is
scaled in increments of 2% with 0% at the bottom and 12% at the top. The first
bar represents the 3.95% Total return for John Hancock Global Technology Fund
Class A. The second bar represents the 3.20% total return for John Hancock
Global Technology Fund Class B. The third bar represents the 10.01% total return
for Average science and technology fund. A note below the chart reads "Total
returns for John Hancock Global Technology Fund are at net asset value with all
distributions reinvested. The average science and technology fund is tracked by
Lipper Analytical Services, Inc. See the following two pages for historical
performance information."]
- --------------------------------------------------------------------------------
We also saw good recent performance from companies that make computer
peripherals, such as Seagate Technology and Quantum, which have bounced back
from their late-summer bottoms. Finally, Microsoft continued its impressive
climb, despite the U.S. Department of Justice lawsuit against it. We will
continue to monitor these events closely and make adjustments as we see fit.
Other software companies, however, proved disappointing. After bringing us
some of our best gains in the first half, Computer Associates International
tumbled when it warned investors that sales could lag as corporations divert
technology spending away from software into solving the problems presented by
the year 2000. Worries over slower software sales also dragged down BMC Software
and PeopleSoft, the latter of which we recently sold. In response to growing
concerns that software spending will slow in the face of year 2000 spending, we
cut our holdings in software companies in favor of hardware-oriented companies
and Internet-related companies that we could buy at reasonable prices.
Outlook
We have a relatively bullish outlook for technology stocks. Other than a handful
of very well-known companies - such as Microsoft, America Online and Dell - most
technology stocks have underperformed the overall stock market during the past
three years. The consequence of this lagging performance is that tech stock
prices currently are very attractive, given their earnings growth rates. Another
thing going for tech companies is that their fundamentals have remained
reasonably strong. Even though economic growth has slowed, tech companies
continue to grow much more rapidly than the economy as a whole. In our view,
there's a reasonable likelihood that certain areas of the world will start to
show improved economic strength. That's not to say that Asia, for example, will
have a vigorous rebound, but we do believe that odds favor economic improvement
rather than further deterioration. We believe that the winners in such an
environment won't be confined to large-company stocks, as they have been over
the past year or so.
"...tech stock prices currently are very attractive, given their earnings growth
rates."
- --------------------------------------------------------------------------------
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.
International investing involves special risks such as political, economic and
currency risks and differences in accounting standards and financial reporting.
Sector investing is subject to greater risks than the market as a whole.
(1)Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE>
================================================================================
John Hancock Funds - Global Technology Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Global Technology 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.
Class A share total return figures include the maximum applicable sales charge
of 5%. Class B performance reflects a maximum contingent deferred sales charge
(maximum 5% and declining to 0% over six years).
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 September 30, 1998
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
Cumulative Total Returns (14.94%) 95.24% 248.27%
Average Annual Total Returns (14.94%) 14.32% 13.29%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended September 30, 1998
SINCE
ONE INCEPTION
YEAR (1/3/94)
---- --------
Cumulative Total Returns (15.14%) 94.48%
Average Annual Total Returns (15.14%) 15.07%
6
<PAGE>
================================================================================
John Hancock Funds - Global Technology Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the
John Hancock Global Technology 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 -- an unmanaged
index that includes 500 widely traded common stocks and is used often as a
measure of stock market performance. Past performance is not indicative of
future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Global Technology Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Stock Index and is equal to $51,737 as of October 31,
1998. The second line represents the value of the hypothetical $10,000
investment made in the John Hancock Global Technology Fund on October 31, 1988,
before sales charge, and is equal to $38,952 as of October 31, 1998. The third
line represents the value of the same hypothetical investment made in the John
Hancock Global Technology Fund, after sales charge, and is equal to $37,001 as
of October 31, 1998.
Line chart with the heading John Hancock Global Technology Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are two lines. The first line represents the Standard
& Poor's 500 Stock Index and is equal to $26,192 as of October 31, 1998. The
second line represents the value of the hypothetical $10,000 investment made in
the John Hancock Globla Technology Fund on January 3, 1994, before sales charge,
and is equal to $20,912 as of October 31, 1998. The third line represents the
value of the same hypothetical investment made in the John Hancock Global
Technology Fund, after sales charge, and is equal to $20,712 as of October 31,
1998.
- --------------------------------------------------------------------------------
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology 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 October 31, 1998. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 1998
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks and units (cost - $147,806,961) ............ $238,966,963
Preferred stocks (cost - $500,000) ....................... 500,000
Bonds (cost - $477,707) .................................. 556,750
Joint repurchase agreement (cost - $24,112,000) .......... 24,112,000
Corporate savings account ................................ 146
------------
264,135,859
Receivable for investments sold ........................... 468,222
Receivable for shares sold ................................ 2,025,586
Interest receivable ....................................... 53,984
Other assets .............................................. 24,435
------------
Total Assets ............................ 266,708,086
-----------------------------------------------------------
Liabilities:
Payable for investments purchased ......................... 2,033,951
Payable for options written ............................... 8,438
Payable for shares repurchased ............................ 87,207
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................. 252,245
Accounts payable and accrued expenses ..................... 68,845
------------
Total Liabilities ....................... 2,450,686
-----------------------------------------------------------
Net Assets:
Capital paid-in ........................................... 171,153,910
Accumulated net realized gain on investments
and written options ...................................... 1,870,644
Net unrealized appreciation of investments
and written options ...................................... 91,250,595
Accumulated net investment loss ........................... (17,749)
------------
Net Assets .............................. $264,257,400
===========================================================
Net Asset Value Per Share:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of
shares authorized with no par value)
Class A - $186,258,658 / 6,545,634 ........................ $28.46
=============================================================================
Class B - $77,998,742 / 2,857,947 ......................... $27.29
=============================================================================
Maximum Offering Price Per Share*
Class A - ($28.46 x 105.26%) .............................. $29.96
=============================================================================
* 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
Year ended October 31, 1998
- --------------------------------------------------------------------------------
Investment Income:
Interest ................................................... $1,203,406
Dividends .................................................. 138,356
------------
1,341,762
------------
Expenses:
Investment management fee - Note B ........................ 2,007,313
Distribution and service fee - Note B
Class A ................................................. 550,500
Class B ................................................. 702,848
Transfer agent fee - Note B ............................... 727,352
Administrative fee - Note B ............................... 100,000
Registration and filing fees .............................. 69,382
Custodian fee ............................................. 62,288
Auditing fee .............................................. 32,500
Printing .................................................. 27,696
Trustees' fees ............................................ 19,160
Miscellaneous ............................................. 7,265
Legal fees ................................................ 3,610
------------
Total Expenses ........................... 4,309,914
-----------------------------------------------------------
Net Investment Loss ...................... (2,968,152)
-----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ...................... 3,469,867
Net realized gain on written options ....................... 225,117
Change in net unrealized appreciation/depreciation
of investments ............................................ 7,783,193
Change in net unrealized appreciation/depreciation
of written options ........................................ 9,863
------------
Net Realized and Unrealized
Gain on Investments
and Written Options ...................... 11,488,040
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................ $8,519,888
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1997 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ......................................................... ($2,689,254) ($2,968,152)
Net realized gain on investments sold and options ........................... 33,306,242 3,694,984
Change in net unrealized appreciation/depreciation of investments and options 14,690,362 7,793,056
------------ ------------
Net Increase in Net Assets Resulting from Operations ...................... 45,307,350 8,519,888
------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and options
Class A - ($1.2268 and $2.4026 per share, respectively) ................... (7,748,777) (15,029,298)
Class B - ($1.2268 and $2.4026 per share, respectively) ................... (2,500,738) (5,391,394)
------------ ------------
Total Distributions to Shareholders ....................................... (10,249,515) (20,420,692)
------------ ------------
From Fund Share Transactions - Net:* ........................................... (2,117,351) 26,258,682
------------ ------------
Net Assets:
Beginning of period ......................................................... 216,959,038 249,899,522
------------ ------------
End of period (including accumulated net investment loss of
$18,783 and $17,749, respectively) ........................................ $249,899,522 $264,257,400
============ ============
</TABLE>
*Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
1997 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ..................................................... 8,298,098 $225,310,630 6,227,786 $173,844,000
Shares issued to shareholders in reinvestment of distributions .. 234,834 6,232,474 496,541 12,219,872
------------ ------------- ------------ -------------
8,532,932 231,543,104 6,724,327 186,063,872
Less shares repurchased ......................................... (8,844,846) (240,557,015) (6,302,628) (176,502,102)
------------ ------------- ------------ -------------
Net increase (decrease) ......................................... (311,914) ($9,013,911) 421,699 $9,561,770
============ ============= ============ =============
CLASS B
Shares sold ..................................................... 1,368,919 $37,796,650 2,014,046 $55,031,614
Shares issued to shareholders in reinvestment of distributions .. 84,278 2,180,266 197,814 4,698,077
------------ ------------- ------------ -------------
1,453,197 39,976,916 2,211,860 59,729,691
Less shares repurchased ......................................... (1,213,498) (33,080,356) (1,615,363) (43,032,779)
------------ ------------- ------------ -------------
Net increase .................................................... 239,699 $6,896,560 596,497 $16,696,912
============ ============= ============ =============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders, and any increase or decrease in money shareholders invested in the
Fund. The footnote illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding dollar
value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology 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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM YEAR ENDED OCTOBER 31,
-------------------------------- JANUARY 1, 1996 TO ----------------------
1993 1994 1995 OCTOBER 31, 1996(7) 1997 1998
------- ------- -------- ------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ...... $14.94 $17.45 $17.84 $24.51 $25.79 $30.05
------- ------- -------- -------- -------- --------
Net Investment Loss ....................... (0.21) (0.22)(1) (0.22)(1,2) (0.14)(1) (0.27)(1) (0.28)(1)
Net Realized and Unrealized Gain on
Investments and Options ................ 4.92 1.87 8.53 1.42 5.76 1.09
------- ------- -------- -------- -------- --------
Total from Investment Operations ...... 4.71 1.65 8.31 1.28 5.49 0.81
------- ------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Options ............ (2.20) (1.26) (1.64) -- (1.23) (2.40)
------- ------- -------- -------- -------- --------
Net Asset Value, End of Period ............ $17.45 $17.84 $24.51 $25.79 $30.05 $28.46
======= ======= ======== ======== ======== ========
Total Investment Return at Net Asset
Value (6) ............................... 32.06% 9.62% 46.53% 5.22%(9) 21.90% 3.95%
Total Adjusted Investment Return at Net
Asset Value (6) ......................... -- -- 46.41%(3) -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .. $41,749 $52,193 $155,001 $166,010 $184,048 $186,259
Ratio of Expenses to Average Net Assets ... 2.10% 2.16% 1.67%(2) 1.57%(8) 1.51% 1.50%
Ratio of Net Investment Loss to Average
Net Assets .............................. (1.49%) (1.25%) (0.89%)(2) (0.68%)(8) (0.95%) (0.97%)
Portfolio Turnover Rate ................... 86% 67% 70% 64% 104% 86%
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM YEAR ENDED OCTOBER 31,
----------------------- JANUARY 1, 1996 TO ---------------------
1994 1995 OCTOBER 31, 1996(7) 1997 1998
------- ------- ------------------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B(4)
Per Share Operating Performance
Net Asset Value, Beginning of Period ................ $17.24(5) $17.68 $24.08 $25.20 $29.12
------- ------- ------- ------- -------
Net Investment Loss (1) ............................. (0.35) (0.39)(2) (0.28) (0.45) (0.45)
Net Realized and Unrealized Gain on Investments
and Options ....................................... 2.05 8.43 1.40 5.60 1.02
------- ------- ------- ------- -------
Total from Investment Operations ................... 1.70 8.04 1.12 5.15 0.57
------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Options ...................... (1.26) (1.64) -- (1.23) (2.40)
------- ------- ------- ------- -------
Net Asset Value, End of Period ...................... $17.68 $24.08 $25.20 $29.12 $27.29
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (6) ...... 10.02%(9) 45.42% 4.65%(9) 21.04% 3.20%
Total Adjusted Investment Return at Net Asset
Value (6) ......................................... -- 45.30%(3) -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............ $9,324 $35,754 $50,949 $65,851 $77,999
Ratio of Expenses to Average Net Assets ............. 2.90%(8) 2.41%(2) 2.27%(8) 2.21% 2.20%
Ratio of Net Investment Loss to Average Net Assets .. (1.98%)(8) (1.62%)(2) (1.38%)(8) (1.65%) (1.67%)
Portfolio Turnover Rate ............................. 67% 70% 64% 104% 86%
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Reflects voluntary fee reductions and expense limitations in effect during
the year ended December 31, 1995. As a result of such fee reductions,
expenses of Class A and Class B shares of the Fund reflect reductions of
$0.02 and $0.03 per share, respectively. Absent such reductions the ratio of
expenses to average net assets would have been 1.79% and 2.53% for Class A
and Class B shares, respectively and the ratio of net investment loss to
average net assets would have been (1.01%) and (1.74%) for Class A and Class
B shares, respectively.
(3) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the Adviser during the periods shown.
(4) Class B shares commenced operations on January 3, 1994.
(5) Initial price to commence operations.
(6) Assumes dividend reinvestment and does not reflect the effect of sales
charge.
(7) Effective October 31, 1996 the fiscal period end changed from December 31 to
October 31.
(8) Annualized.
(9) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology Fund
Schedule of Investments
October 31, 1998
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Technology Fund on October 31, 1998. It's divided into four main
categories: common stocks and units, preferred stocks, bonds and short-term
investments. The stocks and bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are listed
last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS AND UNITS
Aerospace/Aircraft Equipment (2.70%)
United Technologies Corp. ..................... 75,000 $7,143,750
-----------
Computer - Graphics (1.62%)
Cadence Design Systems, Inc.* ................ 200,000 4,275,000
-----------
Computer - Internet Services (10.59%)
America Online, Inc.* ......................... 130,000 16,518,125
E*TRADE Group, Inc.* .......................... 130,000 2,340,000
EarthLink Network, Inc.* ...................... 60,000 2,310,000
Exodus Communications, Inc.* .................. 75,000 2,381,250
Fvc.com, Inc.* ................................ 100,000 850,000
N2K, Inc.* .................................... 100,000 493,750
RealNetworks, Inc.* ........................... 50,000 1,684,375
Sportsline USA, Inc.* ......................... 100,000 1,406,250
-----------
27,983,750
-----------
Computer - Local Networks (8.88%)
3Com Corp.* ................................... 50,000 1,803,125
Ascend Communications, Inc.* .................. 175,000 8,443,750
Cisco Systems, Inc.* .......................... 210,000 13,230,000
-----------
23,476,875
-----------
Computer - Memory Devices (8.11%)
EMC Corp.* .................................... 200,000 12,875,000
Network Appliance, Inc.* ...................... 60,000 3,285,000
Quantum Corp.* ................................ 150,000 2,625,000
Seagate Technology, Inc.* ..................... 100,000 2,637,500
-----------
21,422,500
-----------
Computer - Mini/Macro (7.16%)
Compaq Computer Corp. ......................... 224,900 7,112,462
Dell Computer Corp.* .......................... 180,000 11,812,500
-----------
18,924,962
-----------
Computer - Services (3.35%)
Fund Tech, Ltd.* (Israel) ..................... 103,000 $1,403,375
Mercury Interactive Corp.* .................... 115,000 4,772,500
Novell, Inc.* ................................. 150,000 2,231,250
SOFTWORKS, Inc.* .............................. 100,000 437,500
-----------
8,844,625
-----------
Computer - Software (25.63%)
BEA Systems, Inc.* ............................ 150,000 2,939,070
BMC Software, Inc.* ........................... 125,000 6,007,812
CBT Group Plc*American Depositary
Receipt (ADR) (Ireland) ..................... 35,700 426,169
Computer Associates International, Inc. ....... 200,000 7,875,000
Compuware Corp.* .............................. 100,000 5,418,750
HNC Software, Inc.* ........................... 100,000 3,362,500
Information Management Associates,
Inc.* ....................................... 130,500 725,906
JDA Software Group, Inc.* ..................... 100,000 950,000
Keane, Inc.* .................................. 100,000 3,325,000
Lernout & Hauspie Speech Products
N.V.* (Belgium) ............................. 50,000 1,981,250
Microsoft Corp.* .............................. 130,000 13,763,750
Networks Associates, Inc.* .................... 160,000 6,800,000
Parametric Technology Corp.* .................. 175,000 2,909,375
Synopsys, Inc.* ............................... 60,000 2,715,000
Unisys Corp.* ................................. 200,000 5,325,000
Wang Laboratories, Inc.* ...................... 150,000 3,206,250
-----------
67,730,832
-----------
Electronics - Components Misc. (2.27%)
SCI Systems, Inc* ............................. 100,000 3,950,000
Sanmina Corp.* ................................ 50,000 2,050,000
-----------
6,000,000
-----------
Electronics - Products Misc. (0.11%)
Microwave Power Devices, Inc.* ................ 90,000 286,875
-----------
Electronics - Semiconductor Components (7.75%)
Altera Corp.* ................................. 75,000 3,121,875
Analog Devices, Inc.* ......................... 125,000 2,484,375
Applied Materials, Inc.* ...................... 120,000 4,162,500
Cypress Semiconductor Corp.* .................. 210,000 2,336,250
NeoMagic Corp.* ............................... 100,000 1,675,000
Novellus Systems, Inc.* ....................... 110,000 4,269,375
Vitesse Semiconductor Corp.* .................. 75,000 2,418,750
-----------
20,468,125
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Medical - Home & Outpatient (0.00%)
Laser Medical Corp.*(r) ....................... 491,800 $50
------------
Telecommunications - Equipment (2.80%)
C-Grams Unlimited, Inc.*(r) ................... 160,000 480,000
Globecomm Systems, Inc.* ...................... 131,904 577,078
Globecomm Systems, Inc.* (R) .................. 101,802 412,298
Intelect Communications, Inc.* ................ 225,000 632,813
Metromedia Fiber Network, Inc.
(Class A)* .................................. 106,000 4,014,750
NorthEast Optic Network, Inc.* ................ 75,000 459,375
PairGain Technologies, Inc.* .................. 100,000 821,880
------------
7,398,194
------------
Telecommunications - Services (6.27%)
Allegiance Telecom, Inc.* ..................... 90,000 1,029,375
China Telecom, Ltd.* (ADR) (Hong Kong) ........ 10,200 388,875
Esat Telecom Group Plc* (ADR) (Ireland) ....... 18,700 565,675
Global Crossing, Ltd.* ........................ 100,000 2,875,000
MCI WorldCom, Inc.* ........................... 50,000 2,762,500
Primus Telecommunications Group,
Inc. * ...................................... 300,000 3,318,750
Qwest Communications International,
Inc.* ....................................... 75,000 2,934,375
WinStar Communications, Inc.* ................. 100,000 2,700,000
------------
16,574,550
------------
Transport - Airline (3.00%)
AMR Corp.* .................................... 70,000 4,690,000
UAL Corp.* .................................... 50,000 3,246,875
------------
7,936,875
------------
UNITS
Electronics - Components Misc. (0.19%)
Digital LAVA, Inc.*(r) ........................ 50 500,000
------------
TOTAL COMMON STOCKS AND UNITS
(Cost $147,806,961) ................ (90.43%) 238,966,963
------- ------------
PREFERRED STOCKS
Medical - Home & Outpatient (0.19%)
Laser Medical Corp.*(r) ....................... 500,000 $500,000
------------
TOTAL PREFERRED STOCKS
(Cost $500,000) ................ (0.19%) 500,000
------- ------------
PAR VALUE
INTEREST CREDIT (000s
RATE RATING** OMITTED)
---- -------- --------
BONDS
Transport - Air Freight (0.21%)
Piedmont Aviation, Inc.
Equip Tr Cert 1988
Ser F 03-28-09............... 10.35% B+ $500 556,750
------------
TOTAL BONDS
(Cost $477,707) (0.21%) 556,750
------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.12%)
Investment in a joint repurchase
agreement transaction with
HSBC Securities, Inc. -
dated 10-30-98, due 11-02-98
(Secured by U.S. Treasury Bond,
7.125%, due 02-15-23 and U.S.
Treasury Notes, 6.250%, due
01-31-02 thru 02-28-02)
-- Note A................... 5.38 24,112 24,112,000
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.35%................ 146
------------
TOTAL SHORT-TERM INVESTMENTS (9.12%) 24,112,146
------- ------------
TOTAL INVESTMENTS (99.95%) 264,135,859
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.05%) 121,541
------- ------------
TOTAL NETASSETS (100.00%) $264,257,400
======= ============
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Technology Fund
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where available,
or Moody's Investors Service or John Hancock Advisers, Inc. where Standard &
Poor's ratings are not available.
(R) This security is exempt from registration under Rule 144A of the Securities
Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $412,298 as of October 31, 1998. See Note A of the
Notes to Financial Statements for valuation policy.
(r) Direct placement securities are restricted as to resale. They have been
valued in accordance with procedures approved by the Trustees after
consideration of restrictions as to resale, financial condition and
prospects of the issuer, general market conditions and pertinent information
in accordance with the Fund's By-Laws and the Investment Company Act of
1940, as amended. The Fund has limited rights to registration under the
Securities Act of 1933 with respect to these restricted securities.
Additional information on these securities is as follows:
MARKET
VALUE AS A MARKET
PERCENTAGE VALUE AT
ACQUISITION ACQUISITION OF FUND'S OCTOBER 31,
ISSUER, DESCRIPTION DATE COST NET ASSETS 1998
- ------------------- ---- ---- ---------- ----
C-Grams Unlimited, Inc. -
Common Stock............ 03-24-98 $480,000 0.18% $480,000
Digital LAVA, Inc. -
Unit.................... 02-11-98 500,000 0.19 500,000
Laser Medical Corp. -
Common Stock ........... 01-12-98 50 0.00 50
Preferred Stock......... 01-12-98 500,000 0.19 500,000
---- ----------
0.56% $1,480,050
==== ==========
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar
denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Technology Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock Series Trust (the "Trust") is a diversified open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of two series: John Hancock Global Technology Fund (the "Fund")
and John Hancock Emerging Growth Fund. The other series of the Trust is reported
in separate financial statements. The investment objective of the Fund is to
achieve long-term capital growth by investing principally in equity securities
of foreign and U.S. companies that rely extensively on technology in their
product development or operations.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. Effective December 8, 1998,
the Board of Trustees have authorized the issuance of Class C shares in 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 services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the 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,
may participate in a joint repurchase agreement. Aggregate cash balances are
invested in one or more repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's custodian
bank receives delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
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.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
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 appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Technology Fund
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 sizes 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. These agreements enable
the Fund to participate with other funds managed by the Adviser in unsecured
lines of credit with banks which permit borrowings up to $800 million,
collectively. Interest is charged to each fund, based on its borrowing, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at
rates ranging from 0.070% to 0.075% per annum based on the average daily unused
portion of the lines of credit, is allocated among the participating funds. The
Fund had no borrowing activity for the year ended October 31, 1998.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated in to U.S. dollars based on London
currency exhange 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.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the 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 contract's
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
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Technology Fund
conditions. To minimize credit and liquidity risks in over-the-counter option
contracts, the Fund will continuously monitor the creditworth-iness 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 year-end
Statement of Assets and Liabilities.
Written option transactions for the year ended October 31, 1998 were as
follows:
OUTSTANDING, BEGINNING OF PERIOD -- $--
------ --------
OPTIONS WRITTEN 1,150 243,417
OPTIONS EXERCISED (1,000) (225,117)
------ --------
OUTSTANDING, END OF PERIOD 150 $18,300
====== ========
Written options outstanding at October 31, 1998, were as follows:
EXPIRATION DATE/ CURRENT
WRITTEN OPTION STRIKE PRICE COST VALUE
- -------------- ------------ ---- -----
Bea Systems, Inc. DEC 98/25 $18,300 $8,438
======= ======
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Adviser is responsible for managing the Fund's investment business affairs
and overseeing the investment activities of the sub-adviser. The Adviser has a
sub-investment management contract with American Fund Advisors, Inc. (the
"Sub-Adviser"), under which the Sub-Adviser, subject to the review of the
Trustees and the overall supervision of the Adviser, provides the Fund with
investment services and advice with respect to investment transactions. Under
the present investment management contract, the Fund pays a monthly management
fee to the Adviser, equivalent on an annual basis, to the sum of (a) 0.85% of
the first $100,000,000 of the Fund's average daily net asset value and (b) 0.75%
of the Fund's average daily net asset value in excess of $100,000,000. The
Adviser pays the Sub-Adviser a monthly management fee, equivalent on an annual
basis, to the sum of (a) 0.35% of the first $100,000,000 of the Fund's average
daily net asset value and (b) 40% of the investment advisory fee received by the
Adviser on amounts over $100,000,000. The Fund pays a monthly administrative fee
at the rate of $100,000 per annum to the Adviser for performance of
administrative services to the Fund.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1998, net sales charges received with regard to sales of Class A shares
amounted to $336,061. Out of this amount, $54,632 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$212,441 was paid as sales commissions to unrelated broker-dealers and $68,988
was paid as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), a related broker-dealer. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Distributors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the year ended October 31, 1998,
contingent deferred sales charges paid to JH Funds amounted to $176,159.
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 and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds for
distribution and service expenses, at an annual rate not to exceed 0.30% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to reimburse JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such 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
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Technology Fund
JHMLICo. The Fund pays the transfer agent fee based on the number of shareholder
accounts and certain out-of-pocket expenses.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are Trustees and/or officers of the Adviser and Mr. Barry J. Gordon is a
director and officer of the Sub-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 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. At October 31, 1998, the Fund's investments to
cover the deferred compensation liability had unrealized appreciation of $1,687.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the year
ended October 31, 1998, aggregated $203,614,226 and $207,732,493, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended October 31, 1998.
The cost of investments owned at October 31, 1998 (excluding the corporate
savings account), for federal income tax purposes was $173,317,790. Gross
unrealized appreciation and depreciation of investments aggregated $102,388,609
and $11,570,686, respectively, resulting in net unrealized appreciation of
$90,817,923.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1998, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments of
$1,382,423, a decrease in accumulated net investment loss of $2,969,186 and a
decrease in capital paid-in of $1,586,763. This represents the amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of October 31, 1998. Additional adjustments may be needed in
subsequent reporting periods. These reclassifications, which have no impact on
the net asset value of the Fund, are primarily attributable to the treatment of
net operating losses and net realized loss on foreign currency transactions in
the computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles and the fund's use of the
tax accounting practice known as equalization. The calculation of net investment
income per share in the financial highlights excludes these adjustments.
18
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John Hancock Funds - Global Technology Fund
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Series Trust --
John Hancock Global Technology Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock Global Technology Fund (the
"Fund"), one of the portfolios constituting John Hancock Series Trust, as of
October 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets and the financial highlights for
each of the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial highlights for each of
the indicated periods prior to the year ended October 31, 1997 were audited by
other auditors whose report dated December 12, 1996 expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and brokers, and other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
John Hancock Global Technology Fund portfolio of John Hancock Series Trust at
October 31, 1998, the results of its operations for the year then ended, the
changes in its net assets and the financial highlights for each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 15, 1998
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its taxable year ended October
31, 1998.
None of the distributions qualify for the dividends received deduction
available to corporations.
The Fund has designated distributions to shareholders of $21,804,811 as
capital gain dividends.
Shareholders will be mailed a 1998 U.S. Treasury Department Form 1099-DIV in
January 1999. This will reflect the tax character of distributions for calendar
year 1998.
19
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