<PAGE> 1
John Hancock Funds
JOHN HANCOCK
GOVERNMENT SECURITIES
TRUST
FINAL REPORT
SEPTEMBER 15, 1995
<PAGE> 2
John Hancock Funds - Government Securities Trust
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter *
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.) *
John P. Toolan *
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
<PAGE> 3
<TABLE>
John Hancock Government Securities Trust
STATEMENT OF ASSETS AND LIABILITIES
FINAL REPORT September 15, 1995* (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies securities
(cost - $460,130,665) $473,194,962
Joint repurchase agreement (cost - $189,000) 189,000
------------------------------------------
473,383,962
Cash 12,765
Receivable for shares sold 2,995
Receivable for investments sold 666,467
Interest receivable 8,383,649
Receivable for variation margin - Note A 37,500
Other assets 59,956
------------------------------------------
Total Assets 482,547,294
-----------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased 141,950
Payable for investments purchased 2,112,079
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 199,998
Accounts payable and accrued expenses 224,207
------------------------------------------
Total Liabilities 2,678,234
-----------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 848,900,628
Accumulated net realized loss on investments and
financial futures contracts (381,938,677)
Net unrealized appreciation of investments and
financial futures contracts 12,907,109
------------------------------------------
Net Assets $479,869,060
=====================================================================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of shares
authorized with $0.01 per share par value, respectively)
Class A - $477,611,353 \ 60,584,042 $7.88
========================================================================================================================
Class B - $2,257,707 \ 286,580 $7.88
========================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE**
Class A - ($7.88 x 104.71%) $8.25
========================================================================================================================
</TABLE>
* The net assets of the John Hancock Government Securities Trust ("the Fund")
were merged into the John Hancock Government Income Fund as of the close of
business on September 15, 1995 and the Fund was subsequently terminated.
The Statement of Assets and Liabilities reflect the Fund's position prior
to the transfer of net assets and the termination of the Fund. (See Note A
to the Notes to Financial Statements).
** On single retail sales of less than $100,000. On sales of $100,000 or more
and on group sales the offering price is reduced.
See notes to financial statements.
<PAGE> 4
<TABLE>
John Hancock Government Securities Trust
STATEMENT OF OPERATIONS
For the period April 1, 1995 to
September 15, 1995* (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $19,620,498
-----------------------------
Expenses:
Investment management fee - Note B 1,466,181
Distribution/service fee - Note B
Class A 561,168
Class B 8,441
Transfer agent fee 532,768
Custodian fee 64,417
Printing 24,041
Legal fees 18,204
Miscellaneous 15,795
Registration and filing fees 14,105
Trustees' fees 6,027
-----------------------------
Total Expenses 2,711,147
-----------------------------
Net Investment Income 16,909,351
-----------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments sold 1,733,033
Net realized gain on financial futures contracts 159,006
Change in net unrealized appreciation/depreciation
of investments 19,696,120
Change in net unrealized appreciation/depreciation
of financial futures contracts (157,188)
-----------------------------
Net Realized and Unrealized Gain on
Investments 21,430,971
--------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $38,340,322
======================================================================================
</TABLE>
* The net assets of the John Hancock Government Securities Trust ("the Fund")
were merged into the John Hancock Government Income Fund as of the close of
business on September 15, 1995 and the Fund was subsequently terminated.
The Statement of Operations reflect the Fund's position prior to the
transfer of net assets and the termination of the Fund. (See Note A to the
Notes to Financial Statements).
See notes to financial statements.
<PAGE> 5
<TABLE>
John Hancock Government Securities Trust
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: SEPTEMBER 15, 1995 MARCH 31,
FROM OPERATIONS: (UNAUDITED)** 1995
----------------------------------------------------
<S> <C> <C>
Net investment income $16,909,351 $43,494,506
Net realized gain (loss) on investments sold 1,892,039 (50,922,906)
Change in net unrealized appreciation/depreciation of investments 19,538,932 23,396,985
----------------------------------------------------
Net Increase in Net Assets Resulting from Operations 38,340,322 15,968,585
----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.2723 and $0.5940 per share, respectively) (17,083,080) (42,628,320)
Class B*** - ($0.2481 and $0.2688 per share, respectively) (63,109) (25,389)
----------------------------------------------------
Total Distributions to Shareholders (17,146,189) (42,653,709)
----------------------------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (31,834,492) (94,670,248)
----------------------------------------------------
NET ASSETS:
Beginning of period 490,509,419 611,864,791
End of period - including undistributed net investment income of none and
$236,838, respectively ----------------------------------------------------
$479,869,060 $490,509,419
====================================================
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
SEPTEMBER 15, 1995 MARCH 31,
(UNAUDITED)** 1995
--------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 665,370 $ 5,169,664 3,304,464 $ 25,387,423
Shares issued to shareholders in reinvestment of distributions 1,033,051 8,044,169 2,609,288 19,732,195
--------------------------------------------------------------------
1,698,421 13,213,833 5,913,752 45,119,618
Less shares repurchased (5,869,952) (45,815,547) (18,668,887) (141,186,832)
--------------------------------------------------------------------
Net decrease (4,171,531) ($ 32,601,714) (12,755,135) ($ 96,067,214)
====================================================================
CLASS B***
Shares sold 132,378 $ 1,029,930 201,709 $ 1,499,539
Shares issued to shareholders in reinvestment of distributions 2,944 22,923 618 4,651
--------------------------------------------------------------------
135,322 1,052,853 202,327 1,504,190
Less shares repurchased (36,632) (285,631) (14,437) (107,224)
--------------------------------------------------------------------
Net increase 98,690 $ 767,222 187,890 $ 1,396,966
====================================================================
</TABLE>
** The net assets of the John Hancock Government Securities Trust were merged
into the John Hancock Government Income Fund as of the close of business on
September 15, 1995 and the Fund was subsequently terminated. The Statement
of Changes in Net Assets reflect the Fund's position prior to the transfer
of net assets and the termination of the Fund. (See Note A to the Notes to
Financial Statements).
*** Class B commenced operations on September 30, 1994.
See notes to financial statements.
<PAGE> 6
John Hancock Funds - Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios and supplemental data are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 15, 1995 YEAR ENDED MARCH 31,
----------------------------------------------------------
(UNAUDITED) 1995 (f) 1994 1993
----------- -------- ---- ----
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 7.55 $ 7.89 $ 8.41 $ 8.04
----------- ----------- ----------- -----------
Net Investment Income 0.27 0.61 0.64 0.66
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 0.33 (0.36) (0.52) 0.40
----------- ----------- ----------- -----------
Total from Investment Operations 0.60 0.25 0.12 1.06
----------- ----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.27) (0.59) (0.64) (0.69)
----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 7.88(c) $ 7.55 $ 7.89 $ 8.41
=========== =========== =========== ===========
Total Investment Return at Net Asset Value 8.07%(a) 3.49% 1.26% 13.68%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 477,611 $ 489,090 $ 611,865 $ 718,426
Ratio of Expenses to Average Net Assets (d) 1.20%* 1.20% 1.14% 1.17%
Ratio of Net Investment Income to Average Net Assets 7.51%* 8.10% 7.60% 7.93%
Portfolio Turnover Rate 80% 337% 453% 322%
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1992 1991
---- ----
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 8.03 $ 7.87
----------- -----------
Net Investment Income 0.87 0.89
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts (0.09) 0.14
----------- -----------
Total from Investment Operations 0.78 1.03
----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.77) (0.87)
----------- -----------
Net Asset Value, End of Period $ 8.04 $ 8.03
=========== ===========
Total Investment Return at Net Asset Value 10.09% 13.87%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 725,645 $ 771,826
Ratio of Expenses to Average Net Assets (d) 1.21% 1.11%
Ratio of Net Investment Income to Average Net Assets 10.63% 11.13%
Portfolio Turnover Rate 199% 117%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE PERIOD SEPTEMBER 30, 1994
APRIL 1, 1995 TO (COMMENCEMENT
SEPTEMBER 15, 1995 OF OPERATIONS)
--------------------
(UNAUDITED) TO MARCH 31, 1995 (f)
----------- ---------------------
<S> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 7.55 $ 7.51(b)
--------- ---------
Net Investment Income 0.24 0.28
Net Realized and Unrealized Gain on Investments
and Financial Futures Contracts 0.34 0.03(e)
--------- ---------
Total from Investment Operations 0.58 0.31
--------- ---------
Less Distributions:
Dividends from Net Investment Income (0.25) (0.27)
--------- ---------
Net Asset Value, End of Period $ 7.88(c) $ 7.55
========= =========
Total Investment Return at Net Asset Value 7.74%(a) 4.20%(a)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 2,258 $ 1,419
Ratio of Expenses to Average Net Assets (d) 1.81%* 1.95%*
Ratio of Net Investment Loss to Average Net Assets 6.84%* 7.35%*
Portfolio Turnover Rate 80% 337%
</TABLE>
* On an annualized basis.
(a) Not annualized.
(b) Initial price to commence operations.
(c) Net asset value per share, before the merger of assets to the John Hancock
Government Income Fund, and the termination of the Fund. (See Note A to the
Notes to Financial Statements).
(d) Excluding interest expense, which equalled 0.10% for the year ended March
31, 1995, 0.02% for the year ended March 31, 1994, 0.27% for the year ended
March 31, 1993 and 0.32% for the year ended March 31, 1992.
(e) May not accord to amounts shown elsewhere in the financial statements.
(f) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
See notes to financial statements.
<PAGE> 7
JOHN HANCOCK FUNDS - GOVERNMENT SECURITIES TRUST
SCHEDULE OF INVESTMENTS
September 15, 1995
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000`S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- --------------------------------- -------------- --------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S. (55.06%)
United States Treasury, Bond 11.500% 11-15-95 $24,390 * $24,607,315
United States Treasury, Bond 15.750 11-15-01 27,475 41,143,812
United States Treasury, Bond 14.250 02-15-02 7,000 * 10,047,170
United States Treasury, Bond 11.625 11-15-02 23,500 31,023,760
United States Treasury, Bond 11.875 11-15-03 6,000 8,175,960
United States Treasury, Bond 13.750 08-15-04 5,000 * 7,554,700
United States Treasury, Bond 12.750 11-15-10 7,250 10,702,813
United States Treasury, Bond 13.875 05-15-11 3,000 * 4,734,840
United States Treasury, Bond 12.000 08-15-13 48,700 72,159,764
United States Treasury, Bond 8.875 08-15-17 3,500 4,397,960
United States Treasury, Bond 7.625 02-15-25 4,500 * 5,096,970
United States Treasury, Bond 6.875 08-15-25 2,000 * 2,106,560
United States Treasury, Note 9.375 04-15-96 41,600 42,457,792
---------------------
264,209,416
---------------------
GOVERNMENTAL - U.S. AGENCIES (43.55%)
Federal Home Loan Mortgage Corp,
CMO REMIC 1634-PN 4.500 12-15-23 10,575 7,769,241
CMO REMIC 1667-PE 6.000 03-15-08 11,750 11,346,035
CMO REMIC 1994-48-E 6.000 11-25-08 3,685 3,483,467
Federal National Mortgage Association,
30 Yr. Pass Thru Ctf 8.000 11-01-24 4,830 4,952,259
30 Yr. Pass Thru Ctf 8.000 05-01-25 5,752 * 5,896,749
CMO REMIC Pass Thru Ctf 1994-36-N 6.500 03-25-24 18,645 * 17,223,319
GTD REMIC Pass Thru Ctf 1994-51-PV 6.000 03-25-24 20,926 18,460,499
GTD REMIC Pass Thru Ctf X225C-TK 6.500 12-25-23 5,032 4,711,210
Government National Mortgage Association,
30 Yr Pass Thru Ctf 7.000 08-15-23 15,300 * 15,165,500
30 Yr Pass Thru Ctf 7.500 05-15-23 to 75,502 * 76,512,699
09-01-25
30 Yr Pass Thru Ctf 8.000 07-15-23 to 9,306 9,590,478
09-15-23
30 Yr Pass Thru Ctf 8.500 02-15-25 3,038 3,171,997
30 Yr Pass Thru Ctf 11.000 01-15-14 to 11,587 12,941,343
12-15-15
Tennessee Valley Authority,
Pwr Bonds 1994 Ser A 7.850 06-15-44 17,500 17,760,750
---------------------
208,985,546
---------------------
TOTAL U.S. GOVERNMENT AND
AGENCIES SECURITIES
(COST $ 460,130,665) (98.61%) 473,194,962
-------- ---------------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT ( 0.04%)
Investment in a joint repurchase agreement
transaction with United Bank of Switzerland,
Dated 09-15-95, Due 09-18-95 (secured by U.S.
Treasury Notes 7.25% Due 11-15-96, 7.50% Due 12-31-96,
4.75% Due 09-30-98, 5.875% Due 03-31-99, 6.875% Due
07-31-99, 6.875% Due 08-31-99, and 5.875%
Due 02-15-04) - Note A 5.850% 189 189,000
TOTAL SHORT-TERM INVESTMENTS (0.04%) 189,000
-------- ---------------------
TOTAL INVESTMENTS (98.65%) $473,383,962
======== =====================
</TABLE>
* Securities, other than short-terms investments, newly added to the
portfolio during the period ended September 15, 1995. 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.
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK GOVERNMENT SECURITIES TRUST
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Bond Fund, (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
15, 1995, the Trust consisted of six series portfolios: John Hancock Government
Securities Trust (the "Fund"), John Hancock Investment Quality Bond Fund, John
Hancock U.S. Government Trust, John Hancock Intermediate Government Trust, John
Hancock Adjustable U.S. Government Fund and John Hancock Adjustable U.S.
Government Trust. The Trustees may authorize the creation of additional Funds
from time to time to satisfy various investment objectives.
The Trustees authorized the issuance of two classes of the Fund, designated as
Class A and Class B. The shares of each class represented an interest in the
same portfolio of investments of the Fund and had equal rights to voting,
redemptions, dividends, and liquidation, except that certain expenses, subject
to the approval of the Trustees, may have been 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
beared distribution/service expenses under the terms of a distribution plan had
exclusive voting rights regarding such distribution plan. Class A shares were
subject to an initial sales charge of up to 4.50% and a 12b-1 distribution plan.
Prior to May 15, 1995, the maximum sales charge was 4.75%. Class B shares were
subject to a contingent deferred sales charge and a separate 12b-1 distribution
plan.
On September 8, 1995, the shareholders of the Fund approved a plan of
reorganization between the Fund and John Hancock Government Income Fund
("Government Income Fund") providing for the transfer of substantially all of
the assets and liabilities of the Fund to Government Income Fund in exchange
solely for shares of beneficial interest of Government Income Fund. After this
transaction and as of the close of business on September 15, 1995, the Fund was
terminated. The financial statements presented herein reflect the position of
the Fund prior to the exchange of net assets and termination of the Fund.
Significant accounting policies of the Fund were as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio were valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
were valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances were invested in one or more repurchase agreements, whose underlying
securities were obligations of the U.S. government and/or its agencies. The
Fund's custodian bank received delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser was responsible for ensuring
that the agreement was fully collateralized at all times.
FINANCIAL FUTURES CONTRACTS The Fund may have bought and sold financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund entered into a financial futures contract, it
was 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 was valued at the official settlement price of the board of
trade or U.S. commodities exchange. Subsequent payments, known as "variation
margin", to and from the broker were made on a daily basis as the market price
of the financial futures contract fluctuated. Daily variation margin
adjustments, arising from this "mark to market", were recorded by the Fund as
unrealized gains or losses.
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK GOVERNMENT SECURITIES TRUST
When the contracts were closed, the Fund recognized a gain or loss. Risks of
entering into futures contracts included the possibility that there may have
been an illiquid market and/or that a change in the value of the contracts may
not have correlated with changes in the value of the underlying securities. In
addition, the Fund could have been prevented from opening or realizing the
benefits of closing out futures positions because of position limits or limits
on daily price fluctuations imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses could have been affected as a result of futures
contracts.
At September 15, 1995 open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Open Contracts Position Depreciation
- ----------- -------------- -------- ------------
<S> <C> <C> <C>
DEC 1995 150 U.S. Treasury Note SHORT $157,188
========
</TABLE>
At September 15, 1995, the Fund had deposited in a segregated account $222,000
par value of U.S. Treasury Note 9.375%, 4/15/96 to cover margin requirements on
open financial futures contracts.
INVESTMENT TRANSACTIONS Investment transactions were recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments were determined on the identified cost basis for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accreted discount from par value on
securities from either the date of issue or the date of purchase over the life
of the security, as required by the Internal Revenue Code.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders. As of September 15, 1995, the Fund's final tax year
end, for Federal income tax purposes, the Fund had $381,506,849 of capital loss
carryforwards available. To the extent that such carryforwards were used by the
Fund, no capital gains distributions were made. The carryforwards expire as
follows: 1996--$231,879,672, 1997--$50,265,256, 1998--$19,146,203,
1999--$6,921,927, 2002--$66,593,890, and 2003--$6,699,901. The unused capital
loss carryforwards as of September 15, 1995 were transferred to the John Hancock
Government Income Fund. These capital loss carryforwards will be available, to
the extent provided by regulations, to offset future net capital gains of the
John Hancock Government Income Fund. Expired capital loss carryforwards are
reclassified to capital paid-in, in the year of expiration
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
was recorded on the accrual basis.
The Fund recorded all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions were determined
in conformity with income tax regulations, which may differ from generally
accepted accounting principles. Dividends paid by the Fund, if any, with respect
to each class of shares were calculated in the same manner, at the same time and
were in the same amount, except for the effect of expenses that may have been
applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust were directly identifiable to
an individual Fund. Expenses which were not identifiable to a specific Fund were
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) were determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, were calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK GOVERNMENT SECURITIES TRUST
NOTE B --
MANAGEMENT FEE,
ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the investment management contract, the Fund paid a monthly management fee
to the Adviser for a continuous investment program equivalent, to 0.650% of the
first $200,000,000 of the Fund's average daily net asset value, 0.625% of the
next $300,000,000, and 0.600% of the Fund's average daily net asset value in
excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, were in excess of the most restrictive state
limit where the Fund was registered to sell shares of beneficial interest, the
fee payable to the Adviser was reduced to the extent of such excess and the
Adviser made additional arrangements necessary to eliminate any remaining excess
expenses. The limits were 2.5% of the first $30,000,000 of the Fund's average
daily net asset value, 2.0% of the next $70,000,000 and 1.5% of the remaining
average daily net asset value.
The Fund had a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
September 15, 1995, JH Funds received net sales charges of $125,034 with regard
to sales of Class A shares. Out of this amount, $12,642 was retained and used
for printing prospectuses, advertising, sales literature and other purposes,
$112,148 was paid as sales commissions to unrelated broker-dealers and $244 was
paid as sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which were redeemed within six years of purchase were subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC were
paid to JH Funds and were used in whole or in part to defray its expenses
related to providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended September 15, 1995
contingent deferred sales charges received by JH Funds amounted to $1,552.
In addition, to compensate JH Funds for the services it provided as
distributor of shares of the Fund, the Fund had adopted a Distribution Plan with
respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund made payments for
distribution and service expenses which in total did not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse JH Funds for its distribution/service costs. Up to a
maximum of 0.25% of such payments may have been service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could have occurred under certain circumstances.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly-owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund paid transfer agent fees based on the number of shareholder
accounts and certain out of pocket expenses.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates. The compensation of unaffiliated Trustees was borne by the Fund.
Effective with the fees paid for 1995, the unaffiliated Trustees may elect to
defer their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund made investments into other John Hancock
Funds, as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
were recorded on the Fund's books as other assets.
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK GOVERNMENT SECURITIES TRUST
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of obligations of the U.S. Government and its
agencies, other than short-term obligations, during the period ended September
15, 1995 aggregated $389,245,255 and $411,370,044, respectively.
The cost of investments owned at September 15, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $460,606,852. Gross
unrealized appreciation and depreciation of investments aggregated $16,111,515,
and $3,334,405, respectively, resulting in net unrealized appreciation of
$12,777,110.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the fiscal period ended September 15, 1995, the Fund has reclassified
amounts to reflect an increase in undistributed net investment income of $80,125
and a decrease in capital paid-in of $80,125. This represents the amount
necessary to report these balances on a tax basis, excluding certain temporary
differences, as of September 15, 1995. 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 generally accepted accounting principles.
<PAGE> 12
John Hancock Funds
JOHN HANCOCK
INVESTMENT QUALITY
BOND FUND
FINAL REPORT
SEPTEMBER 15, 1995
<PAGE> 13
John Hancock Funds - John Hancock Investment Quality Bond Fund
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter *
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.) *
John P. Toolan *
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
<PAGE> 14
John Hancock Investment Quality Bond Fund
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
Final Report September 15, 1995* (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Publicly traded bonds (cost - $82,900,699) $83,644,092
Joint repurchase agreement (cost - $80,000) 80,000
-----------------------------
83,724,092
Receivable for investments sold 2,057,140
Interest receivable 1,723,843
Other assets 83,705
-----------------------------
Total Assets 87,588,780
------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,441,600
Payable for shares repurchased 5,885
Payable for variation margin - Note A 27,221
Payable to John Hancock Advisers, Inc. and affiliates - Note B 53,317
Accounts payable and accrued expenses 89,427
-----------------------------
Total Liabilities 1,617,450
------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 104,729,520
Accumulated net realized loss on investments, options, foreign currency
transactions and financial futures contracts (19,488,926)
Net unrealized appreciation of investments, foreign currency transactions
and financial futures contracts 730,736
-----------------------------
Net Assets $85,971,330
====================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with $0.01 per
share par value, respectively)
Class A - $78,550,023 / 9,195,328 $8.54
=====================================================================================================================
Class B - $7,421,307 / 868,756 $8.54
=====================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE**
Class A - ($8.54 x 104.71%) $8.94
=====================================================================================================================
</TABLE>
* The net assets of the John Hancock Investment Quality Bond Fund (the
"Fund") were merged into the John Hancock Sovereign Bond Fund as of the
close of business on September 15, 1995 and the Fund was subsequently
terminated. The Statement of Assets and Liabilities reflects the Fund's
position prior to the transfer of the net assets and the termination of the
Fund. (See Note A to the Notes to Financial Statements).
** On single retail sales of less than $100,000. On sales of $100,000 or
more and on group sales the offering price was reduced.
See notes to financial statements.
<PAGE> 15
John Hancock Investment Quality Bond Fund
<TABLE>
STATEMENT OF OPERATIONS
For the period April 1, 1995 to
September 15, 1995* (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $3,584,417
-------------------------
Expenses:
Investment management fee - Note B 252,040
Distribution/service fee - Note B
Class A 93,831
Class B 31,787
Transfer agent fee 100,186
Custodian fee 33,600
Printing 28,662
Auditing fee 23,699
Legal fees 14,139
Trustees' fees 7,231
Advisory board fee 7,007
Registration and filing fees 5,244
Miscellaneous 678
-------------------------
Total Expenses 598,104
-----------------------------------------------------------------------------------------------
Net Investment Income 2,986,313
-----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold (78,956)
Net realized gain on financial futures contracts 151,639
Change in net unrealized appreciation/depreciation
of investments 4,191,738
Change in net unrealized appreciation/depreciation
on financial futures contracts (32,343)
-------------------------
Net Realized and Unrealized Gain on
Investments and Financial Futures Contracts 4,232,078
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $7,218,391
===============================================================================================
</TABLE>
* The net assets of the Fund were merged into the John Hancock Sovereign Bond
Fund as of the close of business on September 15, 1995 and the Fund was
subsequently terminated. The Statement of Operations reflects the Fund's
position prior to the transfer of net assets and the termination of the
Fund. (See Note A to the Notes to Financial Statements).
See notes to financial statements.
<PAGE> 16
John Hancock Investment Quality Bond Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
SEPTEMBER 15,1995 MARCH 31,
(UNAUDITED)** 1995
------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $2,986,313 $7,591,568
Net realized gain (loss) on investments sold, options,
foreign currency transactions and financial futures contracts 72,683 (7,781,316)
Change in net unrealized appreciation/depreciation of investments,
foreign currency transactions and financial futures contracts 4,159,395 1,248,406
------------------------------------------------
Net Increase in Net Assets Resulting from Operations 7,218,391 1,058,658
------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A - ($0.2984 and $0.6600 per share, respectively) (2,895,062) (6,944,803)
Class B - ($0.2711 and $0.5904 per share, respectively) (241,335) (486,623)
------------------------------------------------
Total Distributions to Shareholders (3,136,397) (7,431,426)
------------------------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (7,908,203) (5,353,781)
------------------------------------------------
NET ASSETS:
Beginning of period 89,797,539 101,524,088
End of period (including undistributed net investment income
of none and $150,084, respectively) ------------------------------------------------
$85,971,330 $89,797,539
================================================
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 15, 1995 YEAR ENDED MARCH 31,
(UNAUDITED)** 1995
---------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 136,361 $1,136,871 877,320 $7,260,092
Shares issued to shareholders
in reinvestment of distributions 197,639 1,668,672 479,004 3,954,812
---------------------------------------------------------------------------------------
334,000 2,805,543 1,356,324 11,214,904
Less shares repurchased (1,219,184) (10,346,659) (2,244,995) (18,518,937)
---------------------------------------------------------------------------------------
Net decrease (885,184) ($7,541,116) (888,671) ($7,304,033)
=======================================================================================
CLASS B
Shares sold 81,375 $683,160 463,584 $3,861,116
Shares issued to shareholders
in reinvestment of distributions 14,304 120,794 29,471 243,889
---------------------------------------------------------------------------------------
95,679 803,954 493,055 4,105,005
Less shares repurchased (138,448) (1,171,041) (261,054) (2,154,753)
---------------------------------------------------------------------------------------
Net increase (decrease) (42,769) ($367,087) 232,001 $1,950,252
=======================================================================================
</TABLE>
** The net assets of the Fund were merged with John Hancock Sovereign Bond
Fund as of the close of business on September 15, 1995, and the Fund was
subsequently terminated. The Statement of Changes in Net Assets does not
reflect the merger of net assets or termination of the Fund. (See Note A to
the Notes to Financial Statements.)
See notes financial statements.
<PAGE> 17
John Hancock Funds - Investment Quality Bond Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios and supplemental data are as follows:
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 15, 1995 YEAR ENDED MARCH 31,
------------------ -------------------------------------
(UNAUDITED) 1995 (b) 1994
----------- -------- ----
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 8.17 $ 8.72 $ 9.26
----------- ----------- -----------
Net Investment Income 0.30(f) 0.66 0.71
Net Realized and Unrealized Gain
(Loss) on Investments and
Financial Futures Contracts 0.37 (0.55) (0.55)
----------- ----------- -----------
Total from Investment Operations 0.67 0.11 0.16
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.30) (0.66) (0.70)
----------- ----------- -----------
Net Asset Value, End of Period $ 8.54(d) $ 8.17 $ 8.72
=========== =========== ===========
Total Investment Return at Net Asset Value 12.13%(a) 1.46% 1.58%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 78,550 $ 82,351 $ 95,601
Ratio of Expenses to Average Net Assets 1.40%* 1.32%(c) 1.25%
Ratio of Net Investment Income to
Average Net Assets 7.32%* 8.15% 7.63%
Portfolio Turnover Rate 82% 202% 242%
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 8.93 $ 8.85 $ 8.52
----------- ----------- -----------
Net Investment Income 0.79 0.80 0.85
Net Realized and Unrealized Gain
(Loss) on Investments and
Financial Futures Contracts 0.31 0.11 0.32
----------- ----------- -----------
Total from Investment Operations 1.10 0.91 1.17
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.77) (0.83) (0.84)
----------- ----------- -----------
Net Asset Value, End of Period $ 9.26 $ 8.93 $ 8.85
=========== =========== ===========
Total Investment Return at Net Asset Value 12.77% 10.72% 14.51%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 111,836 $ 96,516 $ 84,039
Ratio of Expenses to Average Net Assets 1.24%(c) 1.36%(c) 1.25%
Ratio of Net Investment Income to
Average Net Assets 8.47% 8.84% 9.89%
Portfolio Turnover Rate 191% 316% 134%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD PERIOD FROM
APRIL 1, 1995 TO YEAR ENDED JUNE 30, 1993
SEPTEMBER 15, 1995 MARCH 31, TO MARCH 31,
(UNAUDITED) 1995(b) 1994
----------- ------- ----
<S> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 8.17 $ 8.72 $ 9.31(e)
--------- --------- ---------
Net Investment Income 0.27(f) 0.59 0.49
Net Realized and Unrealized Gain
(Loss) on Investments and
Financial Futures Contracts 0.37 (0.55) (0.60)
--------- --------- ---------
Total from Investment Operations 0.64 0.04 (0.11)
--------- --------- ---------
Less Distributions:
Dividends from Net Investment Income (0.27) (0.59) (0.48)
--------- --------- ---------
Net Asset Value, End of Period $ 8.54(d) $ 8.17 $ 8.72
========= ========= =========
Total Investment Return at Net Asset Value 11.53% (a) 0.62% (1.51%)(a)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 7,421 $ 7,447 $ 5,923
Ratio of Expenses to Average Net Assets 2.07%* 2.07%(c) 1.99%(c)*
Ratio of Net Investment Income to
Average Net Assets 6.64%* 7.40% 6.58% *
Portfolio Turnover Rate 82% 202% 242%
</TABLE>
* On an annualized basis.
(a) Not annualized.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(c) Excluding interest expense, which equaled 0.12% for the year ended March
31, 1995, 0.07% for the year ended March 31, 1993 and 0.34% for the year
ended March 31, 1992.
(d) Net asset value per share, before the merger of assets into the John
Hancock Sovereign Bond Fund, and the termination of the Fund. (See Note A
to the Notes to Financial Statements).
(e) Initial price to commence operations.
(f) On average month end shares outstanding.
See notes to financial statements.
<PAGE> 18
<TABLE>
<CAPTION>
JOHN HANCOCK INVESTMENT QUALITY BOND FUND
SCHEDULE OF INVESTMENTS
September 15, 1995 (Unaudited) Par Value
Interest S+P (000`s Market
Issuer - Description Rate Rating** Omitted) Value
- -------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS
AEROSPACE ( 0.36%)
JET EQUIPMENT TRUST SER 1995-B,
*CERT 08-15-14 (R) 10.910 % BB+ $ 300 $ 310,350
------------------
BANKS ( 4.86%)
ABBEY NATIONAL FIRST CAPITAL B.V.,
*SUB NOTE 10-15-04 8.200 AA- 1,000 1,095,660
BARCLAYS NORTH AMERICAN CAPITAL CORP.,
GTD CAP NOTE 05-15-21 9.750 AA- 500 574,820
DEN DANSKE BANK AKTIESELSKAB,
*SUB NOTE 06-15-05 (R) 7.250 BBB+ 640 645,235
INTERNATIONAL BANK FOR RECONSTRUCTION AND
DEVELOPMENT, 30 YR BOND 07-15-17 9.250 AAA 1,500 1,864,860
------------------
4,180,575
------------------
BROADCASTING ( 5.61%)
CABLEVISION SYSTEMS CORP.,
SR SUB DEB 04-01-04 10.750 B 1,000 1,062,500
CENTURY COMMUNICATIONS CORP.,
*SR SUB DEB 10-15-03 11.875 B+ 500 531,250
CONTINENTAL CABLEVISION, INC.,
SR SUB DEB 06-01-07 11.000 BB- 625 693,750
JONES INTERCABLE, INC.,
*SR SUB DEB 07-15-04 11.500 B+ 375 406,875
ROGERS CABLESYSTEMS LTD.,
SR SEC SECOND PRIORITY NOTE 3-15-05 10.000 BB+ 250 261,250
TKR CABLE I, INC.,
*SR DEB 10-30-07 10.500 BBB- 1,000 1,162,530
VIACOM INC.,
*SUB DEB 07-07-06 8.000 BB- 710 701,125
------------------
4,819,280
------------------
COMPUTERS ( 0.38%)
UNISYS CORP.,
CREDIT SENSITIVE NOTE 07-01-97 13.500 BB- 300 325,500
------------------
CONTAINERS ( 0.29%)
STONE CONTAINER CORP.,
*SR NOTE 02-01-01 9.875 B 250 250,625
------------------
FINANCE ( 2.02%)
SANTANDER FINANCIAL ISSUANCES LTD.,
*SUB GTD NOTE 04-15-05 7.875 A+ 900 954,836
STANDARD CREDIT CARD MASTER TRUST I,
CLASS A CREDIT CARD PART CTF SER 1995-2 01-07-00 8.625 AAA 750 779,063
------------------
1,733,899
------------------
</TABLE>
See notes to financial statements.
<PAGE> 19
<TABLE>
<CAPTION>
JOHN HANCOCK INVESTMENT QUALITY BOND FUND
SCHEDULE OF INVESTMENTS
September 15, 1995 (Unaudited) Par Value
Interest S+P (000`s Market
Issuer - Description Rate Rating** Omitted) Value
- -------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
GOVERNMENTAL - FOREIGN (8.82%)
NOVA SCOTIA, PROVINCE OF,
*DEB 04-01-22 8.750 % A- $ 500 $ 562,605
SF DEB 05-15-13 11.500 A- 2,255 2,600,240
ONTARIO, PROVINCE OF,
DEB 11-05-11 17.000 AA- 3,750 4,417,800
------------------
7,580,645
------------------
GOVERNMENTAL - U.S. ( 22.61%)
UNITED STATES TREASURY,
BOND 08-15-05 10.750 AAA 1,365 1,814,590
*BOND 08-15-17 8.875 AAA 3,090 3,882,770
BOND 02-15-23 7.125 AAA 2,570 2,727,001
*NOTE 11-15-96 7.250 AAA 700 712,250
*NOTE 05-15-98 9.000 AAA 3,320 3,578,329
*NOTE 11-30-99 7.750 AAA 3,195 3,407,659
*NOTE 05-15-01 8.000 AAA 3,025 3,316,156
------------------
19,438,755
------------------
GOVERNMENTAL - U.S. AGENIES (28.78%)
FEDERAL HOME LOAN MORTGAGE CORP.,
CMO REMIC 1218-G 05-15-14 4.500 AAA 1,000 920,930
CMO REMIC 1611-F 05-15-21 5.750 AAA 5,500 5,247,330
CMO REMIC 1994-48 E 11-25-08 6.000 AAA 5,000 4,726,550
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION,
*30 YR SF PASS THRU CTF 8-15-25 7.500 AAA 14
16,202
*30 YR SF PASS THRU CTF 4-14-22 TO 6-1-25 + 8.000 AAA 5,932,307
5,701
*30 YR SF PASS THRU CTF 7-16-16 TO 8-15-16 9.000 AAA 6,867,158
6,441
*30 YR SF PASS THRU CTF 1-15-19 TO 3-15-25 10.000 AAA 1,029,621
943
------------------
24,740,098
------------------
INSURANCE ( 2.24%)
MASSACHUSETTS MUTUAL LIFE INSURANCE CO.,
SURPLUS NOTE 11-15-23 (R) 7.625 AA- 750 728,775
NEW YORK LIFE INSURANCE CO.,
SURPLUS NOTE 12-15-23 (R) 7.500 AA 1,250 1,198,888
------------------
1,927,663
------------------
OIL & GAS ( 2.78%)
NORSK HYDRO, a.s.,
DEB 06-15-23 7.750 A- 2,000 2,060,100
TRANSTEXAS GAS CORP.,
*SER SEC NOTE 06-15-02 11.500 BB- 310 327,050
------------------
2,387,150
------------------
</TABLE>
See notes to financial statements.
<PAGE> 20
<TABLE>
<CAPTION>
JOHN HANCOCK INVESTMENT QUALITY BOND FUND
SCHEDULE OF INVESTMENTS
September 15, 1995 (Unaudited) Par Value
Interest S+P (000`s Market
Issuer - Description Rate Rating** Omitted) Value
- -------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
PUBLISHING ( 0.94%)
TIME WARNER INC.,
DEB 01-15-13 9.125 % BBB- $ 745 $ 804,928
------------------
RETAIL ( 0.73%)
GRAND UNION CORP.,
*SR NOTE 09-01-04 12.000 B- 325 311,594
PENN TRAFFIC CO.,
*SR NOTE 11-01-04 10.650 BB- 325 315,250
------------------
626,844
------------------
STEEL ( 1.07%)
UCAR GLOBAL ENTERPRISES INC.,
SR SUB NOTE 01-15-05 12.000 B+ 405 455,625
WEIRTON STEEL CORP.,
SR NOTE 06-01-05 10.750 B 500 466,250
------------------
921,875
------------------
TOBACCO ( 1.49%)
RJR NABISCO, INC.,
NOTE 12-01-02 8.625 BBB- 1,000 1,037,580
*NOTE 09-15-03 7.625 BBB- 250 242,625
------------------
1,280,205
------------------
TRANSPORTATION ( 2.42%)
RAIL CAR TRUST NO.,
TRUST NOTE 1992-1, 06-1-04 7.750 AAA 859 907,023
UNITED AIR LINES, INC.,
*DEB SER A 05-01-04 10.670 BB 1,000 1,176,730
------------------
2,083,753
------------------
UTILITIES ( 11.90%)
BRITISH COLUMBIA HYDRO AND POWER AUTH.
(GTD BY PROVINCE OF BRITISH COLUMBIA),
BOND SER FG 04-15-11 15.000 AA+ 2,050 2,253,791
BOND SER FH 07-15-11 15.500 AA+ 225 255,656
BOND SER FJ 11-15-11 15.500 AA+ 1,081 1,258,089
BVPS II FUNDING CORP.,
COLLATERALIZED LEASE 12-1-07 8.330 BB+ 300 285,627
CLEVELAND ELECTRIC ILLUMINATING CO.,
*1ST MTG SER 2005 B 05-15-05 9.500 BB 500 500,700
FIRST PV FUNDING CORP.,
LEASE OBLIG SER 1986 B 1-15-16 10.150 B+ 1,000 1,018,750
GG1B FUNDING CORP.,
*SEC LEASE OBLIG BOND 01-15-11 7.430 BBB- 345 337,629
GTE CORP.,
DEB 11-01-20 10.250 BBB+ 875 1,021,869
HYDRO-QUEBEC (GTD BY PROVINCE OF QUEBEC),
DEB SER HS 02-01-21 9.400 A+ 700 832,468
LONG ISLAND LIGHTING CO.,
*GEN REF BOND 05-01-21 9.750 BBB- 1,000 1,016,960
DEB 03-15-03 7.050 BB+ 250 238,263
LOUISIANA POWER & LIGHT CO.,
SEC LEASE OBLIG BOND SER B 1-2-17 10.670 BBB- 500 540,345
MIDLAND FUNDING CORP. I,
SR SEC LEASE OBLIG SER C 7-23-02 10.330 BB- 402 416,487
PHILLIPINE LONG DISTANCE TELEPHONE CO.,
*NOTE 08-01-05 9.875 BB 250 255,313
------------------
10,231,947
------------------
TOTAL PUBLICLY TRADED BONDS (97.29%) 83,644,092
------ ------------------
(COST $ 82,900,699)
</TABLE>
See notes to financial statements.
<PAGE> 21
<TABLE>
<CAPTION>
JOHN HANCOCK INVESTMENT QUALITY BOND FUND
SCHEDULE OF INVESTMENTS
September 15, 1995 (Unaudited) Par Value
Interest (000`s Market
Issuer - Description Rate Omitted) Value
- -------------------- ---- -------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.09%)
Investment in a joint repurchase agreement transaction
with U.B.S. Securities Inc., Dated 09-15-95, Due 09-18-95
(secured by U.S. Treasury Notes, 4.750% thru 7.500%
due 11-15-96 thru 02-15-04) - Note A 5.850 % $ 80 $ 80,000
------------
TOTAL SHORT-TERM INVESTMENTS (0.09%) 80,000
------- ------------
TOTAL INVESTMENTS (97.39%) $83,724,092
======= ============
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $2,883,248 as of September 15, 1995. See
Note A of the Notes to Financial Statements for valuation policy.
+ These securities having an aggregate value of $1,451,048 or 1.69% of the
Fund's net assets, have been purchased on a when issued basis subsequent to
the date of this schedule. The purchase price and the interest rate of such
security is fixed at trade date, although the Fund does not earn any
interest on such securities until settlement date. The Fund has instructed
its Custodian Bank to segregate assets with a current value at least equal
to the amount of its when issued commitments. Accordingly, the market value
of $1,591,561 of U.S. Treasury Note 8.000%, 05-15-01 has been segregated to
cover the when issued commitments.
* Securities, other than short-term investments, newly added to the portfolio
during the period ended September 15,1995.
** Credit ratings are unaudited and are rated by Moody's Investor Services or
John Hancock Advisers, Inc. where Standard and Poors ratings are not
available.
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.
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INVESTMENT QUALITY BOND FUND
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Bond Fund, (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
15, 1995, the Trust consisted of six series portfolios: John Hancock Investment
Quality Bond Fund (the "Fund"), John Hancock Government Securities Trust, John
Hancock U.S. Government Trust, John Hancock Intermediate Government Trust, John
Hancock Adjustable U.S. Government Fund, and John Hancock Adjustable
U.S.Government Trust. The Trustees may authorize the creation of additional
Funds from time to time to satisfy various investment objectives.
The Trustees authorized the issuance of two classes of the Fund, designated
as Class A and Class B. The shares of each class represented an interest in the
same portfolio of investments of the Fund and had 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/service expenses under the terms of a distribution plan have
exclusive voting rights regarding such distribution plan. Class A shares were
subject to an initial sales charge of up to 4.50% and a 12b-1 distribution plan.
Prior to May 15, 1995, the maximum sales charge was 4.75%. Class B shares were
subject to a contingent deferred sales charge and a separate 12b-1 distribution
plan.
On September 8, 1995, the shareholders of the Fund approved a plan of
reorganization between the Fund and John Hancock Sovereign Bond Fund ("Sovereign
Bond Fund") providing for the transfer of substantially all of the assets and
liabilities of the Fund to Sovereign Bond Fund in exchange solely for shares of
beneficial interest of Sovereign Bond Fund. After this transaction and as of the
close of business on September 15, 1995, the Fund was terminated. The financial
statements presented herein reflect the position of the Fund prior to the
exchange of the net assets and termination of the Fund. Significant accounting
policies of the Fund were as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio were valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
were valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances were invested in one or more repurchase agreements, whose underlying
securities were obligations of the U.S. government and/or its agencies. The
Fund's custodian bank received delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser was responsible for ensuring
that the agreement was fully collateralized at all times.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund entered into a financial futures contract, it
was 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 was valued at the official settlement price of the board of
trade or U.S. commodities exchange. Subsequent payments, known as "variation
margin", to and from the broker were made on a daily basis as the market price
of the financial futures contract fluctuated. Daily variation margin
adjustments, arising from this "mark to market", were recorded by the Fund as
unrealized gains or losses.
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INVESTMENT QUALITY BOND FUND
When the contracts were closed, the Fund recognized a gain or loss. Risks of
entering into futures contracts included the possibility that there may have
been an illiquid market and/or that a change in the value of the contracts may
not have correlated with changes in the value of the underlying securities. In
addition, the Fund could have been prevented from opening or realizing the
benefits of closing out futures positions because of position limits or limits
on daily price fluctuations imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses could have been affected as a result of futures
contracts.
At September 15, 1995, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Open Contracts Position Depreciation
- ----------- -------------- -------- ------------
<S> <C> <C> <C>
DEC 1995 5 U.S. Treasury Bond SHORT $12,657
=======
</TABLE>
At September 15, 1995, the Fund had deposited in a segregated account $12,000
par value of U.S. Treasury Bond 7.125%, 2/15/23 to cover margin requirements on
open financial futures contracts.
INVESTMENT TRANSACTIONS Investment transactions were recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments were determined on the identified cost basis.
DISCOUNT ON SECURITIES The Fund accreted discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders. As of September 15, 1995, the Fund's final tax year
end, for Federal income tax purposes, the Fund had $19,406,872 of capital loss
carryforwards available. To the extent that such carryforwards were used by the
Fund, no capital gains distributions were made. The carryforwards expire as
follows: 1996--$3,512,860, 1997--$1,409,609, 1998--$1,909,995, 2000--$755,945,
2002--$10,107,031, and 2003--$1,711,432. The unused capital loss carryforwards
as of September 15, 1995 were transferred to the John Hancock Sovereign Bond
Fund. These capital loss carryforwards will be available, to the extent provided
by regulations, to offset future net capital gains of the John Hancock Sovereign
Bond Fund. Expired capital loss carryforwards are reclassified to capital
paid-in, in the year of expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
was recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions were determined
in conformity with income tax regulations, which may differ from generally
accepted accounting principles. Dividends paid by the Fund, if any, with respect
to each class of shares were calculated in the same manner, at the same time and
were in the same amount, except for the effect of expenses that may have been
applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust were directly identifiable to
an individual Fund. Expenses which were not readily identifiable to a specific
Fund were allocated in such manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) were determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, were calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INVESTMENT QUALITY BOND FUND
NOTE B --
MANAGEMENT FEE,
ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, the Fund paid a monthly
management fee to the Adviser for a continuous investment program equivalent, to
0.6250% of the first $75,000,000 of the Fund's average daily net asset value,
0.5625% of the next $75,000,000, and 0.5000% of the Fund's average daily net
asset value in excess of $150,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, were in excess of the most restrictive state
limit where the Fund was registered to sell shares of beneficial interest, the
fee payable to the Adviser was reduced to the extent of such excess and the
Adviser made additional arrangements necessary to eliminate any remaining excess
expenses. The current limits were 2.5% of the first $30,000,000 of the Fund's
average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of the
remaining average daily net asset value.
The Fund had a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
September 15, 1995, JH Funds received net sales charges of $28,202 with regard
to sales of Class A shares. Out of this amount, $3,148 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $25,054
was paid as sales commissions to unrelated broker-dealers and none was paid as
sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries which include Tucker Anthony and Sutro.
Class B shares which were redeemed within six years of purchase were subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC were
paid to JH Funds and were used in whole or in part to defray its expenses
related to providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended September 15, 1995
contingent deferred sales charges received by JH Funds amounted to $18,294.
In addition, to compensate JH Funds for the services it provided as
distributor of shares of the Fund, the Fund had adopted a Distribution Plan with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund made payments to JH Funds for
distribution and service expenses which in total did not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse JH Funds for its distribution and service costs. Up to a
maximum of 0.25% of such payments may have been service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances. In order to
comply with this rule, the 12b-1 fee was decreased on Class B shares to 0.95%
effective July 1, 1995 and further reduced to 0.75% on August 1, 1995.
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INVESTMENT QUALITY BOND FUND
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund paid transfer agent fees based on the number of shareholder
accounts and certain out of pocket expenses.
Mr. Edward J. Boudreau, Jr. was a director and officer of the Adviser and its
affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees was borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may have elected to defer their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund made investments into other John Hancock Funds, as applicable, to cover
its liability with regard to the deferred compensation. Investments to cover the
Fund's deferred compensation liability were recorded on the Fund's books as
other assets. The deferred compensation liability was marked to market on a
periodic basis and income earned by the investment was recorded on the Fund's
books.
The Fund had an independent advisory board composed of certain members of the
former Tranamerica Board of Trustees who provided advice to the current Trustees
in order to facilitate a smooth management transition for which the Fund paid
the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. Government and its agencies and short-term securities, during the period
ended September 15, 1995 aggregated $18,366,412 and $31,491,515, respectively.
Purchases and proceeds from sales of obligations of the U.S. Government and its
agencies during the period ended September 15, 1995 aggregated $51,701,997 and
$47,720,998, respectively.
The cost of investments owned at September 15, 1995 for Federal income tax
purposes was $83,005,276. Gross unrealized appreciation and depreciation of
investments aggregated $2,706,610, and $1,987,794, respectively, resulting in
net unrealized appreciation of $718,816.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the fiscal period ended September 15, 1995, the Fund has reclassified
amounts to reflect an increase in undistributed net investment income of $44,875
and a decrease in capital paid-in of $44,875. This represents the amount
necessary to report these balances on a tax basis, excluding certain temporary
differences, as of September 15, 1995. 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 generally accepted accounting principles.
<PAGE> 26
JOHN HANCOCK FUNDS
JOHN HANCOCK
INTERMEDIATE GOVERNMENT
TRUST
FINAL REPORT
SEPTEMBER 22, 1995
<PAGE> 27
John Hancock Funds - John Hancock Intermediate Government Trust
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter *
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.) *
John P. Toolan *
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
<PAGE> 28
<TABLE>
John Hancock Funds - John Hancock Intermediate Government Trust
STATEMENT OF ASSETS AND LIABILITIES
Final Report September 22, 1995* (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies securities
(cost - $6,599,064) $6,688,567
Joint repurchase agreement (cost - $287,000) 287,000
Corporate savings account 914
------------------------
6,976,481
Receivable for investments sold 2,152
Interest receivable 75,737
Receivable from John Hancock Advisers, Inc. - Note B 56,287
Other assets 1,030
------------------------
Total Assets 7,111,687
-----------------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased 793
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 9,824
Accounts payable and accrued expenses 20,893
------------------------
Total Liabilities 31,510
-----------------------------------------------------------------------
NET ASSETS:
Capital paid-in 7,873,356
Accumulated net realized loss on investments (882,682)
Net unrealized appreciation of investments 89,503
------------------------
Net Assets $7,080,177
=======================================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of shares
authorized with $0.01 per share par value, respectively)
Class A - $6,599,818 / 698,546 $9.45
====================================================================================================
Class B - $480,359 / 50,843 $9.45
====================================================================================================
MAXIMUM OFFERING PRICE PER SHARE**
Class A - ($9.45 x 104.71%) $9.90
====================================================================================================
</TABLE>
* The net assets of the John Hancock Intermediate Government Trust ("the
Fund") were merged into the John Hancock Adjustable U.S. Government Trust
as of the close of business on September 22, 1995 and the Fund was
subsequently terminated. The Statement of Assets and Liabilities reflects
the Fund's position prior to the transfer of net assets and the termination
of the Fund. (See Note A to the Notes to Financial Statements).
** On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price was reduced.
See notes to financial statements.
<PAGE> 29
<TABLE>
John Hancock Funds - John Hancock Intermediate Government Trust
STATEMENT OF OPERATIONS
For the period April 1, 1995 to
September 22, 1995* (Unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $316,332
-------------------------
Expenses:
Investment management fee - Note B 19,342
Distribution/service fee - Note B
Class A 8,920
Class B 2,480
Auditing fee 26,608
Printing 26,260
Custodian fee 24,911
Legal fees 16,224
Transfer agent fee - Note B 9,198
Registration and filing fees 8,291
Miscellaneous 639
Trustees' fees 319
Advisory board fee 200
-------------------------
Total Expenses 143,392
Less Expenses Reimbursable
by John Hancock Advisers, Inc.-
Note B (91,570)
-------------------------
Net Expenses 51,822
---------------------------------------------------------------------------
Net Investment Income 264,510
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold (153,740)
Change in net unrealized appreciation/depreciation
of investments 337,562
-------------------------
Net Realized and Unrealized Gain on
Investments 183,822
---------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $448,332
===========================================================================
</TABLE>
* The net assets of the John Hancock Intermediate Government Trust ("the
Fund") were merged into the John Hancock Adjustable U.S. Government
Trust as of the close of business on September 22, 1995 and the Fund
was subsequently terminated. The Statement of Operations reflects the
Fund's position prior to the transfer of net assets and the
termination of the Fund. (See Note A to the Notes to Financial
Statements).
See notes to financial statements.
<PAGE> 30
<TABLE>
<CAPTION>
John Hancock Funds - John Hancock Intermediate Government Trust
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: SEPTEMBER 22, 1995 MARCH 31,
FROM OPERATIONS: (UNAUDITED)*** 1995
-------------- ------------------
<S> <C> <C>
Net investment income $264,510 $614,636
Net realized loss on investments sold (153,740) (612,843)
Change in net unrealized appreciation/depreciation of investments 337,562 185,575
-------------------------------------------
Net Increase in Net Assets Resulting from Operations 448,332 187,368
-------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3188 and $0.6252 per share, respectively) (251,124) (606,830)
Class B** - ($0.2871 and $0.2785 per share, respectively) (17,046) (4,486)
-------------------------------------------
Total Distributions to Shareholders (268,170) (611,316)
-------------------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (1,405,587) (1,010,030)
-------------------------------------------
NET ASSETS:
Beginning of period 8,305,602 9,739,580
-------------------------------------------
End of period (including undistributed net investment income of
none and $3,660, respectively) $7,080,177 $8,305,602
===========================================
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED
(UNAUDITED)*** MARCH 31, 1995
-------------- --------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 8,230 $83,731 143,806 $1,366,714
Shares issued to shareholders in reinvestment of distributions 13,017 153,769 42,067 392,164
--------------------------------------------------------------
21,247 237,500 185,873 1,758,878
Less shares repurchased (185,636) (1,815,739) (328,696) (3,062,091)
--------------------------------------------------------------
Net decrease (164,389) ($1,578,239) (142,823) ($1,303,213)
==============================================================
CLASS B**
Shares sold 110,411 $1,031,975 40,014 $368,660
Shares issued to shareholders in reinvestment of 754 8,221 338 3,123
distributions
--------------------------------------------------------------
111,165 1,040,196 40,352 371,783
Less shares repurchased (92,108) (867,544) (8,567) (78,600)
--------------------------------------------------------------
Net increase 19,057 $172,652 31,785 $293,183
==============================================================
</TABLE>
** Class B shares commenced operations on September 30, 1994.
*** The net assets of the John Hancock Intermediate Government Trust ("the
Fund") were merged into the John Hancock Adjustable U.S. Government Trust
as of the close of business on September 22, 1995 and the Fund was
subsequently terminated. The Statement of Changes in Net Assets reflect the
Fund's position prior to the transfer of net assets and the termination of
the Fund. (See Note A to the Notes to Financial Statements).
See notes to financial statements.
<PAGE> 31
John Hancock Funds - John Hancock Intermediate Government Trust
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios and supplemental data are as follows:
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED MARCH 31,
--------------------------------------------------------------------
(UNAUDITED) 1995(f) 1994 1993 1992 1991
---------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.28 $ 9.68 $ 10.23 $ 9.84 $ 9.62 $ 9.45
------- ------- ------- ------- ------- -------
Net Investment Income 0.31 0.63 0.63 0.57 0.70 0.78
Net Realized and Unrealized Gain (Loss) on
Investments 0.18 (0.40) (0.54) 0.40 0.23 0.17
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.49 0.23 0.09 0.97 0.93 0.95
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.32) (0.63) (0.64) (0.58) (0.71) (0.78)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 9.45 (c) $ 9.28 $ 9.68 $ 10.23 $ 9.84 $ 9.62
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value 5.29%(a) 2.50% 0.73% 10.13% 9.89% 10.47%
Total Adjusted Investment Return at Net Asset
Value (d) 4.15%(a) 2.08% (0.01%) 7.33% 6.39% 8.44%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 6,600 $ 8,011 $ 9,740 $ 1,494 $ 1,414 $ 1,537
Ratio of Expenses to Average Net Assets 1.30%* 1.29% 1.30% 0.45% 0.51% 0.60%
Ratio of Adjusted Expenses to Average Net Assets (d) 3.69%* 1.71% 2.04% 3.25% 4.01% 2.63%
Ratio of Net Investment Income to Average Net Assets 6.94%* 6.68% 6.08% 5.64% 7.12% 8.41%
Ratio of Adjusted Net Investment Income to Average
Net Assets (d) 4.55%* 6.26% 5.34% 2.84% 3.62% 6.38%
Portfolio Turnover Rate 42% 74% 89% 73% 169% 97%
** Expense Reimbursement Per Share $ 0.11 $ 0.04 $ 0.08 $ 0.29 $ 0.34 $ 0.20
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE PERIOD SEPTEMBER 30, 1994
APRIL 1, 1995 TO (COMMENCEMENT
SEPTEMBER 22, 1995 OF OPERATIONS)
--------------------- TO MARCH 31, 1995 (f)
(UNAUDITED) ---------------------
-----------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.28 $ 9.27 (b)
--------- ---------
Net Investment Income 0.28 0.28
Net Realized and Unrealized Gain on Investments 0.18 0.01 (e)
--------- ---------
Total from Investment Operations 0.46 0.29
--------- ---------
Less Distributions:
Dividends from Net Investment Income (0.29) (0.28)
--------- ---------
Net Asset Value, End of Period $ 9.45 (c) $ 9.28
========= =========
Total Investment Return at Net Asset Value 4.91% (a) 3.17% (a)
Total Adjusted Investment Return at Net Asset Value (d) 3.77% (a) 2.75% (a)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 480 $ 295
Ratio of Expenses to Average Net Assets 1.98% * 2.04% *
Ratio of Adjusted Expenses to Average Net Assets (d) 4.37% * 2.46% *
Ratio of Net Investment Income to Average Net Assets 6.23% * 5.93% *
Ratio of Adjusted Net Investment Income to Average Net Assets(d) 3.84% * 5.51% *
Portfolio Turnover Rate 42% 74%
** Expense Reimbursement Per Share $0.11 $0.02
</TABLE>
* On an annualized basis.
(a) Not annualized.
(b) Initial price to commence operations.
(c) Net asset value per share, before the merger of assets to the John
Hancock Adjustable U.S. Government Trust, and the termination of the
Fund. (See Note A to the Notes to Financial Statements).
(d) On an unreimbursed basis without expense reduction.
(e) May not accord to amounts shown elsewhere in the financial statements.
(f) On December 22, 1994, John Hancock Advisers, Inc. became the
investment adviser of the Fund.
See notes to financial statements.
<PAGE> 32
<TABLE>
<CAPTION>
JOHN HANCOCK FUNDS - JOHN HANCOCK INTERMEDIATE GOVERNMENT TRUST
Schedule of Investments
September 22, 1995 (Unaudited)
...................................................................................................................................
PAR VALUE
INTEREST MATURITY (000's MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S (72.32%)
United States Treasury, Bond 11.125 % 8/15/03 $3,685 $4,783,572
United States Treasury, Note 9.375 4/15/96 330 336,600
----------
5,120,172
----------
GOVERNMENTAL-U.S AGENCIES (22.15%)
Federal National Mortgage Association 8.500 8/01/24 1,517 1,568,395
----------
TOTAL U.S. GOVERNMENT AND
AGENCIES SECURITIES
(Cost $6,599,064) (94.47%) 6,688,567
------ -----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.06%)
Investment in a joint repurchase
agreement transaction with
Lehman Brothers, Inc. - Dated 09-22-95,
due 09-25-95 (secured by U.S.
Treasury Bill, 5.46% due 02-29-96 and
by U.S. Treasury Notes 4.00% thru 8.75%
due 01-31-96 thru 6-30-98) -
Note A 5.630 9/25/95 $287 287,000
----------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% 914
-----------
TOTAL SHORT -TERM INVESTMENTS (4.07%) 287,914
-------- -----------
TOTAL INVESTMENTS (98.54%) $8,976,481
======== ===========
</TABLE>
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.
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INTERMEDIATE GOVERNMENT TRUST
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Bond Fund, (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
22, 1995, the Trust consisted of six series portfolios: John Hancock
Intermediate Government Trust (the "Fund"), John Hancock Investment Quality Bond
Trust, John Hancock U.S. Government Trust, John Hancock Government Securities
Trust, Adjustable U.S. Government Fund and John Hancock Adjustable U.S.
Government Trust. The Trustees may authorize the creation of additional Funds
from time to time to satisfy various investment objectives.
The Trustees authorized the issuance of two classes of the Fund, designated as
Class A and Class B. The shares of each class represented an interest in the
same portfolio of investments of the Fund and had equal rights to voting,
redemptions, dividends, and liquidation, except that certain expenses, subject
to the approval of the Trustees, may have been 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
beared distribution/service expenses under the terms of a distribution plan had
exclusive voting rights regarding such distribution plan. Class A shares were
subject to an initial sales charge of up to 4.50% (prior to May 15, 1995 the
sales charge was 4.75%), and a 12b-1 distribution plan. Class B shares were
subject to a contingent deferred sales charge and a separate 12b-1 distribution
plan.
On September 8, 1995, the shareholders of the Fund approved a plan of
reorganization between the Fund and John Hancock Adjustable U.S. Government
Trust ("Adjustable U.S. Government Trust") providing for the transfer of
substantially all of the assets and liabilities of the Fund to Adjustable U.S.
Government Trust in exchange solely for shares of beneficial interest of
Adjustable U.S. Government Trust. After this transaction and as of the close of
business on September 22, 1995, the Fund was terminated. The financial
statements presented herein reflect the position of the Fund prior to the
exchange of net assets and termination of the Fund. Significant accounting
policies of the Fund were as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio were valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
were valued at amortized cost which approximates market value.
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., a wholly-owned subsidiary of The Berkeley Financial Group, may participate
in a joint repurchase agreement transaction. Aggregate cash balances were
invested in one or more repurchase agreements, whose underlying securities were
obligations of the U.S. government and/or its agencies. The Fund's custodian
bank received delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser was responsible for ensuring that the agreement was
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions were recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments were determined on the identified cost basis for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accreted discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INTERMEDIATE GOVERNMENT TRUST
FEDERAL INCOME TAXES The Fund's policy was to comply with the requirements of
the Internal Revenue Code that were applicable to regulated investment
companies. It will not be subject to Federal income tax on taxable earnings
which are distributed to shareholders. As of September 22, 1995, the Fund's
final tax year end, for Federal income tax purposes, the Fund had $882,712 of
capital loss carryforwards available. To the extent that such carryforwards were
used by the Fund, no capital gains distributions were made. The carryforwards
expire as follows: 1997 -- $28,597, 2002 -- $706,792, and 2003 -- $147,323. The
unused capital loss carryforwards as of September 22, 1995 were transferred to
the John Hancock Adjustable U.S. Government Trust. These capital loss
carryforwards will be available, to the extent provided by regulations, to
offset future net realized capital gains of the John Hancock Adjustable U.S.
Government Trust. Expired capital loss carryforwards are reclassified to capital
paid-in, in the year of expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
was recorded on the accrual basis.
The Fund recorded all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions were determined
in conformity with income tax regulations, which may differ from generally
accepted accounting principles. Dividends paid by the Fund, if any, with respect
to each class of shares were calculated in the same manner, at the same time and
were in the same amount, except for the effect of expenses that were applied
differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust were directly identifiable to
an individual Fund. Expenses which were not identifiable to a specific Fund were
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) were determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, were calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
NOTE B --
MANAGEMENT FEE,
ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the investment management contract, the Fund paid a monthly management fee
to the Adviser for a continuous investment program equivalent, to 0.50% of the
Fund's average daily net asset value.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, were in excess of the most restrictive state
limit where the Fund was registered to sell shares of beneficial interest, the
fee payable to the Adviser was reduced to the extent of such excess and the
Adviser made additional arrangements necessary to eliminate any remaining excess
expenses. The limits were 2.5% of the first $30,000,000 of the Fund's average
daily net asset value, 2.0% of the next $70,000,000 and 1.5% of the remaining
average daily net asset value.
The Adviser had agreed to limit the Fund's expenses further to the extent
required to prevent expenses from exceeding 1.30% and 2.05% of the Fund's
average daily net asset value of Class A and Class B shares, respectively. The
Class B limit was reduced to 1.97% during the period due to the redemption of
12b-1 expenses as noted below. Accordingly, for the period ended September 22,
1995, the reduction in the Adviser's fee collectively with any additional
amounts not borne by the Fund by virtue of the expense limit for the Fund
amounted to $91,570.
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INTERMEDIATE GOVERNMENT TRUST
The Fund had a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
September 22, 1995, JH Funds received net sales charges of $1,374 with regard to
sales of Class A shares. Out of this amount, $179 was retained and used for
printing prospectuses, advertising, sales literature and other purposes and
$1,195 was paid as sales commissions to unrelated broker-dealers.
Class B shares which were redeemed within six years of purchase were subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC were
paid to JH Funds and were used in whole or in part to defray its expenses
related to providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended September 22, 1995
contingent deferred sales charges received by JH Funds amounted to $603.
In addition, to compensate JH Funds for the services it provided as
distributor of shares of the Fund, the Fund adopted Distribution Plans with
respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund made payments for
distribution and service expenses which in total did not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse JH Funds for its distribution and service costs. Up to a
maximum of 0.25% of such payments may have been service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could have occurred under certain circumstances. In
order to comply with this rule, the 12b-1 fee was decreased for Class B shares
to 0.95% effective June 1, 1995 and was further decreased to 0.75% effective
August 1, 1995.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly-owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund paid transfer agent fees based on the number of shareholder
accounts and certain out of pocket expenses.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates. The compensation of unaffiliated Trustees was borne by the Fund.
Effective with the fees paid for 1995, the unaffiliated Trustees may elect to
defer their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund made investments into other John Hancock
Funds, as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
were recorded on the Fund's books as other assets.
The Fund has an independent advisory board composed of certain members of the
former Transamerica Board of Trustees who provide advice to the current Trustees
in order to facilitate a smooth management transition for which the Fund pays
the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of obligations of the U.S. Government and its
agencies, other than short-term obligations, during the period ended September
22, 1995 aggregated $2,954,016 and $3,159,736, respectively.
The cost of investments owned at September 22, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $6,886,064. Gross
unrealized appreciation and depreciation of investments aggregated $114,872, and
$25,369, respectively, resulting in net unrealized appreciation of $89,503.
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK INTERMEDIATE GOVERNMENT TRUST
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the period ended September 22, 1995, the Fund has reclassified $30,025
from capital paid-in to undistributed net investment income. This represents the
amount necessary to report these balances on a tax basis, excluding certain
temporary differences, as of September 22, 1995. 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 generally accepted accounting principles.
<PAGE> 37
John Hancock Funds
JOHN HANCOCK
U. S. GOVERNMENT
TRUST
FINAL REPORT
SEPTEMBER 22, 1995
<PAGE> 38
John Hancock Funds - John Hancock U.S. Government Trust
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter *
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.) *
John P. Toolan *
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
<PAGE> 39
<TABLE>
John Hancock Funds - John Hancock U.S. Government Trust
STATEMENT OF ASSETS AND LIABILITIES
Final Report September 22, 1995* (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies securities
(cost - $17,311,529) $17,673,844
Short-term notes (cost $1,415,000) 1,415,000
Corporate savings account 922
------------------------
19,089,766
Receivable for investments sold 4,424,433
Interest receivable 149,359
Other assets 2,229
------------------------
Total Assets 23,665,787
-----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased 23,332
Payable for investments purchased 7,302,118
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 8,854
Accounts payable and accrued expenses 10,277
------------------------
Total Liabilities 7,344,581
-----------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 69,653,757
Accumulated net realized loss on investments and
financial futures contracts (53,694,866)
Net unrealized appreciation of investments 362,315
------------------------
Net Assets $16,321,206
===============================================================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of shares
authorized with $0.01per share par value, respectively)
Class A - $16,043,311 / 2,036,421 $7.88
=================================================================================================================
Class B - $277,895 / 35,266 $7.88
=================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE**
Class A - ($7.88 x 104.71%) $8.25
=================================================================================================================
</TABLE>
* The net assets of John Hancock U.S. Government Trust (the "Fund") were
merged into the John Hancock Adjustable U.S. Government Fund as of the
close of business September 22, 1995 and the Fund was subsequently
terminated. The Statement of Assets and Liabilities reflect the Fund's
position prior to the transfer of the net assets and termination of the
Fund. (See Note A to the Notes to Financial Statements).
** On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price was reduced.
See notes to financial statements.
<PAGE> 40
<TABLE>
John Hancock Funds - John Hancock U.S. Government Trust
STATEMENT OF OPERATIONS
For the period April 1, 1995 to September 22, 1995 * (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $661,042
------------------------
Expenses:
Investment management fee - Note B 52,816
Custodian fee 35,119
Distribution/service fee - Note B
Class A 19,973
Class B 1,263
Printing 16,305
Auditing fee 12,573
Transfer agent fee 8,771
Registration and filing fees 8,714
Legal fees 4,671
Miscellaneous 563
Advisory board fee 312
Trustees' fees 225
------------------------
Total Expenses 161,305
------------------------
Net Investment Income 499,737
------------------------
Realized and Unrealized Loss on Investments:
Net realized gain on investments sold 64,549
Change in net unrealized appreciation/depreciation
of investments 406,521
------------------------
Net Realized and Unrealized Gain on
Investments 471,070
---------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $970,807
=================================================================================
</TABLE>
* The net assets of John Hancock U.S. Government Trust (the "Fund") were
merged into the John Hancock Adjustable U.S. Government Fund as of the
close of business September 22, 1995 and the Fund was subsequently
terminated. The Statement of Operations reflect the Fund's position prior
to the transfer of net assets and the termination of the Fund. (See Note A
to the Notes to Financial Statements).
See notes to financial statements.
<PAGE> 41
<TABLE>
John Hancock Funds - John Hancock U.S. Government Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
SEPTEMBER 22,1995 MARCH 31,
(UNAUDITED) 1995
----------- ----
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $499,737 $1,564,753
Net realized gain (loss) on investments sold and financial futures contracts 64,549 (2,440,350)
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts 406,521 1,489,299
-----------------------------------------------
Net Increase in Net Assets Resulting from Operations 970,807 613,702
-----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.2304 and $0.5678 per share, respectively) (491,095) (1,549,572)
Class B *** - ($0.2054 and $0.2490 per share, respectively) (7,536) (3,939)
Distributions in excess of net investment income
Class A - (none and $0.0050 per share, respectively) ---- (1,106)
-----------------------------------------------
Total Distributions to Shareholders (498,631) (1,554,617)
-----------------------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (1,931,877) (5,018,515)
-----------------------------------------------
NET ASSETS:
Beginning of period 17,780,907 23,740,337
End of period (including distibutions in excess of net investment income of
none and $1,106, respectively) -----------------------------------------------
$16,321,206 $17,780,907
===============================================
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 1, 1995
TO SEPTEMBER 22, 1995 **
------------------------
(UNAUDITED)
-----------
SHARES AMOUNT
------ ------
<S> <C> <C>
CLASS A
Shares sold 34,653 $270,823
Shares issued to shareholders in reinvestment of distributions 13,149 103,065
-----------------------------------------------------------------
47,802 373,888
Less shares repurchased (302,053) (2,377,054)
-----------------------------------------------------------------
Net decrease (254,251) ($2,003,166)
=================================================================
CLASS B ***
Shares sold 12,163 $93,719
Shares issued to shareholders in reinvestment of distributions 319 2,501
-----------------------------------------------------------------
12,482 96,220
Less shares repurchased (3,098) (24,931)
-----------------------------------------------------------------
Net increase 9,384 $71,289
=================================================================
<CAPTION>
YEAR ENDED MARCH 31,
1995
----
SHARES AMOUNT
------ ------
<S> <C> <C>
CLASS A
Shares sold 384,350 $2,961,231
Shares issued to shareholders in reinvestment of distributions 58,661 450,381
---------------------------------------------
443,011 3,411,612
Less shares repurchased (1,126,066) (8,625,358)
---------------------------------------------
Net decrease (683,055) ($5,213,746)
=============================================
CLASS B ***
Shares sold 27,216 $205,317
Shares issued to shareholders in reinvestment of distributions 34 263
---------------------------------------------
27,250 205,580
Less shares repurchased (1,368) (10,349)
--------------------------------------------
Net increase 25,882 $195,231
=============================================
</TABLE>
** The net assets of the Fund were merged with John Hancock Adjustable U.S.
Government Fund as of the close of business on September 22, 1995, and the
Fund was subsequently terminated. The Statement of Changes in Net Assets
does not reflect the merger of net assets or termination of the Fund. (see
Note A to the Notes to Financial Statements).
*** Class B shares commenced operations on September 30, 1994.
See notes to financial statements.
<PAGE> 42
John Hancock Funds - John Hancock U.S. Government Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the preiod indicated, investment returns, key
ratios and supplemental data are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 15, 1995 YEAR ENDED MARCH 31,
--------------------------------------------------------------------
(UNAUDITED) 1995 (f) 1994
----------- -------- ----
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 7.68 $ 7.98 $ 8.49
----------- ----------- -----------
Net Investment Income 0.23 0.58 0.58
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 0.20 (0.31) (0.48)
----------- ----------- -----------
Total from Investment Operations 0.43 0.27 0.10
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.23) (0.57) (0.61)
----------- ----------- -----------
Net Asset Value, End of Period $ 7.88(g) $ 7.68 $ 7.98
=========== =========== ===========
Total Investment Return at Net Asset Value 5.65%(e) 3.68% 1.05%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 16,043 $ 17,582 $ 23,740
Ratio of Expenses to Average Net Assets (b) 1.95%* 1.59% 1.37%
Ratio of Net Investment Income to Average Net Assets 6.16%* 7.69% 6.86%
Portfolio Turnover Rate 102% 438% 264%
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 8.16 $ 8.34 $ 8.18
----------- ----------- -----------
Net Investment Income 0.61 0.87(a) 0.90
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 0.43 (0.22) 0.11
----------- ----------- -----------
Total from Investment Operations 1.04 0.65 1.01
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income (0.71) (0.83) (0.85)
----------- ----------- -----------
Net Asset Value, End of Period $ 8.49 $ 8.16 $ 8.34
=========== =========== ===========
Total Investment Return at Net Asset Value 13.13% 8.05% 13.04%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 18,159 $ 21,184 $ 123,493
Ratio of Expenses to Average Net Assets (b) 1.31% 1.08% 1.13%
Ratio of Net Investment Income to Average Net Assets 7.07% 10.48% 10.72%
Portfolio Turnover Rate 342% 179% 154%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
APRIL 1, 1995 TO SEPTEMBER 30, 1994
SEPTEMBER 15, 1995 (COMMENCEMENT
------------------ OF OPERATIONS)
(UNAUDITED) TO MARCH 31, 1995(f)
----------- --------------------
<S> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 7.68 $ 7.61(c)
------- -------
Net Investment Income 0.21 0.26(a)
Net Realized and Unrealized Gain on Investments
and Financial Futures Contracts 0.20 0.06(d)
------- -------
Total from Investment Operations 0.41 0.32
------- -------
Less Distributions:
Dividends from Net Investment Income (0.21) (0.25)
------- -------
Net Asset Value, End of Period $ 7.88(g) $ 7.68
======= =======
Total Investment Return at Net Asset Value 5.32%(e) 4.28%(e)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 278 $ 199
Ratio of Expenses to Average Net Assets (b) 2.65%* 2.34%*(b)
Ratio of Net Investment Loss to Average Net Assets 5.51%* 6.94%*
Portfolio Turnover Rate 102% 438%
</TABLE>
* On an annualized basis.
(a) On average month end shares outstanding.
(b) Excluding interest expense, which equalled 0.17% for the year ended March
31, 1995, 0.04% for the year ended March 31, 1994, and 0.17% for the year
ended March 31, 1992.
(c) Initial price to commence operations.
(d) May not accord to amounts shown elsewhere in the financial statements.
(e) Not annualized.
(f) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(g) Net asset value per share, before the merger of assets to the John Hancock
Adjustable U.S. Government Trust, and the termination of the Fund. (See
Note A to the Notes to Financial Statements).
See notes to financial statements.
<PAGE> 43
John Hancock Funds - John Hancock U.S. Government Trust
Schedule of Investments
September 22, 1995 (Unaudited)
<TABLE>
<CAPTION>
Par Value
Interest Maturity (000`s Market
Issuer - Description Rate Date Omitted) Value
- -------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S. ( 31.50%)
United States Treasury, Bond 12.000 % 8-15-13 $ 1,910 $ 2,801,435
United States Treasury, Bond 7.625 2-15-25 100 * 111,797
United States Treasury, Note 8.875 5-15-00 2,000 * 2,228,120
-----------------
5,141,352
-----------------
Governmental - U.S. Agencies ( 76.79%)
Federal National Mortgage Association,
30 Yr SF Pass Thru Ctf 7.000 9-1-10 2,450 * 2,450,000
Government National Mortgage Association,
30 Yr SF Pass Thru Ctf 7.500 5-15-24 2,139 2,153,820
30 Yr SF Pass Thru Ctf 8.000 5-15-24 to 3,823 3,920,797
11-15-24
30 Yr SF Pass Thru Ctf 9.000 4-15-16 to 3,784 4,007,875
1-15-17
-----------------
12,532,492
-----------------
TOTAL U.S. GOVERNMENT AND
AGENCIES SECURITIES
(Cost $17,311,529) (108.29%) 17,673,844
--------------- -----------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT ( 8.67%)
Investment in a joint repurchase agreement
transaction with Lehman Brothers, Dated
09-22-95, Due 09-25-95 (secured by U. S.
Treasury Notes, 4.00% through 8.75%
due 01-31-96 through 06-30-98 and U.S.
Treasury Bill due 02-29-96) - Note A 5.63 09-25-95 1,415 1,415,000
-----------------
CORPORATE SAVINGS ACCOUNT ( 0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current Rate 3.00% 922
-----------------
TOTAL SHORT-TERM INVESTMENTS (8.67%) 1,415,922
--------------- -----------------
TOTAL INVESTMENTS (116.96%) $ 19,089,766
================ =================
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period April 1 to September 22, 1995. 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.
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK U.S. GOVERNMENT TRUST
(UNAUDITED)
NOTE A ---
ACCOUNTING POLICIES
John Hancock Bond Fund, (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
15, 1995, the Trust consisted of six series portfolios: John Hancock U.S.
Government Trust (the "Fund"), John Hancock Investment Quality Bond Fund, John
Hancock Government Securities Trust, John Hancock Intermediate Government Trust,
John Hancock Adjustable U.S. Government Fund and John Hancock Adjustable U.S.
Government Trust. The Trustees may authorize the creation of additional Funds
from time to time to satisfy various investment objectives.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under the terms of a distribution
plan, have exclusive voting rights regarding such distribution plan. Class A
Shares are subject to an initial sales charge of up to 4.50% and a 12b-1
distribution plan. Prior to May 1, 1995, the maximum sales charge was 4.75%.
Class B Shares are subject to a contingent deferred sales charge and a separate
12b-1 distribution plan.
On September 8, 1995, the shareholders of the Fund approved a plan of
reorganization between the Fund and John Hancock Adjustable U.S. Government Fund
providing for the transfer of substantially all of the assets and liabilities of
the Fund to Adjustable U.S. Government Fund in exchange solely for shares of
beneficial interest of Adjustable U.S. Government Fund. After this transaction
and as of the close of business on September 22, 1995, the Fund was terminated.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio were valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
were valued at amortized cost which approximates market value.
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., a wholly-owned subsidiary of The Berkeley Financial Group, may participate
in a joint repurchase agreement transaction. Aggregate cash balances were
invested in one or more repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's custodian
bank received delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser was responsible for ensuring that the agreement was
fully collateralized at all times.
OPTIONS Listed options were valued at the last quoted sales price on the
exchange on which they were primarily traded. Purchased put or call
over-the-counter options were valued at the average of the "bid" prices obtained
from two independent brokers. Written put or call over-the-counter options will
be valued at the average of the "asked' prices obtained from two independent
brokers. Upon the writing of a call or put option, an amount equal to the
premium received by the Fund will be included in the Statement of Assets and
Liabilities as an asset and corresponding liability. The amount of the liability
will be subsequently marked-to-market to reflect the current market value of the
written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK U.S. GOVERNMENT TRUST
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities. There were no written option transactions
for the period ended September 22, 1995.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it
will be 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 will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", to and from the broker will be 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", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize 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
fluctuations 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 September 22, 1995, there were no open positions in financial futures
contracts.
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 for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FEDERAL INCOME TAX The Fund's policy was to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
was not subject to Federal income tax on taxable earnings which were distributed
to shareholders. As of September 22, 1995, the Fund's final tax year end, for
Federal income tax purposes, the Fund has $53,694,866 of capital loss
carryforwards available. To the extent that such carryforwards were used by the
Fund, no capital gain distributions were made. The carryforwards expire as
follows: 1996 - $39,799,667, 1997 - $2,986,286, 1998 - $5,412,804, 1999 -
$653,763, 2000 - $2,152,064, 2002 - $2,529,305 and 2003 - $160,977. The unused
capital loss carryforwards as of September 22, 1995 were transferred to the John
Hancock Adjustable U.S. Government Trust. These capital loss carryforwards will
be available, to the extent provided by regulations, to offset future net
capital gains of the John Hancock Adjustable U.S. Government Trust. Expired
capital loss carryforwards are reclassed to capital paid-in, in the year of
expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund, if any,
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 as explained previously.
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK U.S. GOVERNMENT TRUST
EXPENSES The majority of expenses of the Trust are directly identifiable to an
individual Fund. Expenses which are not identifiable to a specific Fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
Funds.
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 assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
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, to
0.650% of the first $200,000,000 of the Fund's average daily net asset value,
0.625% of the next $300,000,000, and 0.600% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
September 22, 1995, JH Funds received net sales charges of $7,235 with regard to
sales of Class A shares. Out of this amount, $3,856 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, and
$3,319 was paid as sales commissions to unrelated broker-dealers.
Class B shares which are redeemed within six years of purchase are subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the period ended September 22, 1995 contingent
deferred sales charges received by JH Funds amounted to $45.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund makes payments to JH Funds, for
distribution and service expenses at an annual rate not to exceed 0.25% of Class
A average daily net assets and 1.00% of Class B average daily net assets, to
reimburse JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly-owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund paid transfer agent fees based on the number of shareholder
accounts and certain out of pocket expenses.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser, and
its affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - JOHN HANCOCK U.S. GOVERNMENT TRUST
Group of Funds Deferred Compensation Plan. The Fund will make investments into
other John Hancock Funds, as applicable, to cover its liability with regard to
the deferred compensation. Investments to cover the Fund's deferred compensation
liability will be recorded on the Fund's books as an other asset. The deferred
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the Fund's books.
The Fund has an independent advisory board composed of certain members of the
former Transamerica Board of Trustees who provide advice to the current Trustees
in order to facilitate a smooth management transition for which the Fund pays
the advisory board and its counsel a fee.
NOTE C---
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies, other than short-term obligations, during the period ended September
22, 1995 aggregated $19,770,492 and $19,472,121, respectively.
The cost of investments owned at September 22, 1995 for Federal income tax
purposes was $17,311,529. Gross unrealized appreciation and depreciation of
investments aggregated $386,023 and $23,708, respectively, resulting in net
unrealized appreciation of $362,315.
NOTE D---
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the fiscal period ended September 22, 1995, the Fund has reclassified
$29,875 from capital paid-in to undistributed net investment income. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of September 22, 1995. 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 generally
accepted accounting principles.
<PAGE> 48
John Hancock Funds
ADJUSTABLE
U.S.
GOVERNMENT
FUND
SEPTEMBER 22, 1995
<PAGE> 49
John Hancock Funds - John Hancock Adjustable U.S. Government Fund
- Adjustable U.S. Government Trust
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter *
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.) *
John P. Toolan *
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
<PAGE> 50
<TABLE>
John Hancock Funds - Adjustable U.S. Government Trust (Fund)
STATEMENT OF ASSETS AND LIABILITIES
September 22, 1995 (Unaudited) **
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in corresponding Portfolio, at value
2,042,729 shares (cost - $20,006,045) - Note A $20,018,691
Dividends receivable from Portfolio 91,562
Receivable from John Hancock Advisers, Inc. - Note B 73,035
Deferred organization expenses - Note A 16,956
Miscellaneous assets 3,298
--------------------------
Total Assets 20,203,542
--------------------------------------------------------------------------------------------------
LIABILITIES:
Dividend payable 84,059
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 9,822
Accounts payable and accrued expenses 40,517
--------------------------
Total Liabilities 134,398
--------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 21,071,166
Accumulated net realized loss on investments (1,021,646)
Net unrealized appreciation of investments 12,646
Undistributed net investment income 6,978
--------------------------
Net Assets $20,069,144
==================================================================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial interest outstanding - unlimited
number of shares authorized with $0.01 per share par value, respectively)
Class A - $11,179,338 \ 1,137,880 $ 9.82
================================================================================================================================
Class B - $8,889,806 \ 904,849 $ 9.82
================================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($9.82 x 103.09%) $ 10.12
================================================================================================================================
</TABLE>
* 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 net assets of the John Hancock Adjustable U.S. Government Trust (the
"Fund") were combined the net assets of the John Hancock Adjustable U.S.
Government Fund (the "Portfolio") as of the close of business on September
22, 1995. The Statement of Assets and Liabilities reflects the Fund's
position prior to the combining of the net assets of the Portfolio. (See
Note A to the Notes to the Notes to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 51
<TABLE>
John Hancock Funds - Adjustable U.S. Government Trust (Fund)
STATEMENT OF OPERATIONS
For the period April 1, 1995 to September 22, 1995 (Unaudited) **
- --------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Net investment income from corresponding Portfolio - Note A $683,412
-------------------
Expenses:
Distribution/service fee - Note B
Class A 15,614
Class B 40,007
Legal fees 34,121
Custodian fee 20,531
Transfer agent fee 13,181
Printing 12,929
Registration and filing fees 12,645
Investment management fee - Note B 10,691
Auditing fee 9,205
Administration fee 7,288
Advisory board fee 240
-------------------
Total Expenses 176,452
Less expenses reimbursable by John
Hancock Advisers, Inc. - Note B (120,830)
--------------------------------------------------------------------------
Net Expenses 55,622
--------------------------------------------------------------------------
Net Investment Income 627,790
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO - NOTE A
Net realized loss on investments sold (233,837)
Change in net unrealized appreciation/depreciation
of investments 359,494
-------------------
Net Realized and Unrealized Gain on
Investments from Corresponding Portfolio 125,657
--------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $753,447
==========================================================================
</TABLE>
** The net assets of the John Hancock Adjustable U.S. Government Trust (the
"Fund") were combined the net assets of the John Hancock Adjustable U.S.
Government Fund (the "Portfolio") as of the close of business on September
22, 1995. The Statement of Operations reflects the Fund's position prior to
the combining of the net assets of the Portfolio. (See Note A to the Notes
to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 52
<TABLE>
John Hancock Funds - Adjustable U.S. Government Trust (Fund)
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: SEPTEMBER 22, 1995 MARCH 31,
FROM OPERATIONS: (UNAUDITED) ** 1995
-------------- ----
<S> <C> <C>
Net investment income $ 627,790 $ 1,338,090
Net realized loss on investments sold from corresponding Portfolio (233,837) (520,533)
Change in net unrealized appreciation/depreciation of investments from corresponding Portfolio 359,494 111,364
-------------------------------
Net Increase in Net Assets Resulting from Operations 753,447 928,921
-------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.2515 and $0.4823 per share, respectively) (389,399) (858,632)
Class B - ($0.2247 and $0.4220 per share, respectively) (247,750) (466,720)
-------------------------------
Total Distributions to Shareholders (637,149) (1,325,352)
-------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (2,502,570) (13,084,232)
-------------------------------
NET ASSETS:
Beginning of period 22,455,416 35,936,079
-------------------------------
End of period (including undistributed net investment income of $6,978 and $16,337, respectively) $20,069,144 $22,455,416
===============================
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED MARCH 31,
(UNAUDITED) ** 1995
-------------- ----
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,305,123 $12,887,487 402,099 $3,948,024
Shares issued to shareholders in reinvestment of distributions 15,854 156,071 53,589 522,853
----------------------------------------------------------------
1,320,977 13,043,558 455,688 4,470,877
Less shares repurchased (1,506,492) (14,878,999) (1,590,669) (15,565,847)
----------------------------------------------------------------
Net decrease (185,515) ($1,835,441) (1,134,981) ($11,094,970)
================================================================
CLASS B
Shares sold 58,764 $579,066 244,622 $2,378,527
Shares issued to shareholders in reinvestment of distributions 13,356 131,483 30,065 293,677
----------------------------------------------------------------
72,120 710,549 274,687 2,672,204
Less shares repurchased (138,717) (1,377,678) (478,404) (4,661,466)
----------------------------------------------------------------
Net decrease (66,597) ($667,129) (203,717) ($1,989,262)
================================================================
</TABLE>
** The net assets of the Fund were combined with the net assets of the
Portfolio as of the close of business on September 22, 1995. The Statement
of Changes reflects the Funds position prior to the combining of the net
assets of the Portfolio.
(See Note A to the Notes to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 53
<TABLE>
John Hancock Funds - Adjustable U.S. Government Trust (Fund)
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows. The per share amounts and ratios which are shown reflect income and
expenses including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED MARCH 31,
---------------------------------------------------------
CLASS A (UNAUDITED) 1995 (d) 1994 1993
----------- -------- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.79 $ 9.89 $ 10.05 $ 10.03
Net Investment Income 0.25 0.49 0.41 0.58
Net Realized and Unrealized Gain (Loss) on Investments 0.03 (0.11) (0.16) 0.02
---------------------------------------------------------
Total from Investment Operations 0.28 0.38 0.25 0.60
---------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.25) (0.48) (0.41) (0.58)
---------------------------------------------------------
Net Asset Value, End of Period
$ 9.82 (e) $ 9.79 $ 9.89 $ 10.05
=========================================================
Total Investment Return at Net Asset Value 2.88%(c) 3.98% 2.51% 6.08%
Total Adjusted Investment Return at Net Asset Value (a) 2.34%(c) 3.43% 2.27% 5.53%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $11,179 $12,950 $24,310 $33,273
Ratio of Expenses to Average Net Assets 0.75%* 0.80% 0.75% 0.50%
Ratio of Adjusted Expenses to Average Net Assets (a) 2.39%* 1.35% 0.99% 1.05%
Ratio of Net Investment Income to Average Net Assets 6.15%* 4.91% 4.09% 5.47%
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 4.51%* 4.36% 3.85% 4.92%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1991
(COMMENCEMENT
OF OPERATIONS)
CLASS A TO MARCH 31, 1992
------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 10.00 (b)
Net Investment Income 0.17
Net Realized and Unrealized Gain (Loss) on Investments 0.03
-------------
Total from Investment Operations 0.20
-------------
Less Distributions:
Dividends from Net Investment Income (0.17)
-------------
Net Asset Value, End of Period
$ 10.03
=============
Total Investment Return at Net Asset Value 1.96%(c)
Total Adjusted Investment Return at Net Asset Value (a) 0.84%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $13,775
Ratio of Expenses to Average Net Assets 0.50%*
Ratio of Adjusted Expenses to Average Net Assets (a) 1.62%*
Ratio of Net Investment Income to Average Net Assets 6.47%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 5.35%*
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED MARCH 31,
---------------------------------------------------------
CLASS B (UNAUDITED) 1995 (d) 1994 1993
----------- -------- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.79 $ 9.89 $ 10.05 $ 10.03
Net Investment Income 0.22 0.43 0.34 0.51
Net Realized and Unrealized Gain (Loss) on Investments 0.03 (0.11) (0.16) 0.02
---------------------------------------------------------
Total from Investment Operations 0.25 0.32 0.18 0.53
---------------------------------------------------------
Less Distributions:
Dividends from Net Investment Income (0.22) (0.42) (0.34) (0.51)
---------------------------------------------------------
Net Asset Value, End of Period $ 9.82(e) $ 9.79 $ 9.89 $ 10.05
=========================================================
Total Investment Return at Net Asset Value (a) 2.62%(c) 3.33% 1.85% 5.40%
Total Adjusted Investment Return at Net Asset Value (a) 2.08%(c) 2.78% 1.61% 4.85%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $8,890 $9,506 $11,626 $13,753
Ratio of Expenses to Average Net Assets 1.40%* 1.45% 1.40% 1.15%
Ratio of Adjusted Expenses to Average Net Assets (a) 3.04%* 2.00% 1.64% 1.70%
Ratio of Net Investment Income to Average Net Assets 5.48%* 4.26% 3.44% 4.82%
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 3.84%* 3.71% 3.20% 4.27%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1991
(COMMENCEMENT
OF OPERATIONS)
CLASS B TO MARCH 31, 1992
-------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00(b)
Net Investment Income 0.15
Net Realized and Unrealized Gain (Loss) on Investments 0.03
-------------
Total from Investment Operations 0.18
-------------
Less Distributions:
Dividends from Net Investment Income (0.15)
-------------
Net Asset Value, End of Period $10.03
=============
Total Investment Return at Net Asset Value (a) 1.80%(c)
Total Adjusted Investment Return at Net Asset Value (a) 0.68%(c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $1,630
Ratio of Expenses to Average Net Assets 1.15%*
Ratio of Adjusted Expenses to Average Net Assets (a) 2.27%*
Ratio of Net Investment Income to Average Net Assets 5.85%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 4.73%*
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) Initial price to commence operations.
(c) Not annualized.
(d) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(e) The net asset value per share, before the merger of assets from the
Portfolio. (See Note A to the Notes to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 54
<TABLE>
John Hancock Funds - Adjustable U.S. Government Fund (Portfolio)
STATEMENT OF ASSETS AND LIABILITIES
FINAL REPORT September 22, 1995 (Unaudited) *
- --------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies obligations
(cost - $17,966,424) $17,978,659
Joint repurchase agreement (cost - $1,777,000) 1,777,000
Corporate savings account 889
---------------------
19,756,548
Receivable for investments sold 148,905
Interest receivable 148,663
Receivable for mortgage backed security 32,253
Receivable from John Hancock Advisers, Inc. - Note B 37,427
---------------------
Total Assets 20,123,796
----------------------------------------------------------------------------
LIABILITIES:
Dividend payable 91,562
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 5,370
Accounts payable and accrued expenses 18,234
---------------------
Total Liabilities 115,166
----------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 21,020,062
Accumulated net realized loss on investments (1,024,173)
Net unrealized appreciation of investments 12,235
Undistributed net investment income 506
---------------------
Net Assets $20,008,630
============================================================================
NET ASSET VALUE PER SHARE:
(Based on 2,034,420 shares of beneficial
interest outstanding - unlimited number of shares
authorized with $0.01 per share par value) $9.84
==================================================================================================
</TABLE>
* The net assets of the John Hancock Adjustable U.S. Government Fund (the
"Portfolio") were collapsed into the John Hancock Adjustable U.S. Government
Trust as of the close of business on September 22, 199 and the Portfolio
subsequently ceased operations. The Statement of Assets and Liabilities
reflects the Portfolio's position prior to the collapse and its cessation of
operations. (See Note A to the Notes to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 55
<TABLE>
John Hancock Funds - Adjustable U.S. Government Fund (Portfolio)
STATEMENT OF OPERATIONS
For the period April 1, 1995 to September 22, 1995 (Unaudited)*
- -------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $720,342
------------------
Expenses:
Investment management fee - Note B 42,703
Auditing fee 27,424
Custodian fee 22,935
Printing 7,132
Legal fees 2,842
Transfer agent fee 2,135
Advisory board fee 1,052
Miscellaneous 821
Trustees' fees 625
Registration and filing fees 420
Administration fee 214
------------------
Total Expenses 108,303
Less expenses reimbursable by John
Hancock Advisers, Inc. - Note B (54,926)
-------------------------------------------------------------------------
Net Expenses 53,377
-------------------------------------------------------------------------
Net Investment Income 666,965
-------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold (32,541)
Change in net unrealized appreciation/depreciation
of investments 175,612
------------------
Net Realized and Unrealized Gain on
Investments 143,071
-------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $810,036
=========================================================================
</TABLE>
* The net assets of the John Hancock Adjustable U.S. Government Fund (the
"Portfolio") were collapsed into the John Hancock Adjustable U.S. Government
Trust as of the close of business on September 22, 1995 and the Portfolio
subsequently ceased operations. The Statement of Operations reflects the
Portfolio's position prior to the collapse and its cessation of operations.
(See Note A to the Notes to the Financial Statements).
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 56
<TABLE>
John Hancock Funds - Adjustable U.S. Government Fund (Portfolio)
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO YEAR ENDED
SEPTEMBER 22, 1995 MARCH 31,
(UNAUDITED) ** 1995
-------------- ----
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net Investment income $ 666,965 $ 1,501,803
Net realized loss on investments sold (32,541) (720,821)
Change in net unrealized appreciation/depreciation of investments 175,612 286,551
----------------------------------
Net Increase in Net Assets Resulting from Operations 810,036 1,067,533
----------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.2617 and $0.4250 per share, respectively) (683,004) (1,481,230)
----------------------------------
FROM FUND SHARE TRANSACTIONS - NET* (2,567,872) (12,957,678)
----------------------------------
NET ASSETS:
Beginning of period 22,449,470 35,820,845
----------------------------------
End of period (including undistributed net investment income of $506 and $16,545, respectively) $20,008,630 $22,449,470
==================================
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 30, 1995 YEAR ENDED MARCH 31,
(UNAUDITED) ** 1995
-------------- ----
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 1,415,379 $13,957,282 633,453 $ 6,228,642
Less shares repurchased (1,677,564) (16,525,154) (1,959,462) (19,186,320)
--------------------------------------------------------------
Net decrease (262,185) ($ 2,567,872) (1,326,009) ($12,957,678)
==============================================================
</TABLE>
** The net assets of the Portfolio were collapsed into John Hancock Adjustable
U.S. Government Trust as of the close business on September 22, 1995. The
Statement of Changes in Net Assets reflects amounts prior to the Portfolio
ceasing operations and the collapse of the net assets of the Portfolio into
the Fund.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 57
John Hancock Adjustable U.S. Government Fund (Portfolio)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1995 TO
SEPTEMBER 22, 1995 YEAR ENDED MARCH 31,
----------------------------------------------------------------
(UNAUDITED) 1995 (b) 1994 1993
----------- -------- ---- ----
<S> <C> <C> <C> <C>
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 20,009 $ 22,449 $ 35,821 $ 46,874
Ratio of Expenses to Average Net Assets 0.50%* 0.50% 0.50% 0.50%
Ratio of Adjusted Expenses to Average Net Assets (a) 1.01%* 0.70% 0.59% 0.62%
Ratio of Net Investment Income to Average Net Assets 6.25%* 5.19% 4.29% 5.53%
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 5.74%* 4.99% 4.20% 5.41%
Portfolio Turnover Rate 104% 341% 244% 186%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1991
(COMMENCEMENT
OF OPERATIONS)
TO MARCH 31, 1992
-----------------
<S> <C>
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 15,348
Ratio of Expenses to Average Net Assets 0.50%*
Ratio of Adjusted Expenses to Average Net Assets (a) 0.85%*
Ratio of Net Investment Income to Average Net Assets 6.85%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a) 6.50%*
Portfolio Turnover Rate 1%
</TABLE>
* On an annaulized basis.
(a) On an unreimbursed basis.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the
investment adviser of the Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 58
John Hancock Funds - Adjustable U.S. Government Fund (Portfolio)
<TABLE>
Schedule of Investments
September 22, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Adjustable U.S. Government Fund on September 22, 1995. It
is divided into two main categories: U.S. government and agencies obligations and short-term investments. Short-term investments,
which represent the Fund's "cash" position, are listed last.
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER DESCRIPTION RATE OMITTED) VALUE
- ------------------ ------ --------- ------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
Federal Home Loan Mortgage Corp.
Adjustable Rate Mortgage
Due 10-01-18 6.197% $ 269 $ 267,253
Due 10-01-18 6.250 144 140,608
Due 05-01-17 6.324 10 10,147
Due 02-01-19 6.391 31 29,869
Due 05-01-17 7.375 54 53,837
Due 05-01-16 7.625 6 5,164
Due 03-01-19 7.639 1,921 1,976,226
Due 10-01-18 7.750 59 59,572
Federal National Mortgage Association,
Adjustable Rate Mortgage
Due 04-01-19 6.065 45 44,591
Due 04-01-15 6.625 492 494,176
Due 06-01-14 6.991 24 24,554
Due 03-01-14 6.991 35 35,431
Due 11-01-13 7.120 104 104,219
Due 03-01-27 7.350 41 40,879
Due 10-01-19 7.563 1,562 1,590,375
Due 10-01-17 7.626 935* 956,211
Due 07-01-16 7.750 46 46,430
Due 09-01-18 7.905 2,083 2,153,354
Due 05-01-17 8.000 52 52,678
Due 09-01-18 8.003 1,469 1,518,620
Due 10-01-17 8.200 246 271,355
Due 06-01-19 8.366 969 1,002,763
Government National Mortgage Association,
30 Yr SF Pass thru Ctf 05-15-15 11.500 8 9,424
30 Yr SF Pass thru Ctf 02-15-14 12.000 25 27,399
30 Yr SF Pass thru Ctf 07-15-15 12.500 66 74,918
GNMA II Due 07-20-25 7.000 6,846* 6,987,606
-----------
TOTAL U.S. GOVERNMENT AND
AGENCIES OBLIGATIONS
(Cost $17,966,424) (69.86%) 17,978,659
------- -----------
SHORT TERM INVESTMENTS
Joint Repurchase Agreement (8.88%)
Investment in a joint repurchase agreement transaction with
Lehman Brothers, Dated 09-22-95, Due 09-25-95
(secured by U.S. Treasury Note, 8.50% Due 07-15-97,
U.S. Treasury Note, 5.625% Due 06-30-97, U.S. Treasury
Note, 7.25% Due 02-15-98) Note A 5.63 1,777 1,777,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%
889
-----------
TOTAL SHORT-TERM INVESTMENTS (8.88%) 1,777,889
------- -----------
TOTAL INVESTMENTS (98.74%) $19,756,548
======= ===========
</TABLE>
* Securities other than short-term investments, newly added to the portfolio
during the period ended September 22, 1995. 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
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - ADJUSTABLE U.S. GOVERNMENT FUND
JOHN HANCOCK ADJUSTABLE U.S. GOVERNMENT TRUST
(UNAUDITED)
NOTE A ---
ACCOUNTING POLICIES
John Hancock Bond Fund, (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
15, 1995, the Trust consisted of six series portfolios: John Hancock Adjustable
U.S. Government Trust (the "Fund"), Adjustable U.S. Government Fund (the
"Portfolio"), John Hancock Investment Quality Bond Fund, John Hancock Government
Securities Trust, John Hancock U.S. Government Trust, and John Hancock
Intermediate Government Trust. The Trustees may authorize the creation of
additional Funds from time to time to satisfy various investment objectives.
The Fund invested substantially all of its assets in the Portfolio,
another series of the Trust having the same investment objective as the Fund,
through the close of business on September 22, 1995. Because the Fund invested
substantially all of its assets in shares of the Portfolio, certain Portfolio
information, including the Fund's share of Portfolio expenses, is included in
these notes and elsewhere in the financial statements. At September 22, 1995,
the Fund owned 100 % of the shares of the Portfolio. At the close of business on
September 22, 1995, the Portfolio was collapsed into the Fund in a tax-free
transaction. All assets and liabilities of the Portfolio, including its
securities retaining their original cost, became assets and liabilities of the
Fund. Income and expenses of the Portfolio for the period from April 1, 1995
through September 22, 1995 were combined with those of the Fund in the Statement
of Operations.
On September 8, 1995, the shareholders of John Hancock Intermediate
Government Trust (JHIGT) approved a plan of reorganization between JHIGT and the
Fund providing for the transfer of substantially all of the assets and
liabilities of JHIGT to the Fund in exchange solely for shares of beneficial
interest of the Fund. Also on September 8, 1995, the shareholders of John
Hancock U.S. Government Trust (JHUSGT) approved a plan of reorganization between
JHUSGT and the Fund providing for the transfer of substantially all of the
assets and liabilities of JHUSGT to the Fund in exchange solely for shares of
beneficial interest of the Fund. These mergers took place after the close of
business on September 22, 1995. Thereafter, JHIGT and JHUSGT were terminated and
on September 25, 1995 the Fund changed its name to John Hancock Intermediate
Government Maturity Fund.
The financial statements presented herein reflect the position of the
Fund on September 22, 1995 and immediately prior to the exchange of net assets
from JHIGT and JHUSGT and the collapse of the Portfolio into the Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under the terms of a distribution
plan, have exclusive voting rights regarding such distribution plan. Class A
Shares are subject to an initial sales charge of up to 3.50% and a 12b-1
distribution plan. Class B Shares are subject to a contingent deferred sales
charge and a separate 12b-1 distribution plan. The following is a summary of
significant accounting policies of the Fund and the Portfolio.
VALUATION OF INVESTMENTS
At September 22, 1995, the Fund's only investment was shares of the Portfolio
which are valued daily at the net asset value of the Portfolio at the close of
trading on the New York Stock Exchange. Securities held by the Portfolio are
valued on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in accordance
with procedures approved by the Trustees. Short-term debt investments maturing
within 60 days are valued by the Portfolio at amortized cost which approximates
market value.
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - ADJUSTABLE U.S. GOVERNMENT FUND
JOHN HANCOCK ADJUSTABLE U.S. GOVERNMENT TRUST
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Portfolio, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc., (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Portfolio'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.
DISCOUNT ON SECURITIES The Portfolio accretes discount from par value on
securities from either the date of issue or the date of purchase over the life
of the security, as required by the Internal Revenue Code.
FEDERAL INCOME TAX The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders. As of September 22, 1995, the Portfolio's final tax
year end, for federal income tax purposes, the Portfolio had $1,024,173 of
capital loss carryforwards available. To the extent such carryforwards were used
by the Portfolio, no capital gain distributions were made. The carryforwards
expire as follows: 2000 - $55,496, 2001 - $23,234, 2002 - $826,584 and 2003 -
$118,859. The unused capital loss carryforwards as of September 22, 1995 were
transferred to the Fund . These capital loss carryforwards will be available, to
the extent provided by regulations to offset future net capital gains of the
Fund. Expired capital loss carryforwards are reclassified to capital paid-in in
the year of expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
held by the Portfolio is recorded on the accrual basis.
The Fund and Portfolio record all distributions to shareholders from
net investment income and realized gains on the ex- dividend date. Such
distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles. Dividends paid by the
Fund if any, 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 effect of
expenses that may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund and/or Portfolio. Expenses which are not identifiable to a
specific Fund and/or Portfolio are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and type of
expense and the relative sizes of the Funds and/or Portfolio.
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 of the Fund based on the appropriate net assets of the respective
classes. Distribution/service fees if any, are calculated daily at the class
level of the Fund based on the appropriate net assets of each class of the Fund
and the specific expense rate(s) applicable to each class of the Fund.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund and Portfolio have been capitalized and are being charged to operations
ratably over a period not to exceed five years which began with the commencement
of operations of the Fund and Portfolio.
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - ADJUSTABLE U.S. GOVERNMENT FUND
JOHN HANCOCK ADJUSTABLE U.S. GOVERNMENT TRUST
NOTE B ---
MANAGEMENT FEE, ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH AFFILIATES AND
OTHERS
Under the investment management contract in effect prior to the close of
business on September 22, 1995 the Fund paid a monthly management fee to the
Adviser for a continuous investment program equivalent, to 0.50% of the Fund's
average daily net asset value. Of this amount 40% represents investment advisory
fees paid by the Portfolio and indirectly by the Fund through its investment in
the Portfolio. The remaining 0.10% is for administrative fees paid directly by
the Fund.
In the event normal operating expenses of the Fund and Portfolio, exclusive of
certain expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund and Portfolio is registered to sell shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent of such excess and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current limits are
2.5% of the first $30,000,000 of the Fund and Portfolio's average daily net
asset value, 2.0% of the next $70,000,000 and 1.5% of the remaining average
daily net asset value.
The Adviser agreed to limit the Fund's and Portfolio's expenses further to the
extent required to prevent the aggregate expenses of the Fund and the Portfolio
from exceeding on an annual basis 0.75% and 1.40% of the average daily net asset
value of Class A and Class B shares, respectively. Accordingly, for the period
ended September 22, 1995, the reduction of expenses amounted to $121,419 and
$54,926 , for the Fund and Portfolio, respectively. The Adviser reserves the
right to terminate these limitations in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
September 22, 1995, JH Funds received net sales charges of $682 with regard to
sales of Class A shares. Out of this amount, $87 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $595
was paid as sales commissions to unrelated broker-dealers and nothing was paid
as sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be subject
to a contingent deferred sales charge ("CDSC") at declining rates beginning at
3.0% of the lesser of the current market value at the time of redemption or the
original purchase cost of the shares being redeemed. Proceeds from the CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the period ended September 22, 1995, contingent
deferred sales charges paid to JH Funds amounted to $23,821.
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - ADJUSTABLE U.S. GOVERNMENT FUND
JOHN HANCOCK ADJUSTABLE U.S. GOVERNMENT TRUST
In addition, to compensate JH Funds for the services it provides as distributor
of shares of the Fund, the Fund has adopted Distribution Plans with respect to
Class A and Class B pursuant to Rule 12b-1 under the Investment Company Act of
1940. Accordingly, the Fund will make payments for distribution and service
expenses which in total will not exceed on an annual basis 0.25% of the Fund's
average daily net assets attributable to Class A shares and 1.00% of the Fund's
average daily net assets attributable to Class B shares, to reimburse JH Funds
for its distribution/service costs. Up to a maximum of 0.25% of such payments
may be service fees as defined by the amended Rules of Fair Practice of the
National Association of Securities Dealers. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances.
As of May 15, 1995, the Fund has a transfer agent agreement with John Hancock
Investor Services Corporation ("Investor Services"), a wholly owned subsidiary
of The Berkeley Financial Group. Prior to this date, The Shareholder Services
Group was the transfer agent. The Fund and the Portfolio pay Investor Services a
fee based on transaction volume and number of shareholder accounts.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates as well as Trustee of the Fund and Portfolio. The compensation of
unaffiliated Trustees is borne by the Fund and Portfolio. Effective with the
fees paid for 1995, 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 and Portfolio will make investments
into other John Hancock Funds, as applicable, to cover its liability as regards
to the deferred compensation. Investments to cover the deferred compensation
liability will be recorded on the books as an other asset. The deferred
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the books.
The Fund and Portfolio have an independent advisory board composed of certain
members of the former Transamerica Board of Trustees who provide advice to the
current Trustees in order to facilitate a smooth management transition for which
the Fund and Portfolio pay the advisory board and its counsel a fee.
NOTE C---
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities by the Portfolio, other than
short-term obligations, during the period ended September 22, 1995 aggregated
$21,589,898 and $25,618,085, respectively.
The cost of investments owned by the Portfolio at September 22, 1995 for Federal
income tax purposes was $19,743,424. Gross unrealized appreciation and
depreciation of investments aggregated $79,354, and $67,119, respectively,
resulting in net unrealized appreciation of $12,235.
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK FUNDS - ADJUSTABLE U.S. GOVERNMENT FUND
JOHN HANCOCK ADJUSTABLE U.S. GOVERNMENT TRUST
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the period ended September 22, 1995, the Fund has reclassified $35,800
from capital paid-in to undistributed net investment income. This represents the
amount necessary to report these balances on a tax basis, excluding certain
temporary differences, as of September 22, 1995. 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 generally accepted accounting principles.
