<PAGE> 1
John Hancock Funds
GLOBAL
TECHNOLOGY
FUND
ANNUAL REPORT
DECEMBER 31, 1994
<PAGE> 2
DIRECTORS
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin
Charles F. Fretz*
Barry J. Gordon
Jack P. Gould*
Harold R. Hiser, Jr.*
Charles L. Ladner*
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
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Marc H. Klee
Senior Vice President
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 Investors 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
INDEPENDENT AUDITORS
Price Waterhouse llp
160 Federal Street
Boston, Massachusetts 02110
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
With 1995 upon us, New Year's resolutions abound. Dieting and saving money --
Americans' long-time favorites -- are sure to top the list once again. And once
again, they'll probably be the most difficult to keep. This year, however,
Congress may give savers an additional incentive to stick to their guns. Both
the Republicans and Democrats want to revive Individual Retirement Accounts
(IRAs). In an effort to encourage savings, IRAs were made available to all
working Americans in 1981. Anyone with earned income could contribute up to
$2,000 annually. The contributions were fully tax-deductible, and the earnings
weren't taxed until withdrawal. IRAs became the most successful savings
program in the U.S., drawing in more than $250 billion and 13 million new
participants by 1985.
Sweeping tax reforms in 1986, however, changed all that. As it stands now,
the full deduction only applies to individuals who earn less than $25,000,
married couples who earn less than $40,000 and people without employer-sponsored
retirement plans. The result of this congressional tinkering: the number of
IRA contributors declined dramatically, from 16.2 million in 1985 to 4.2
million in 1992.
Legislators are now taking a closer look at expanding the accessibility of
IRAs once again. Several proposals are on the table: (1) the Republicans'
"Contract with America" includes the American Dream Savings Account, a type
of IRA; (2) President Clinton has proposed expanding eligibility by raising
income limits; and (3) several congressional representatives have introduced
legislation to restore the universal availability of a fully tax-deductible IRA.
We enthusiastically support restoring IRAs to their original luster. Not
only will they provide a tax break to middle-income Americans, but they'll go
a long way toward raising the nation's dangerously low personal savings
rate -- the lowest of any major industrialized country. There's an increasing
awareness that Social Security and pension plans will no longer provide for the
retirement needs of middle-income Americans. Increasing IRA accessibility
for more working individuals and families is one of the most sensible ways to
help Americans take responsibility for their future financial needs. We urge
you to support the expanded IRA by contacting your congressional
representative or senator.
Sincerely,
Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
2
<PAGE> 3
BY BARRY GORDON AND
MARC KLEE, CO-PORTFOLIO MANAGERS
JOHN HANCOCK GLOBAL
TECHNOLOGY FUND
Technology outperforms other sectors in a declining
market; foreign stocks lag domestic counterparts
Rising interest rates and inflationary fears made 1994 a challenging year
for stocks. In that difficult environment, technology outpaced most other
sectors of the global economy, especially during the second half of the year.
As a global fund, we maintained a 12% exposure to foreign companies. At
year-end, the Fund had investments in Chile, Finland, Hong Kong, Mexico, Peru,
Britain and the U.S. Within the technology sector, domestic stocks generally
performed better than foreign stocks. The Fund's global investment strategy
was, therefore, at a disadvantage during the past year, causing performance
to slightly lag its peers. For the year ended December 31, 1994, the Fund's
Class A and Class B shares had total returns of 9.62% and 10.02%, respectively,
at net asset value compared to 10.59% for the average science and technology
fund, according to Lipper Analytical Services.1
While investing overseas held us back in 1994, we think it will help us in
the future. Eventually the string of interest-rate increases by the Federal
Reserve should do what it was designed to do: slow economic growth in the U.S.
When that happens, the best opportunities could be overseas, particularly in
Europe where the recovery so far has been spotty and in Japan where the economy
has lately begun to show signs of life.
"RISING INTEREST RATES AND
INFLATIONARY FEARS MADE 1994 A
CHALLENGING YEAR - "
[PHOTO]
BARRY GORDON (LEFT) AND MARC KLEE (RIGHT), CO-PORTFOLIO MANAGERS
[A 2 1/4" x 3" photo of Barry Gordon and Marc Klee at bottom right. Caption
reads: "Barry Gordon (left) and Marc Klee right), Co-Portfolio Managers."]
3
<PAGE> 4
John Hancock Funds - Global Technology Fund
[GRAPHIC]
[Chart with the heading "Top Five Common Stock Holdings" at the top of the left
hand column. The chart lists five holdings: 1) Integrated Device Technology
4.3%; 2) Computer Associates International 3.9%; 3) Teradyne 3.9%; 4) Adaptec
3.8%; and 5) General Instrument 3.7%. A footnote below reads: "As a percentage
of net assets on December 31, 1994.]
"SEMI-CONDUCTORS ARE FINDING
THEIR WAY INTO MORE AND MORE
PRODUCTS."
THREE MAIN SUBSECTORS
At the end of 1994, the majority of the Fund's assets were in three categories;
computer software and hardware; networking and telecommunications; and
semiconductors. What follows is a summary of how each subsector performed.
COMPUTERS. Computer and hardware companies were 38% of the Fund's investments
at the end of the period. At the top of the list was Computer Associates, the
second largest software company in the U.S. after Microsoft. Computer
Associates has grown rapidly by acquiring poorly managed niche companies and
making them more profitable. That strategy makes some investors uncomfortable
and may explain why the stock has been selling at a price-to-earnings ratio
below the industry norm. That fact, however, makes Computer Associates an
especially attractive situation.
Among the Fund's largest hardware holdings are Adaptec, which makes
components and interfaces for personal computers; and Silicon Graphics, a
leading manufacturer of scientific and multimedia workstations. Silicon
Graphics was a good performer. Even after moving up more than 20% during the
past year, it still seems to have significant upside potential. Its roster
of strategic partners includes Nintendo and Time Warner.
TELECOMMUNICATIONS. One of our largest telecommunications stocks was also our
most disappointing investment of 1994: Telefonos de Mexico. The Mexican
telephone monopoly was hit hard late in the year after it failed to sign an
expected deal with AT&T which would have helped it prepare for 1996 -- when
Mexico's long-distance market opens to foreign competition. Subsequently,
Telmex was able to reach an agreement with Sprint. But then renewed civil
unrest in Mexico and the sharp devaluation of the peso took their toll.
Overall, Telmex fell 39% during the year.
Networking stocks did better. The best was 3Com, which makes hubs, adapter
cards and networking systems that allow computers to communicate with one
another. Higher-than-expected earnings caused the stock to take off in the
second half of the year, essentially doubling in price. Cisco Systems,
another networking stock, was more erratic. A sharp reduction in the
company's order backlog made some analysts wonder about the stability of
future earnings, and the stock took a big hit early in the year. It has
since recovered enough to finish the year about 10% above where it started.
Together, telecommunications and networking stocks totaled 34% of the Fund's
assets.
SEMICONDUCTORS. Semiconductors are finding their way into more and more
products. They're
[GRAPHIC]
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"' the header for the right column is "Recent
performance...and what's behind the numbers. The first listing is Integrated
Device Technology followed by an up arrow and the phrase "Rebounding earnings."
The second listing is LSI Logic followed by an up arrow and the phrase
"Explosion in orders." The third listing is Level One followed by a down arrow
and the phrase "Order delays." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."]
4
<PAGE> 5
John Hancock Funds - Global Technology Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended December 31, 1994." The chart
is scaled in increments of 6% from bottom to top, with 12% at the top and 0% at
the bottom. Within the chart, there are three solid bars. The first
represents the 9.62% total return for John Hancock Global Technology Fund:
Class A. The second represents the 10.02 total return for the average science
and technology fund. Footnote below reads: "Total returns for John Hancock
Global Technology Fund are at net asset value with all distributions
reinvested. The average science and technology fund is tracked by Lipper
Analytical Services. See following page for historical performance
information."]
not just computers anymore; they're in cars, household appliances and heavy
machinery. As a result, demand is growing, both for the chips themselves and
for testing devices and services. Our best performer in this sector during
the second half of the year was LSI Logic, which makes chips for specialized
applications. LSI's extensive library of proprietary modules has helped the
company meet custom orders faster and cheaper than its competitors. This
has caused orders to explode which, in turn, has had a positive impact on
earnings. Integrated Device Technology, another large investment, makes SRAM
chips for personal computers. It's a play on anticipated demand for personal
computers that run on Intel's Pentium chip. All together, semiconductor
stocks made up 22% of the Fund's assets.
GLOBAL OUTLOOK IMPROVING
Many of the factors that contributed to a disappointing year for stocks in 1994
are still in place as we begin the new year. Inflation has remained
surprisingly modest, but economic expansion continues. That suggests we may
see higher interest rates in the months ahead. Historically, as interest
rates have risen, stock prices have fallen. Investors would, therefore, do
well to begin the year with modest expectations.
That said, we can identify at least two developing trends that bode well for
our technology holdings. The first we touched on earlier: the wave of economic
expansion that's breaking across Europe and may be about to reach Japan.
Steady, dependable growth, as long as it's not accompanied by steep inflation,
favors technology stocks because they respond more quickly than most to economic
expansion. That's why, as the rest of the world's developed countries begin to
catch up with the economic growth rate in the U.S., we'll pay special attention
to companies with exposure to overseas markets.
Second, we think 1995 may be a better year for foreign telecommunications
stocks. In a way, the stocks have become victims of their own success. As
higher prices encouraged public offerings, the market was flooded with new
issues. But that should be less of a factor going forward. As investor demand
increases and supply levels off, telecommunications stocks could benefit.
Moreover, recent declines in stocks such as Telmex have brought prices in the
sector back down to the point where they're beginning to look like bargains
again.
"STEADY, DEPENDABLE GROWTH...
FAVORS TECHNOLOGY STOCKS..."
- -------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance would
be lower.
International investing involves special risks as detailed in the
prospectus.
5
<PAGE> 6
Notes To Performance Information
John Hancock Funds - Global Technology Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended December 31,
1994 with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year, 5-year, and 10-year periods were
4.13%, 9.54% and 9.69%, respectively, and reflect payment of the maximum sales
charge of 5.00%. Total return (not annualized) since inception on January 3,
1994 for Class B shares was 5.02% and reflects the maximum contingent deferred
sales charge of 5.00%, declining to 0% after six years. All performance data
shown represent past performance and should not be considered indicative of
future performance. Returns and principal values of Fund investments will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Different sales charges were in effect prior to
March 1987 and are not reflected in the above performance information.
Performance is affected by a 12b-1 plan, which commenced on January 1, 1994 for
both Class A and Class B shares. Consult your prospectus for more information
regarding the risks associated with international and industry segment
investing.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF
THE FUND (OR MOST RECENT TEN YEARS)
[GRAPHIC]
Line chart with the heading Global Technology Fund: Class A, representing the
growth of a hypothetical $10,000 investment over the life of the fund (or most
recent 10 years). Within the chart are three lines. The first line represents
the value of the Standard & Poor's 500 Stock Index and is equal to $38,268 as of
December 31, 1994. The second line represents the value of the hypothetical
$10,000 investment made in Global Technology Fund on December 30, 1984, before
sales charge, and is equal to $26,551 as of December 31, 1994. The third line
represents the Global Technology Fund after sales charge and is equal to $25,215
as of December 31, 1994.
[GRAPHIC]
Line chart with the heading Global Technology Fund: Class B, representing the
growth of a hypothetical $10,000 investment over the life of the fund (or most
recent 10 years). Within the chart are three lines. The first line represents
the value of the hypothetical $10,000 investment made in Global Technology Fund
on January 3, 1994, before contingent deferred sales charge, and is equal to
$11,002 as of December 31, 1994. The second line represents Global Technology
Fund after contingent deferred sales charge and is equal to $10,502 as of
December 31, 1994. The third line represents the value of the Standard & Poor's
500 Stock Index and is equal to $10,131 as of December 31, 1994.
*The Standard & Poor's 500 Stock Index is an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance.
6
<PAGE> 7
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- ---------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $46,164,020)...................... $57,779,001
Rights and warrants (cost - $69,000).................... 71,250
Bonds (cost - $804,125)................................. 797,500
Joint repurchase agreement (cost - $2,951,000).......... 2,951,000
Corporate savings account............................... 7,899
-----------
61,606,650
Receivable for shares sold.............................. 41,962
Dividends receivable.................................... 17,200
Interest receivable..................................... 19,391
-----------
Total Assets........................ 61,685,203
---------------------------------------------------
LIABILITIES:
Payable for shares repurchased.......................... 48,915
Payable to John Hancock Advisers, Inc.
and affiliates - Note B............................... 66,496
Accounts payable and accrued expenses................... 52,490
-----------
Total Liabilities................... 167,901
---------------------------------------------------
NET ASSETS:
Capital paid-in......................................... 49,906,696
Net unrealized appreciation of investments.............. 11,610,606
-----------
Net Assets.......................... $61,517,302
===================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding _ 50 million shares authorized
with $0.20 per share par value, respectively)
Class A - $52,193,442/2,925,484......................... $ 17.84
=======================================================================
Class B - $9,323,860/527,263............................ $ 17.68
=======================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($17.84 x 105.26%)............................ $ 18.78
=======================================================================
</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.
** Class B shares commenced operations on January 3, 1994.
THE STATEMENT OF ASSETS AND lIABILITIES IS THE FUND'S
BALANCE SHEET AND SHOWS THE VALUE OF WHAT THE FUND OWNS,
IS DUE AND OWES ON DECEMBER 31, 1994. YOU'LL ALSO FIND
THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER
SHARE AS OF THAT DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S
INVESTMENT INCOME EARNED AND EXPENSES INCURRED IN
OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended December 31, 1994
- --------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest.................................................. $ 283,388
Dividends (net of foreign withholding taxes of $20,500)... 193,642
----------
477,030
----------
Expenses:
Investment management fee - Note B...................... 522,041
Transfer agent fee - Note B
Class A............................................... 153,211
Class B**............................................. 14,708
Distribution/service fee - Note B
Class A............................................... 143,635
Class B**............................................. 43,258
Administration fee...................................... 100,000
Registration and filing fees............................ 53,452
Custodian fee........................................... 50,343
Auditing fee............................................ 27,000
Printing................................................ 25,537
Directors' fees......................................... 15,147
Miscellaneous........................................... 6,939
Legal fees.............................................. 4,612
----------
Total Expenses...................... 1,159,883
--------------------------------------------------
Net Investment Loss................. ( 682,853)
--------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments sold..................... 4,596,638
Net realized gain on options.............................. 139,495
Change in net unrealized appreciation/depreciation
of investments.......................................... ( 78,528)
----------
Net Realized and Unrealized
Gain on Investments................. 4,657,605
--------------------------------------------------
Net Increase in Net Assets
Resulting from Operations............ $3,974,752
==================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss......................................... ($ 682,853) ($ 562,465)
Net realized gain on investments sold and options........... 4,736,133 5,253,292
Change in net unrealized appreciation/depreciation of
investments............................................... ( 78,528) 5,168,267
----------- -----------
Net Increase in Net Assets Resulting from Operations...... 3,974,752 9,859,094
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments and
options
Class A - ($1.2625 and $2.2029 per share, respectively)... ( 3,443,707) ( 4,686,441)
Class B** - ($1.2625 and none per share, respectively).... ( 614,018) ----
----------- -----------
Total Distributions to Shareholders..................... ( 4,057,725) ( 4,686,441)
----------- -----------
FROM FUND SHARE TRANSACTIONS - NET*........................... 19,850,814 4,482,712
----------- -----------
NET ASSETS:
Beginning of period......................................... 41,749,461 32,094,096
----------- -----------
End of period............................................... $61,517,302 $41,749,461
=========== ===========
*ANALYSIS OF FUND SHARE TRANSACTIONS:
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.............................................. 1,628,280 $29,997,844 511,180 $ 8,883,674
Shares issued to shareholders in reinvestment of
distributions.......................................... 184,986 3,235,355 257,052 4,334,760
--------- ----------- ------- -----------
1,813,266 33,233,199 768,232 13,218,434
Less shares repurchased.................................. (1,279,970) ( 22,995,150) ( 524,177) ( 8,735,722)
--------- ----------- ------- -----------
Net increase 533,296 $10,238,049 244,055 $ 4,482,712
========= =========== ======= ===========
CLASS B**
Shares sold................................................ 563,553 $10,264,273
Shares issued to shareholders in reinvestment of
distributions............................................ 33,535 581,498
--------- -----------
597,088 10,845,771
Less shares repurchased.................................... ( 69,825) ( 1,233,006)
--------- -----------
Net increase............................................... 527,263 $ 9,612,765
========= ===========
</TABLE>
** Class B shares commenced operations on January 3, 1994.
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAVE CHANGED SINCE THE END OF THE PREVIOUS FISCAL PERIOD. THE
DIFFERENCE REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT AND OPTION GAINS
AND LOSSES, DISTRIBUTIONS PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE
IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE
NUMBER OF FUND SHARES SOLD, REINVESTED AND REDEEMED, DURING THE LAST TWO
PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
periods indicated, investment returns, key ratios and supplemental data are
as follows:
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
CLASS A 1994 1993 1992 +1991+ +1990+
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 17.45 $ 14.94 $ 15.60 $ 12.44 $ 16.93
------- ------- ------- ------- -------
Net Investment Income (Loss).................................. ( 0.22)(a) ( 0.21) ( 0.15)(b) 0.05 ( 0.04)
Net Realized and Unrealized Gain (Loss) on Investments,
Options and Foreign Currency Transactions................. 1.87 4.92 1.00 4.11 ( 3.09)
------- ------ ------- ------- -------
Total from Investment Operations........................... 1.65 4.71 0.85 4.16 ( 3.13)
------- ------ ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.......................... -- -- -- ( 0.04) --
Distributions from Net Realized Gain on Investments Sold,
Options and Foreign Currency Transactions................... ( 1.26) ( 2.20) ( 1.51) ( 0.96) ( 1.36)
------- ------ ------- ------- -------
Total Distributions...................................... ( 1.26) ( 2.20) ( 1.51) ( 1.00) ( 1.36)
------- ------ ------- ------- -------
Net Asset Value, End of Period................................ $ 17.84 $ 17.45 $ 14.94 $ 15.60 $ 12.44
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value.................... 9.62% 32.06% 5.70%(c) 33.05% (18.46%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $52,193 $41,749 $32,094 $31,580 $28,864
Ratio of Expenses to Average Net Assets....................... 2.16% 2.10% 2.05%(b) 2.32% 2.36%
Ratio of Net Investment Income (Loss) to Average Net Assets... ( 1.25%) ( 1.49%) ( 0.88%)(b) 0.34% ( 0.28%)
Portfolio Turnover Rate....................................... 67% 86% 76% 67% 38%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------------------
PERIOD ENDED
DECEMBER 31,
1994
------------
<S> <C>
Class B(d)
PER SHARE OPERATING PERFORMANCE
Net Assets Value, Beginning of Period ....................................... $ 17.24 (e)
--------
Net Investment Loss ......................................................... ( 0.35)(a)
Net Realized and Unrealized Gain on Investments and Options ................. 2.05
--------
Total from Investment Operations ............................................ 1.70
--------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and Options ........ ( 1.26)
--------
Net Asset Value, End of Period .............................................. $ 17.68
========
Total Investment Return at Net Asset Value .................................. 10.02%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ................................... $ 9,324
Ratio of Expenses to Average Net Assets ..................................... 2.90%(f)
Ratio of Net Investment Loss to Average Net Assets .......................... ( 1.98%)(f)
Portfolio Turnover Rate ..................................................... 67%
</TABLE>
(a) On average month end shares outstanding.
(b) Reflects voluntary expense limitations in effect during the year ended
December 31, 1992 (see Note B to the Notes to the Financial Statements). As
a result of such limitations, expenses of the Fund for 1992 reflect
reductions of $0.03 per share. Absent such limitations, for 1992, the ratio
of expenses to average net assets would have been 2.22% and the ratio of
net investment income to average net assets would have been (1.05%).
(c) Without the reimbursement, total investment return would have been lower.
(d) Class B shares commenced operations on January 3, 1994.
(e) Initial price to commence operations.
(f) On an annualized basis.
+ These periods are covered by the report of other independent accountants
(not included herein).
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS, AND TOTAL INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE
FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE PREVIOUS
PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN
THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
December 31, 1994
- --------------------------------------------------------------------------------------
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
BROADCASTING (5.74%)
Tele-Communications, Inc. (Class A)** ...... 50,000 $ 1,087,500
Telewest Communications PLC,
American Depositary
Receipt (ADR) (United Kingdom)** ......... 50,000* 1,325,000
Viacom, Inc. (Class A) ..................... 3,200 133,200
Viacom, Inc. (Class B) ..................... 24,246 984,994
-----------
3,530,694
-----------
COMPUTERS - PERIPHERAL (8.54%)
Adaptec, Inc.** .............................. 100,000 2,350,000
EMC Corp.** .................................. 80,000* 1,730,000
S3, Inc.** ................................... 75,000* 1,171,875
-----------
5,251,875
-----------
COMPUTERS - SOFTWARE (19.76%)
Applix, Inc.** ............................... 42,500* 531,250
BMC Software, Inc.** ......................... 25,000 1,418,750
Cheyenne Software, Inc.** .................... 75,000 993,750
Computer Associates International, Inc. ...... 50,000 2,425,000
Electro Brain International Corp.** .......... 165,000 46,398
FTP Software, Inc.** ......................... 50,000* 1,575,000
Oracle Systems Corp.** ....................... 50,000 2,206,250
Parametric Technology Co. .................... 40,000* 1,370,000
Pinnacle Systems, Inc.** ..................... 100,000* 1,450,000
Telebase Systems, Inc.** (r) ................. 217,360 141,284
-----------
12,157,682
-----------
COMPUTERS - MINI/MICRO (9.66%)
Compaq Computer Corp.** ...................... 50,000* 1,975,000
Silicon Graphics, Inc.** ..................... 50,000 1,543,750
Stratus Computer, Inc.** ..................... 30,000* 1,140,000
Tandem Computers, Inc.** ..................... 75,000* 1,284,375
-----------
5,943,125
-----------
ELECTRONICS (25.61%)
ADFlex Solutions, Inc.** ..................... 100,000* 1,675,000
Applied Materials, Inc.** .................... 50,000 2,087,500
GaSonics International Corp.** ............... 60,000* 945,000
Integrated Device Technology, Inc.** ......... 90,000* 2,655,000
Lam Research Corp.** ......................... 50,000* 1,862,500
Level One Communications, Inc.** ............. 75,000 1,125,000
LSI Logic Corp.** ............................ 50,000* 2,018,750
PRI Automation, Inc.** ....................... 50,000* 787,500
SGS-Thomson Microelectronics N.V.** .......... 10,000* 227,500
Teradyne, Inc.** ............................. 70,000 2,371,250
-----------
15,755,000
-----------
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
FREEDOM GLOBAL TECHNOLOGY FUND ON DECEMBER 31, 1994. IT'S DIVIDED INTO FOUR MAIN
CATEGORIES: COMMON STOCKS, RIGHTS, WARRANTS, BONDS AND SHORT-TERM INVESTMENTS.
THE STOCKS, RIGHTS, WARRANTS AND BONDS ARE FURTHER BROKEN DOWN BY INDUSTRY
GROUPS. UNDER EACH INDUSTRY GROUP IS A LIST OF THE SECURITIES OWNED BY THE FUND.
SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED
LAST.
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
TELECOMMUNICATIONS (24.61%)
3Com Corp.** ................................. 40,000 $ 2,060,000
Allen Group, Inc. ............................ 70,000 1,671,250
cisco Systems, Inc.** ........................ 60,000 2,100,000
DSC Communications Corp.** ................... 60,000* 2,160,000
Empresas Telex-Chile,
S.A. (ADR) (Chile) ........................... 50,000* 531,250
General Instrument Corp.** ................... 75,000* 2,250,000
Hong Kong Telecommunications, Ltd.
(ADR) (Hong Kong) ............................ 25,000* 478,125
Nextel Communications, Inc. (Class A)** ...... 50,000* 718,750
Nokia Corp. (ADR) (Finland) .................. 10,000* 750,000
SSE Telecom, Inc.** .......................... 125,000 781,250
Telefonos de Mexico,
S.A. de C.V. (ADR) (Mexico) .................. 40,000 1,640,000
-----------
15,140,625
-----------
TOTAL COMMON STOCKS
(Cost $46,164,020) (93.92%) 57,779,001
------ -----------
<CAPTION>
NUMBER OF RIGHTS
OR WARRANTS
----------------
<S> <C> <C>
RIGHTS & WARRANTS
BROADCASTING (0.07%)
Viacom, Inc., Variable Common Rights.** ...... 40,000* 45,000
-----------
ELECTRONICS (0.04%)
Ibis Technology Corp., Warrants** ............ 70,000* 26,250
-----------
TOTAL RIGHTS & WARRANTS
(Cost $69,000) ( 0.11%) 71,250
------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
Financial Statements
John Hancock Funds - Global Technology Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING*** OMITTED) VALUE
- ------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
BONDS
ELECTRONICS (0.53%)
Kulicke & Soffa Industries, Inc.,
Conv Sub Deb, 03-01-08 ..................................................... 8.000% B- $ 300 $ 322,500
-----------
TELECOMMUNICATIONS (0.77%)
Tele 2000 Conv Note, 04-14-97 (Peru) (R) ..................................... 9.750 NR 500* 475,000
-----------
TOTAL BONDS
(Cost $804,125) ( 1.30%) 797,500
------- -----------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (4.80%)
Investment in a joint repurchase agreement transaction with
Lehman Brothers,Inc., Dated 12-30-94, Due 01-03-95,
(secured by U.S. Treasury Bonds, 9.25% due 2-15-16,
8.125% due 8-15-21, and U.S. Treasury Notes, 7.875%
due 7-31-96, 4.625% due 8-15-95) Note A ................................... 5.850 -- 2,951 2,951,000
-----------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company Daily Interest Savings Account Current Rate 3.00% 7,899
-----------
TOTAL SHORT-TERM INVESTMENTS ( 4.81%) 2,958,899
-------- -----------
TOTAL INVESTMENTS (100.14%) $61,606,650
======== ===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(R) This security is 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. See Note A
of the Notes to Financial Statements for valuation policy. Rule 144A
securities amounted to $475,000, as of December 31, 1994.
(r) Direct placement securities are restricted to resale. They have been valued
at fair value by the Trustees after considerations of restrictions as to
resale, financial condition and prospects of the issuer, general market
conditions and pertinent information in accordance with the Fund's By-Laws
and the Investment Company Act of 1940, as amended. The Fund has limited
rights to registration under the Securities Act of 1933 with respect to
these restrictedes. Additional information on each restricted security is
as follows:
<TABLE>
<CAPTION>
MARKET
VALUE AS A
PERCENTAGE MARKET
ACQUISITION ACQUISITION OF FUND'S VALUE AT
SECURITY DATE COST NET ASSETS DECEMBER 31, 1994
- -------- ----------- ----------- ---------- -----------------
<S> <C> <C> <C> <C>
Telebase Systems, Inc. - Common Stock .................. 11-14-91 $ 304,304 0.23% $ 141,284
</TABLE>
*Securities, other than short-term investments, newly added to the portfolio
during the period ended December 31, 1994.
**Non-income producing security.
***Credit ratings are unaudited.
NR Not Rated by either Standard & Poor's or Moody's Investors Services.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer, however, security is U.S. dollar
denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
Notes to Financial Statements
John Hancock Funds - Global Technology Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock Technology Series, Inc. ( the "Company") is an open-end investment
company registered under the Investment Company Act of 1940. The Company
consists of two series: John Hancock Global Technology Fund (the "Fund"), a
diversified series, and John Hancock National Aviation & Technology Fund, a
non-diversified series. The Directors authorized the sale of Class B shares as
of January 3, 1994 and adoption of 12b-1 distribution plans as of January 1 and
3, 1994 for Class A and Class B shares of the Fund, respectively. 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 Directors, 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 to such distribution plan. Significant accounting policies of the Fund
are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost which approximates market value.
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 are invested in one or more repurchase agreements,
whose underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale, or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund'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.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to foreign
withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses
that may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Company are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and type
of expense and the relative size of the Funds.
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. Transfer agent expenses and distribution/service fees if any, are
calculated daily at the class level based on the appropriate net assets of
each class and the specific expense rate(s) applicable to each class.
13
<PAGE> 14
Notes to Financial Statements
John Hancock Funds - Global Technology Fund
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options are valued at the average of the "bid" prices obtained
from two independent brokers. Written put or call over-the-counter options are
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 is included in the Statement of Assets and
Liabilities as an asset and corresponding liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use options contracts to manage its exposure to the
stock market. Writing puts and buying calls tend to increase the Fund's
exposure to the underlying instrument and buying puts and writing calls tend to
decrease the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options is limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure is limited to the change
in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options
have minimal credit risk as the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over-the-counter
option contracts, the Fund continuously monitors 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.
A summary of written call option transactions for the period ended
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
(000's OMITTED) RECEIVED
--------------- --------
<S> <C> <C>
Outstanding, beginning of period................ ---- ----
Options written................................. 1,000 $139,495
Options expired................................. (1,000) (139,495)
------ --------
Outstanding, end of period...................... ---- ----
====== ========
</TABLE>
DISCOUNT ON SECURITIES The Fund accretes discount from par value on investment
securities from either the date of issue or date of purchase over the life
of the security, as required by the Internal Revenue Code.
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of the sub-adviser. The
Adviser has a sub-investment management contract with American Fund Advisors,
Inc. (the "Sub-Adviser"), under which the Sub-Adviser, subject to the review
of the Directors and the overall supervision of the Adviser, provides the Fund
with investment services and advice with respect to investment transactions.
Under the present investment management contract, for the period ended
December 31, 1994, the Fund paid a monthly management fee to the Adviser,
equivalent on an annual basis, to the sum of (a) 1.00% of the first
$100,000,000 of the Fund's average daily net asset value and (b) 0.75% of the
Fund's average daily net asset value in excess of $100,000,000. Effective
January 1, 1995, the Adviser will waive a portion of the management fee
amounting to 0.15% of the average daily net asset value of the first
$100,000,000 of each series of the Fund. Therefore, the Fund will pay a monthly
management fee to the
14
<PAGE> 15
Notes to Financial Statements
John Hancock Funds - Global Technology Fund
Adviser, equivalent on an annual basis, to the sum of 0.85% of the first
$100,000,000 of the Fund's average daily net asset value. The Adviser pays the
Sub-Adviser a monthly management fee, equivalent on an annual basis, to the sum
of (a) 0.40% of the first $100,000,000 of the Fund's average daily net asset
value and (b) 40% of the investment advisory fee received by the Adviser on
amounts over $100,000,000. The Fund pays a monthly administrative fee at the
rate of $100,000 per annum to the Adviser for performance of administrative
services to the Fund. 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, 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.
In the event that the ratio for 1992, 1993, or 1994 of normal operating
expenses of the Fund, exclusive of extraordinary expenses including, but not
limited to litigation, to the Fund's average daily net assets for such year,
exceeds the average expense ratio for the Fund for the three years ended
December 31, 1990 (restated as if the current annual rates for calculating the
management fee and the current expense limitations had been in effect
throughout the three year period), the fees payable to the Adviser will be
reduced to the extent required to eliminate such excess and the Adviser will
make any additional arrangements necessary to eliminate any remaining such
excess. No such reduction in fees was necessary under such arrangement for the
period ended December 31, 1994. At a shareholder meeting on December 8, 1993 the
shareholders approved a proposal which excludes the amounts payable by the
Fund under the Rule 12b-1 distribution plans (effective in January 1994)
from the calculation of the expense limit described above.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1,
1995, JH Funds was known as John Hancock Broker Distribution Services, Inc. For
the period ended December 31, 1994, JH Funds received net sales charges of
$231,773 with regard to sales of Class A shares. Out of this amount, $35,779
was retained and used for printing prospectuses, advertising, sales literature
and other purposes, and $89,166 was paid as sales commissions and first year
service fees to unrelated broker-dealers and $106,830 was paid as sales
commissions and first year service fees to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro"). 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, all of which are
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 December 31,
1994 contingent deferred sales charges received by JH Funds amounted to $8,869.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940 effective January 1 and 3, 1994, respectively. Accordingly,
the Fund makes payments to JH Funds, for distribution and service expenses at an
annual rate not to exceed 0.30% of Class A average daily net assets and 1.00%
of Class B average daily net assets to reimburse JH Funds for its
distribution/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 which became effective July 7, 1993. Under
the amended Rules of Fair Practice, curtail-
15
<PAGE> 16
ment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned subsidiary of The
Berkeley Financial Group. Prior to January 1, 1995, JH Investor Services was
known as John Hancock Funds Services, Inc. For the period ended December 31,
1994, the Fund paid a monthly transfer agent fee, equivalent on an annual basis,
to 0.32% and 0.34% of the Fund's average daily net asset value, attributable to
Class A and Class B shares of the Fund, respectively, plus out of pocket
expenses incurred by Investor Services on behalf of the Fund for proxy
mailings. Effective January 1, 1995, the Fund will pay transfer agent fees
based on transaction volume and the number of shareholder accounts.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser,
and Mr. Barry J. Gordon is a director and officer of the Sub-Adviser. Mr.
Thomas W.L. Cameron is an affiliated Director of the Fund. The compensation of
unaffiliated Directors is borne by the Fund.
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 December 31, 1994, aggregated $47,249,821 and $31,950,402,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the period ended December 31, 1994.
The cost of investments owned at December 31, 1994 for Federal income
tax purposes was $49,988,145. Gross unrealized appreciation and depreciation
of investments aggregated $14,913,919 and $3,303,313, respectively, resulting
in net unrealized appreciation of $11,610,606.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended December 31, 1994, the Fund has reclassified amounts to
reflect a decrease in accumulated net investment loss of $682,853, a decrease
in accumulated net realized gain on investments of $682,794 and a decrease in
capital paid-in of $59. This represents the cumulative amount necessary to
report these balances on a tax basis, excluding certain temporary differences,
as of December 31, 1994. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain differences
in the computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles.
16
<PAGE> 17
John Hancock Funds - Global Technology Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
John Hancock Global Technology Fund and the
Directors of John Hancock Technology Series, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of John Hancock
Global Technology Fund (the "Fund") (a portfolio of John Hancock Technology
Series, Inc.) at December 31, 1994, the results of its operations for the year
then ended, the changes in its net assets and the financial highlights for the
periods indicated in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is
furnished with respect to the distributions of the Fund for its fiscal year
ended December 31, 1994.
With respect to the Fund's ordinary taxable income for the fiscal year
ended December 31, 1994, none of the dividends qualify for the corporate
dividends received deduction.
The Fund designated distributions to shareholders of $2,745,000 as
long-term capital gain dividends. Shareholders were mailed a 1994 U.S.
Treasury Department Form 1099-DIV in January 1995 representing their
proportionate share.
United States Government Obligations: The Fund did not have any assets
invested in U.S. Treasury bonds, bills, and notes or other U.S. government
agencies at year end. The Fund did not derive any income from these
investments. For specific information on exemption provisions in your state,
consult your local state tax office or your tax adviser.
Price Waterhouse LLP
Boston, Massachusetts
February 16, 1995
17
<PAGE> 18
Notes
John Hancock Funds - Global Technology Fund
18
<PAGE> 19
Notes
John Hancock Funds - Global Technology Fund
19
<PAGE> 20
(LOGO) JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue Boston, MA 02199-7603
This report is for the information of shareholders of the John Hancock Global
Technology Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page.
A box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
<PAGE> 21
JOHN HANCOCK FUNDS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
NATIONAL
AVIATION &
TECHNOLOGY
FUND
ANNUAL REPORT
December 31, 1994
<PAGE> 22
DIRECTORS
Edward J. Boudreau, Jr.
James F. Carlin*
Thomas W. L. Cameron
Charles F. Fretz*
Barry J. Gordon
Jack P. Gould*
Harold R. Hiser, Jr.*
Charles L. Ladner*
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
Barry J. Gordon
President
Anne C. Hodsdon
Executive Vice President
Thomas H. Drohan
Senior Vice President and Secretary
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Marc H. Klee
Senior Vice President
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
With 1995 upon us, New Year's resolutions abound. Dieting and saving money --
Americans' long-time favorites -- are sure to top the list once again. And
once again, they'll probably be the most difficult to keep. This year, however,
Congress may give savers an additional incentive to stick to their guns.
Both the Republicans and Democrats want to revive Individual Retirement
Accounts (IRAs). In an effort to encourage savings, IRAs were made available to
all working Americans in 1981. Anyone with earned income could contribute up to
$2,000 annually. The contributions were fully tax-deductible, and the earnings
weren't taxed until withdrawal. IRAs became the most successful savings program
in the U.S., drawing in more than $250 billion and 13 million new participants
by 1985.
Sweeping tax reforms in 1986, however, changed all that. As it stands
now, the full deduction only applies to individuals who earn less than $25,000,
married couples who earn less than $40,000 and people without
employer-sponsored retirement plans. The result of this congressional
tinkering: the number of IRA contributors declined dramatically, from 16.2
million in 1985 to 4.2 million in 1992.
Legislators are now taking a closer look at expanding the accessibility
of IRAs once again. Several proposals are on the table: (1) the Republicans'
"Contract with America" includes the American Dream Savings Account, a type of
IRA; (2) President Clinton has proposed expanding eligibility by raising income
limits; and (3) several congressional representatives have introduced
legislation to restore the universal availability of a fully tax-deductible
IRA.
We enthusiastically support restoring IRAs to their original luster.
Not only will they provide a tax break to middle-income Americans, but they'll
go a long way toward raising the nation's dangerously low personal savings rate
- -- the lowest of any major industrialized country. There's an increasing
awareness that Social Security and pension plans will no longer provide for the
retirement needs of middle-income Americans. Increasing IRA accessibility for
more working individuals and families is one of the most sensible ways to help
Americans take responsibility for their future financial needs. We urge you to
support the expanded IRA by contacting your congressional representative or
senator.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 23
BY BARRY GORDON AND
MARC KLEE, CO-PORTFOLIO MANAGERS
JOHN HANCOCK
NATIONAL AVIATION & TECHNOLOGY FUND
AIRLINE STOCKS DECLINE AS PROFITS SUFFER;
FUND ADDS TECHNOLOGY STOCKS
1994 was a tough year for John Hancock National Aviation & Technology Fund.
Rising interest rates, slumping profits in the airline industry and cutbacks
in defense spending combined to create conditions as challenging as any the
Fund has faced in its more than 60-year history. The Fund's performance
reflected those challenges. For the year ended December 31, 1994, the Fund's
Class A and Class B shares had total returns of -14.16% and -14.39%,
respectively, at net asset value compared to 10.59% for the average science and
technology fund, according to Lipper Analytical Services.1
[A 2 1/2" x 2 1/2" photo of Barry Gordon and Marc Klee at bottom right.
Caption reads: "Barry Gordon (left) and Marc Klee (right), Co-Portfolio
Managers."]
Please keep in mind that the performance comparison is not as useful as
it might be. Here's why. No other fund in the Lipper group shares our focus on
the airline and aerospace industries. That said, we've redeployed a portion of
our assets out of airlines and into potentially more attractive opportunities
in technology. Airline stocks were 52% of the Fund's assets at the beginning of
1994. By the end of 1994, they were 24%. During the
[CAPTION]
"1994 WAS A TOUGH YEAR..."
3
<PAGE> 24
John Hancock Funds - National Aviation & Technology Fund
[Chart with the heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) UAL Corp. 7.9%; 2) Thermo Electron
Corp 6.1%; 3) AMR Corp. 5.8%; 4) Raytheon Co. 5.8%; and 5) United Technologies
Corp 5.7%. A footnote below reads: "As a percentage of net assets on December
31, 1994."]
same period, technology stocks rose from 16% to 51%. Meanwhile, our stake in
aerospace and defense stocks has remained fairly stable at 22%. We held an
additional 3% in cash at the end of the period, after a $2.47 per share
capital-gains distribution paid in December 1994. We'll have more to say about
the distribution later. What follows is a sector-by sector rundown of the
Fund's performance.
AIRLINES: FARE WARS OFFSET HIGHER VOLUME, LOWER CAPACITY
The Dow Jones Airline Index fell more than 30% during 1994, making it among
the worst performing sectors of the market. Despite "load factors" for the
industry that were unusually high by historical standards, airline stocks
suffered. Load factors take into account both the supply of seats and the
demand for tickets. Normally when load factors are rising -- as they did
throughout the year -- pricing is firmer, translating into higher earnings.
Instead, fares declined and earnings suffered.
In the airline industry, often it's the weakest carriers who initiate
price cuts. They do so simply to improve cash flow, offering steep discounts in
exchange for up-front payment on tickets that may not be used for several
months. Healthier competitors then have to match the lower fares and profits
suffer accordingly. We saw that often in 1994. We also saw a lot of upstarts
invading what had once been considered sacred territories. For example,
ValueJet, a new discount carrier, took on Delta at its hub in Atlanta. As a
result, fares declined, dragging profits down with them.
Six months ago, UAL Corp., the parent of United Airlines, was far and
away the Fund's largest investment at more than 18% of total assets. By
year-end, it was less than 8%, due mainly to the purchase of a majority stake
in UAL by its employees. One consequence of that was a capital gain on shares
held for many years, which contributed to December's unusually large
distribution. After the employee buyout, we chose not to reinvest in UAL as
heavily as we had in the past in order to better diversify the Fund's holdings.
Our stake in UAL had gotten so high mainly because the stock's price had risen
over the years, not because of additional purchases. We also eliminated the
Fund's positions in regional airlines Comair, Atlantic Coast and Atlantic
Southeast, while sharply reducing our position in Mesa, another regional
carrier. We feel that increased competition has made the small carriers
increasingly vulnerable.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Thermo
Electron Corp. followed by an up arrow and the phrase "Strong earnings
momentum." The second listing is Southwest Airlines followed by a down arrow
and the phrase "Caught in fare war." The third listing is Mesa Airlines
followed by a down arrow and the phrase "Disappointing earnings." Footnote
below reads: "See "Schedule of Investments." Investment holdings are subject
to change."]
[CAPTION]
"...WE'VE REDEPLOYED A PORTION OF OUR ASSETS OUT OF AIRLINES..."
4
<PAGE> 25
John Hancock Funds - National Aviation & Technology Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended December 31, 1994." The chart
is scaled in increments of 15% from bottom to top, with 15% at the top and
- -15% at the bottom. Within the chart, there are three solid bars. The first
represents the -14.16% total return for John Hancock National Aviation &
Technology Fund: Class A. The second represents the -14.39% total return for
John Hancock National Aviation & Technology Fund: Class B. The third
represents the 10.59% total return for the average science and technology fund.
Footnote below reads: "Total returns for John Hancock National Aviation &
Technology Fund are at net asset value with all distributions reinvested. The
average science and technology fund is tracked by Lipper Analytical Services.
See following page for historical performance information."]
AEROSPACE: DEFENSE CUTBACKS MAY BE SLOWING DOWN
We've been adding shares lately in defense and aerospace. That may seem counter
intuitive, given the recent steep cutbacks in defense spending. But those
cutbacks have begun to slow, and that trend is likely to continue now that the
Republicans control Congress. Also, all three of our largest holdings in the
sector -- Raytheon, United Technologies Corp. and General Motors' Hughes
Aircraft Corp. -- are conglomerates with interests in industries other than
defense. As the market stops treating those stocks as pure defense plays, we
expect to see prices rise.
TECHNOLOGY: INCREASING OPPORTUNITIES
By and large, the Fund's stake in technology stocks helped us avoid even
greater losses than we suffered in 1994. Our holdings were spread across a
number of subsectors, including computer software and hardware, semiconductors
and communications. Among the largest individual positions were Computer
Associates, which has pursued a successful growth strategy of acquiring
poorly managed companies and making them more profitable; Silicon Graphics,
which makes multimedia workstations and has ties to the entertainment and
publishing industries; and Teradyne, an electronics testing company that has
profited from the explosion in applications for semiconductors.
OUTLOOK: IMPROVING FOR AIRLINES, GLOBAL TECHNOLOGY
Many of the factors that contributed to falling stock prices in 1994 are
still in place as we begin the new year. Inflation has remained surprisingly
modest, but economic expansion at home and abroad continues, suggesting the
possible need for still more rate increases. Investors would, therefore, do
well not to expect a sudden turnaround either in the broader market or the
share price of the Fund.
That said, 1995 could turn out to be a better year for airline stocks.
Load factors remain high, and eventually that's likely to have a positive
impact on pricing. While our stake in airlines is lower now than it was a year
ago, we've preserved large holdings in UAL (8)%; AMR Corp., the parent of
American Airlines (6)%; and Southwest Airlines (3)%. All three are well
positioned to benefit from any improvement in airline industry profitability.
Meanwhile, we will look for opportunities to add to our technol ogy holdings,
while maintaining the size of our stake in the aerospace industry. As the rest
of the world's developed countries begin to catch up with the economic growth
rate in the United States, we'll pay special attention to companies with
exposure to overseas markets.
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance would be
lower.
[CAPTION]
"...WE WILL LOOK FOR OPPORTUNITIES TO ADD TO OUR TECHNOLOGY HOLDINGS."
5
<PAGE> 26
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - National Aviation & Technology Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ended December 31,
1994 with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year, 5-year and 10-year periods were
(18.48)%, 1.46% and 8.68%, respectively, and reflect payment of maximum sales
charge of 5.00%. Total return (not annualized) since inception on January 3,
1994 for Class B shares was (18.67)% and reflects the maximum contingent
deferred sales charge of 5.00%. All performance data shown represent past
performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Different sales charges were in effect prior to March 1987 and
are not reflected in the above performance information. Performance is affected
by a 12b-1 plan, which commenced on January 1, 1994 for both Class A and Class
B shares. Consult your prospectus for more information regarding the risks
associated with industry segment investing.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND (OR MOST
RECENT TEN YEARS)
[National Aviation & Technology Fund
Class A shares
Line chart with the heading National Aviation & Technology Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund (or most recent 10 years). Within the chart are three lines. The
first line represents the value of the Standard & Poor's 500 Stock Index and is
equal to $38,268 as of December 31, 1994. The second line represents the value
of the hypothetical $10,000 investment made in the National Aviation &
Technology Fund on December 31, 1984, before sales charge, and is equal to
$24,188 as of December 31, 1994. The third line represents the National
Aviation & Technology Fund after sales charge and is equal to $22,989 as of
December 31, 1994.
National Aviation & Technology Fund
Class B shares
Line chart with the heading National Aviation & Technology Fund: Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund (or most recent 10 years). Within the chart are three lines. The
first line represents the value of the Standard & Poor's 500 Stock Index and is
equal to $10,131 as of December 31, 1994. The second line represents the value
of the hypothetical $10,000 investment made in the National Aviation &
Technology Fund on January 3, 1994, before contingent deferred sales charge,
and is equal to $8,561 as of December 31, 1994. The third line represents
National Aviation & Technology Fund after contingent deferred sales charge and
is equal to $8,133 as of December 31, 1994.
*The Standard & Poor's 500 Stock Index is an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance.]
6
<PAGE> 27
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON DECEMBER 31, 1994. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- ---------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common and preferred stocks and warrants
(cost - $33,988,700)............................... $52,431,531
Bonds (cost - $1,258,358)............................ 1,186,710
Joint repurchase agreement (cost - $284,000)......... 284,000
Corporate saving account............................. 750
----------
53,902,991
Receivable for investments sold........................ 1,524,500
Receivable for shares sold............................. 1,737
Dividends receivable................................... 15,000
Interest receivable.................................... 26,856
Miscellaneous receivable............................... 16,941
----------
Total Assets................... 55,488,025
--------------------------------------------------
LIABILITIES:
Payable for shares repurchased......................... 57,138
Payable to John Hancock Advisers, Inc. and affiliates -
Note B............................................... 54,623
Accounts payable and accrued expenses.................. 51,629
----------
Total Liabilities.............. 163,390
--------------------------------------------------
NET ASSETS:
Capital paid-in - Note D............................... 36,953,452
Net unrealized appreciation of investments............. 18,371,183
----------
Net Assets..................... $55,324,635
==================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - 40 million shares authorized
with $1.25 per share par value, respectively)
Class A - $54,840,078 /7,579,596....................... $ 7.24
==========================================================================
Class B - $484,557/67,821.............................. $ 7.14
==========================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($7.24 x 105.26)%............................ $ 7.62
==========================================================================
<FN>
** 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.
** Class B shares commenced operations on January 3, 1994.
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED
AND EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES)
FOR THE PERIOD STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1994
- ---------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 487,545
Interest................................................... 419,567
-----------
907,112
-----------
Expenses:
Investment management fee - Note B....................... 690,068
Administration fee....................................... 100,000
Transfer agent fee - Note B
Class A.............................................. 82,679
Class B**............................................ 151
Distribution/service fee - Note B
Class A.............................................. 56,005
Class B**............................................ 1,079
Registration and filing fees............................. 48,304
Custodian fee............................................ 45,694
Auditing fee............................................. 27,500
Directors' fees.......................................... 21,767
Printing................................................. 20,492
Miscellaneous............................................ 6,577
Legal fees............................................... 4,252
-----------
Total Expenses....................... 1,104,568
----------------------------------------------------
Net Investment Loss.................. (197,456)
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND OPTIONS:
Net realized gain on investments sold...................... 15,688,423
Net realized gain on options............................... 43,449
Change in net unrealized appreciation/depreciation
of investments........................................... (26,248,652)
-----------
Net Realized and Unrealized
Loss on Investments
and Options.......................... (10,516,780)
----------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations............ $(10,714,236)
====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 28
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss.............................................................. $ (197,456) $ (513,565)
Net realized gain on investments sold and options................................ 15,731,872 8,069,779
Change in net unrealized appreciation/depreciation of investments................ (26,248,652) 6,962,838
------------- ------------
Net Increase (Decrease) in Net Assets Resulting from Operations................ (10,714,236) 14,519,052
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments sold and options
Class A - ($2.4704 and $1.1714 per share, respectively)........................ (15,479,601) (7,555,479)
Class B ** - ($2.4704 and none per share, respectively)........................ (114,033) --
------------- ------------
Total Distributions to Shareholders.......................................... (15,593,634) (7,555,479)
------------- ------------
FROM FUND SHARE TRANSACTIONS -- NET*............................................... 4,071,478 (509,603)
------------- ------------
NET ASSETS:
Beginning of period.............................................................. 77,561,027 71,107,057
------------- ------------
End of period ................................................................... $ 55,324,635 $77,561,027
============= ============
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1993
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................................. 73,479 $ 780,882 82,066 $ 991,562
Shares issued to shareholders in reinvestment of distributions.......... 1,341,271 9,684,264 413,466 4,651,425
---------- ------------ --------- ------------
1,414,750 10,465,146 495,532 5,642,987
Less shares repurchased................................................. (685,600) (7,002,388) (520,848) (6,152,590)
---------- ------------ --------- ------------
Net increase (decrease)............................................... 729,150 $ 3,462,758 (25,316) $ (509,603)
========== ============ ========= ============
CLASS B **
Shares sold............................................................. 58,006 $ 556,005
Shares issued to shareholders in reinvestment of distributions.......... 16,130 115,006
---------- ------------
74,136 671,011
Less shares repurchased............................................... (6,315) (62,291)
---------- ------------
Net increase........................................................ 67,821 $ 608,720
========== ============
<FN>
**Class B shares commenced operations on January 3, 1994.
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S
NET ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT AND OPTION GAINS AND LOSSES,
DISTRIBUTIONS PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY
SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND
SHARES SOLD, REINVESTED AND REDEEMED, DURING THE LAST TWO PERIODS, ALONG WITH
THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 29
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology 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>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991(c) 1990(c)
------- ------- ------- ------- -------
CLASS A
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period...................................... $ 11.32 $ 10.34 $ 10.91 $ 8.84 $ 11.67
------- ------- ------- ------- -------
Net Investment Income (Loss).............................................. (0.03)(a) (0.07) (0.01)(a) 0.05 0.10
Net Realized and Unrealized Gain (Loss) on Investments and Options........ (1.58) 2.22 0.31 2.70 (2.33)
------- ------- ------- ------- -------
Total from Investment Operations....................................... (1.61) 2.15 0.30 2.75 (2.23)
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income...................................... -- -- -- (0.03) (0.10)
Distributions from Net Realized Gain on Investments Sold and Options...... (2.47) (1.17) (0.87) (0.65) (0.50)
------- ------- ------- ------- -------
Total Distributions.................................................... (2.47) (1.17) (0.87) (0.68) (0.60)
------- ------- ------- ------- -------
Net Asset Value, End of Period............................................ $ 7.24 $ 11.32 $ 10.34 $ 10.91 $ 8.84
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value................................ (14.16)% 20.88% 3.02% 31.09 (19.26)%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................. $54,840 $77,561 $71,107 $73,344 $62,882
Ratio of Expenses to Average Net Assets................................... 1.60% 1.49% 1.53% 1.64% 1.67%
Ratio of Net Investment Income (Loss) to Average Net Assets............... (0.28)% (0.66)% (0.07)% 0.42% 0.95%
Portfolio Turnover Rate................................................... 44% 23% 34% 28% 29%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 30
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)-
- ----------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1994
TO DECEMBER 31, 1994
--------------------
CLASS B**
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period..................................... $ 11.23(b)
-------
Net Investment Loss...................................................... (0.09)(a)
Net Realized and Unrealized Loss on Investments and options.............. (1.53)
-------
Total from Investment Operations................................... (1.62)
-------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and Options..... (2.47)
-------
Total Distributions................................................ (2.47)
-------
Net Asset Value, End of Period........................................... $ 7.14
=======
Total Investment Return at Net Asset Value............................... (14.39)%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................ $ 485
Ratio of Expenses to Average Net Assets.................................. 2.59%*
Ratio of Net Investment Income (Loss) to Average Net Assets.............. (1.13)%*
Portfolio Turnover Rate.................................................. 44%
<FN>
* On an annualized basis.
** Class B shares commenced operations on January 3, 1994.
(a) On average month end shares outstanding.
(b) Initial price to commence operations.
(c) These periods are covered by the report of other independent accountants (not included herein).
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS, AND TOTAL INVESTMENT RETURN OF THE FUND. IT SHOWS HOW
THE FUND'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE
PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS
PRESENTED IN THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 31
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
FREEDOM NATIONAL AVIATION & TECHNOLOGY FUND ON DECEMBER 31, 1994. IT'S DIVIDED
INTO FIVE MAIN CATEGORIES: COMMON STOCKS, PREFERRED STOCK, WARRANTS, BONDS, AND
SHORT-TERM INVESTMENTS. THE INVESTMENTS ARE FURTHER BROKEN DOWN BY INDUSTRY
GROUPS. UNDER EACH INDUSTRY GROUP IS A LIST OF THE SECURITIES OWNED BY THE
FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE
LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
December 31, 1994
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE (10.27)%
Boeing Co. (The)............................ 30,000 $ 1,402,500
Loral Corp.................................. 30,000* 1,136,250
United Technologies Corp. .................. 50,000 3,143,750
-----------
5,682,500
-----------
COMPUTERS (23.93)%
BMC Software, Inc.**........................ 20,000 1,135,000
Computer Associates International, Inc. .... 50,000 2,425,000
Oracle Systems Corp.**...................... 60,000 2,647,500
S3, Inc.**.................................. 50,000* 781,250
Silicon Graphics, Inc.**.................... 50,000* 1,543,750
Stratus Computer, Inc.**.................... 70,000* 2,660,000
Symantec Corp.**............................ 100,000* 1,750,000
Telebase Systems, Inc.** (r)................ 454,500 295,425
-----------
13,237,925
-----------
DIVERSIFIED OPERATIONS (10.18)%
General Motors Corp. (Class H).............. 70,000 2,441,250
Raytheon Co................................. 50,000 3,193,750
-----------
5,635,000
-----------
ELECTRONICS (11.63)%
Applied Materials, Inc.**................... 60,000* 2,505,000
FLIR Systems, Inc.**........................ 75,000 937,500
Integrated Device Technologies, Inc.**...... 35,000* 1,032,500
Ramtron International Corp. **.............. 55,556* 263,891
Teradyne, Inc.**............................ 50,000* 1,693,750
-----------
6,432,641
-----------
MACHINERY (8.25)%
Thermo Electron Corp.**..................... 75,000 3,365,625
Thermolase Corp.**.......................... 50,000* 387,500
ThermoTrex Corp.**.......................... 60,000 810,000
-----------
4,563,125
-----------
POLLUTION CONTROL (2.56)%
Browning-Ferris Industries, Inc. ........... 50,000 1,418,750
-----------
TELECOMMUNICATIONS (5.29)%
BroadBand Technologies, Inc.**.............. 50,000* 1,500,000
Qualcomm, Inc.**............................ 60,000* 1,425,000
-----------
2,925,000
-----------
TRANSPORTATION (22.05)%
AMR Corp. **................................ 60,000 $ 3,195,000
Mesa Airlines, Inc.**....................... 125,000 1,125,000
Northwest Airlines Corp. Class A**.......... 100,000* 1,575,000
Southwest Airlines Co....................... 100,000 1,675,000
UAL Corp.................................... 50,000 4,368,750
USAir Group, Inc. **........................ 60,000 262,500
-----------
12,201,250
-----------
TOTAL COMMON STOCKS
(Cost $33,787,032) (94.16)% 52,096,191
------ -----------
PREFERRED STOCK
ELECTRONICS (0.59)%
Ramtron International Corp. Ser C Conv **... 55,556 326,392
-----------
TOTAL PREFERRED STOCK
(Cost $166,668) (0.59)% 326,392
------ -----------
WARRANTS
BIOMEDICS/GENETICS (0.02)%
Scios-Nova Inc. ** (r)...................... 36,346 8,748
-----------
MEDICAL/DENTAL (0.00)%
Biosearch Medical Products, Inc. ** (r)..... 20,000 200
-----------
TOTAL WARRANTS
(Cost $35,000) (0.02)% 8,948
------ -----------
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS
(Cost $33,988,700) (94.77)% 52,431,531
------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 32
FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
<TABLE>
<CAPTION>
INTEREST S&P PAR VALUE MARKET
ISSUER, DESCRIPTION RATE*** RATING*** (000'S OMITTED) VALUE
- ------------------- -------- --------- --------------- ------
<S> <C> <C> <C> <C>
BONDS
AEROSPACE (0.46)%
Aeronca, Inc., Conv Sub Deb, 01-31-96.............................................. 12.500% NR $ 400 $ 252,000
-----------
TRANSPORTATION (1.69)%
Northwest Airlines Inc., Bond, 11-30-00 (r)........................................ 12.092 CCC 485* 485,385
Piedmont Aviation Inc., Equip Tr Cert 1988 Ser F, 03-28-09......................... 10.350 BB 500 449,325
-----------
934,710
-----------
TOTAL BONDS
(Cost $1,258,358) (2.15)% 1,186,710
------- -----------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.51)%
Investment in a joint repurchase agreement transaction with Lehman Brothers, Inc.
Dated 12-30-94, Due 01-03-95 (secured by U.S. Treasury Bonds, 9.25%
Due 02-15-16, and 8.125% Due 08-15-21, and U.S. Treasury Notes, 4.625%
Due 08-15-95, and 4.625% Due 08-15-95) Note A.................................... 5.850 - 284 284,000
-----------
CORPORATE SAVINGS ACCOUNT (0.00)%
Investors Bank & Trust Company Daily Interest Savings Account Current Rate 3.00%... 750
-----------
TOTAL SHORT-TERM INVESTMENTS (0.51)% 284,750
------- -----------
TOTAL INVESTMENTS (97.43)% $53,902,991
======= ===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(r) Direct placement securities are restricted to resale. They have been
valued at fair value by the Trustees after considerations of restrictions
as to resale, financial condition and prospects of the issuer, general
market conditions and pertinent information in accordance with the Fund's
By-Laws and the Investment Company Act of 1940, as amended. The Fund has
limited rights to registration under the Securities Act of 1933 with
respect to these restricted securities.
<TABLE>
Additional information on each restricted security is as follows:
<CAPTION>
VALUE AS A
PERCENTAGE MARKET
ACQUISITION ACQUISITION OF FUND'S VALUE AT
SECURITY DATE COST NET ASSETS DECEMBER 31, 1994
-------- ---- ---- ---------- -----------------
<S> <C> <C> <C> <C>
Biosearch Medical Products, Inc. - Warrants.................. 10-24-90 $ 0 0.00% $ 200
Northwest Airlines, Inc. - Bond.............................. 06-17-94 450,000 0.88 485,385
Scios-Nova Inc. - Warrants................................... 06-28-91 35,000 0.02 8,748
Telebase Systems, Inc. - Common Stock........................ 11-14-91 636,300 0.53 295,425
<FN>
* Securities other than short-term investments, newly added to the portfolio during the period ended December 31, 1994.
** Non-income producing security.
*** Credit ratings are unaudited.
NR Not Rated by either Standard & Poor's or Moody's Investors Services.
</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.
12
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Technology Series, Inc. (the "Company") is an open-end investment
company registered under the Investment Company Act of 1940. The Company
consists of two series: John Hancock Global Technology Fund, a diversified
series, and John Hancock National Aviation & Technology Fund (the "Fund"), a
non-diversified series. The Directors authorized the sale of Class B shares as
of January 3, 1994 and adoption of 12b-1 distribution plans as of January 1 and
3, 1994 for Class A and Class B shares of the Fund, respectively. 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 Directors, 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 to such
distribution plan. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
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 are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Included in Net
realized gains on investments sold in the Statement of Operations is $8,481,000
received as a special distribution resulting from the reorganization of UALCorp.
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.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on investment
securities is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations which may differ from
generally accepted accounting principles. Dividends paid by the Fund, 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 explai ned previously.
EXPENSES The majority of the expenses of the Company are directly identifiable
to an individual Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative size of the Funds.
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. Trans fer
agent expenses and distribution/service fees
13
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
if any, are calculated daily at the class level based on the appropriate net
assets of each class and the specific expense rate(s) applicable to each
class.
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options are valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options are 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 is included in the Statement of Asse
ts and Liabilities as an asset and corresponding liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use options contracts to manage its exposure to the
stock market. Writing puts and buying calls tend to increase the Fund's
exposure to the underlying instrument and buying puts and writing calls tend
to decrease the Fund's exposure to the underlying instrument, or hedge other
Fund investments.
The maximum exposure to loss for any purchased options is limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure is limited to the change
in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options
have minimal credit risk as the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over-the-counter option
contracts, the Fund continuously monitors 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.
A summary of written call option transactions for the period ended
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
(000'S OMITTED) RECEIVED
------------- --------
<S> <C> <C>
Outstanding, beginning of period.... - -
Options written..................... 100 $ 43,449
Options expired..................... (100) (43,449)
--- -------
Outstanding, end of period.......... - -
=== =======
</TABLE>
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
investment securities from either the date of issue or date of purchase over
the life of the security, as required by the Internal Revenue Code.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of the sub-adviser. The
Adviser has a sub-investment management contract with American Fund Advisors,
Inc. (the "Sub-Adviser"), under which the Sub-Adviser, subject to the review
of the Directors and the overall supervision of the Adviser, provides the
Fund with investment services and advice with respect to investment
transactions.
Under the present investment management contract, for the year ended
December 31, 1994, the Fund paid an monthly management fee to the Adviser
equivalent, on an annual basis, to the sum of (a) 1.00% of the first
$100,000,000 of the Fund's average daily net asset value and (b) 0.75% of the
Fund's average daily net asset value in excess of $100,000,000. Effective
January 1, 1995, the Adviser will waive a portion of the management fee
amounting to 0.15% of the average daily net asset value of the first
$100,000,000 of each series of the Company. Therefore, the Fund will pay a
monthly management fee to the Adviser, equivalent on an annual basis, to the
sum of
14
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
0.85% of the first $100,000,000 of the Fund's average daily net asset value.
The Adviser pays the Sub-Adviser a monthly management fee, equivalent on
an annual basis, to the sum of (a) 0.40% of the first $100,000,000 of the
Fund's average daily net asset value and (b) 40% of the investment advisory fee
received by the Adviser on amounts over $100,000,000. The Fund pays a monthly
administrative fee at the rate of $100,000 per annum to the Adviser for
performance of administrative services to the Fund.
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, 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.
In the event that the ratio for 1992, 1993, or 1994 of normal operating
expenses of the Fund, exclusive of extraordinary expenses including, but not
limited to litigation, to the Fund's average daily net assets for such year,
exceeds the average expense ratio for the Fund for the three years ended
December 31, 1990 (restated as if the current annual rates for calculating the
management fee and the current expense limitations had been in effect
throughout the three year period), the fees payable to the Advi ser will be
reduced to the extent required to eliminate such excess and the Adviser will
make any additional arrangements necessary to eliminate any remaining such
excess. No reduction in fees was necessary for the period ended December 31,
1994. At a shareholder meeting on December 8, 1993 the shareholders appr a
proposal which excludes the amounts payable by the Fund under the Rule 12b-1
distribution plans (effective in January 1994) from the calculation of the
expense limit described above.
The Fund has a distribution agreement with John Hancock Funds Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1,
1995, JH Funds was known as John Hancock Broker Distribution Services, Inc.
For the period ended December 31, 1994, JH Funds received net sales charges
of $9,741 with regard to sales of Class A shares. Out of this amount, $1,443
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, and $3,254 was paid as sales commissions and
first year service fees to unrelated broker-dealers and $5,044 was paid as
sales commissions and first year service fees to sales personnel of John
Hancock Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). 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, all of which are
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
December 31, 1994 contingent deferred sales charges received by JH Funds
amounted to $664.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940, effective January 1 and 3, 1994, respectively.
Accordingly, the Fund makes payments to JH Funds for distribution and service
expenses at an annual rate not to exceed 0.30% of Class A average daily net
assets and 1.00% of Class B average daily net assets to reimburse JH Funds for
its distribution/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 which became effective July 7, 1993.
Under the amended Rules of Fair
15
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - National Aviation & Technology Fund
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 A shares to 0.05% effective May 1, 1994 and
decreased to 0.00% effective June 1, 1994.
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 January 1, 1995, Investor Services was
known as John Hancock Fund Services, Inc. The Fund pays a monthly transfer
agent fee, equivalent on an annual basis, to 0.12% and 0.14% of the Fund's
average daily net asset value, attributable to Class A and Class B shares of
the Fund, respectively, plus out of pocket expenses incurred by Fund Services
on behalf of the Fund for proxy mailings. Effective January 1, 1995, the Fund
will pay transfer agent fees based on transaction volume and the number of
shareholder accounts outstanding.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser,
and Mr. Barry J. Gordon is a director and officer of the Sub-Adviser. Mr.
Thomas W. L. Cameron is an affiliated Director of the Fund. The compensation
of unaffiliated Directors is borne by the Fund.
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 December 31, 1994, aggregated $27,466,649 and $29,858,522,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the period ended December 31, 1994.
The cost of investments owned at December 31, 1994 (including the
joint repurchase agreement) for Federal income tax purposes was $35,531,058.
Gross unrealized appreciation and depreciation of investments aggregated
$20,335,831 and $1,964,648, respectively, resulting in net unrealized
appreciation of $18,371,183.
NOTE D --RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended December 31, 1994, the Fund has reclassified amounts to
reflect a decrease in accumulated net investment loss of $197,456, a decrease
in accumulated net realized gain on investments of $138,238 and a decrease in
capital paid-in of $59,218. This represents the cumulative amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of December 31, 1994. Additional adjustments may be needed in
subsequent reporting periods. These reclassifications, which have no impact
on the net asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
16
<PAGE> 37
John Hancock Funds - National Aviation & Technology Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock
National Aviation and Technology Fund and the
Directors of John Hancock Technology Series, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of John Hancock
National Aviation & Technology Fund (the "Fund") (a portfolio of John Hancock
Technology Series, Inc.) at December 31, 1994, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for the periods indicated in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 16, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended December
31, 1994.
The Fund designated distributions to shareholders of $15,577,000 as
long-term capital gain dividends. Shareholders were mailed a 1994 U.S.
Treasury Department Form 1099-DIV in January 1995 representing their
proportionate share.
None of the Fund's distributions qualify for the dividends received
deduction available to corporations.
United States Government Obligations: The Fund did not invest in U.S.
Treasury bonds, bills, and notes or other U.S. government agencies at year
end. The Fund did not derive any income from these investments. For specific
information on exemption provisions in your state, consult your local state
tax office or your tax adviser.
17
<PAGE> 38
NOTES
John Hancock Funds - National Aviation & Technology Fund
18
<PAGE> 39
NOTES
John Hancock Funds - National Aviation & Technology Fund
19
<PAGE> 40
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FUND U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[A 1/2" by 1/2" John Hancock Funds Logo in upper left hand corner of the page.
A box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
National Aviation & Technology Fund. It may be used as sales literature when
preceded or accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]
JH 8500A 12/94
