---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
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[PHOTO]
Real Estate
Fund
OCTOBER 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
------------------------------------------
TRUSTEES
STEPHEN L. BROWN
JAMES F. CARLIN
WILLIAM H. CUNNINGHAM*
RONALD R. DION*
MAUREEN R. FORD
HAROLD R. HISER, JR.
ANNE C. HODSDON
CHARLES L. LADNER
STEVEN R. PRUCHANSKY*
RICHARD S. SCIPIONE
LT. GEN. NORMAN H. SMITH, USMC (RET.)
JOHN P. TOOLAN
*Members of the Audit Committee
OFFICERS
STEPHEN L. BROWN
Chairman
MAUREEN R. FORD
Vice Chairman and Chief Executive Officer
ANNE C. HODSDON
President, Chief Operating Officer
and Chief Investment Officer
OSBERT M. HOOD
Executive Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Vice President and Compliance Officer
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 WATER STREET
BOSTON, MASSACHUSETTS 02109
TRANSFER AGENT
JOHN HANCOCK SIGNATURE SERVICES, INC.
1 JOHN HANCOCK WAY, SUITE 1000
BOSTON, MASSACHUSETTS 02217-1000
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109-1803
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is to
welcome you to the New Millennium! I wish you all the best for a century filled
with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make new
resolutions, or re-commit to old ones. It seems fitting, therefore, that this
special New Year 2000 coincides with a very important, although certainly less
exotic, event.
Starting last October, personalized Social Security statements are being sent to
125 million workers over age 25, showing estimates of the retirement, disability
and survivor benefits that they and their families are eligible to receive now
and in the future.
The statements, to be sent out annually, will provide people with a glimpse of
what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for them
at all. But many people also already know that government benefits will only
fulfill a small piece of their retirement needs.
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[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to fourth paragraph.]
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The best thing about this massive mailing is that it can serve as a wake-up call
to encourage families to focus more on planning for their financial future.
When you receive your statement, expected to be within three months of your next
birthday, we urge you to read it carefully for accuracy, making sure your annual
earnings history and amounts you have contributed over the years are correct.
Keep in mind that the estimated benefits are precisely that, and that rules and
regulations may change by the time you retire. Also remember that they are not
inflation adjusted, so it would be unrealistic to expect them to have the same
purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your investment
professional, or to select one if you are not working with somebody. He or she
can help you focus on establishing and maintaining a sound plan to achieve a
comfortable retirement. Together, you should make sure to maximize your
participation in tax-advantaged programs like IRAs and 401(k)s.
The stakes are too high to leave your retirement lifestyle to chance. Congress'
awareness-raising effort is commendable. The next step is yours. Mark the
beginning of the New Millennium by taking it.
Sincerely,
/s/ Maureen R. Ford
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
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BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
THOMAS FINUCANE AND THOMAS GOGGINS, PORTFOLIO MANAGERS, AND
JAY MCKELVEY, ASSISTANT PORTFOLIO MANAGER
John Hancock
Real Estate Fund
Rising interest rates curb REITs' first-half advance
Recently, shareholders approved a change in the Fund's fiscal year end from
December to October. What follows is a discussion of the Fund's performance and
strategy during the 12 months ended October 31, 1999.
After rebounding nicely in the spring, real estate investment trusts (REITs)
encountered stiff headwinds in the last six months of the Fund's fiscal year and
gave back all the earlier advances. The culprits were rising interest rates and
the strength of the rest of the market, in particular the red-hot technology
sector.
REITs had their moment in the sun earlier in the year when investors,
feeling more confident in stabilizing overseas markets and buoyed by strong
earnings reports and a vibrant economy, went looking for bargains in
long-overlooked sectors of the market. But that didn't last long, as the
strength of the economy and fears of an inflation spike sent interest rates
rising in anticipation of Federal Reserve Board action. The Fed did raise rates
in June and again in August as a pre-emptive inflation strike. REIT stocks are
sensitive to interest-rate moves because part of their appeal to investors is
the income stream they offer from the underlying real estate. So their stock
prices can behave in a bond-like manner, falling when rates rise and vice versa.
With the turbulent second half, REITs wound up losing some ground in the last 12
months.
"...culprits were rising interest rates and the strength of the rest of the
market..."
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[A 2" x 2 1/2" photo bottom right side of John Hancock Real Estate Fund. Caption
below reads "Fund management team members. Standing (l-r): Jay McKelvey, Tom
Goggings and Tom Finucane. Seated (l-r): Lisa Welch, Jim Schmidt and Patricia
Ouimet."]
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3
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John Hancock Funds - Real Estate Fund
"We benefited from our overweighting in office REITs, which produced strong
results..."
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[Table at top left hand column entitled "Top Five Holdings." The first listing
is Equity Office Properties Trust 5.5%, the second is Equity Residential
Properties Trust 5.2%, the third Simon Property Group 3.6%, the fourth Vornado
Realty Trust 3.0% and the fifth Archstone Communities Trust 2.7%. A note below
the table reads "As a percentage of net assets on October 31, 1999."]
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Fund performance
For the year ended October 31, 1999, John Hancock Real Estate Fund's Class A
shares posted a total return of -0.23% at net asset value. That was better than
the -4.11% return of the average real estate fund, according to Lipper, Inc.(1)
Strategy review
The Fund seeks long-term growth of capital with income as a secondary goal by
investing in securities of real estate and real-estate-related companies. Our
primary focus is on REITs, which are companies that own, operate and develop
real estate and are specifically structured to pass all the income from property
operations on to shareholders, thereby qualifying them for special tax
treatment. We own a diversified portfolio of REITs across the broad spectrum of
sub-sectors, from offices to hotels and retail REITs. We target companies whose
prices are undervalued compared to their growth prospects, that can benefit from
merger activity and that are in areas of the country with strong supply/demand
characteristics.
Takeouts boost performance
Several of our REITs were the subjects of takeovers during the year, either
through acquisitions, or by managements' taking the companies private.
Contributing to our out-performance were takeovers of Berkshire Realty, Tower
Realty, Storage Trust Realty and Weeks. This activity confirms our belief that
these REITs have strong intrinsic value that will inevitably be recognized, if
not by the capital markets, then in the private markets.
Office, apartments strong
We benefited from our overweighting in office REITs, which produced strong
results during the year. Vacancy rates remained low, because the vibrant economy
kept demand strong enough to absorb an increased amount of new construction. In
this area, our top performers included Boston Properties and Spieker Properties.
Apartment REITs were also lifted by the low vacancy rates, especially as
rising interest rates made home ownership less affordable and bolstered demand
for apartments. In that sub-sector, we did well with Apartment Investment &
Management Co. and Berkshire Realty.
Non-REITs add diversity and return
During the year, we increased our stake in non-REIT companies involved in real
estate financing, including Fannie Mae and several savings and loans. We did
this to diversify the portfolio and own companies with stronger earnings growth.
In addition, we believe these companies provide a better way to participate in
the growth of the single-family residential market than mortgage REITs, whose
businesses have lower profit
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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 Berkshire
Realty followed by an up arrow with the phrase "Management takes the company
private." The second listing is Boston Properties followed by an up arrow with
phrase "Good management in supply-constrained markets." The third listing is
Simon Property Group followed by a down arrow with the phrase "Hurt by concerns
about the Internet and consumer spending." 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 - Real Estate Fund
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[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the year ended October 31, 1999." The
chart is scaled in increments of 1% with -5% at the bottom and 0% at the top.
The first bar represents the -0.23% total return for John Hancock Real Estate
Fund Class A. The second bar represents the -4.11% total return for Average real
estate fund. A note below the chart reads "Total returns for John Hancock Real
Estate Fund are at net asset value with all distributions reinvested. The
average real estate fund is tracked by Lipper, Inc.1 See the following two pages
for historical performance information."]
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margins and which are more susceptible to interest-rate risk. Many of our
non-REITs, which make up approximately 10% of the portfolio, served the Fund
well this year, especially Fannie Mae, which has benefited from the explosion in
single-family housing.
Retail, hotels lag
Despite solid fundamentals, retail REITs were hit by concerns that e-commerce
would eat into traditional storefront business and by the potential for a
slowdown in consumer spending, although that has yet to occur. We continue to
believe the market has overreacted, especially in the near term, since the
quality retail space owned by REITs is increasing, which has caused a boost in
retail sales per square foot -- an important measure of value.
Hotel REITs rallied strongly in the first half of the fiscal year on the
strength of the U.S. economy, but then lost most of their ground in the second
half as interest rates and inflation fears rose. Concerns also grew that too
many new hotel rooms were being built that would put downward pressure on
occupancy rates. With their short-term "leases," hotels are the most sensitive
to changes in the economic picture. Our underweighting in this sector helped us
avoid some, but not all, of the fallout.
A look ahead
Despite the recent performance, we remain encouraged about the prospects for
REITs going forward. Vacancy rates remain low, with manageable levels of new
construction contributing to a healthy supply/demand equation. What's more,
after being out of favor, REIT valuations are very attractive compared to their
solid fundamentals and growth potential. As long as this persists, we expect
further consolidation and takeout activity, which could provide the Fund with a
good source of buyout premiums.
That said, the lending environment has become less favorable for further
property acquisitions, which is why we place great emphasis on good management.
We invest only in companies with management teams that know how to grow through
solid management of existing assets, rather than through further borrowing
(which dilutes stock prices) to finance new real estate purchases. In addition,
we focus on management teams that display the ability to be as focused on their
shareholders as they are on their real estate.
"...REIT valuations are very attractive compared to their solid fundamentals and
growth potential."
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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.
Sector investing is subject to greater risks than the market as a whole.
(1) Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
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John Hancock Funds - Real Estate Fund
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A LOOK AT PERFORMANCE
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The table on the right shows the cumulative total return and the average annual
total return for the John Hancock Real Estate Fund. Total return measures the
change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include the maximum applicable sales
charge of 5%.
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus carefully before you invest or send money.
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CLASS A
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For the period ended September 30, 1999
ONE
YEAR
--------
Cumulative Total Return (5.33%)
Average Annual Total Return(1) (5.33%)
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 1.35% (not
including 12b-1 fee) of the Fund's daily average net assets. Without the
limitation of expenses, the average annual total return for the one-year
period would have been (15.51%).
6
<PAGE>
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John Hancock Funds - Real Estate Fund
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WHAT HAPPENED TO A $10,000 INVESTMENT...
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The chart on the right shows how much a $10,000 investment in the John Hancock
Real Estate Fund would be worth, assuming all distributions were reinvested for
the period indicated. For comparison, we've shown the same $10,000 investment in
the Standard & Poor's 500 Index and the Morgan Stanley Real Estate Investment
Trust (REIT)Index. The Standard & Poor's 500 Index is an unmanaged index that
includes 500 widely traded common stocks and is often used as a measure of stock
market performance. The Morgan Stanley Real Estate Investment Trust Index is an
unmanaged index consisting of the most actively traded real estate investment
trusts. It is designed to be a measure of real estate equity performance. It is
not possible to invest in an index. Past performance is not indicative of future
results.
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Line chart with the heading John Hancock Real Estate Fund Class A, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are four lines. The first line represents the Standard & Poor's
500 Index and is equal to $13,587 as of October 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Real Estate Fund on September 30, 1998, before sales charge, and is
equal to $9,932 as of October 31, 1999. The third line represents the value of
the same hypothetical investment made in the John Hancock Real Estate Fund,
after sales charge, and is equal to $9,432 as of October 31, 1999. The fourth
line represents the Morgan Stanley REIT Index and is equal to $9,197 as of
October 31, 1999.
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7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
Statement of Assets and Liabilities
October 31, 1999
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Assets:
Investments at value - Note C:
Common stocks (cost - $1,016,425) ........................... $933,113
Corporate savings account ................................... 50,307
------------
983,420
Receivable for investments sold .............................. 75,909
Receivable from John Hancock Advisers, Inc.
and affiliates - Note B .................................... 93,158
Receivable for shares sold ................................... 10
Dividends receivable ......................................... 1,742
Other assets ................................................. 7
------------
Total Assets ............................... 1,154,246
-----------------------------------------------------------
Liabilities:
Payable for investments purchased ............................ 82,848
Accounts payable and accrued expenses ........................ 111,212
------------
Total Liabilities .......................... 194,060
-----------------------------------------------------------
Net Assets:
Capital paid-in .............................................. 1,012,916
Accumulated net realized gain on investments ................. 24,857
Net unrealized depreciation of investments ................... (83,312)
Undistributed net investment income .......................... 5,725
------------
Net Assets ................................. $960,186
===========================================================
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 - $960,186/101,337 ................................... $9.48
=============================================================================
Maximum Offering Price Per Share*
($9.48 x 105.26%) ............................................ $9.97
=============================================================================
* 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 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, 1999. You'll
also find the net asset value and the maximum offering price per share as of
that date.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
Statement of Operations
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<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 30, 1998
(COMMENCEMENT OF FOR THE PERIOD FROM
OPERATIONS) TO JANUARY 1, 1999 TO
DECEMBER 31, 1998 OCTOBER 31, 1999(1)
----------------- -------------------
<S> <C> <C>
Investment Income:
Dividends ............................................................ $16,994 $50,185
Interest ............................................................. 1,518 1,563
------------ ------------
18,512 51,748
------------ ------------
Expenses:
Investment management fee - Note B .................................. 2,008 6,742
Distribution and service fee - Note B ............................... 753 2,528
Custodian fee ....................................................... 9,000 65,213
Auditing fee ........................................................ 10,000 20,000
Printing ............................................................ 555 1,755
Legal fees .......................................................... 2,025 1,080
Transfer agent fee - Note B ......................................... 300 787
Miscellaneous ....................................................... 30 275
Accounting and legal service fee - Note B ........................... 36 143
Registration and filing fees ........................................ -- 100
Trustees' fees ...................................................... 25 79
------------ ------------
Total Expenses ..................................... 24,732 98,702
-------------------------------------------------------------------------------------------
Less Expense Reductions - Note B ................... (20,589) (84,785)
-------------------------------------------------------------------------------------------
Net Expenses ....................................... 4,143 13,917
-------------------------------------------------------------------------------------------
Net Investment Income .............................. 14,369 37,831
-------------------------------------------------------------------------------------------
Realized and Unrealized Loss on Investments:
Net realized gain (loss) on investments sold ......................... (6,163) 31,251
Change in net unrealized appreciation/depreciation of investments .... (3,823) (79,489)
------------ ------------
Net Realized and Unrealized Loss
on Investments ..................................... (9,986) (48,238)
-------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations .......................... $4,383 ($10,407)
===========================================================================================
</TABLE>
(1) Effective October 31, 1999, the fiscal period end changed from December 31
to October 31.
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.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 30, 1998
(COMMENCEMENT OF FOR THE PERIOD FROM
OPERATIONS) TO JANUARY 1, 1999 TO
DECEMBER 31, 1998 OCTOBER 31, 1999(1)
----------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................... $14,369 $37,831
Net realized gain (loss) on investments sold ........................ (6,163) 31,251
Change in net unrealized appreciation/depreciation of investments ... (3,823) (79,489)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations ... 4,383 (10,407)
------------ ------------
Distributions to Shareholders:
Distributions from net investment income
Class A - ($0.1173 and $0.3441, per share, respectively) .......... (11,880) (34,900)
------------ ------------
From Fund Share Transactions - Net: * .................................. 1,013,211 (221)
------------ ------------
Net Assets:
Beginning of period ................................................. -- 1,005,714
------------ ------------
End of period (including undistributed net investment income
$2,489 and $5,725, respectively) .................................. $1,005,714 $960,186
============ ============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 30, 1998
(COMMENCEMENT OF FOR THE PERIOD FROM
OPERATIONS) TO JANUARY 1, 1999 TO
DECEMBER 31, 1998 OCTOBER 31, 1999(1)
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ............... 102,524 $1,025,004 484 $4,726
Shares reinvested ......... -- -- 50 494
----------- ----------- ----------- -----------
102,524 1,025,004 534 5,220
Less shares repurchased ... (1,199) (11,793) (522) (5,441)
----------- ----------- ----------- -----------
Net increase (decrease) ... 101,325 $1,013,211 12 ($221)
=========== =========== =========== ===========
</TABLE>
(1) Effective October 31, 1999, the fiscal period end changed from December 31
to October 31.
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.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
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<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 30, 1998 PERIOD FROM
(COMMENCEMENT OF OPERATIONS) JANUARY 1, 1999 TO
TO DECEMBER 31, 1998 OCTOBER 31, 1999(7)
-------------------- -------------------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period .............................. $10.00 $9.93
--------- -----------
Net Investment Income(1) .......................................... 0.14 0.37
Net Realized and Unrealized Loss on Investments ................... (0.09) (0.48)
--------- -----------
Total From Investment Operations ............................... 0.05 (0.11)
--------- -----------
Less Distributions:
Dividends from Net Investment Income ............................. (0.12) (0.34)
--------- -----------
Net Asset Value, End of Period .................................... $9.93 $9.48
========= ===========
Total Investment Return at Net Asset Value (2) .................... 0.47%(5) (1.11%)(5)
Total Adjusted Investment Return at Net Asset Value (2,3) ......... (1.60%)(5) (9.49%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .......................... $1,006 $960,186
Ratio of Expenses to Average Net Assets ........................... 1.65%(6) 1.65%(6)
Ratio of Adjusted Expenses to Average Net Assets (4) .............. 9.85%(6) 11.71%(6)
Ratio of Net Investment Income to Average Net Assets .............. 5.72%(6) 4.49%(6)
Ratio of Adjusted Net Investment Loss to Average Net Assets (4) ... (2.48%)(6) (5.57%)(6)
Portfolio Turnover Rate ........................................... 109% 345%
Fee Reduction Per Share (1) ....................................... $0.20 $0.83
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Not annualized.
(6) Annualized.
(7) Effective October 31, 1999, the fiscal year end changed from December 31
to October 31.
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
Schedule of Investments
October 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Real Estate Fund on October 31, 1999. It's divided into two main categories:
common stocks and short-term investments. The stocks are further broken down by
industry groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Banks - United States (0.43%)
North Fork Bancorp., Inc. ..................... 200 $4,137
----------
Finance (3.06%)
Associates First Capital Corp. (Class A) ...... 300 10,950
CIT Group, Inc. (The) (Class A) ............... 300 7,162
FINOVA Group, Inc. (The) ...................... 100 4,406
Heller Financial, Inc. ........................ 100 2,375
Household International, Inc. ................. 100 4,462
----------
29,355
----------
Finance - Savings and Loan (3.19%)
Astoria Financial Corp. ....................... 200 7,200
Charter One Financial, Inc. ................... 210 5,158
Dime Bancorp., Inc. .......................... 300 5,362
GreenPoint Financial Corp. .................... 200 5,700
Washington Mutual, Inc. ....................... 200 7,187
----------
30,607
----------
Mortgage Banking (3.31%)
Countrywide Credit Industries, Inc. ........... 200 6,787
Fannie Mae .................................... 200 14,150
Freddie Mac ................................... 200 10,812
----------
31,749
----------
Real Estate - Operations (0.53%)
CB Richard Ellis Services, Inc.* .............. 200 2,462
Trammell Crow Co.* ............................ 100 1,450
Vornado Operating, Inc.* ...................... 200 1,200
----------
5,112
----------
REIT Equity - Apartments (16.04%)
Apartment Investment & Management Co.
(Class A) ................................... 600 22,575
Archstone Communities Trust ................... 1,300 26,000
Avalonbay Communities, Inc. ................... 500 16,156
BRE Properties, Inc. (Class A) ................ 300 6,806
Cornerstone Realty Income Trust, Inc. ......... 200 2,075
Equity Residential Properties Trust ........... 1,200 50,175
Essex Property Trust, Inc. .................... 100 3,256
Home Properties of New York, Inc. ............. 400 10,675
Post Properties, Inc. ......................... 200 7,725
Walden Residential Properties, Inc. ........... 400 8,575
----------
154,018
----------
REIT Equity - Diversified (5.92%)
Brookfield Properties Corp. (Canada) .......... 200 2,150
Capital Automotive REIT ....................... 300 3,825
Catellus Development Corp. * .................. 200 2,350
Colonial Properties Trust ..................... 600 15,300
Entertainment Properties Trust ................ 200 2,812
Franchise Finance Corp. of America ............ 600 13,050
Glenborough Realty Trust, Inc. ................ 700 9,143
National Golf Properties, Inc. ................ 100 2,137
Prison Realty Trust, Inc. ..................... 600 6,112
----------
56,879
----------
REIT Equity - Health Care (0.17%)
Meditrust Cos ................................. 200 1,612
----------
REIT Equity - Hotel/Restaurant (3.50%)
Hospitality Properties Trust .................. 200 4,225
Host Marriott Corp. ........................... 1,700 15,300
Starwood Hotels & Resorts
Worldwide, Inc. ............................. 500 11,468
Wyndham International (Class A) * ............ 900 2,587
----------
33,580
----------
REIT Equity - Office Property (28.67%)
Alexandria Real Estate Equities, Inc. ......... 300 8,625
Arden Realty, Inc. ............................ 500 10,062
Bedford Property Investors, Inc. .............. 200 3,500
Boston Properties Corp. ....................... 500 14,906
Brandywine Realty Trust ....................... 1,100 18,493
CarrAmerica Realty Corp. ...................... 600 13,350
Cornerstone Properties, Inc. .................. 200 2,912
Corporate Office Properties Trust, Inc. ....... 700 5,075
Cousins Properties, Inc. ...................... 300 9,506
Crescent Real Estate Equities Co. ............. 900 15,018
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Real Estate Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
REIT Equity - Office Property (continued)
Duke-Weeks Realty Corp. ....................... 1,000 $19,625
Equity Office Properties Trust ................ 2,400 53,100
Great Lakes REIT, Inc. ........................ 100 1,444
Highwood Properties, Inc. ..................... 400 9,675
Kilroy Realty Corp. ........................... 200 3,837
Koger Equity, Inc. ............................ 200 3,100
Mack-Cali Realty Corp. ........................ 600 15,450
Prentiss Properties Trust ..................... 700 15,006
Prime Group Realty Trust ...................... 500 7,187
Reckson Associates Realty Corp. ............... 500 9,250
SL Green Realty Corp. ......................... 700 12,731
Spieker Properties, Inc. ...................... 500 17,468
Trinet Corporate Realty Trust, Inc. ........... 100 2,306
Trizec Hahn Corp. (Canada) .................... 200 3,700
----------
275,326
----------
REIT Equity - Regional Mall (9.70%)
CBL & Associates Properties, Inc. ............. 500 11,125
General Growth Properties, Inc. ............... 500 14,468
Macerich Co. (The) ............................ 300 6,000
Mills Corp. ................................... 100 1,800
Rouse Co. (The) ............................... 700 15,487
Simon Property Group, Inc. .................... 1,500 34,593
Taubman Centers, Inc. ......................... 400 4,525
Urban Shopping Centers, Inc. .................. 200 5,162
----------
93,160
----------
REIT Equity - Shopping Centers (12.26%)
Chelsea GCA Realty, Inc. ...................... 100 3,100
Developers Diversified Realty Corp. ........... 1,500 21,375
Federal Realty Investment Trust ............... 400 7,275
First Washington Realty Trust, Inc. ........... 300 6,131
JDN Realty Corp. .............................. 400 7,625
Kimco Realty Corp. ............................ 600 20,475
New Plan Excel Realty Trust ................... 600 10,387
Realty Income Corp. ........................... 400 9,000
Vornado Realty Trust .......................... 900 28,518
Weingarten Realty Investors ................... 100 3,825
----------
117,711
----------
REIT Equity - Storage (4.29%)
PS Business Parkes, Inc. (Class A) ............ 300 6,787
Public Storage, Inc. .......................... 1,000 24,125
Shurgard Storage Centers, Inc. ................ 100 2,362
Sovran Self Storage, Inc. ..................... 100 2,125
Storage USA, Inc. ............................. 200 5,825
----------
41,224
----------
REIT Equity - Warehouse/Industries (6.11%)
AMB Property Corp. ............................ 400 7,950
Cabot Industrial Trust ........................ 200 4,000
Centerpoint Properties Corp. .................. 100 3,262
EastGroup Properties, Inc. .................... 100 1,831
First Industrial Realty Trust, Inc. ........... 100 2,469
Liberty Property Trust ........................ 600 14,025
ProLogis Trust ................................ 1,300 25,106
----------
58,643
----------
TOTAL COMMON STOCKS
(Cost $1,016,425) (97.18%) 933,113
-------- ----------
SHORT-TERM INVESTMENTS
Corporate Savings Account
Brown Brothers Harriman Trust Co., Ltd.
Daily Interest Savings Account
Current Rate 4.91% .......................... 50,307
----------
TOTAL SHORT-TERM INVESTMENTS (5.24%) 50,307
-------- ----------
TOTAL INVESTMENTS (102.42%) 983,420
-------- ----------
OTHER ASSETS AND LIABILITIES, NET (2.42%) (23,234)
-------- ----------
TOTAL NET ASSETS (100.00%) $960,186
======== ==========
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock Series Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of four series portfolios: John Hancock Real Estate Fund (the "Fund"), John
Hancock Balanced Fund, John Hancock Large Cap Value Fund and John Hancock
Sovereign Investors Fund. Prior to May 1, 1999, John Hancock Balanced Fund was
known as John Hancock Sovereign Balanced Fund. Prior to June 1, 1999, John
Hancock Large Cap Value Fund was known as John Hancock Growth and Income Fund.
The other three series of the Trust are reported in separate financial
statements. The investment objective is to seek long-term growth of capital
through investing in equity securities of real estate companies.On September 14,
1999, the Trustees voted to approve a change in the fiscal period end from
December 31 to October 31. This change is effective October 31, 1999. On October
13, 1999, the shareholders voted to approve an agreement and plan of
reorganization providing for the reorganization of the Fund from a series of
John Hancock Investment Trust into a series of John Hancock Series Trust. This
change is effective November 1, 1999.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C shares. No Class B or Class
C shares were issued during the period ended October 31, 1999. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights to voting, redemptions, dividends and liquidation,
except that certain expenses, subject to the approval of the Trustees, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal Revenue
Service. Shareholders of a class which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing sources
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days or
less are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund identifies the dividend. Interest income on
investment securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes, which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
Dividends paid by the Fund with respect to each class of shares will be
calculated in the same manner, at the same time and will be in the same amount,
except for the effect of expenses that may be applied differently to each class.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not identifiable to a specific fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative size of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowings. In
addition, a commitment fee is charged based on the average daily unused portion
of the line of credit and is allocated among the participating funds. The Fund
had no borrowing activity for the year ended October 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral should
the borrower of the securities fail financially. There was no securities lending
for the period ended October 31, 1999.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities, other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
foreign currency contract is closed out or offset by a matching contract. Risks
may arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk other than the offset by the currency amount of the underlying
transaction.
There were no open forward foreign currency contracts at October 31, 1999.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. Buying futures tends to increase the Fund's exposure to
the underlying instrument. Selling futures tends to decrease the Fund's exposure
to the underlying instrument or hedge other Fund instruments. At the time the
Fund enters into a financial futures contract, it is required to deposit with
its custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange on
which it trades. Subsequent payments, known as "variation margin," to and from
the broker are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1999, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the written option.
The Fund may use options contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure to
the underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms ("credit risk"), 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 because the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit risk and liquidity risks in over-the-counter
option contracts, the Fund will continuously monitor the creditworthiness of all
its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
There were no written option transactions for the year ended October 31,
1999.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of 0.80% of the Fund's average daily net asset
value.
The Adviser has agreed to limit the Fund's expenses on Class A shares to
1.35% (not including the 12b-1 fees) of the Fund's daily average net assets.
Accordingly, the reduction in the Fund's expenses amounted to $84,785 for the
period ended October 31, 1999. The Adviser reserves the right to terminate this
limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. There were no net sales
charges received with regard to sales of Class A shares for the year ended
October 31, 1999.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan with
respect to Class A pursuant to Rule 12b-1 under the Investment Company Act of
1940. Accordingly, the Fund will make payments to JH Funds at an annual rate not
to exceed 0.30% of Class A average daily net assets to reimburse JH Funds for
its distribution and service costs. A maximum of 0.25% of these payments may be
service fees as defined by the Conduct Rules of the National Association of
Securities Dealers. Under the Conduct Rules, curtailment of a portion of the
Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of John Hancock
Mutual Life Insurance Company ("JHMLICo"). The Fund pays transfer agent fees
based on the number of shareholder accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Maureen R. Ford,
Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are directors and/or officers of
the Adviser, and/or its affiliates, as well as Trustees of the Fund through
December 31, 1999. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer, for tax purposes, their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation. Investments to
cover the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the related
other asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investment as well as any unrealized gains or
losses. The investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended October 31, 1999, aggregated $3,417,554 and
$3,364,742, respectively. There were no purchases or sales of obligations of the
U.S. government and its agencies during the period ended October 31, 1999.
The cost of investments owned at October 31, 1999 (excluding the corporate
savings account) for federal income tax purposes was $1,040,002. Gross
unrealized appreciation and depreciation of investments aggregated $4,747 and
$111,636, respectively, resulting in net unrealized depreciation of $106,889.
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Real Estate Fund
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments of $231, an
increase in undistributed net investment income of $305 and a decrease in
capital paid-in of $74. This represents the amount necessary to report these
balances on a tax basis, excluding certain temporary differences, as of October
31, 1999. 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 real estate investment
trusts in the computation of distributable income and capital gains under
federal tax rules versus generally accepted accounting principles. The
calculation of net investment income in the financial highlights excludes these
adjustments.
18
<PAGE>
================================================================================
John Hancock Funds - Real Estate Fund
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
John Hancock Series Trust
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock Real Estate Fund (the "Fund")
(a series of John Hancock Series Trust) as of October 31, 1999, the related
statements of operations and changes in net assets and the financial highlights
for the periods from the commencement of operations, September 30, 1998 to
December 31, 1998 and from January 1, 1999 to October 31, 1999. 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 at October
31, 1999 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund at October
31, 1999, the results of its operations, the changes in its net assets and its
financial highlights for the period from the commencement of operations,
September 30, 1998 to December 31, 1998 and from January 1, 1999 to October 31,
1999, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
December 3, 1999
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal period ended October 31,
1999.
63.69% of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1999 U.S. Treasury Department Form 1099-DIV
in January of 2000. This will reflect the tax character of all distributions for
calendar year 1999.
SHAREHOLDER MEETING (UNAUDITED)
On October 13, 1999, a special meeting of John Hancock Real Estate Fund was
held. The shareholders approved the following proposal (votes in parentheses):
To approve an Agreement and Plan of Reorganization providing for the
reorganization of John Hancock Real Estate Fund from a series of John Hancock
Investment Trust into a series of John Hancock Series Trust (101,090 FOR, 0
AGAINST and 0 ABSTAINING).
19
<PAGE>
================================================================================
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