N-CSR 1 equitytrust1.txt JOHN HANCOCK EQUITY TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4079 John Hancock Equity Trust (Exact name of registrant as specified in charter) 101 Huntington Avenue, Boston, Massachusetts 02199 (Address of principal executive offices) (Zip code) Susan S. Newton, Secretary 101 Huntington Avenue Boston, Massachusetts 02199 (Name and address of agent for service) Registrant's telephone number, including area code: 617-375-1702 Date of fiscal year end: October 31 Date of reporting period: October 31, 2004 ITEM 1. REPORT TO SHAREHOLDERS. JOHN HANCOCK Growth Trends Fund 10.31.2004 Annual Report [A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower, center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."] [A photo of James A. Shepherdson, Chief Executive Officer, flush left next to first paragraph.] CEO CORNER Table of contents Your fund at a glance page 1 Managers' report page 2 A look at performance page 6 Growth of $10,000 page 7 Your expenses page 8 Fund's investments page 10 Financial statements page 16 Trustees & officers page 30 For more information page 33 Dear Fellow Shareholders, The stock market made little, if any, headway year-to-date through October 2004, as it wrestled with a variety of uncertainties. Questions about the continuing strength of the economy, the effects of rising interest rates and expectations for corporate earnings growth kept investors jittery. In addition, record high crude oil prices, geopolitical issues and a closely contested U.S. presidential race all weighed on the market. The picture brightened in early November with the election over and oil prices moderating somewhat. Year-to-date through October 31, 2004, the Standard & Poor's 500 Index was up 3.06%, while the Dow Jones Industrial Average and the Nasdaq Composite Index were slightly negative, returning -2.40% and -1.05%, respectively. Despite the Federal Reserve's three hikes in short-term interest rates from historic lows, bonds still managed to outperform stocks, with the Lehman Brothers Aggregate Bond Index up 4.22%. In news closer to home, we are pleased to announce that on June 15, 2004, your fund's Board of Trustees appointed Charles L. Ladner as independent Chairman of the Board of Trustees, a position previously held by John Hancock Funds LLC's former Chairman and Chief Executive Officer, Maureen Ford Goldfarb. This appointment came in advance of new SEC regulations requiring all mutual funds to have independent chairmen. Mr. Ladner has served as an independent member of John Hancock Funds' Board of Trustees since 1992 and formerly held the position of Senior Vice President and Chief Financial Officer of UGI Corporation, a public utility holding company in Valley Forge, PA, until his retirement in 1998. He brings a wealth of knowledge, experience and leadership and we are delighted to have him serve as Chairman. Sincerely, /S/ JAMES A. SHEPHERDSON James A. Shepherdson, Chief Executive Officer This commentary reflects the CEO's views as of October 31, 2004. They are subject to change at any time. YOUR FUND AT A GLANCE The Fund seeks long-term growth of capital by investing approximately one third of its assets in equity securities of U.S. and foreign companies in each of the following sec- tors: financial services, health care and technology. Over the last twelve months * The stock market posted solid returns, generated mostly in 2003 and early 2004, as rising uncertainties kept investors wary for the bulk of 2004. * The Fund's health care, financial and technology portfolios produced positive returns, led by technology. * The Fund lagged the broad market because its investment mandate prevented it from benefiting from strong gains in the industrial and energy sectors. [Bar chart with heading "John Hancock Growth Trends Fund." Under the heading is a note that reads "Fund performance for the year ended October 31, 2004." The chart is scaled in increments of 2% with 0% at the bottom and 4% at the top. The first bar represents the 2.90% total return for Class A. The second bar represents the 2.04% total return for Class B. The third bar represents the 2.04% total return for Class C. A note below the chart reads "Total returns for the Fund are at net asset value with all distributions reinvested."] Top holdings Financial Services 8.6% Wells Fargo 8.2% Citigroup 7.9% Bank of America 7.8% American Express 7.6% State Street Health Care 6.1% Gilead Sciences 6.0% WebMD 5.7% Neurocrine Biosciences 4.9% Charles River Laboratories 4.7% Celgene Technology 14.5% Microsoft 11.4% IBM 9.1% QUALCOMM 6.9% Cisco Systems 4.4% Intel As a percentage of Financial Services, Health Care and Technology net assets, respectively, on 10-31-04. 1 MANAGERS' REPORT JOHN HANCOCK Growth Trends Fund Stocks advanced for the fiscal year ended October 31, 2004, with the Standard & Poor's 500 Index returning 9.42%. The market rallied early on, but pressures mounted in 2004. Soaring oil prices, rising interest rates, geopolitical concerns, the presidential election and concerns about sustainability of economic growth hampered any market advance. In this period, John Hancock Growth Trends Fund's Class A, Class B and Class C shares posted total returns of 2.90%, 2.04% and 2.04%, respectively, at net asset value. That compared with the 8.25% return of the average multi-cap core fund, according to Lipper, Inc.1 The Fund lagged its benchmark index and its Lipper peer group average because our mandate to invest one third of the Fund in each of three sectors -- health care, technology and financials -- prevented us from participating in the stronger-performing industrial and energy sectors. "Regional banks were also bolstered by an upswing in mergers..." FINANCIALS By James K. Schmidt, CFA, John Hancock Advisers, LLC Financial stocks generated positive results during the year, led by regional banks, diversified banks and real estate investment trusts (REITs), as growing uncertainties led investors to these more conservative safe-haven sectors, given their high dividends and stable earnings. Regional banks were also bolstered by an upswing in mergers, spearheaded by the announced mega-merger between FleetBoston and Bank of America just as the fiscal year began last November. Not surprisingly, banks involved in mergers were some of the biggest contributors to the financial portfolio's and the Fund's performance during the year, including FleetBoston and Bank of America. Other top performers included Charter One, which was acquired by Royal Bank of Scotland, and SouthTrust, which was bought by Wachovia. Our detractors to performance came largely from the more market-sensitive sectors, including brokers, asset managers and 2 trust banks, all of which derive significant portions of their revenues from market activity. The sluggish market placed State Street Corp., Citigroup and Morgan Stanley at the bottom of our performance list. Citigroup's stock was also hit by regulatory issues overseas. The insurance group suffered a major reversal later in the period due to a string of setbacks. Pricing began to soften and an unusually large number of back-to-back hurricanes failed to firm up pricing. Then the worst disaster struck in the form of bid-rigging and price-fixing charges brought against property and casualty broker Marsh & McLennan. It was our biggest detractor from performance. We're still optimistic about the prospects for financial stocks. We expect the group to navigate fairly well in the rising interest rate environment, and may continue to see outperformance if the economic recovery remains sluggish. HEALTH CARE By Linda I. Miller, CFA, John Hancock Advisers, LLC In June 2004, Linda Miller, a vice president and portfolio manager of John Hancock Advisers, assumed portfolio management responsibility for the health care portfolio. Ms. Miller also manages John Hancock Biotechnology Fund and John Hancock Health Sciences Fund. Health care stocks posted decent returns during the period, although they lagged the overall market due to the uncertainty over the outcome of the U.S. presidential election and product-related disappointments. "The health care portion of the Fund was helped by several of its larger positions..." The health care portion of the Fund was helped by several of its larger positions including Gilead Sciences, Inc., which reported better-than-expected earnings due to strong sales growth of its HIV treatments, and Charles River Laboratories, a leader in providing products and services for drug development. Other winners included: Celgene Corp., which makes the drug Thalomid, a leading treatment for multiple myeloma; Baxter International, whose products include drugs, vaccines and surgery products; and some medical device and orthopedic companies, such as Guidant Corp. 3 Disappointments included NPS Pharmaceuticals, which fell when the company said its experimental osteoporosis drug may raise calcium levels too high in some patients, and Taro Pharmaceuticals, which posted poor financial results it attributed to reduced purchases by its largest wholesaler customers and competitive pricing pressure on its generic drugs. We sold these two. [Table at top left-hand side of page entitled "Top five industry groups." The first listing is Biotechnology 11%, the second is Communications equipment 8%, the third is Systems software 7%, the fourth is Pharmaceuticals 7% and the fifth is Diversified banks 7%.] We're reasonably optimistic about the prospects for health care stocks. The world's aging population provides strong underpinnings for the bullish future of health care stocks over the long term. The re-election of President Bush also seemed to reassure investors that status quo, rather than radical change, will be the watchwords for national health-care policies. [Pie chart at middle of page with heading "Portfolio diversification As a percentage of net assets on 10-31-04." The chart is divided into four sections (from top to left): Technology 34%, Financials 32%, Health care 31% and Short-term investments & other 3%.] TECHNOLOGY By Anurag Pandit, CFA, John Hancock Advisers, LLC Technology stocks declined modestly during the past year as moderating economic growth, disappointing earnings and increased market uncertainty weighed on the sector. However, the technology portion of the portfolio produced positive results thanks to favorable positioning and strong stock selection. Our primary strategy was to emphasize segments of the technology sector that stood to gain the most from a rebound in corporate spending on technology. Consequently, we focused on software and communication equipment companies, which posted solid gains during the period, while underweighting semiconductor stocks, which declined sharply. 4 Stock selection contributed significantly to performance. The top individual contributor was QUALCOMM, a wireless chipmaker and one of the largest technology holdings in the portfolio. Another wireless telecommunications firm, Motorola, also performed well as several of its new cellular phone products helped the company gain market share. [Table at top of page entitled "Scorecard." The header for the left column is "Investment" and the header for the right column is "Period's performance...and what's behind the numbers." The first listing is QUALCOMM followed by an up arrow with the phrase "Growing popularity of its proprietary CDMA technology boosts profit margins." The second listing is Bank of America followed by an up arrow with the phrase "Market more positive on FleetBoston deal." The third listing is NPS Pharmaceuticals followed by a down arrow with the phrase "Disappointing news on osteoporosis drug."] "...the technology portion of the port folio produced positive results thanks to favorable positioning and strong stock selection." Among software stocks, drafting and design software maker Autodesk was the best performer. The company successfully introduced product upgrades and increased prices, which boosted revenues and profit margins. Other top contributors included Internet auction site eBay and security software makers Symantec and VeriSign. Although our underweight in semiconductor stocks limited their negative impact on the portfolio, this segment still detracted the most from performance. Intel, the largest semiconductor manufacturer, declined by more than 30% after weaker sales led to disappointing revenues and lower profit margins. Looking ahead, we have a generally neutral outlook for the technology sector. Although valuations in the technology sector are more compelling and corporate balance sheets are strong, we see no extraordinary adoption of new technology that is likely to fuel dramatic growth in the near term. This commentary reflects the views of the portfolio managers through the end of the Fund's period discussed in this report. The managers' statements reflect their own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant. 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 A LOOK AT PERFORMANCE For the period ended October 31, 2004 Class A Class B Class C Inception date 9-22-00 9-22-00 9-22-00 Average annual returns with maximum sales charge (POP) One year -2.24% -2.96% 1.04% Since inception -13.96 -13.93 -13.51 Cumulative total returns with maximum sales charge (POP) One year -2.24 -2.96 1.04 Since inception -46.06 -46.00 -44.90 Performance figures assume all distributions are reinvested. Returns with maximum sales charge reflect a sales charge on Class A shares of 5% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. The Class B shares' CDSC declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. The return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than the original cost. The returns reflect past results and should not be considered indicative of future performance. The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Fund's performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable. 6 GROWTH OF $10,000 This chart shows what happened to a hypothetical $10,000 investment in Class A shares for the period indicated. For comparison, we've shown the same investment in the Standard & Poor's 500 Index. Cum Value Cum Value of $10K of $10K S&P 500 Plot Date (No Load) (w/Load) Index 9-22-00 $10,000 $9,500 $10,000 9-30-00 10,000 9,497 9,918 10-31-00 9,540 9,060 9,876 1-31-01 8,670 8,234 9,467 4-30-01 7,390 7,018 8,684 7-31-01 6,842 6,497 8,447 10-31-01 5,880 5,584 7,417 1-31-02 6,261 5,945 7,939 4-30-02 5,810 5,517 7,589 7-31-02 4,598 4,366 6,451 10-31-02 4,498 4,271 6,297 1-31-03 4,367 4,148 6,112 4-30-03 4,638 4,404 6,579 7-31-03 5,269 5,004 7,138 10-31-03 5,519 5,242 7,608 1-31-04 5,940 5,641 8,225 4-30-04 5,690 5,403 8,085 7-31-04 5,469 5,194 8,078 10-31-04 5,680 5,394 8,323 [Line chart with the heading "GROWTH OF $10,000." Within the chart are three lines. The first line represents the Standard & Poor's 500 Index and is equal to $8,323 as of October 31, 2004. The second line represents the value of the hypothetical $10,000 investment made in the John Hancock Growth Trends Fund, before sales charge, and is equal to $5,680 as of October 31, 2004. The third line represents the value of the same hypothetical investment made in the John Hancock Growth Trends Fund, after sales charge, and is equal to $5,394 as of October 31, 2004.] Class B Class C 1 Period beginning 9-22-00 9-22-00 Without sales charge $5,510 $5,510 With maximum sales charge 5,400 5,510 Index 8,323 8,323 Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund's Class B and Class C shares, respectively, as of October 31, 2004. The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes. Standard & Poor's 500 Index is an unmanaged index that includes 500 widely traded common stocks. It is not possible to invest directly in an index. Index figures do not reflect sales charges and would be lower if they did. 1 No contingent deferred sales charge applicable. 7 YOUR EXPENSES These examples are intended to help you understand your ongoing operating expenses. Understanding fund expenses As a shareholder of the Fund, you incur two types of costs: * Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc. * Ongoing operating expenses including management fees, distribution and service fees (if applicable) and other fund expenses. We are going to present only your ongoing operating expenses here. Actual expenses/actual returns This example is intended to provide information about your fund's actual ongoing operating expenses, and is based on your fund's actual return. It assumes an account value of $1,000.00 on April 30, 2004, with the same investment held until October 31, 2004. Account value Expenses paid $1,000.00 Ending value during period on 4-30-04 on 10-31-04 ended 10-31-04 1 ------------------------------------------------------------------ Class A $998.20 $8.29 Class B 994.60 11.78 Class C 994.60 11.78 Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at October 31, 2004 by $1,000.00, then multiply it by the "expenses paid" for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows: Example -- -- -- -- | My account value / | | "expenses paid" | My | $8,600.00 / $1,000.00 = 8.6 | X $| from table | = actual | / | | | expenses -- -- -- -- 8 Hypothetical example for comparison purposes This table allows you to compare your fund's ongoing operating expenses with those of any other fund. It provides an example of the Fund's hypothetical account values and hypothetical expenses based on each class's actual expense ratio and an assumed 5% annual return before expenses (which is not your fund's actual return). It assumes an account value of $1,000.00 on April 30, 2004, with the same investment held until October 31, 2004. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Account value Expenses paid $1,000.00 Ending value during period on 4-30-04 on 10-31-04 ended 10-31-04 1 ------------------------------------------------------------------ Class A $1,016.84 $8.37 Class B 1,013.32 11.89 Class C 1,013.32 11.89 Remember, these examples do not include any transaction costs, such as sales charges; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs. 1 Expenses are equal to the Fund's annualized expense ratio of 1.65%, 2.35% and 2.35% for Class A, Class B and Class C, respectively, multiplied by the average account value over the period, multiplied by [number of days in most recent fiscal half-year/365 or 366] (to reflect the one-half year period). 9 FINANCIAL STATEMENTS FUND'S INVESTMENTS Securities owned by the Fund on October 31, 2004 This schedule is divided into two main categories: common stocks and short-term investments. Common stocks are further broken down by industry group. Short-term investments, which represent the Fund's cash position, are listed last.
Issuer Shares Value Common stocks 97.17% $169,059,917 (Cost $148,209,960) Application Software 2.54% 4,414,685 Citrix Systems, Inc. (I)(L) 93,050 2,245,297 Hyperion Solutions Corp. (I) 31,200 1,252,056 Macromedia, Inc. (I) 33,800 917,332 Asset Management & Custody Banks 5.30% 9,229,275 Bank of New York Co., Inc. (The) 100,000 3,246,000 Franklin Resources, Inc. 3,000 181,860 Legg Mason, Inc. 16,500 1,051,215 Northern Trust Corp. 10,000 425,400 State Street Corp. 96,000 4,324,800 Biotechnology 10.59% 18,418,833 Abgenix, Inc. (I) 135,000 1,229,850 Amgen, Inc. (I) 30,000 1,704,000 Biogen Idec, Inc. (I) 5,000 290,800 Celgene Corp. (I) 90,000 2,665,800 Charles River Laboratories International, Inc. (I) 60,000 2,807,400 Genentech, Inc. (I) 12,500 569,125 Gilead Sciences, Inc. (I) 100,000 3,463,000 Lexicon Genetics, Inc. (I) 210,000 1,367,100 Medarex, Inc. (I) 54,436 414,258 Millennium Pharmaceuticals, Inc. (I) 50,000 649,000 Neurocrine Biosciences, Inc. (I) 70,000 3,258,500 Communications Equipment 8.14% 14,164,765 Cisco Systems, Inc. (I) 215,450 4,138,794 McDATA Corp. (Class A) (I) 59,600 374,288 Motorola, Inc. 144,159 2,488,184 QUALCOMM, Inc. (L) 130,650 5,462,477 VeriSign, Inc. (I) 63,400 1,701,022 See notes to financial statements. 10 FINANCIAL STATEMENTS Issuer Shares Value Computer Hardware 5.28% $9,189,083 Dell, Inc. (I) 39,500 1,384,870 Hewlett-Packard Co. 52,715 983,662 International Business Machines Corp. 75,995 6,820,551 Computer Storage & Peripherals 2.13% 3,702,077 EMC Corp. (I) 182,986 2,355,030 Lexmark International, Inc. (I) 16,208 1,347,047 Consumer Finance 2.76% 4,803,885 American Express Co. 84,000 4,457,880 MBNA Corp. 13,500 346,005 Data Processing & Outsourced Services 0.78% 1,356,048 First Data Corp. 32,850 1,356,048 Diversified Banks 7.17% 12,468,161 Bank of America Corp. 101,212 4,533,285 Fifth Third Bancorp 62,000 3,049,780 Wells Fargo & Co. 81,800 4,885,096 Drug Retail 0.19% 332,100 Impax Laboratories, Inc. (I) 22,500 332,100 Health Care Equipment 6.70% 11,648,984 Boston Scientific Corp. (I) 55,000 1,941,500 Guidant Corp. 20,000 1,332,400 Integra LifeSciences Holdings (I) 30,000 962,400 Kinetic Concepts, Inc. (I) 40,000 1,993,200 Medtronic, Inc. 45,000 2,299,950 Smith & Nephew Plc (United Kingdom) 90,000 764,734 Varian Medical Systems, Inc. (I) 20,000 803,000 Zimmer Holdings, Inc. (I) 20,000 1,551,800 Health Care Facilities 2.67% 4,649,500 HCA, Inc. 55,000 2,020,150 Manor Care, Inc. (I) 45,000 1,473,300 Triad Hospitals, Inc. (I) 35,000 1,156,050 Health Care Services 2.73% 4,756,500 Cerner Corp. (I) 30,000 1,354,500 WebMD Corp. (I) 450,000 3,402,000 Insurance Brokers 1.15% 1,992,735 Marsh & McLennan Cos., Inc. 44,750 1,237,785 Willis Group Holdings Ltd. (Bermuda) 21,000 754,950 See notes to financial statements. 11 FINANCIAL STATEMENTS Issuer Shares Value Internet Retail 1.21% $2,108,376 eBay, Inc. (I) 21,600 2,108,376 Internet Software & Services 0.80% 1,394,523 Digital Insight Corp. (I)(L) 89,050 1,394,523 Investment Banking & Brokerage 2.92% 5,075,822 Goldman Sachs Group, Inc. (The) 34,000 3,344,920 Lehman Brothers Holdings, Inc. 10,000 821,500 Morgan Stanley 17,800 909,402 Life & Health Insurance 0.70% 1,215,241 AFLAC, Inc. 1,200 43,056 Conseco, Inc. (I) 26,980 452,185 Scottish Re Group Ltd. (Cayman Islands) 32,000 720,000 Managed Health Care 1.24% 2,156,000 Aetna, Inc. 10,000 950,000 Anthem, Inc. (I) 15,000 1,206,000 Multi-Line Insurance 4.11% 7,144,985 American International Group, Inc. 61,900 3,757,949 Hartford Financial Services Group, Inc. (The) 8,200 479,536 PartnerRe Ltd. (Bermuda) 50,000 2,907,500 Other Diversified Financial Services 3.60% 6,261,388 Citigroup, Inc. 105,000 4,658,850 JPMorgan Chase & Co. 39,000 1,505,400 National Financial Partners Corp. (I) 3,160 97,138 Pharmaceuticals 7.31% 12,711,911 Abbot Laboratories 50,000 2,131,500 Alcon, Inc. (Switzerland) 6,000 427,200 Cell Genesys, Inc. (I) 80,000 524,800 Cubist Pharmaceuticals, Inc. (I) 125,000 1,275,625 Cyress Bioscience, Inc. (I) 37,085 389,763 Pfizer, Inc. 70,000 2,026,500 Rigel Pharmaceuticals, Inc. (I) 85,000 2,040,000 Roche Holding AG (Switzerland) 12,000 1,222,523 Shire Pharmaceuticals Group Plc, American Depositary Receipt (ADR) (United Kingdom) (I) 85,000 2,414,000 Teva Pharmaceutical Industries Ltd. (Israel) 10,000 260,000 Photographic Products 0.25% 443,794 Lexar Media, Inc. (I)(L) 65,650 443,794 See notes to financial statements. 12 FINANCIAL STATEMENTS Issuer Shares Value Property & Casualty Insurance 0.55% $955,844 Ambac Financial Group, Inc. 3,850 300,531 Transatlantic Holdings, Inc. 11,250 655,313 Regional Banks 2.69% 4,687,875 M&T Bank Corp. 8,500 875,500 SouthTrust Corp. 87,500 3,812,375 Reinsurance 0.38% 655,480 RenaissanceRe Holdings Ltd. (Bermuda) 14,000 655,480 Semiconductor Equipment 1.67% 2,914,617 Applied Materials, Inc. (I)(L) 105,950 1,705,795 KLA-Tencor Corp. (I)(L) 26,550 1,208,822 Semiconductors 3.91% 6,811,972 Intel Corp. 117,800 2,622,228 Power Integrations, Inc. (I) 10,600 226,840 Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) (I) 232,992 1,763,749 Texas Instruments, Inc. 89,945 2,199,155 Systems Software 7.34% 12,764,108 Macrovision Corp. (I) 77,850 2,105,064 Microsoft Corp. 311,650 8,723,084 Symantec Corp. (I)(L) 34,000 1,935,960 Thrifts & Mortgage Finance 0.36% 631,350 Fannie Mae 9,000 631,350 Interest Par value Issuer, description, maturity date rate (000) Value Short-term investments 10.35% $18,007,852 (Cost $18,007,852) Joint Repurchase Agreement 2.85% 4,967,000 Investment in a joint repurchase agreement transaction with Morgan Stanley -- Dated 10-29-04, due 11-01-04 (secured by U.S. Treasury Bond 8.125% due 08-15-19, U.S. Treasury Note 5.875% due 11-15-04, U.S. Treasury Inflation Indexed Bonds 3.375% thru 3.625% due 04-15-28 thru 04-15-32, and U.S. Treasury Inflation Indexed Notes 3.375% thru 3.875% due 01-15-09 thru 01-15-12) 1.770% $4,967 4,967,000 Shares Cash Equivalents 7.50% 13,040,852 AIM Cash Investment Trust (T) 13,040,852 13,040,852 See notes to financial statements. 13 FINANCIAL STATEMENTS Total investments 107.52% $187,067,769 Other assets and liabilities, net (7.52%) ($13,076,291) Total net assets 100.00% $173,991,478
(I) Non-income-producing security. (L) All or a portion of this security is on loan as of October 31, 2004. (T) Represents investment of securities lending collateral. Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer. The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. See notes to financial statements. 14 PORTFOLIO CONCENTRATION October 31, 2004 (unaudited) This table shows the Fund's investments as a percentage of net assets, aggregated by various industries. Sector distribution Value as a percentage of Fund's net assets ------------------------------------------------------------------------------- Financials 31.67% Health Care 31.43 Information Technology 34.07 Short-term Investments 10.35 See notes to financial statements. 15 FINANCIAL STATEMENTS ASSETS AND LIABILITIES October 31, 2004 This Statement of Assets and Liabilities is the Fund's balance sheet. It shows the value of what the Fund owns, is due and owes. You'll also find the net asset value and the maximum offering price per share. Assets Investments at value (cost $166,217,812) including $12,697,060 of securities loaned $187,067,769 Cash 1,229 Receivable for investments sold 317,993 Receivable for shares sold 31,655 Dividends and interest receivable 182,301 Receivable from affiliates 14, 308 Other assets 8,882 Total assets 187,624,137 Liabilities Payable for investments purchased 47,884 Payable for shares repurchased 263,510 Payable upon return of securities loaned 13,040,852 Payable to affiliates Management fees 110,773 Distribution and service fees 18,051 Other 78,089 Other payables and accrued expenses 73,500 Total liabilities 13,632,659 Net assets Capital paid-in 376,423,625 Accumulated net realized loss on investments and foreign currency transactions (223,280,565) Net unrealized appreciation of investments and translation of assets and liabilities in foreign currencies 20,851,294 Accumulated net investment loss (2,876) Net assets $173,991,478 Net asset value per share Based on net asset values and shares outstanding -- the Fund has an unlimited number of shares authorized with no par value Class A ($57,698,569 [DIV] 10,183,097 shares) $5.67 Class B ($85,390,188 [DIV] 15,503,532 shares) $5.51 Class C ($30,902,721 [DIV] 5,610,754 shares) $5.51 Maximum offering price per share Class A 1 ($5.67 [DIV] 95%) $5.97 1 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced. See notes to financial statements. 16 FINANCIAL STATEMENTS OPERATIONS For the year ended October 31, 2004 This Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated. Investment income Dividends (net of foreign withholding taxes of $18,586) $1,932,952 Securities lending 64,759 Interest 45,700 Total investment income 2,043,411 Expenses Investment management fees 1,819,959 Class A distribution and service fees 194,000 Class B distribution and service fees 977,327 Class C distribution and service fees 365,535 Class A, B and C transfer agent fees 956,520 Custodian fees 91,906 Printing 58,945 Accounting and legal services fees 54,202 Miscellaneous 39,264 Registration and filing fees 32,359 Professional fees 24,849 Trustees' fees 11,976 Interest 7,388 Securities lending fees 1,713 Total expenses 4,635,943 Less expense reductions (413,218) Net expenses 4,222,725 Net investment loss (2,179,314) Realized and unrealized gain (loss) Net realized gain (loss) on Investments 1,018,565 Foreign currency transactions (4,691) Change in net unrealized appreciation (depreciation) of Investments 6,286,570 Translation of assets and liabilities in foreign currencies 737 Net realized and unrealized gain 7,301,181 Increase in net assets from operations $5,121,867 See notes to financial statements. 17 FINANCIAL STATEMENTS CHANGES IN NET ASSETS These Statements of Changes in Net Assets show how the value of the Fund's net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and any increase or decrease in money shareholders invested in the Fund. Year Year ended ended 10-31-03 10-31-04 Increase (decrease) in net assets From operations Net investment loss ($2,264,556) ($2,179,314) Net realized gain (loss) (51,590,047) 1,013,874 Change in net unrealized appreciation (depreciation) 94,112,450 6,287,307 Increase in net assets resulting from operations 40,257,847 5,121,867 From Fund share transactions (35,411,929) (44,394,938) Net assets Beginning of period 208,418,631 213,264,549 End of period 1 $213,264,549 $173,991,478 1 Includes accumulated net investment loss of $2,061 and $2,876, respectively. See notes to financial statements. 18 FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS CLASS A SHARES The Financial Highlights show how the Fund's net asset value for a share has changed since the end of the previous period. Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 Per share operating performance Net asset value, beginning of period $10.00 $9.54 $5.87 $4.49 $5.51 Net investment income (loss) 2 0.01 (0.05) (0.05) (0.03) (0.04) Net realized and unrealized gain (loss) on investments (0.47) (3.61) (1.33) 1.05 0.20 Total from investment operations (0.46) (3.66) (1.38) 1.02 0.16 Less distributions From net investment income -- (0.01) -- -- -- Net asset value, end of period $9.54 $5.87 $4.49 $5.51 $5.67 Total return 3,4 (%) (4.60) 5 (38.37) (23.51) 22.72 2.90 Ratios and supplemental data Net assets, end of period (in millions) $86 $99 $65 $69 $58 Ratio of expenses to average net assets (%) 1.65 6 1.65 1.65 1.65 1.65 Ratio of adjusted expenses to average net assets 7 (%) 1.75 6 1.85 1.88 2.02 1.86 Ratio of net investment income (loss) to average net assets (%) 0.57 6 (0.70) (0.91) (0.64) (0.62) Portfolio turnover (%) 11 116 68 76 40
See notes to financial statements. 19 FINANCIAL HIGHLIGHTS CLASS B SHARES
Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 Per share operating performance Net asset value, beginning of period $10.00 $9.54 $5.83 $4.42 $5.40 Net investment loss 2 -- 8 (0.10) (0.09) (0.06) (0.07) Net realized and unrealized gain (loss) on investments (0.46) (3.61) (1.32) 1.04 0.18 Total from investment operations (0.46) (3.71) (1.41) 0.98 0.11 Net asset value, end of period $9.54 $5.83 $4.42 $5.40 $5.51 Total return 3,4 (%) (4.60) 5 (38.89) (24.19) 22.17 2.04 Ratios and supplemental data Net assets, end of period (in millions) $125 $161 $102 $104 $85 Ratio of expenses to average net assets (%) 2.34 6 2.35 2.35 2.35 2.35 Ratio of adjusted expenses to average net assets 7 (%) 2.44 6 2.55 2.58 2.72 2.56 Ratio of net investment loss to average net assets (%) (0.13) 6 (1.40) (1.61) (1.34) (1.32) Portfolio turnover (%) 11 116 68 76 40
See notes to financial statements. 20 FINANCIAL HIGHLIGHTS CLASS C SHARES
Period ended 10-31-00 1 10-31-01 10-31-02 10-31-03 10-31-04 Per share operating performance Net asset value, beginning of period $10.00 $9.54 $5.83 $4.42 $5.40 Net investment loss 2 -- 8 (0.10) (0.09) (0.06) ( 0.07) Net realized and unrealized gain (loss) on investments (0.46) (3.61) (1.32) 1.04 0.18 Total from investment operations (0.46) (3.71) (1.41) 0.98 0.11 Net asset value, end of period $9.54 $5.83 $4.42 $5.40 $5.51 Total return 3,4 (%) (4.60) 5 (38.89) (24.19) 22.17 2.04 Ratios and supplemental data Net assets, end of period (in millions) $53 $69 $42 $41 $31 Ratio of expenses to average net assets (%) 2.34 6 2.35 2.35 2.35 2.35 Ratio of adjusted expenses to average net assets 7 (%) 2.44 6 2.55 2.58 2.72 2.56 Ratio of net investment loss to average net assets (%) (0.13) 6 (1.40) (1.61) (1.34) (1.32) Portfolio turnover (%) 11 116 68 76 40
1 Class A, Class B and Class C shares began operations on 9-22-00. 2 Based on the average of the shares outstanding. 3 Assumes dividend reinvestment and does not reflect the effect of sales charges. 4 Total returns would have been lower had certain expenses not been reduced during the periods shown. 5 Not annualized. 6 Annualized. 7 Does not take into consideration expense reductions during the periods shown. 8 Less than $0.01 per share. See notes to financial statements. 21 NOTES TO STATEMENTS Note A Accounting policies John Hancock Growth Trends Fund (the "Fund") is a diversified series of John Hancock Equity Trust, an open-end management investment company registered under the Investment Company Act of 1940. The investment objective of the Fund is to achieve long-term growth of capital. The Fund will invest in a number of industry groups without concentration in any particular industry. The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B and Class C shares. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Share holders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Significant accounting policies of the Fund are as follows: Valuation of investments Securities in the Fund's portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or if quotations are not readily available, or the value has been materially affected by events occurring after the closing of a foreign market, at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments, which have a remaining maturity of 60 days or less may be valued at amortized cost which approximates market value. Investments in AIM Cash Investment Trust are valued at their net asset value each business day. All portfolio transactions initially expressed in terms of foreign currencies have been translated into U.S. dollars as described in "Foreign currency translation" below. Joint repurchase agreement Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with other registered investment companies having a management contract with John Hancock Advisers, LLC (the "Adviser"), a wholly owned subsidiary of John Hancock Financial Services, Inc., may participate in a joint repurchase agreement transaction. Aggregate cash balances are invested in one or more large repurchase agreements, whose underlying securities are obligations of the U.S. government and/or its agencies. The Fund's custodian bank receives delivery of the underlying securities for the joint account on the Fund's behalf. The Adviser is responsible for ensuring that the agreement is fully collateralized at all times. 22 Foreign currency translation All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 4:00 P.M., London time, on the date of any determination of the net asset value of the Fund. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of the transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign currency exchange gains or losses arise from sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency exchange gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. Investment transactions Investment transactions are recorded as of the date of purchase, sale or maturity. Net realized gains and losses on sales of investments are determined on the identified cost basis. Capital gains realized on some foreign securities are subject to foreign taxes, which are accrued as applicable. Class allocations Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the appropriate net asset value of the respective classes. Distribu tion and service fees, if any, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class. Expenses The majority of expenses are directly identifiable to an individual fund. Expenses that are not readily identifiable to a specific fund will be allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative sizes of the funds. Bank borrowings The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into a syndicated line of credit agreement with various banks. This agreement enables the Fund to participate with other funds managed by the Adviser in an unsecured line of credit with banks, which permits borrowings of up to $250 million, collectively. Interest is charged to each fund, based on its borrowing. In addition, a commitment fee is charged to each fund based on the average daily unused portion of the line of credit and is allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the year ended October 31, 2004. Securities lending The Fund may lend securities to certain qualified brokers who pay the Fund negotiated lender fees. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral, should the borrower of the securities fail financially. On October 31, 2004, the Fund loaned securities having a market value of $12,697,060 collateralized by cash in the amount of $13,040,852. The 23 cash collateral was invested in a short-term instrument. Securities lending expenses are paid by the Fund to the Adviser. Forward foreign currency exchange contracts The Fund may enter into forward foreign currency exchange contracts as a hedge against the effect of fluctuations in currency exchange rates. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date at a set price. The aggregate principal amounts of the contracts are marked to market daily at the applicable foreign currency exchange rates. Any resulting unrealized gains and losses are included in the determination of the Fund's daily net asset value. The Fund records realized gains and losses at the time the forward foreign currency exchange contracts are closed out. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of the contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. These contracts involve market or credit risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. The Fund may also purchase and sell forward contracts to facilitate the settlement of foreign currency denominated portfolio transactions, under which it intends to take delivery of the foreign currency. Such contracts normally involve no market risk if they are offset by the currency amount of the underlying transactions. The Fund had no open forward foreign currency exchange contracts on October 31, 2004. Federal income taxes The Fund qualifies as a "regulated investment company" by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required. For federal income tax purposes, the Fund has $222,780,511 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforward expires as follows: October 31, 2009 -- $83,769,657, October 31, 2010 -- $87,616,374 and October 31, 2011 -- $51,394,480. Dividends, interest and distributions Dividend income on investment securities is recorded on the ex-dividend date or, in the case of some foreign securities, on the date thereafter when the Fund identifies the dividend. Interest income on investment securities is recorded on the accrual basis. Foreign income may be subject to foreign withholding taxes, which are accrued as applicable. The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. Distribu tions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of October 31, 2004, there were no distributable earnings on a tax basis. Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital. Use of estimates The preparation of these financial statements, in accordance with accounting principles generally accepted in the United States of America, incorporates estimates made by management in determining the reported amount of 24 assets, liabilities, revenues and expenses of the Fund. Actual results could differ from these estimates. Note B Management fee and transactions with affiliates and others The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a monthly management fee to the Ad vi ser at an annual rate of 0.75% of the Fund's average daily net asset value. Until June 16, 2004 the Fund paid a management fee to the Adviser at an annual rate of 1.00% of the Fund's average daily net asset value. The Adviser had a subadvisory agreement with Mercury Advisors. The subadvisory agreement was terminated effective June 16, 2004. The Fund was not responsible for payment of the subadvisory fees. The Adviser has agreed to limit the Fund's total expenses, excluding distribution and service fees, to 1.35% of the Fund's average daily net asset value, on an annual basis, at least until February 28, 2005. Accordingly, the expense reductions related to the total expense limitation amounted to $338,605 for the year ended October 31, 2004. The Adviser reserves the right to terminate this limitation in the future. The Fund has Distribution Plans with John Hancock Funds, LLC ("JH Funds"), a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH Funds for the services it provides as distributor of shares of the Fund. Accordingly, the Fund makes monthly payments to JH Funds at an annual rate not to exceed 0.30% of Class A average daily net asset value and 1.00% of Class B and Class C average daily net asset value. A maximum of 0.25% of such payments may be service fees as defined by the Conduct Rules of the National Association of Securities Dealers. Under the Conduct Rules, curtailment of a portion of the Fund's 12b-1 payments could occur under certain circumstances. Class A shares are assessed up-front sales charges. During the year ended October 31, 2004, JH Funds received net up-front sales charges of $132,735 with regard to sales of Class A shares. Of this amount, $20,239 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $75,738 was paid as sales commissions to unrelated broker-dealers and $36,758 was paid as sales commissions to sales personnel of Signator Investors, Inc. ("Signator Investors"), a related broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance Company ("JHLICo") , is the indirect sole shareholder of Signator Investors. Prior to July 15, 2004, Class C shares were assessed up-front sales charges. During the year ended October 31, 2004, JH Funds received net up-front sales charges of $8,762 with regard to sales of Class C shares. Of this amount, $8,618 was paid as sales commissions to unrelated broker-dealers and $144 was paid as sales commissions to sales personnel of Signator Investors. Class B shares that are redeemed within six years of purchase are subject to a contingent deferred sales charge ("CDSC") at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a CDSC at a rate of 1.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds and are used in whole or in part to defray its expenses for providing distribution related services to the Fund in connection with the sale of Class B and Class C shares. During the year ended October 31, 2004, CDSCs received by JH Funds 25 amounted to $466,072 for Class B shares and $6,940 for Class C shares. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo. For Class A, Class B and Class C shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of the each class's average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses aggregated and allocated to each class on the basis of its relative net asset value. Signature Services agreed to voluntarily reduce the Fund's asset-based portion of the transfer agent fee if the total transfer agent fee exceeds the Lipper, Inc. median transfer agency fee for comparable mutual funds by 0.05%. Accordingly, the transfer agent expense for Class A, Class B and Class C shares was reduced by $74,613 for the year ended October 31, 2004. Signature Services reserves the right to terminate this limitation at any time. The Fund has an agreement with the Adviser to perform necessary tax, accounting and legal services for the Fund. The compensation for the year amounted to $54,202. The Fund also paid the Adviser the amount of $1,052 for certain publishing services, included in the printing fees. Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or its affiliates, as well as Trustee 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 investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund. Note C Fund share transactions This listing illustrates the number of Fund shares sold and repurchased during the last two periods, along with the corresponding dollar value.
Year ended 10-31-03 Period ended 10-31-04 Shares Amount Shares Amount Class A shares Sold 1,904,610 $9,337,076 1,425,444 $8,093,762 Repurchased (3,866,431) (18,250,013) (3,710,781) (21,104,062) Net decrease (1,961,821) ($8,912,937) (2,285,337) ($13,010,300) Class B shares Sold 1,542,219 $7,313,411 1,183,795 $6,544,677 Repurchased (5,376,766) (25,094,848) (4,953,899) (27,393,331) Net decrease (3,834,547) ($17,781,437) (3,770,104) ($20,848,654) Class C shares Sold 518,564 $2,468,614 425,690 $2,372,094 Repurchased (2,399,620) (11,186,169) (2,324,764) (12,908,078) Net decrease (1,881,056) ($8,717,555) (1,899,074) ($10,535,984) Net decrease (7,677,424) ($35,411,929) (7,954,515) ($44,394,938)
26 Note D Investment transactions Purchases and proceeds from sales or maturities of securities, other than short-term securities and obligations of the U.S. government, during the year ended October 31, 2004, aggregated $78,870,281 and $125,966,684, respectively. The cost of investments owned on October 31, 2004, including short-term investments, for federal income tax purposes was $166,717,866. Gross unrealized appreciation and depreciation of investments aggregated $27,994,824 and $7,644,921, respectively, resulting in net unrealized appreciation of $20,349,903. The difference between book basis and tax basis net unrealized appreciation of investments is attributable primarily to the tax deferral of losses on certain sales of securities. Note E Reclassification of accounts During the year ended October 31, 2004, the Fund reclassified amounts to reflect a decrease in accumulated net realized loss on investments of $4,905, a decrease in accumulated net investment loss of $2,178,499 and a decrease in capital paid-in of $2,183,404. This represents the amount necessary to report these balances on a tax basis, excluding certain temporary differences, as of October 31, 2004. Addi tion al 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 certain differences in the computation of distributable income and capital gains under federal tax rules versus accounting principles generally accepted in the United States of America, and book and tax differences in accounting for net operating loss, deferred compen sation and foreign currency adjustments. The calculation of net investment income (loss) per share in the Fund's Financial Highlights excludes these adjustments. Note F Subsequent event A special meeting of shareholders was held on December 1, 2004, at which time one or more new Trustees were elected to the Fund's Board of Trustees. Several Trustees had reached the age for mandatory retirement and plan to retire in 2004 and 2005. The Board of Trustees recommended and shareholders approved a proposal to consolidate the two panels into one Board of Trustees for all open-end funds within the John Hancock funds complex. The effective date for the newly elected Trustees to the Fund will be December 1, 2004, and the Trustees & Officers section has been updated accordingly. 27 AUDITORS' REPORT Report of Pricewaterhouse- Coopers LLP, Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of John Hancock Growth Trends Fund, In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the John Hancock Growth Trends Fund (the "Fund") at October 31, 2004, the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts December 13, 2004 28 TAX INFORMATION Unaudited For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended October 31, 2004. The Fund hereby designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2004. Shareholders will be mailed a 2004 U.S. Treasury Department Form 1099-DIV in January 2005. This will reflect the total of all distributions that are taxable for the calendar year 2004. 29 TRUSTEES & OFFICERS This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees Name, age Number of Position(s) held with Fund Trustee John Hancock Principal occupation(s) and other of Fund funds overseen directorships during past 5 years since 1 by Trustee Charles L. Ladner, 2 Born: 1938 2004 49 Independent Chairman (since 2004); Chairman and Trustee, Dunwoody Village, Inc. (retirement services) (until 2003); Senior Vice President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association (since 2001). James F. Carlin, Born: 1940 2004 29 Director and Treasurer, Alpha Analytical Inc. (analytical laboratory) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc. (since 1995); Part Owner and Vice President, Mone Lawrence Carlin Insurance Agency, Inc. (since 1996); Director and Treasurer, Rizzo Associates (engineering) (until 2000); Chairman and CEO, Carlin Consolidated, Inc. (management/investments) (since 1987); Director and Partner, Proctor Carlin & Co., Inc. (until 1999); Trustee, Massachusetts Health and Education Tax Exempt Trust (since 1993); Director of the following: Uno Restaurant Corp. (until 2001), Arbella Mutual (insurance) (until 2000), HealthPlan Services, Inc. (until 1999), Flagship Healthcare, Inc. (until 1999), Carlin Insurance Agency, Inc. (until 1999); Chairman, Massachusetts Board of Higher Education (until 1999). Richard P. Chapman, Jr., Born: 1935 2000 21 President and Chief Executive Officer, Brookline Bancorp Inc. (lending) (since 1972); Director, Lumber Insurance Co. (insurance) (until 2000); Chairman and Director, Northeast Retirement Services, Inc. (retirement administration) (since 1998). William J. Cosgrove, Born: 1933 2000 21 Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A. (retired 1991); Executive Vice President, Citadel Group Representatives, Inc. (financial reinsurance) (until 2004); Director, Hudson City Savings Bank (since 1995); Director, Hudson City Bancorp (since 1999); Trustee, Scholarship Fund for Inner City Children (since 1986). 30 Independent Trustees (continued) Name, age Number of Position(s) held with Fund Trustee John Hancock Principal occupation(s) and other of Fund funds overseen directorships during past 5 years since 1 by Trustee William H. Cunningham, Born: 1944 2004 29 Former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman and CEO, IBT Technologies (until 2001); Director of the following: The University of Texas Investment Management Company (until 2000), Hire.com (until 2004), STC Broadcasting, Inc. and Sunrise Television Corp. (electronic manufacturing) (until 2001), Symtx, Inc. (electronic manufacturing) (since 2001), Adorno/Rogers Technology, Inc. (until 2004), Pinnacle Foods Corporation (until 2003), rateGenius (Internet service) (until 2003), Jefferson-Pilot Corporation (diversified life insurance company) (since 1985), New Century Equity Holdings (formerly Billing Concepts) (until 2001), eCertain (until 2001), ClassMap.com (until 2001), Agile Ventures (until 2001), LBJ Foundation (until 2000), Golfsmith International, Inc. (until 2000), Metamor Worldwide (until 2000), AskRed.com (until 2001), Southwest Airlines (since 2000) and Introgen (since 2000); Advisory Director, Q Investments (until 2003); Advisory Director, Chase Bank (formerly Texas Commerce Bank -- Austin) (since 1988), LIN Television (since 2002), WilTel Communications (until 2003) and Hayes Lemmerz International, Inc. (diversified automotive parts supply company) (since 2003). Ronald R. Dion, Born: 1946 2004 29 Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director, The New England Council and Massachusetts Roundtable; Trustee, North Shore Medical Center; Director, Boston Stock Exchange; Director, BJ's Wholesale Club, Inc. and a corporator of the Eastern Bank; Trustee, Emmanuel College. John A. Moore, 2 Born: 1939 2000 31 President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences International (health research) (until 2003); Principal, Hollyhouse (consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002). Patti McGill Peterson, 2 Born: 1943 2000 31 Executive Director, Council for International Exchange of Scholars and Vice President, Institute of International Education (since 1998); Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until 1998); Former President of Wells College and St. Lawrence University; Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford Foundation, International Fellowships Program (since 2002); Director, Lois Roth Endowment (since 2002); Director, Council for International Educational Exchange (since 2003). Steven Pruchansky, Born: 1944 2004 29 Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Managing Director, JonJames, LLC (real estate) (since 2001); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). 31 Non-Independent Trustees 3 Name, age Number of Position(s) held with Fund Trustee John Hancock Principal occupation(s) and other of Fund funds overseen directorships during past 5 years since 1 by Trustee James A. Shepherdson, Born: 1952 2004 49 President and Chief Executive Officer Executive Vice President, Manulife Financial Corporation (since 2004); Chairman, Director, President and Chief Executive Officer, John Hancock Advisers, LLC and The Berkeley Financial Group, LLC (holding company); Chairman, Director, President and Chief Executive Officer, John Hancock Funds, LLC; Chairman, President, Director and Chief Executive Officer, Sovereign Asset Management Corporation ("SAMCorp"); Director, Chairman and President, NM Capital Management, Inc.; President, John Hancock Retirement Services, John Hancock Life Insurance Company (until 2004); Chairman, Essex Corporation (until 2004); Co-Chief Executive Officer, MetLife Investors Group (until 2003); Senior Vice President, AXA/Equitable Insurance Company (until 2000). Principal officers who are not Trustees Name, age Position(s) held with Fund Officer Principal occupation(s) and of Fund directorships during past 5 years since William H. King, Born: 1952 2000 Vice President and Treasurer Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001). Susan S. Newton, Born: 1950 2000 Senior Vice President, Secretary and Chief Legal Officer Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each of the John Hancock funds, John Hancock Funds and The Berkeley Financial Group, LLC; Vice President, Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital Management, Inc.
The business address for all Trustees and Officers is 101 Huntington Avenue, Boston, Massachusetts 02199. The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available, without charge, upon request, by calling 1-800-225-5291. 1 Each Trustee serves until resignation, retirement age or until his or her successor is elected. 2 Member of Audit Committee. 3 Non-independent Trustees hold positions with the Fund's investment adviser, underwriter and certain other affiliates. 32 For more information The Fund's proxy voting policies, procedures and records are available without charge, upon request: By phone On the Fund's Web site On the SEC's Web site 1-800-225-5291 www.jhfunds.com/proxy www.sec.gov Investment adviser John Hancock Advisers, LLC 101 Huntington Avenue Boston, MA 02199-7603 Principal distributor John Hancock Funds, LLC 101 Huntington Avenue Boston, MA 02199-7603 Custodian The Bank of New York One Wall Street New York, NY 10286 Transfer agent John Hancock Signature Services, Inc. 1 John Hancock Way, Suite 1000 Boston, MA 02217-1000 Legal counsel Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, MA 02109-1803 Independent registered public accounting firm PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 How to contact us Internet www.jhfunds.com Mail Regular mail: Express mail: John Hancock John Hancock Signature Services, Inc. Signature Services, Inc. 1 John Hancock Way, Suite 1000 Mutual Fund Image Operations Boston, MA 02217-1000 529 Main Street Charlestown, MA 02129 Phone Customer service representatives 1-800-225-5291 24-hour automated information 1-800-338-8080 TDD line 1-800-554-6713 A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the Securities and Exchange Commission's Web site, www.sec.gov. 33 [A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner. A tag line below reads "JOHN HANCOCK FUNDS."] 1-800-225-5291 1-800-554-6713 (TDD) 1-800-338-8080 EASI-Line www.jhfunds.com Now available: electronic delivery www.jhfunds.com/edelivery This report is for the information of the shareholders of the John Hancock Growth Trends Fund. 4600A 10/04 12/04 ITEM 2. CODE OF ETHICS. As of the end of the period, October 31, 2004, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Senior Financial Officers"). A copy of the code of ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. William F. Glavin is the audit committee financial expert and is "independent", pursuant to general instructions on Form N-CSR Item 3. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees The aggregate fees billed for professional services rendered by the principal accountant(s) for the audit of the registrant's annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $18,300 for the fiscal year ended October 31, 2003 and $19,200 for the fiscal year ended October 31, 2004. These fees were billed to the registrant and were approved by the registrant's audit committee. (b) Audit-Related Services There were no audit-related fees during the fiscal year ended October 31, 2003 and fiscal year ended October 31, 2004 billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant ("control affiliates"). (c) Tax Fees The aggregate fees billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning ("tax fees") amounted to $2,200 for the fiscal year ended October 31, 2003 and $2,300 for the fiscal year ended October 31, 2004. The nature of the services comprising the tax fees was the review of the registrant's income tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant's audit committee. There were no tax fees billed to the control affiliates. (d) All Other Fees There were no other fees during the fiscal year ended October 31, 2003 and fiscal year ended October 31, 2004 billed to the registrant or to the control affiliates. (e)(1) See attachment "Approval of Audit, Audit-related, Tax and Other Services", with the audit committee pre-approval policies and procedures. (e)(2) There were no fees that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended October 31, 2003 and October 31, 2004 on behalf of the registrant or on behalf of the control affiliates that relate directly to the operations and financial reporting of the registrant. (f) According to the registrant's principal accountant, for the fiscal year ended October 31, 2004, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%. (g) The aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $2,200 for the fiscal year ended October 31, 2003 and $58,762 for the fiscal year ended October 31, 2004. (h) The audit committee of the registrant has considered the non-audit services provided by the registrant's principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no material changes to previously disclosed John Hancock Funds - Administration Committee Charter. ITEM 10. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of Ethics for Senior Financial Officers is attached. (a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference. (c)(1) Approval of Audit, Audit-related, Tax and Other Services is attached. (c)(2) Contact person at the registrant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. John Hancock Equity Trust By: ------------------------------ James A. Shepherdson President and Chief Executive Officer Date: December 21, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: ------------------------------ James A. Shepherdson President and Chief Executive Officer Date: December 21, 2004 By: ----------------------- William H. King Vice President and Treasurer Date: December 21, 2004