================================================================================
John Hancock Funds
- -------------------------------------------------------------------------------
Global
Technology
Fund
ANNUAL REPORT
October 31, 1996
<PAGE>
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DIRECTORS
EDWARD J. BOUDREAU, JR.
THOMAS W. L. CAMERON
JAMES F. CARLIN*
WILLIAM H. CUNNINGHAM*
CHARLES F. FRETZ*
HAROLD R. HISER, JR.*
ANNE C. HODSDON
CHARLES L. LADNER*
LEO E. LINBECK, JR.*
PATRICIA P. MCCARTER*
STEVEN R. PRUCHANSKY*
RICHARD S. SCIPIONE
LT. GEN. NORMAN H. SMITH, USMC (RET.)*
JOHN P. TOOLAN*
* Members of the Audit Committee
OFFICERS
EDWARD J. BOUDREAU, JR.
Chairman and Chief Executive Officer
ROBERT G. FREEDMAN
Vice Chairman and
Chief Investment Officer
BARRY J. GORDON
President
ANNE C. HODSDON
Executive Vice President
JAMES B. LITTLE
Senior Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Second Vice President and Compliance Officer
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:
Most analysts agree that the Social Security system will run out of money by
the year 2030 unless Congress makes some changes. Although it seems a long way
off, the issue is serious enough that a presidential commission is already
studying the problem, and experts and politicians alike have weighed in with a
slew of prescriptions. Legislative action could be in the offing for 1997.
The problem stems from demographic and societal changes. The number of
retirees collecting Social Security is growing rapidly, while the number of
workers supporting the system is shrinking. Consider this: in 1950, there were
16 workers paying into the Social Security system for each retiree collecting
benefits. Today, there are three workers for each retiree and by 2019 there
will be two. Starting then, the Social Security Administration estimates that
the amount paid out in Social Security benefits will start to be greater than
the amount collected in Social Security taxes. Compounding the issue is the
fact that people are retiring earlier and living longer.
The state of the system has already left many people, especially younger and
middle-aged workers, feeling insecure about Social Security. A recent survey by
the Employee Benefits Research Institute (EBRI) found that 79% of current
workers polled had little confidence in the ability of Social Security to
maintain the same level of benefits as those received by today's retirees.
Instead, they said they expect to use their own savings or employer-sponsored
pensions for their retirement. Yet, remarkably, another EBRI survey revealed
that only slightly more than half of America's current workers are saving money
for retirement. Fewer than half own IRAs or participate in employer-sponsored
pension or savings plans.
[A 1-1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to first paragraph]
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce your
standard of living once you stop working. So we encourage you to save all that
you can now, so you can live the way you'd like later.
Sincerely,
/s/Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
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BY BARRY GORDON AND MARC KLEE, CO-PORTFOLIO MANAGERS
John Hancock Global
Technology Fund
Technology stocks post mediocre gains,
despite strong earnings and revenues growth
Recently, the Fund's fiscal year end changed from December to October. What
follows is a discussion of the Fund's performance for the 12 months ended
October 31, 1996.
With the help of fairly stable interest rates and low inflation, the broad stock
market, as measured by the Standard and Poor's 500-Stock Index, climbed 24.10%
for the year ended October 31, 1996. But the going was tough, as whole sectors
shifted in and out of favor whenever it seemed the economy might be headed in a
different direction. The only safe haven seemed to be large-company stocks with
a track record of steadily growing earnings.]
In the technology sector, five years of strong gains ended in late 1995 as
prices on semiconductors declined more than expected. This caused investors to
question whether demand was real and caused stock prices to drop throughout the
technology industry. After a bumpy year, the Morgan Stanley High Technology
Index closed October with a 12-month return of 1.58%. At the same time, the
sector's earnings and revenue growth continued to outpace the general market.
This combination of lagging stock prices and strong fundamentals have made
technology stocks as attractive as they have been in five years.
Performance review
When we gave you our last annual report, we were pleased to be able to report
gains on the order of 45% for the year ended December 31, 1995. Unfortunately,
this year gave technology investors a strong reminder that these stocks can go
down as sharply as they can go up. For the year ended October 31, 1996, the
Fund's Class A and Class B shares posted total returns of 1.99% and 1.30%,
respectively, at net asset value, as the Fund got caught in the market's
crosswinds. That compared to the 7.57% return for the
"A sizable stake in semiconductors
cost us early in the period..."
[A 2" x 3" photo of the fund's portfolio management team. Caption reads:
"Global Technology Fund Management team (l-r) Barry Gordon, Marc Klee, Alan
Lowenstein".]
3
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John Hancock Funds - Global Technology Fund
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[Chart entitled "Top Five Common Stock Holdings" at top left hand column. The
chart has five listings: 1) Computer Associates 5.5%; 2) Cisco Systems 4.3%;
3) UAL Corp. 3.5%; 4) 3Com Corp. 3.4%; 5) Parametric Technology 3.4%. A
footnote below states "As a percentage of net assets on October 31, 1996."]
- --------------------------------------------------------------------------------
This Fund increased its emphasis on
higher-quality, larger company stocks.
average science and technology fund, according to Lipper Analytical
Services.(1) Please see pages six and seven for longer-term performance
information.
Several factors contributed to the Fund's modest performance. A sizable
stake in semiconductors cost us early in the period when the stocks tumbled. By
June, we had trimmed our investment in semiconductors to 12% of the Fund's net
assets, owning only those names with the best prospects. Intel, for example,
did especially well because of much higher-than-expected demand for its newest
generation chip (the Pentium Pro) and a focus on high profitability
microprocessors. Although semiconductor stocks recovered during the last four
months of our fiscal year, their gains weren't enough to offset earlier losses.
- --------------------------------------------------------------------------------
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Computer
Associates followed by an up arrow and the phrase "Strong earnings and revenue
gains." The second listing is UAL followed by a down arrow and the phrase
"Weakness in trans-Pacific routes, higher oil prices." The third listing is
America Online followed by a down arrow and the phrase "Problems with
subscriber turnover and pricing." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
We also lost ground this past summer from having a 10% stake in declining
aviation stocks. One of the Fund's top investments was UAL Corp., the parent
company of United Airlines. We had retained both UAL and AMR Corp., the parent
of American Airlines, from our merger with John Hancock National Aviation &
Technology Fund. We liked UAL's valuation, route structure, and cost control
system. But the strong dollar, which crimped travel on UAL's trans-Pacific
routes, and the recent rise in oil prices temporarily hurt the company's
earnings. The stock fell 15% between June and October. Over the same period,
AMR's stock price fell 11%, despite the successful spin off of Saber -- its
high-tech travel reservations systems company. With airlines having record
earnings in 1996 and enhanced prospects for 1997, we expect these stocks to
resume their upward movement shortly.
Restricted securities also hampered performance. These are investments in
private companies like Primus Telecommunications Group and N2K (an Internet
information provider), which have not yet gone public. Their value usually
doesn't change until their initial public offering -- hopefully at a
substantial markup to what we paid. No such offerings closed during our fiscal
year, which cost us in the face of a rising market. But at least one of our
private holdings is expected to go public before year end.
More focus on larger companies
Still, despite a mostly flat total return, there were some bright spots in our
portfolio. What has worked well is our increased emphasis on higher quality,
larger company stocks, which now dominate our list of top investments. We
increased our stake in companies such as Computer Associates, Cisco Systems,
Microsoft
4
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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 October 31, 1996." The chart is
scaled in increments of 2% from bottom to top, with 8% at the top and 0% at the
bottom. Within the chart there are three solid bars. The first represents the
1.99% total return for John Hancock Global Technology Fund: Class A. The second
represents the 1.30% total return for John Hancock Global Technology Fund: Class
B. The third represents the 7.57% total return for the average science and
technology fund. A footnote below states "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.(1)
See following two pages for historical performance information."]
- --------------------------------------------------------------------------------
and Intel. In addition, we continued to focus on two areas -- software and
networking equipment companies -- which account for about half the Fund's
investments.
Software has become the dominant part of the Fund because we believe it is
becoming increasingly important as corporations need more information and
control of their various hardware systems. Our largest holding, Computer
Associates -- which designs software for mainframes and "client/server"
applications -- has had very strong earnings growth. ("Client/ server" refers
to desktop PCs or workstations that are connected to a central computer.) The
stock rose 21% in the four months since June. The story was much the same with
Parametric Technology, a company that makes software to help engineers design
products. Microsoft has also done well since mid-year, thanks to the success of
both its new operating systems, Windows NT, and Windows `95.
In the networking area, we believe that the best opportunities are on the
equipment side. As product cycles get shorter and shorter, there's more of a
move toward one-stop shopping in networking equipment. Cisco Systems and 3Com
- -- two of our top five investments -- dominate this business.
"Technology spending
continues to grow..."
Optimism tempered by realism
Technology spending continues to grow as a percentage of personal and capital
expenditures, and there are no signs of slowdown. With stock prices at today's
levels, we expect strong earnings and revenues growth to deliver decent gains
for the sector. If the economy plods along and corporate earnings gains become
harder to come by, which many market analysts expect, technology stocks should
appear even more attractive.
Nevertheless, the rising tide will not lift all boats. Individual stock
selection will be increasingly important, especially since we believe the
sector will continue to be volatile. In the months ahead, we'll especially look
for opportunities in the semiconductor segment, where the worst news may be
over, and in the software segment, which has so much growth potential.
- --------------------------------------------------------------------------------
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
This commentary reflects the views of the portfolio managers through the end
of the Fund's period discussed in this report. Of course, the managers' views
are subject to change as market and other conditions warrant.
International and sector investing involve special risks as detailed in the
prospectus.
5
<PAGE>
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A LOOK AT PERFORMANCE
- -------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Global Technology Fund. Total
return is a performance measure that equals the sum of all income and capital
gains distributions, assuming reinvestment of these distributions and the
change in the price of the Fund's net asset value per share. Performance
figures include the maximum applicable sales charge of 5% for Class A shares.
The effect of the maximum contingent deferred sales charge for Class B shares
(maximum 5% and declining to 0% over six years) is included in Class B
performance. Performance is affected by a 12b-1 plan, which commenced on
January 1, 1994 for both Class A and Class B shares. Different sales charge
schedules for Class A shares were in effect prior to March 1987 and are not
reflected in the performance information. Remember that all figures represent
past performance and are no guarantee of how the Fund will perform in the
future. Also, keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth more
or less than their original cost, depending on when you sell them.
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
- -------------------------------------------------------------------------------
For the period ended September 30, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---- ----- -----------
John Hancock
Global Technology Fund: Class A (5.26%) 144.16% 243.06%
John Hancock
Global Technology Fund: Class B (5.93%) N/A 65.96%(1)
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
For the period ended September 30, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---- ----- -----------
John Hancock
Global Technology Fund: Class A (5.26%) 19.55% 13.12%
John Hancock
Global Technology Fund: Class B (5.93%) N/A 20.31%(1)
Notes to Performance
(1) Class B shares started on January 3, 1994.
6
<PAGE>
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WHAT HAPPENED TO A $10,000 INVESTMENT...
- -------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Global Technology Fund would be worth on October 31, 1996, assuming you had
invested on the day shares started or have been invested for the most recent
ten years and have reinvested all distributions. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500-Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is used often
as a measure of stock market performance.
- --------------------------------------------------------------------------------
[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. Within
the chart are three lines. The first line represents the value of the Standard
& Poor's 500 Stock Index and is equal to $39,194 as of October 31, 1996. The
second line represents the value of the hypothetical $10,000 investment made in
the Global Technology Fund on October 31, 1986, before sales charge, and is
equal to $34,165 as of October 31, 1996. The third line represents the Global
Technology Fund, after sales charge, and is equal to $32,464 as of October 31,
1996.]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[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. Within
the chart are three lines. The first line represents the value of the Global
Technology Fund, before sales charge, and is equal to $16,743 as of October 31,
1996. The second line represents the value of the hypothetical $10,000
investment made in the Global Technology Fund, after sales charge, on January 3,
1994, and is equal to $16,443 as of October 31, 1996. The third line represents
the value of the Standard & Poor's 500 Stock Index and is equal to $16,250 as of
October 31, 1996.]
- --------------------------------------------------------------------------------
7
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Statement of Assets and Liabilities
October 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investments at value - Note C:
Common stocks and Warrants (cost - $128,101,125)............................ $196,927,986
Bonds (cost - $ 1,476,323).................................................. 1,415,879
Short-term investments (cost - $17,732,000)................................. 17,732,000
Corporate savings account................................................... 275
------------
216,076,140
Receivable for shares sold................................................... 50,900
Receivable for investments sold.............................................. 1,383,950
Dividends receivable......................................................... 3,000
Interest receivable.......................................................... 25,179
Other assets................................................................. 11,949
------------
Total Assets............................................... 217,551,118
-------------------------------------------------------------------------------------
Liabilities:
Payable for shares purchased................................................. 32,229
Payable for investments purchased............................................ 256,200
Payable to John Hancock Advisers, Inc. and affiliates - Note B............... 252,496
Accounts payable and accrued expenses........................................ 51,155
------------
Total Liabilities.......................................... 592,080
-------------------------------------------------------------------------------------
Net Assets:
Capital paid-in.............................................................. 138,019,467
Accumulated net realized gain on investments................................. 10,184,343
Net unrealized appreciation of investments................................... 68,767,177
Accumulated net investment loss.............................................. ( 11,949)
------------
Net Assets................................................. $216,959,038
=====================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding -
200 million shares authorized with $0.20 per share par value, respectively)
Class A - $166,009,818/6,435,849............................................. $ 25.79
=======================================================================================================
Class B - $50,949,220/2,021,751.............................................. $ 25.20
=======================================================================================================
Maximum Offering Price Per Share*
Class A - ($25.79 x 105.26%)................................................. $ 27.15
========================================================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on October 31, 1996. You'll
also find the net asset value and the maximum offering price per share as of
that date.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Statement of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1996
1995 TO OCTOBER 31, 1996(1)
------------ ----------------------
<S> <C> <C>
Investment Income:
Interest................................................................ $ 749,744 $ 1,281,066
Dividends............................................................... 248,870 248,387
---------- -----------
998,614 1,529,453
---------- -----------
Expenses:
Investment management fee - Note B..................................... 1,195,680 1,366,434
Distribution/service fee - Note B
Class A.............................................................. 315,339 400,996
Class B.............................................................. 227,106 374,149
Transfer agent fee - Note B............................................ 378,566 544,574
Administration fee - Note B............................................ 99,726 83,191
Registration and filing fees........................................... 72,008 52,274
Printing............................................................... 57,518 29,691
Custodian fee.......................................................... 42,394 36,453
Auditing fee........................................................... 38,833 33,530
Trustees' fees......................................................... 15,271 26,637
Miscellaneous.......................................................... 9,960 4,437
Legal fees............................................................. 5,842 15,836
Less Management Fee Reduction - Note B................................. ( 150,000) --
---------- -----------
Total Expenses........................................ 2,308,243 2,968,202
-------------------------------------------------------------------------------------------
Net Investment Loss................................... ( 1,309,629) ( 1,438,749)
-------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments sold................................... 13,461,306 10,184,343
Change in net unrealized appreciation/depreciation of investments....... 13,067,131 2,282,873
---------- -----------
Net Realized and Unrealized Gain on Investments....... 26,528,437 12,467,216
-------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.. $25,218,808 $11,028,467
===========================================================================================
</TABLE>
(1) Effective October 31, 1996, the fiscal period changed from December 31 to
October 31.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains for the period
stated.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM
------------------------- JANUARY 1, 1996 TO
1994 1995 (1) OCTOBER 31, 1996(1)
--------- ----------- -------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss..................................................... ($ 682,853) ($ 1,309,629) ($ 1,438,749)
Net realized gain on investments sold................................... 4,736,133 13,461,306 10,184,343
Change in net unrealized appreciation/depreciation of investments....... ( 78,528) 13,067,131 2,282,873
---------- ----------- ------------
Net Increase in Net Assets Resulting from Operations................... 3,974,752 25,218,808 11,028,467
---------- ----------- ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A - ($1.2625, $1.6414 and none per share, respectively).......... ( 3,443,707) ( 9,890,377) --
Class B - ($1.2625, $1.6414 and none per share, respectively).......... ( 614,018) ( 2,261,154) --
---------- ----------- ------------
Total Distributions to Shareholders.................................. ( 4,057,725) ( 12,151,531) --
---------- ----------- ------------
From Fund Share Transactions-- Net*....................................... 19,850,814 116,170,259 15,175,733
---------- ----------- ------------
Net Assets:
Beginning of period..................................................... 41,749,461 61,517,302 190,754,838
---------- ----------- ------------
End of period (including accumulated net investment loss of none, none, and
$11,949, respectively)................................................. $61,517,302 $190,754,838 $216,959,038
========== =========== ============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------- PERIOD FROM JANUARY 1, 1996
1994 1995 TO OCTOBER 31,1996(1)
---------------------- --------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold.......................... 1,628,280 $29,997,844 3,475,266 $84,847,624 5,635,772 $142,521,461
Shares issued in reorganization -
Note E ............................. -- -- 2,736,868 75,930,600 -- --
Shares issued to shareholders in
reinvestment of distributions....... 184,986 3,235,355 326,658 8,057,488 -- --
-------- ---------- -------- ---------- ----------- ------------
1,813,266 33,233,199 6,538,792 168,835,712 5,635,772 142,521,461
Less shares repurchased.............. (1,279,970) ( 22,995,150) (3,139,612) ( 76,326,307) ( 5,524,587) (140,513,358)
-------- ---------- -------- ---------- ----------- ------------
Net increase......................... 533,296 $10,238,049 3,399,180 $92,509,405 111,185 $ 2,008,103
======== ========== ======== ========== =========== ============
CLASS B
Shares sold.......................... 563,553 $10,264,273 2,136,672 $52,751,817 1,386,160 $ 33,871,394
Shares issued in reorganization -
Note E............................. -- -- 21,055 576,404 -- --
Shares issued to shareholders in
reinvestment of distributions....... 33,535 581,498 83,607 2,026,634 -- --
-------- ---------- -------- ---------- ----------- ------------
597,088 10,845,771 2,241,334 55,354,855 1,386,160 33,871,394
Less shares repurchased.............. ( 69,825) ( 1,233,006) (1,283,970) ( 31,694,001) ( 849,036) ( 20,703,764)
-------- ---------- -------- ---------- ----------- ------------
Net increase......................... 527,263 $ 9,612,765 957,364 $23,660,854 537,124 $ 13,167,630
======== ========== ======== ========== =========== ============
</TABLE>
(1) Effective October 31, 1996, the fiscal period changed from December 31 to
October 31.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Financial Highlights
Selected data for each share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios, and supplemental data are as
follows:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM
----------------------------------------- JANUARY 1, 1996 TO
1991 1992 1993 1994 1995 OCTOBER 31, 1996(7)
------- ------- ------- ------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period................... $ 12.44 $ 15.60 $ 14.94 $ 17.45 $ 17.84 $ 24.51
------- ------- ------- ------- -------- --------
Net Investment Income (Loss)........................... 0.05 ( 0.15)(2) ( 0.21) ( 0.22)(1) ( 0.22)(1)(2)( 0.14)(1)
Net Realized and Unrealized Gain on Investments,
Options and Foreign Currency Transactions............ 4.11 1.00 4.92 1.87 8.53 1.42
------- ------- ------- ------- -------- --------
Total from Investment Operations.................... 4.16 0.85 4.71 1.65 8.31 1.28
------- ------- ------- ------- -------- --------
Less Distributions:
Dividends from Net Investment Income................... ( 0.04) -- -- -- -- --
Distributions from Net Realized Gain on Investments
Sold, Options and Foreign Currency Transactions...... ( 0.96) ( 1.51) ( 2.20) ( 1.26) ( 1.64) --
------- ------- ------- ------- -------- --------
Total Distributions................................. ( 1.00) ( 1.51) ( 2.20) ( 1.26) ( 1.64) --
------- ------- ------- ------- -------- --------
Net Asset Value, End of Period......................... $ 15.60 $ 14.94 $ 17.45 $ 17.84 $ 24.51 $ 25.79
======= ======= ======= ======= ======== ========
Total Investment Return at Net Asset Value (6)......... 33.05% 5.70% 32.06% 9.62% 46.53% 5.22%(9)
Total Adjusted Investment Return at Net Asset Value (6) -- 5.53%(3) -- -- 46.41%(3) --
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted).............. $31,580 $32,094 $41,749 $52,193 $155,001 $166,010
Ratio of Expenses to Average Net Assets................ 2.32% 2.05%(2) 2.10% 2.16% 1.67%(2) 1.57%(8)
Ratio of Net Investment Income (Loss) to Average
Net Assets.......................................... 0.34% ( 0.88%)(2)( 1.49%) ( 1.25%) ( 0.89%)(2) ( 0.68%)(8)
Portfolio Turnover Rate................................ 67% 76% 86% 67% 70% 64%
Average Brokerage Commission Rate (10)................. N/A N/A N/A N/A N/A $ 0.0685
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Financial Highlights (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD FROM
---------------------- JANUARY 1, 1996 TO
1994 1995 OCTOBER 31, 1996(7)
------ ------- ---------------------
<S> <C> <C> <C>
CLASS B(4)
Per Share Operating Performance
Net Asset Value, Beginning of Period..................................... $17.24(5) $ 17.68 $ 24.08
------ ------- -------
Net Investment Loss...................................................... ( 0.35)(1) ( 0.39)(1)(2) ( 0.28)(1)
Net Realized and Unrealized Gain on Investments and Options.............. 2.05 8.43 1.40
------ ------- -------
Total from Investment Operations....................................... 1.70 8.04 1.12
------ ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and Options..... ( 1.26) ( 1.64) --
------ ------- -------
Net Asset Value, End of Period........................................... $17.68 $ 24.08 $ 25.20
====== ======= =======
Total Investment Return at Net Asset Value (6)........................... 10.02%(9) 45.42% 4.65%(9)
Total Adjusted Investment Return at Net Asset Value (6).................. -- 45.30%(3) --
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted)................................ $9,324 $35,754 $50,949
Ratio of Expenses to Average Net Assets.................................. 2.90%(8) 2.41%(2) 2.27%(8)
Ratio of Net Investment Loss to Average Net Assets....................... ( 1.98%)(8) ( 1.62%)(2)
( 1.38%)(8)
Portfolio Turnover Rate.................................................. 67% 70% 64%
Average Brokerage Commission Rate (10)................................... N/A N/A $0.0685
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Reflects voluntary fee reductions and expense limitations in effect during
the years ended December 31, 1995 and 1992, respectively. As a result of
such fee reductions, expenses of Class A and Class B shares of the Fund
for 1995 reflect reductions of $0.02 and $0.03 per share, respectively.
Absent such reductions, for 1995, the ratio of expenses to average net
assets would have been 1.79% and 2.53% for Class A and Class B shares,
respectively and the ratio of net investment income to average net assets
would have been (1.01%) and (1.74%) for Class A and Class B shares,
respectively. 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%).
(3) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the Adviser during the periods shown.
(4) Class B shares commenced operations on January 3, 1994.
(5) Initial price to commence operations.
(6) Assumes dividend reinvestment and does not reflect the effect of sales
charge.
(7) Effective October 31, 1996 the fiscal period changed from December 31 to
October 31.
(8) On an annualized basis.
(9) Not annualized.
(10) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
===============================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
Schedule of Investments
October 31, 1996
- -------------------------------------------------------------------------------
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
COMMON STOCKS
Aerospace / Aircraft (4.29%)
Boeing Co...................... 30,000 $ 2,861,250
United Technologies Corp....... 50,000 6,437,500
-----------
9,298,750
-----------
Broker Services (0.64%)
E* TRADE Group, Inc.*.......... 125,000 1,390,625
-----------
Business Services - Misc (0.74%)
Abacus Direct Corp.*........... 50,000 1,312,500
Sabre Group Holdings, Inc.*.... 10,000 305,000
-----------
1,617,500
-----------
Computer - Graphics (1.52%)
S3, Inc.*...................... 175,000 3,303,125
-----------
Computer - Integrated Systems (10.42%)
Computer Associates International, Inc. 200,000 11,825,000
Informix Corp.*................ 200,000 4,437,500
Oracle Corp.*.................. 150,000 6,346,875
-----------
22,609,375
-----------
Computer - Local Networks (10.75%)
Cheyenne Software, Inc.*....... 150,000 4,556,250
Cisco Systems, Inc.*........... 150,000 9,281,250
Madge Networks N.V. (Netherlands)* 50,000 500,000
Penril Datacom Networks, Inc.* (r) 150,000 1,537,500
3Com Corp.*.................... 110,000 7,438,750
-----------
23,313,750
-----------
Computer - Memory Devices (5.87%)
EMC Corp.*..................... 125,000 3,281,250
HMT Technology Corp.*.......... 125,000 1,734,375
Network Appliance, Inc.*....... 49,200 1,722,000
Read-Rite Corp.*............... 75,000 1,331,250
Seagate Technology, Inc.*...... 70,000 4,672,500
-----------
12,741,375
-----------
Computer - Mini / Macro (2.91%)
Compaq Computer Corp.*......... 40,000 2,785,000
Gateway 2000, Inc.*............ 75,000 3,529,687
-----------
6,314,687
-----------
Computer - Peripheral Equipment (5.86%)
Adaptec, Inc.*................. 110,000 6,696,250
Encad, Inc.*................... 55,000 2,255,000
U.S. Robotics Corp.*........... 60,000 3,772,500
-----------
12,723,750
-----------
The Schedule of Investments is a complete list of all securities owned by the
Global Technology Fund on October 31, 1996. It's divided into four main
categories: common stocks, warrants, bonds and short-term investments. The
stocks, warrants and bonds are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position are listed
last.
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
Computer - Services (1.08%)
America Online, Inc.*.......... 75,000 $ 2,034,375
Orckit Communications Ltd. (Israel)* 25,000 300,000
-----------
2,334,375
-----------
Computer - Software (20.18%)
Aurum Software, Inc.*.......... 3,200 101,600
Business Objects S.A.
American Depositary Receipts
(ADR) (France)*............... 75,000 1,115,625
Electronics for Imaging, Inc.*. 50,000 3,600,000
GT Interactive Software Corp.*. 40,000 765,000
HNC Software, Inc.*............ 75,000 2,362,500
Hummingbird Communications Ltd.
(Canada)*..................... 75,000 2,137,500
Insignia Solutions, Inc. (ADR)
(Great Britain)*.............. 100,000 537,500
Integrated Measurement Systems, Inc. * 75,000 1,171,875
Memco Software Ltd. (Israel)*.. 6,500 118,625
MetaTools, Inc.*............... 60,000 1,155,000
Microsoft Corp.*............... 50,000 6,862,500
Network General Corp.*......... 50,000 1,206,250
Novadigm, Inc. *............... 160,000 1,300,000
Parametric Technology Corp. *.. 150,000 7,331,250
Platinum Technology, Inc. *.... 125,000 1,796,875
Saville Systems Ireland PLC,
(ADR) (Ireland)*.............. 32,500 1,401,562
Security Dynamics Technologies, Inc.* 10,000 812,500
Software 2000, Inc.*........... 53,000 384,250
Synopsys, Inc.*................ 100,000 4,500,000
Verity, Inc.*.................. 50,000 593,750
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
===============================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
Computer - Software (continued)
Versant Object Technology Corp* 80,000 $ 1,560,000
Wang Laboratories, Inc.*....... 100,000 2,337,500
Worldtalk Communications Corp.* 50,000 625,000
-----------
43,776,662
-----------
Electronics (9.53%)
Analog Devices, Inc.*.......... 90,000 2,340,000
Atmel Corp.*................... 100,000 2,537,500
General Motors Corp. (Class H). 50,000 2,668,750
Intel Corp..................... 60,000 6,592,500
LSI Logic Corp.*............... 125,000 3,312,500
Ramtron International Corp.*... 214,007 1,578,302
Xilinx, Inc.*.................. 50,000 1,637,500
-----------
20,667,052
-----------
Instruments - Scientific (2.52%)
Thermo Electron Corp.*......... 150,000 5,475,000
-----------
Printing - Commercial (0.73%)
Applied Graphics Technologies, Inc.* 100,000 1,575,000
-----------
Retail (1.19%)
Tech Data Corp.*............... 100,000 2,575,000
-----------
Telecom (6.63%)
ECI Telecommunications Ltd. (Israel) 100,000 2,000,000
Intelect Communications
System Ltd. (Bermuda) *....... 195,000 1,194,375
Lightbridge, Inc.*............. 75,000 721,875
Loral Space & Communications System* 60,000 952,500
N2K Inc.* (r).................. 671,860 436,709
Premiere Technologies, Inc.*... 70,000 1,137,500
Primus Telecommunications
Group, Inc.* (r).............. 70,000 1,431,500
QUALCOMM, Inc.*................ 60,000 2,385,000
SmarTalk Teleservices, Inc.*... 100,000 1,500,000
SSE Telecom, Inc.*............. 100,000 912,500
Telco Communications Group*.... 75,000 1,218,750
Worldcomm Systems, Inc.* (r)... 37,510 500,001
-----------
14,390,710
-----------
Transport (5.82%)
AMR Corp.*..................... 60,000 5,040,000
UAL Corp.*..................... 160,000 7,580,000
-----------
12,620,000
-----------
TOTAL COMMON STOCKS
(Cost $128,087,125) (90.68%) 196,726,736
------ -----------
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
WARRANTS
Electronics (0.09%)
Ibis Technology Corp.*......... 70,000 $ 201,250
-----------
TOTAL WARRANTS
(Cost $14,000) ( 0.09%) 201,250
------ -----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $128,101,125) (90.77%) 196,927,986
------ -----------
PAR VALUE
INTEREST S&P (000'S
RATE** RATING** OMITTED)
-------- -------- ----------
BONDS
Aerospace / Aircraft (0.09%)
Aeronca, Inc., (r)
Conv Sub Deb 01-31-00. 12.50% NR $252 189,000
-----------
Telecom (0.19%)
Tele 2000
Conv Note 04-14-97
(Peru) (R)............ 9.75 NR 500 425,000
-----------
Transport (0.37%)
Northwest Airlines, Inc.,
Sr Note 12-31-00...... 12.09 BB- 286 294,119
Piedmont Aviation Inc.,
Equip Tr Cert 1988
Ser F 03-28-09........ 10.35 B+ 500 507,760
-----------
801,879
-----------
TOTAL BONDS
(Cost $1,476,323) ( 0.65%) 1,415,879
------ -----------
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
===============================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE** OMITTED) MARKET VALUE
- ------------------- -------- ---------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.33%)
Investment in a joint repurchase
agreement transaction with SBC
Capital Markets, Inc. Dated
10-31-96, Due 11-01-96 (Secured
by U.S. Treasury Bonds, 6.25% thru
12.00%, due 11-15-12 thru 8-15-23) -
Note A................ 5.54% $13,732 $ 13,732,000
-----------
Short-Term Notes (1.84%)
Merrill Lynch & Co., Inc.,
Due 11-01-96.......... 5.25 4,000 4,000,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75%.... 275
-----------
TOTAL SHORT-TERM INVESTMENTS ( 8.17%) 17,732,275
------ -----------
TOTAL INVESTMENTS (99.59%) $216,076,140
====== ===========
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. Rule 144A
securities amounted to $425,000, as of October 31, 1996.
(r) Direct placement securities are restricted to resale. They have been
valued at fair value by the Trustees after consideration of restrictions as to
resale, financial condition and prospects of the issuer, general market
conditions and pertinent information in accordance with the Fund's By-Laws and
the Investment Company Act of 1940, as amended. The Fund has limited rights to
registration under the Securities Act of 1933 with respect to these restricted
securities. Additional information on each restricted security is as follows:
MARKET
VALUE AS A
PERCENTAGE MARKET
ACQUISITION ACQUISITION OF FUND'S VALUE AT
SECURITY DATE COST NET ASSETS OCTOBER 31, 1996
- -------- ----------- ----------- ---------- ----------------
Aeronca, Inc. -
Common Stock..... 02-01-96 $ 242,252 0.09% $ 189,000
N2K Inc. -
Common Stock..... 11-14-91 940,604 0.20 436,709
Penril Datacom
Networks, Inc. -
Common Stock..... 02-09-96 1,042,500 0.71 1,537,500
Primus Telecommunications Group, Inc.
Common Stock..... 10-30-95 500,000
Common Stock..... 01-23-96 240,000 0.66 1,431,500
Worldcomm Systems, Inc. -
Common Stock..... 03-30-95 500,000 0.23 500,001
*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.
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.
15
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Technology Series, Inc. (the "Company") is a diversified open-end
management investment company, registered under the Investment Company Act of
1940. The Company consists of one series: John Hancock Global Technology Fund
(the "Fund"). On June 25, the Board of Directors voted to change the fiscal
period end from December 31 to October 31. This change is effective October 31,
1996. The investment objective of the Fund is to achieve long-term capital
growth by investing principally in equity securities of foreign and U.S.
companies that rely extensively on
technology in their product development or operations.
The Directors have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends, and liquidation, except that
certain expenses, subject to the approval of the 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 and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Directors. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement. Aggregate cash balances
are invested in one or more repurchase agreements, whose underlying securities
are obligations of the U.S. government and/or its agencies. The Fund's
custodian bank receives delivery of the underlying securities for the joint
account on the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment companies
and to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities must be treated as ordinary income
even though such items are gains and losses for accounting purposes.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses
that may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Company are directly identifiable
to an individual fund. Expenses which are not identifiable to a specific fund
are allocated in such a manner as deemed equitable, taking into consideration,
among other things, the nature and type of expense and the relative sizes of
the funds.
16
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
CLASS ALLOCATIONS Income, common expenses and realized and
unrealized gains (losses) are calculated at the Fund level and allocated daily
to each class of shares based on the appropriate net assets of the respective
classes. Distribution and service fees if any, are calculated daily at the
class level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities,
revenues, and expenses of the Fund. Actual results could differ from these
estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Adviser is responsible for managing the Fund's investment business affairs
and overseeing the investment activities of the sub-adviser. The Adviser has a
sub-investment management contract with American Fund Advisors, Inc. (the
"Sub-Adviser"), under which the Sub-Adviser, subject to the review of the
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, the Fund pays a monthly management
fee to the Adviser, equivalent on an annual basis, to the sum of (a) 0.85% of
the first $100,000,000 of the Fund's average daily net asset value and (b)
0.75% of the Fund's average daily net asset value in excess of $100,000,000.
The Adviser pays the Sub-Adviser a monthly management fee, equivalent on an
annual basis, to the sum of (a) 0.35% of the first $100,000,000 of the Fund's
average daily net asset value and (b) 40% of the investment advisory fee
received by the Adviser on amounts over $100,000,000. The Fund pays a monthly
administrative fee at the rate of $100,000 per annum to the Adviser for
performance of administrative services to the Fund.
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.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended October
31, 1996, net sales charges received with regard to sales of Class A shares
amounted to $414,197. Out of this amount, $62,394 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$258,072 was paid as sales commissions to unrelated broker-dealers and $93,731
was paid as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and
Sutro & Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's
indirect parent, John Hancock Mutual Life Insurance Company, is the indirect
sole shareholder of Distributors and John Hancock Freedom Securities
Corporation and its subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 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 October 31,
1996, contingent deferred sales charges paid to JH Funds amounted to $127,842.
17
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
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. Accordingly, the Fund will make payments to JH Funds for
distribution and service expenses, at an annual rate not to exceed 0.30% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to reimburse JH Funds for its distribution and service costs. Up to a maximum
of 0.25% of such payments may be service fees as defined by the amended Rules
of Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Investor Services a fee based on the number of
shareholder accounts and certain out-of-pocket expenses.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C. Hodsdon
are directors and officers 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. Effective with the fees paid for 1995, the unaffiliated
Directors may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund makes investments into other John Hancock funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the related other asset
are always equal and are marked to market on a periodic basis to reflect any
income earned by the investment as well as any unrealized gains or losses. At
October 31, 1996, the Fund's investments to cover the deferred compensation
liability had unrealized appreciation of $760.
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 October 31, 1996, aggregated $127,157,071 and $116,737,934, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 (excluding the corporate
savings account), for federal income tax purposes was $147,374,603. Gross
unrealized appreciation and depreciation of investments aggregated $81,588,342
and $12,887,080, respectively, resulting in net unrealized appreciation of
$68,701,262.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified $1,426,800
from accumulated net investment loss to capital paid-in. This represents the
amount necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 1996. Additional adjustments may be
needed in subsequent reporting periods. These reclassifications, which have no
impact on the net asset value of the Fund, are primarily attributable to the
treatment of net operating losses in the computation of distributable income
and capital gains under federal tax rules versus generally accepted accounting
principles. The calculation of net investment income per share in the financial
highlights excludes these adjustments.
18
<PAGE>
===============================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Global Technology Fund
NOTE E --
REORGANIZATION
On July 19, 1995, the shareholders of the John Hancock National Aviation &
Technology Fund (JHNA&T) approved a plan of reorganization between JHNA&T and
the Fund providing for the transfer of substantially all of the assets and
liabilities of JHNA&T to the Fund in exchange soley for Class A and Class B
shares of the Fund. The acquisition was accounted for a tax free exchange of
2,736,868 Class A shares, and 21,055 Class B shares of John Hancock Global
Technology Fund for the net assets of JHNA&T,which amounted to $75,930,600 and
$576,404 for Class A and Class B shares, respectively, including $41,806,567 of
unrealized appreciation, after the close of business at July 28, 1995. The
aggregate net assets of the Fund and JHNA&T immediately before the acquisition
were $117,123,530 and $75,507,004 for Class A and Class B, respectively. The
aggregate net assets of the Fund and JHNA&T immediately after the merger were
$193,630,533.
19
<PAGE>
===============================================================================
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 series of John Hancock Technology Series, Inc.) at October
31, 1996, and the results of its operations, 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 the significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at October
31, 1996 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
DECEMBER 12, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1996.
The Fund has not paid any distributions of ordinary income dividends or net
long-term capital gains during the fiscal year ended October 31, 1996. It is
anticipated that there will be a distribution from sales of securities to
shareholders of record on December 23, 1996 and payable December 30, 1996.
Shareholders will receive a 1996 U.S. Treasury Department Form 1099-DIV in
January 1997 representing their proportionate share.
None of the distributions qualify for the dividends received deduction
available to corporations.
20
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NOTES
John Hancock Funds - Global Technology Fund
21
<PAGE>
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NOTES
John Hancock Funds - Global Technology Fund
22
<PAGE>
===============================================================================
NOTES
John Hancock Funds - Global Technology Fund
23
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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."]
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603
-------------
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-------------
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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 recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
8300A 10/96
12/96
