<PAGE> 1
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SPECIAL
OPPORTUNITIES
FUND
SEMI-ANNUAL REPORT
APRIL 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Frederick L. Cavanaugh, Jr.
Vice President
David A. Beckwith
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
INVESTMENT SUB-ADVISER
John Hancock Advisers International Limited
34 Dover Street
London, England W1X3RA
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ EDWARD J. BOUDREAU, JR.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY MICHAEL P. DICARLO,
CHIEF EQUITY OFFICER AND PORTFOLIO MANAGER
JOHN HANCOCK
SPECIAL OPPORTUNITIES FUND
Falling interest rates spur stocks to new highs;
growth stocks deliver earnings, appear to gain momentum
Market conditions have changed dramatically since the last time we reported to
shareholders. Interest rates, after having risen sharply for the better part of
a year, peaked around the beginning of the period in November and started
heading back down. Stocks rallied in response, although aggressive growth stocks
- -- the focus of the Fund's investment strategy -- tended to lag the larger, blue
chip stocks that make up the Dow Jones Industrial Average. All this took place
against a backdrop of much slower economic growth. Initial estimates of
first-quarter growth in the gross domestic product were less than 3% at an
annualized rate, compared to more than 5% in the fourth quarter of 1994.
John Hancock Special Opportunities Fund finished the period with a positive
return, recapturing some of the losses suffered earlier last year. For the six
months ended April 30, 1995, the Fund's total return at net asset value was
5.93% for Class A shares and 5.72% for Class B shares. Those returns compared
favorably with the total return of 5.13% for the average capital appreciation
fund tracked by Lipper Analytical Services.(1)
New shareholders may need to be reminded of the Fund's unique investment
strategy. In a
[A 2 1/2" x 3 3/4" photo of Michael P.
DiCarlo at bottom right. Caption reads:
"Michael P. DiCarlo, Portfolio Manager"]
[CAPTION]
"MARKET CONDITIONS HAVE CHANGED DRAMATICALLY..."
3
<PAGE> 4
John Hancock Funds - Special Opportunities Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holders: 1) Microsoft Corp. 5.2% 2) Infinity
Broadcasting 4.5% 3) CUC International 4.3% 4) Computer Associates
International 4.3% 5) America Online 4.2%. A footnote below reads: "As a
percentage of net assets on April 30, 1995."]
nutshell, we make concentrated investments in the five sectors of the economy
that we believe hold the best potential for growth. Our continuing search for
the most attractive opportunities led us out of two sectors -- retail and
telecommunications -- at the end of the period and into new areas. What follows
is a sector-by-sector rundown of the Fund's performance during the past six
months.
HEALTH CARE
We began buying health-care stocks about six months ago, focusing on companies
we felt had the best chance to prosper in a climate of reform. Everybody still
seems to agree on the need for cost containment in health care. But it looks now
as if that will be accomplished in the private sector rather than with
government mandates. That creates opportunities for managed-care providers like
HMOs and home-care specialists, whose focus is cost containment. Examples
include HealthSouth Rehabilitation and Coventry, both of which are growing at
better than 30% annually and are possible takeover targets as the industry
consolidates. Overall, this sector was flat during the period.
MEDIA/INFORMATION DISTRIBUTION
The case for media and information distribution rests with all the changes
taking place in the way we bring knowledge and entertainment into our homes.
This sector was a big gainer for the Fund, driven by the outstanding performance
of America Online, which was up more than 160% during the period. America Online
is the fastest growing -- and now the largest -- on-line computer service. On
the media side, Walt Disney profited from the weak U.S. dollar as foreign
tourists increased attendance at its theme parks. Infinity Broadcasting, among
the Fund's largest investments, has had success lately buying laggard radio
stations in big markets and converting them to dominant players.
TECHNOLOGY
This was our biggest sector concentration, and our most successful. Microsoft
performed well as investors anticipated the release of the latest version of its
Windows software. Another big winner was Helix Technology, which makes equipment
used to manufacture semiconductors. Semiconductors are the guts of every new
piece of productivity-enhancing technology that comes along. And they've helped
fuel what's shaping up as the next industrial revolution. Finally, Computer
Associates International had a strong period, buoyed by growing sales of its
database management software for mainframe computers.
[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 America
Online followed by an up arrow and the phrase "Growing subscriber base." The
second listing is Walt Disney followed by an up arrow and the phrase "Weak
dollar attracts foreign tourists." The third listing is Ann Taylor followed by
a down arrow and the phrase "Slowing economy cuts spending." Footnote below
reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
[CAPTION]
"WE BEGAN BUYING HEALTH-CARE STOCKS ABOUT SIX MONTHS AGO..."
4
<PAGE> 5
John Hancock Funds - Special Opportunities Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the six months ended April 30, 1995." The
chart is scaled in increments of 3% bottom to top, with 6% at the top and 0% at
the bottom. Within the chart, there are three solid bars. The first represents
the 5.93% total return for John Hancock Special Opportunities Fund: Class A.
The second represents the 5.72% total return for John Hancock Special
Opportunities Fund: Class B. The third represents the 5.13% total return for
the average capital appreciation fund. Footnote below reads: "Total returns for
John Hancock Special Opportunities Fund are at net asset value with all
distributions reinvested. The average capital appreciation fund is tracked by
Lipper Analytical Service.(1) See following page for historical performance
information."]
RETAIL AND TELECOMMUNICATIONS ARE OUT;
PRECIOUS METALS AND OIL AND GAS ARE IN
By the end of the period, only two retail names remained in the Fund -- Tommy
Hilfiger and St. John Knits, both of which are mainly apparel manufacturers
rather than retailers. The problems with the sector began after what turned out
to be a strong Christmas season. Unfortunately, consumers ran up a lot of
credit-card debt in the process, and that made prospects look bleak for the rest
of '95. The other sector we've been winding out of is telecommunications. It
performed reasonably well but has limited potential going forward. At the end of
April, our only remaining telecommunications holdings were Vanguard Cellular and
International CableTel. General Instruments and Scientific Atlanta, both
equipment manufacturers that profited from growth in developing communications
and the cable industry, had already been sold.
Precious metals, one of two new sectors in the Fund, look attractive for
several reasons. First, with all the regional crises and economic dislocations
that have roiled international markets in recent months, more people now want to
own gold as a means of protecting and creating wealth. Second, Chinese citizens
are now allowed to buy gold, and that's potentially a huge market. Finally,
demand by the jewelry industry continues to outstrip supply. As a result, for
the first time in years, we're seeing real signs of increased demand for
precious metals.
Oil and gas is the other new sector where we'll be looking for opportunities
in the months ahead. It's a play on increased demand for energy from developing
countries, including China, at a time when production in two of the world's
largest suppliers, the United States and Russia, has fallen off dramatically.
OUTLOOK
As the economy slows and blue-chip companies, especially the more
economically-sensitive ones, have a harder time sustaining earnings growth, we
think aggressive growth stocks may be in a position to outperform the broader
market in the months ahead. If there's one thing long-term investors have been
able to count on over the years, it's this: Stock prices follow earnings. That
bodes well for the kind of companies we look for -- those that can deliver
strong earnings growth in good economic times and bad.
- ---------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"PRECIOUS METALS, ONE OF TWO NEW SECTORS IN THE FUND, LOOK ATTRACTIVE FOR
SEVERAL REASONS."
5
<PAGE> 6
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Special Opportunities Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on November
1, 1993 were (3.08%) and (6.19%) respectively, and reflect payment of the
maximum sales charge of 5.00%. The average annualized total returns for Class B
shares for the 1-year period and since inception on November 1, 1993 were
(3.75%) and (6.82%) respectively, and reflect the applicable contingent deferred
sales charge (maximum contingent deferred sales charge is 5.00% and declines to
0% over 6 years). The Adviser voluntarily limited the Fund's expenses, including
the management fee (but not including the transfer agent and 12b-1 fees) to
0.90% of the Fund's average daily net assets. Without the limitation of
expenses, the average annualized total returns for Class A shares for the 1-year
period and since inception on November 1, 1993 would have been (3.20%) and
(6.31%), respectively. The average annualized total returns for Class B shares
for the 1-year period and since inception on November 1, 1993 would have been
(3.78%) and (6.94%), respectively. All performance data shown represents 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. See the prospectus for risks associated with industry segment investing.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
SPECIAL OPPORTUNITIES FUND: CLASS A
[Line chart with the heading Special Oportunities 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 $11,472* as of April 30, 1995. The second line represents the value
of the hypothetical $10,000 investment made in the Special Oportunities Fund on
November 1, 1993, before sales charge, and is equal to $9,882 as of April 30,
1995. The third line represents the Special Oportunities Fund after sales
charge and is equal to $9,385 as of April 30, 1995.]
SPECIAL OPPORTUNITIES FUND: CLASS B
[Line chart with the heading Special Oportunities 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 Standard & Poor's 500 Stock Index and
is equal to $11,472* as of April 30, 1995. The second line represents the value
of the hypothetical $10,000 investment made in the Special Oportunities Fund on
November 1, 1993, before sales charge, and is equal to $9,788 as of April 30,
1995. The third line represents the Special Oportunities Fund after sales
charge and is equal to $9,299 as of April 30, 1995.]
*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 - Special Opportunities Fund
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $196,491,658) .............. $229,460,418
Joint repurchase agreement (cost - $9,154,000) ... 9,154,000
Corporate savings account ........................ 3,607
-----------
238,618,025
Receivable for shares sold ......................... 413,390
Interest receivable ................................ 1,623
Dividends receivable ............................... 78,841
Deferred organization expenses - Note A ............ 91,420
-----------
Total Assets .................... 239,203,299
------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ..................... 367,470
Payable for investments purchased .................. 4,205,252
Payable to John Hancock Advisers, Inc. and
affiliates - Note B .............................. 202,459
Accrued fees and expenses .......................... 154,029
-----------
Total Liabilities ............... 4,929,210
------------------------------------------------------------
NET ASSETS:
Capital paid-in .................................... 231,940,618
Accumulated net realized loss on investments and
foreign currency transactions .................... (29,630,580)
Net unrealized appreciation of investments and
foreign currency transactions .................... 32,969,036
Accumulated net investment loss .................... (1,004,985)
-----------
Net Assets ...................... $234,274,089
============================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest
outstanding - unlimited number of shares authorized with no
par value, repectively)
Class A - $99,715,790/11,866,531 ................... $ 8.40
===============================================================================
Class B - $134,558,299/16,174,765 .................. $ 8.32
===============================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($8.40 x 105.26%) ........................ $ 8.84
===============================================================================
<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 C shares commenced operations on July 6, 1994. All shares were redeemed
on April 12, 1995.
</TABLE>
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 APRIL 30, 1995. 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>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Interest ........................................... $ 772,252
Dividends (net of foreign withholding taxes
of $42,762) ...................................... 391,982
----------
1,164,234
----------
Expenses:
Investment management fee - Note B ............... 881,890
Distribution/service fee - Note B
Class A ......................................... 138,822
Class B ......................................... 638,807
Transfer agent fee - Note B
Class A ......................................... 173,623
Class B ......................................... 242,976
Class C** ....................................... 81
Custodian fee .................................... 26,064
Trustees' fees ................................... 21,784
Auditing fee ..................................... 13,414
Organization expense - Note A .................... 12,916
Legal fees ....................................... 11,966
Printing ......................................... 6,876
----------
Total Expenses .................. 2,169,219
------------------------------------------------------------
Net Investment Loss ............. (1,004,985)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold .............. (6,646,585)
Net realized loss on foreign currency transactions.. (16,637)
Change in net unrealized appreciation/depreciation
of investments ................................... 20,126,861
Change in net unrealized appreciation/depreciation
of foreign currency transactions ................. 276
----------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions ........... 13,463,915
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ....... $12,458,930
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
FOR THE PERIOD
NOVEMBER 1, 1993
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1995 OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss ...................................................................... $ (1,004,985) $ (1,363,789)
Net realized loss on investments sold and foreign currency transactions .................. (6,663,222) (22,967,358)
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions.................................................................... 20,127,137 12,841,899
------------- -------------
Net Incease (Decrease) in Net Assets Resulting from Operations ......................... 12,458,930 (11,489,248)
------------- -------------
FROM FUND SHARE TRANSACTIONS-- NET* ....................................................... (2,657,846) 235,962,253
------------- -------------
NET ASSETS:
Beginning of period ...................................................................... 224,473,005 ....
------------- -------------
End of period (including accumulated net investment loss of $1,004,985 and none,
respectively) ........................................................................... $234,274,089 $224,473,005
============= =============
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE PERIOD NOVEMBER 1, 1993
APRIL 30, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
-------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ............................................ 1,716,425 $13,500,384 20,116,435 $167,224,012
Shares issued in reorganization - Note D................ 1,058,125 8,798,091 .... ....
----------- ------------ ----------- -------------
2,774,550 22,298,475 20,116,435 167,224,012
Less shares repurchased ................................ (2,555,164) (20,121,206) (8,469,290) (70,395,194)
----------- ------------ ----------- -------------
Net increase ........................................... 219,386 $ 2,177,269 11,647,145 $ 96,828,818
=========== ============ =========== =============
CLASS B
Shares sold ............................................ 1,609,581 $12,491,048 19,318,988 $159,278,074
Shares issued in reorganization - Note D................ 69,972 584,726 .... ....
----------- ------------ ----------- -------------
1,679,553 13,075,774 19,318,988 159,278,074
Less shares repurchased ................................ (2,265,816) (17,739,179) (2,557,960) (20,304,549)
----------- ------------ ----------- -------------
Net increase (decrease) ................................ (586,263) $(4,663,405) 16,761,028 $138,973,525
=========== ============ =========== =============
CLASS C**
Shares sold ............................................ 11,302 $ 89,559 21,556 $ 166,302
Less shares repurchased ................................ (32,055) (261,269) (803) (6,392)
----------- ------------ ----------- -------------
Net increase (decrease) ................................ (20,753) ($171,710) 20,753 $ 159,910
=========== ============ =========== =============
<FN>
** Class C shares commenced operations on July 6, 1994. All shares were redeemed
on April 12, 1995.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities 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
listed as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED FOR THE PERIOD NOVEMBER 1, 1993
APRIL 30, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
---------------- -------------------------------
CLASS A
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................ $ 7.93 $ 8.50
-------- --------
Net Investment Loss ............................................. (0.02)(b) (0.03)(b)
Net Realized and Unrealized Gain (Loss) on Investments .......... 0.49 (0.54)
-------- --------
Total from Investment Operations .............................. 0.47 (0.57)
-------- --------
Net Asset Value, End of Period .................................. $ 8.40 $ 7.93
======== ========
Total Investment Return at Net Asset Value ...................... 5.93% (6.71)%
Total Adjusted Investment Return at Net Asset Value(a) ......... -- (6.83)%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ....................... $ 99,716 $ 92,325
Ratio of Expenses to Average Net Assets ** ...................... 1.57%* 1.50%
Ratio of Adjusted Expenses to Average Net Assets(a) ............. -- 1.62%
Ratio of Net Investment Loss to Average Net Assets .............. (0.53%)* (0.41)%
Ratio of Adjusted Net Investment Loss to Average Net Assets(a) .. -- (0.53)%
Portfolio Turnover Rate ......................................... 73% 57%
** Expense Reimbursement Per Share .............................. -- $ 0.01(b)
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ............................ $ 7.87 $ 8.50
-------- --------
Net Investment Loss ............................................. (0.04)(b) (0.09)(b)
Net Realized and Unrealized Gain (Loss) on Investments .......... 0.49 (0.54)
-------- --------
Total from Investment Operations .............................. 0.45 (0.63)
-------- --------
Net Asset Value, End of Period .................................. $ 8.32 $ 7.87
======== ========
Total Investment Return at Net Asset Value ...................... 5.72% (7.41)%
Total Adjusted Investment Return at Net Asset Value(a) .......... -- (7.53)%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ....................... $134,558 $131,983
Ratio of Expenses to Average Net Assets ** ...................... 2.26%* 2.22%*
Ratio of Adjusted Expenses to Average Net Assets(a) ............. -- 2.34%*
Ratio of Net Investment Loss to Average Net Assets .............. (1.19%)* (1.13)%*
Ratio of Adjusted Net Investment Loss to Average Net Assets(a) .. -- (1.25)%*
Portfolio Turnover Rate ......................................... 73% 57%
** Expense Reimbursement Per Share .............................. -- $ 0.01(b)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
PERIOD ENDED FOR THE PERIOD JULY 6, 1994
APRIL 12, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
---------------- ----------------------------
CLASS C(e)
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .............................. $ 7.94 $ 7.60
------ ------
Net Realized and Unrealized Gain on Investments ................... 0.30(d) 0.34(d)
------ ------
Net Asset Value, End of Period .................................... $ 8.24 $ 7.94
====== ======
Total Investment Return at Net Asset Value ........................ 3.40% (4.47%)
Total Adjusted Investment Return at Net Asset Value(a) ............ -- (4.85%)(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ......................... $ 218 $ 165
Ratio of Expenses to Average Net Assets ** ........................ 0.98%* 1.01%*
Ratio of Adjusted Expenses to Average Net Assets(a) ............... -- 1.39%*
Ratio of Net Investment Income to Average Net Assets .............. 0.23%* 0.03%*
Ratio of Adjusted Net Investment Income to Average Net Assets(a) .. -- (0.35%)*
Portfolio Turnover Rate ........................................... 73% 57%
** Expense Reimbursement Per Share ................................ -- $ 0.01(b)
<FN>
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) On average month end shares outstanding.
(c) Unaudited.
(d) May not accord to amounts shown elsewhere in the financial statements.
(e) Net asset value and net assets at the end of the period reflect amounts
prior to the redemption of all shares on April 12, 1995.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT LOSS, GAINS (LOSSES),
AND TOTAL INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE
FOR A SHARE HAS CHANGED SINCE THE COMMENCEMENT OF OPERATIONS. 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 - Special Opportunities Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
COMMON STOCKS
BROADCASTING (7.76%)
Infinity Broadcasting Corp. (Class A)**.. 244,700 $ 10,430,339
Lin Television Corp.** .................. 215,000* 7,740,000
------------
18,170,339
------------
CHEMICAL (0.06%)
Kao Corp. (Japan) ....................... 12,000 145,684
------------
COMMERCIAL SERVICES (2.62%)
RTW, Inc.** ............................. 42,000* 609,000
Robert Half International, Inc.** ....... 210,000* 5,538,750
------------
6,147,750
------------
COMPUTERS (18.84%)
BMC Software, Inc.** .................... 155,000 9,610,000
Computer Associates International, Inc... 158,000 10,171,250
Lotus Development Corp.** ............... 25,000* 787,500
Microsoft Corp.** ....................... 150,000 12,262,500
Saber Software Corp.** .................. 25,000* 175,000
Seagate Technology, Inc.** .............. 208,500* 6,645,932
3Com Corp.** ............................ 80,000* 4,480,000
------------
44,132,182
------------
CONSTRUCTION (0.42%)
Australian National Industries, Ltd .....
(Australia) ........................... 200,000 209,580
CEMEX SA (Class B) American Depositary
Receipt (ADR) (Mexico) ................ 18,812 60,326
Chiyoda Corp. (Japan) ................... 6,000 76,412
Ekran Berhad (Malaysia) ................. 70,000 212,618
Hopewell Holdings (Hong Kong) ........... 200,000 142,140
Rust International, Inc.** .............. 15,500 240,250
Tolmex SA de CV (Mexico) ................ 11,000 37,132
------------
978,458
------------
DIVERSIFIED OPERATIONS (4.53%)
CUC International Inc.** ................ 250,000 10,187,500
Hutchinson Whampoa (Hong Kong) .......... 50,000 217,085
Ogden Corp. ............................. 10,000 203,750
------------
10,608,335
------------
ELECTRICAL (3.42%)
Consolidated Electric Power Asia Ltd.
(Hong Kong) .......................... 1,503 3,292
Integrated Device Technology, Inc.** ... 80,000* 3,050,000
Linear Technology Corp. ................ 80,000* 4,780,000
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SPECIAL OPPORTUNITIES FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. THE COMMON STOCKS ARE
FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
ELECTRICAL (CONTINUED)
Minnesota Power & Light Co. ............ 6,000 $ 156,750
Thermolase Corp.** ..................... 750 17,063
----------
8,007,105
----------
ELECTRONICS (3.48%)
Helix Technology Corp. ................. 236,400 7,742,100
Thermo Instrument Systems, Inc.** ...... 11,250 262,969
Thermotrex Corp.** ..................... 7,500 149,063
----------
8,154,132
----------
ENGINEERING (0.36%)
Dai-Dan Co., Ltd. (Japan) .............. 4,000 61,892
Fluor Corp. ............................ 5,000 257,500
Foster Wheeler Corp. ................... 8,000 296,000
Harding Associates, Inc.** ............. 16,000 98,000
Jacobs Engineering Group, Inc.** ...... 7,000 138,250
----------
851,642
----------
HAZARDOUS WASTE (2.44%)
Handex Environmental Recovery, Inc.**... 16,000 98,000
Rollins Environmental Services, Inc.**.. 25,000 115,625
TETRA Technologies, Inc.** ............. 412,000 5,510,500
----------
5,724,125
----------
HEALTHCARE (13.52%)
Coventry Corp.** ....................... 170,000* 3,995,000
HealthCare COMPARE Corp.**.............. 160,000* 4,810,000
HEALTHSOUTH Corp.** .................... 330,000* 6,517,500
Lincare Holdings, Inc.** ............... 160,000* 4,940,000
Rotech Medical Corp.** ................. 130,100* 4,228,250
Vencor, Inc.** ......................... 231,700* 7,182,700
----------
31,673,450
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
LEISURE & RECREATION (3.71%)
Cobra Golf, Inc.** .......................... 5,000 $ 108,750
Walt Disney Co., (The) ...................... 155,000* 8,583,125
------------
8,691,875
------------
MEDICAL (9.17%)
Boston Scientific Corp.** ................... 320,268* 8,727,303
Community Health Systems, Inc.** ........... 205,100* 7,127,225
MediSense, Inc.** ........................... 89,100* 1,436,738
Olympus Optical Co., Ltd. (Japan) ........... 10,000 99,979
STAAR Surgical Co.** ........................ 395,000* 4,098,125
------------
21,489,370
------------
METALS (4.04%)
Battle Mountain Gold Co. .................... 200,000* 2,200,000
Hemlo Gold Mines, Inc. ...................... 200,000* 2,225,000
Kinross Gold Corp. (Canada)** ............... 404,500* 2,452,443
M.I.M. Holdings Ltd. (Australia) ........... 50,480 73,842
Santa Fe Pacific Gold Corp.** ............... 200,000* 2,525,000
------------
9,476,285
------------
OIL & GAS (10.24%)
Benton Oil & Gas Co.** ...................... 400,000* 4,925,000
Coflexip (ADR) (France) ..................... 71,400* 2,154,267
Leviathan Gas Pipe Line** ................... 5,000 125,000
Nabors Industries, Inc.** ................... 288,600* 2,723,663
Petroleum Geo-Services AS (ADR)
(Norway)** ................................ 200,000* 5,462,500
Pride Petroleum Services, Inc.** ........... 515,500* 4,124,000
Seitel Inc.** ............................... 140,000* 4,480,000
------------
23,994,430
------------
SOLID WASTE (0.99%)
Amcor Ltd. (Australia) ...................... 36,759 270,190
Brambles Industries Ltd. (Australia) ........ 30,000 296,052
IMCO Recycling, Inc.** ...................... 9,500 149,625
Industrielle de Transports Automobiles
SA (France) ............................... 1,980 280,388
Kaiser Resources, Inc.** .................... 10,100 74,488
Laidlaw, Inc. (Class B) ..................... 23,500 211,500
Powerscreen International (United Kingdom)... 60,000 269,394
Thermo Fibertek, Inc.** ..................... 8,000 147,000
Thermo Remediation, Inc. .................... 15,000 241,875
Waste Management Intl., PLC, (ADR)
(United Kingdom)** ........................ 15,000 129,375
Wheelabrator Technologies, Inc. ............. 8,676 125,802
WMX Technologies, Inc. ...................... 4,835 131,754
------------
2,327,443
------------
TELECOMMUNICATIONS (9.45%)
America Online, Inc.** ...................... 210,000 $ 9,738,750
Cascade Communications Corp.* ............... 53,700* 3,866,400
International CableTel, Inc.** .............. 11,000 324,500
Renaissance Communications Corp.** .......... 184,000 5,060,000
Tele Communications, Inc. (Class A) ......... 10,000 191,250
Vanguard Cellular Systems, Inc. (Class A)**.. 133,300 2,949,263
------------
22,130,163
------------
TEXTILE-APPAREL MANUFACTURING (2.53%)
St. John Knits, Inc. ........................ 38,200 1,322,675
Tommy Hilfiger Corp.** ...................... 200,000 4,600,000
------------
5,922,675
------------
WATER TREATMENT (0.36%)
Compagnie Generale des Eaux (France) ...... 1,316 138,897
Kurimoto, Ltd. (Japan) .................... 12,000 137,114
Kurita Water Industry Co., Ltd. (Japan) ... 6,000 146,398
Lyonnaise Des Eaux Dumez (France ) ........ 2,000 199,191
Mitsubishi Kakoki Kaisha, Ltd. (Japan) .... 8,000 76,746
Wessex Water, PLC (United Kingdom) ........ 30,000 136,629
------------
834,975
------------
TOTAL COMMONS STOCKS
(Cost $196,491,658) ......... ( 97.94%) 229,460,418
---------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (OOO'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (3.91%)
Investment in a joint repurchase
agreement transaction with
B.T. Securities Corp. - Dated
04-28-95, Due 05-01-95
(secured by U.S. Treasury Bond,
10.75% Due 08-15-05, and
by U.S. Treasury Notes,
6.875% Due 10-31-96.)
Note A ........................ 5.93% $ 9,154 $ 9,154,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank and Trust Company
Daily Interest Savings Account
Current Rate 3.00% ............ 3,607
------------
TOTAL SHORT-TERM INVESTMENTS (3.91%) 9,157,607
-------- ------------
TOTAL INVESTMENTS (101.85%) $238,618,025
======== ============
</TABLE>
* Securities other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
PORTFOLIO CONCENTRATION
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SPECIAL OPPORTUNITIES FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE
UNITED STATES OF AMERICA. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE
ECONOMIC AND FINANCIAL CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE
CONCENTRATION OF INVESTMENTS BY INDUSTRY CATEGORY FOR INDIVIDUAL SECURITIES HELD
BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
COUNTRIES. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT
APRIL 30, 1995 ASSIGNED TO COUNTRY CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
<S> <C>
Australia .................................. 0.36%
Canada ..................................... 1.05
France ..................................... 1.18
Hong Kong .................................. 0.15
Japan ...................................... 0.32
Malaysia ................................... 0.09
Mexico ..................................... 0.04
Norway ..................................... 2.33
United Kingdom ............................. 0.23
United States .............................. 92.19
-----
TOTAL INVESTMENTS 97.94%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Special Opportunities Fund (the "Fund,"
which commenced operations on November 1, 1993), John Hancock Global Fund, John
Hancock Global Income Fund, John Hancock Short-Term Strategic Income Fund and
John Hancock International Fund. Prior to January 2, 1995, John Hancock Global
Fund was known as John Hancock Freedom Global Fund, John Hancock Global Income
Fund was known as John Hancock Freedom Global Income Fund, and John Hancock
International Fund was known as John Hancock Freedom International Fund.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C shares. The shares of each
class represent an interest in the same portfolio of investments of the Fund and
have equal rights to voting, redemption, dividends, and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Class C shares were outstanding during the period from
November 1, 1994 through April 12, 1995, but the Trustees abolished Class C
shares as of May 1, 1995. 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 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, the Fund has $22,967,357 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October 31,
2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. 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
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
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 Trust 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 sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the written option.
There were no written option transactions for the period ended April 30,
1995.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency exchange contract is closed out or offset by a
matching contract. Risks may arise upon entering these contracts from potential
inability of counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
There were no open foreign currency forward exchange contracts at April 30,
1995.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain percentage
of the value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the board of
trade or U.S.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
commodities exchange. Subsequent payments, known as "variation margin," are made
to and from the broker on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, there were no open positions in financial futures
contracts.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
NOTE B --
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of: (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value, (b) 0.75% of the next $500,000,000 and (c)
0.70% of the Fund's average daily net asset value in excess of $1,000,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets. The Adviser reserves the right to
terminate this voluntary limitation in the future.
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 April 30, 1995, JH Funds received net sales charges of $258,666
with regard to sales of Class A shares. Out of this amount, $38,823 was retained
and used for printing prospectuses, advertising, sales literature and other
purposes, $105,910 was paid as sales commissions to unrelated broker-dealers and
$113,933 was paid as sales commissions 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, which are broker-dealers.
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 April 30, 1995,
contingent deferred sales charges received by JH Funds amounted to $306,562.
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 shares pursuant
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Special Opportunities Fund
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 the Fund's average daily net assets
attributable to Class A shares and 1.00% of the Fund's average daily net assets
attributable to Class B shares, to reimburse JH Funds for its
distribution/service costs. Up to a maximum of 0.25% of these 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. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.30%, 0.32% and 0.10% of the
average daily net asset value of Class A, Class B and Class C shares of the
Fund, respectively, plus out of pocket expenses incurred by Investor Services on
behalf of the Fund for proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1995 aggregated $187,501,855 and
$142,695,256, respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for federal income tax purposes was $205,645,658. Gross
unrealized appreciation and depreciation of investments aggregated $38,642,252,
and $5,673,492, respectively, resulting in net unrealized appreciation of
$32,968,760.
NOTE D --
REORGANIZATION
On November 30, 1994, the shareholders of John Hancock Environmental Fund (JHEF)
approved a plan of reorganization between JHEF and the Fund providing for the
transfer of substantially all of the assets and liabilities of JHEF to the Fund
in exchange solely for Class A shares and Class B shares of the Fund. The
acquisition was accounted for as a tax free exchange of 1,058,125 Class A
shares, and 69,972 Class B shares for the net assets of JHEF which amounted to
$7,921,550 and $519,918 for Class A and Class B shares, respectively, including
$941,350 of unrealized depreciation, after the close of business at December 16,
1994.
17
<PAGE> 18
NOTES
John Hancock Funds - Special Opportunities Fund
18
<PAGE> 19
NOTES
John Hancock Funds - Special Opportunities Fund
19
<PAGE> 20
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM 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
Special Opportunities 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."]
<PAGE> 21
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
GLOBAL
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 22
TRUSTEES
EDWARD J. BOUDREAU, JR.
Chairman
WILLIAM A. BARRON, III*
DOUGLAS M. COSTLE*
LELAND O. ERDAHL*
RICHARD A. FARRELL*
WILLIAM F. GLAVIN*
PATRICK GRANT*
RALPH LOWELL, JR.*
JOHN A. MOORE*
PATTI McGILL PETERSON*
JOHN W. PRATT*
*Members of the Audit Committee
OFFICERS
EDWARD J. BOUDREAU, JR.
Chairman and Chief Executive Officer
ROBERT G. FREEDMAN
Vice Chairman and
Chief Investment Officer
ANNE C. HODSDON
President
THOMAS H. DROHAN
Senior Vice President and Secretary
JAMES B. LITTLE
Senior Vice President and
Chief Financial Officer
MICHAEL P. DICARLO
Senior Vice President
JAMES K. HO
Senior Vice President
FREDERICK L. CAVANAUGH, JR.
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
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK INVESTOR SERVICES CORPORATION
P.O. BOX 9116
BOSTON, MASSACHUSETTS 02205-9116
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
INVESTMENT SUB-ADVISER
JOHN HANCOCK ADVISERS INTERNATIONAL LIMITED
34 DOVER STREET
LONDON, ENGLAND W1X3RA
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our Customer Service Representatives at 1-800-225-5291, from
8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 23
BY DAVID S. BECKWITH FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
GLOBAL FUND
PROFIT-TAKING, POLITICAL UNCERTAINTY, REGIONAL CRISES HURT RETURNS
IN ASIA AND LATIN AMERICA; U.S. AND EUROPE POST GAINS
Most foreign markets produced disappointing returns during the past six
months. Overall stocks were down about 15% in the emerging markets of the
Pacific Basin; about 25% to 30% in Latin America; and, for U.S. investors who
benefited from the strength of the dollar, about 5% in Japan. Europe, which rose
about 7% on average, and the United States, up about 10%, were the only major
regions of the world that posted gains during the period.
[A 2 1/2" x 3 1/2" photo of David S. Beckwith at bottom right. Caption reads:
"David S. Beckwith, Portfolio Manager."]
Among the many reasons for the poor performance were continued profit-taking;
the growing strength of the yen, which threatened to undermine Japan's fragile
recovery; and political uncertainty in Europe. There were also a series of
unsettling regional crises, including the sharp drop in the Mexican peso, the
Kobe earthquake in Japan, and the collapse of Barings Bank in the U.K. Together,
those factors contributed to a shift in market sentiment, away from foreign
markets and toward the perceived safety of the U.S. market.
John Hancock Global Fund proved more vulnerable than most to the negative
factors affecting foreign markets. For the six months ended April 30, 1995, the
Fund's total return was -4.46% for Class A shares and -4.70%
[CAPTION]
"MOST FOREIGN MARKETS PRODUCED DISAPPOINTING RETURNS..."
3
<PAGE> 24
John Hancock Funds - Global Fund
[Pie chart with heading "Portfolio Diversification" at top of left column. The
pie is divided into six sections. From left to right: Pacific Rim 23%; Latin
America 3%; Europe 35%; Japan 18%; United States 20%; and Short-Term
Investments & Other 1%. A footnote below reads: "As a percentage of net assets
on April 30, 1995."
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 Coca-Cola
followed by an up arrow and the phrase "Strong sales overseas." The second
listing is Carter Holt Harvey followed by an up arrow and the phrase "Possible
takeover target." The third listing is Sony followed by a down arrow and the
phrase "Rising yen, declining consumer confidence." Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."]
for Class B shares of net asset value. Those returns compared to a -2.57% return
for the average global fund, according to Lipper Analytical Services.1
EMERGING MARKETS A DRAG ON PERFORMANCE
The main reason for the Fund's below-average performance was its 18% stake in
emerging markets. That was down from 25% at the beginning of the period but was
still higher than most other global funds. The sudden devaluation of the peso in
December was a blow not just to Latin America but also the Pacific Rim, as
chastened investors fled the world's peripheral economies. At the end of the
period, about 5% of the Fund was invested in Hong Kong, more than any other
emerging market. Our focus in Hong Kong remains on companies such as Swire
Pacific and CITIC Pacific -- conglomerates that are well-placed to profit from
economic growth in China and throughout the Pacific Rim.
EUROPE
Close to 35% of the Fund's assets were in Europe at the end of April, with the
largest single-country concentration -- about 10% -- in Britain. The economic
recovery in Europe has lagged the U.S., but Britain is ahead of the rest of
Europe. That's why we like the so-called soft cyclicals there -- that is, stocks
that tend to do well in the mature phase of a recovery. These include large
holdings such as the pharmaceutical company SmithKline Beecham and two
entertainment companies: Thorn EMI, a music retailer, and Carlton
Communications, a broadcaster.
Elsewhere in Europe, where the recovery is not as advanced, we own more
early-phase cyclicals such as Mannesmann, a German conglomerate that we've added
in the past six months. In Scandinavia, our focus has been on growth stocks,
including Sweden's Atlas Copco, a large supplier of industrial compressors; and
Ericsson, a wireless telecommunications specialist. Among the Fund's
best-performing investments of the past six months was France's LVMH, a maker of
luggage and spirits.
United States
The Fund's stake in domestic stocks rose during the middle of the period, but we
sold on strength and ended up about where we started, at 20% of total assets.
That puts the United States first among countries represented in the Fund, but
that level is still below the country's
[CAPTION]
"CLOSE TO 35% OF THE FUND'S ASSETS WERE IN EUROPE..."
4
<PAGE> 25
John Hancock Funds - Global Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the six months ended April 30, 1995." The
chart is scaled in increments of 1% from top to bottom, with 0% at the top and
- -5% at the bottom. Within the chart, there are three solid bars. The first
represents the -4.46% total return for John Hancock Global Fund: Class A. The
second represents the -4.70% total return for John Hancock Global Fund: Class
B. The third represents the -2.57% total return for the average global fund.
Footnote below reads: "Total returns for John Hancock Global Fund are at net
asset value with all distributions reinvested. The average global fund is
tracked by Lipper Analytical Services.(1) See following page for historical
performance information."]
36% weighting in global markets. Among the top performers were Home Depot, a
specialty retailer on a fast-growth track; and Coca-Cola, a long-time holding,
which rose sharply on strong earnings fueled by overseas unit growth. We've
taken some profits in Coca-Cola and today own about one-third fewer shares than
we did when the period began. Johnson & Johnson, one of the Fund's largest
holdings, has emerged lately as a leader in the new era of health-care reform by
offering health-care providers a full range of products and services.
JAPAN
The sharp rise in the value of the yen was a plus, especially during the second
half of the period, offsetting investment losses in the Fund's 18% stake in
Japan. On the other hand, worry over the yen contributed to a sharp sell-off in
major exporters, including two of the Fund's largest holdings, Sony and
Matsushita Electric. A while ago, we began buying cyclicals such as Sumitomo
Osaka Cement, Daido Steel, and NKK, another steel company, on the theory that
they would be among the first to benefit from a Japanese recovery. Those stocks
received an unexpected boost in the wake of the tragedy in Kobe as investors
anticipated more than $200 billion worth of infrastructure spending expected
over the next year or two.
AUSTRALIA AND NEW ZEALAND
While both markets have been hot and cold in recent months, the region remains
attractive, thanks to solid economic growth, low inflation and strong corporate
earnings. We've kept large stakes in Western Mining, an Australian metals
company, and Carter Holt Harvey, a New Zealand forest products company. Lately,
though we've been paring back our mining and natural resources holdings in favor
of industrial stocks, including Australia's BTR Nylex, which makes
plastics-related materials.
OUTLOOK REMAINS PROMISING
So far in 1995, we've seen a dramatic and positive shift in market sentiment.
Despite losses for the six-month period covered by this report, most foreign
markets are up year-to-date, and we expect that trend will continue. While the
U.S. economy is slowing down, the rest of the world is growing at a faster pace
than it did in 1994. Moreover, earnings are strong, inflation remains under
control, and most foreign stocks are cheaper today than they were a year ago. We
believe that bodes well for the Fund's prospects in the months ahead.
- --------------------------------------------------------------------------------
1 Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"SO FAR IN 1995, WE'VE SEEN A DRAMATIC AND POSITIVE SHIFT IN MARKET SENTIMENT."
5
<PAGE> 26
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Global Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on January
3, 1992 were (3.43%) and 6.15%, respectively, and reflect payment of the maximum
5% sales charge. The average annualized total returns for Class B shares for the
1-year and 5-year periods and since inception on September 2, 1986 were (3.99%),
5.91% and 8.92%, respectively, and reflect the applicable contingent deferred
sales charge (maximum contingent deferred sales charge is 5% and declines to 0%
over 6 years). All performance data shown represent past performance and should
not be considered indicative of future performance. For Class A shares,
different sales charges were in effect prior to August 1992 and are not
reflected in the performance data. 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. See the prospectus for a discussion
of the risks associated with international investing, including currency and
political risks and differences in accounting standards and financial reporting.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
Global Fund
Class A Shares
Line chart with the heading Global 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 Morgan Stanley World Index and is
equal to $13,446* as of April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Global Fund on January 3, 1992,
before sales charge, and is equal to $13,124 as of April 30, 1995. The third
line represents the Global Fund after sales charge and is equal to $12,462 as of
April 30, 1995.
Global Fund
Class B Shares
Line chart with the heading Global Fund: Class B, representing the growth of a
hypothetical $10,000 investment over the life of the fund. Within the chart are
two lines.
The first line represents the value of the Morgan Stanley World Index and is
equal to $22,748* as of April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Glboal Fund on September 2,
1986 and is equal to $21,377** as of April 30, 1995.
*The Morgan Stanley World Index is an unmanaged index which measures the
performance of a diverse range of global stock markets.
**No applicable contingent deferred sales charge.
6
<PAGE> 27
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and rights (cost - $98,420,779) ....... $ 118,161,621
Bonds (cost - $450,000) ............................. 429,750
Joint repurchase agreement (cost - $1,335,000) ...... 1,335,000
-------------
119,926,371
Cash .................................................. 1,471
Foreign currency, at value (cost - $1,586,088) ........ 1,579,583
Receivable for shares sold ............................ 85,422
Receivable for investments sold ....................... 441,435
Interest receivable ................................... 2,048
Dividends receivable .................................. 473,938
Foreign tax receivable ................................ 72,396
Prepaid expenses ...................................... 4,902
-------------
Total Assets ....................... 122,587,566
-----------------------------------------------------------
LIABILITIES:
Payable for foreign currency purchased ................ 5,316
Payable for shares repurchased ........................ 53,189
Payable for investments purchased ..................... 1,039,321
Foreign tax payable ................................... 59,794
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ................................. 128,417
Accounts payable and accrued expenses ................. 62,738
-------------
Total Liabilities .................. 1,348,775
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ....................................... 98,767,165
Accumulated net realized gain on investments and
foreign currency transactions ....................... 2,945,949
Net unrealized appreciation of investments and
foreign currency transactions ....................... 19,721,049
Net investment loss ................................... (195,372)
-------------
Net Assets ......................... $ 121,238,791
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with no par
value, respectively)
Class A - $92,617,802/7,621,012 ....................... $ 12.15
==============================================================================
Class B - $28,620,989/2,405,351 ....................... $ 11.90
==============================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($12.15 x 105.26%) .......................... $ 12.79
==============================================================================
</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.
** All Class C shares were redeemed on March 31, 1995.
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 APRIL 30, 1995. 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.
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $119,726) ........................................... $ 962,854
Interest ................................................. 71,160
-----------
1,034,014
-----------
Expenses:
Investment management fee - Note B ..................... 572,759
Distribution/service fee - Note B
Class A ............................................... 134,919
Class B ............................................... 140,586
Transfer agent fee - Note B
Class A ............................................... 170,648
Class B ............................................... 47,608
Class C** ............................................. 296
Custodian fee .......................................... 98,914
Registration and filing fees ........................... 19,427
Auditing fee ........................................... 16,861
Trustees' fees ......................................... 12,070
Printing ............................................... 11,755
Miscellaneous .......................................... 2,259
Legal fees ............................................. 1,284
-----------
Total Expenses ........................ 1,229,386
-----------------------------------------------------------
Net Investment Loss ................... (195,372)
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments sold .................... 3,013,847
Net realized loss on foreign currency transactions ....... (68,028)
Change in net unrealized appreciation/depreciation
of investments ......................................... (9,090,566)
Change in net unrealized appreciation/depreciation of
foreign currency transactions .......................... 130,876
-----------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ......... (6,013,871)
-----------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ............. ($6,209,243)
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 28
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: APRIL 30, 1995 OCTOBER 31,
FROM OPERATIONS: (UNAUDITED) 1994
----------- -----------
<S> <C> <C>
Net investment loss ................................................................. ($ 195,372) ($ 804,218)
Net realized gain on investments sold and foreign currency transactions ............. 2,945,819 13,362,429
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions ...................................................... (8,959,690) (2,685,194)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................... (6,209,243) 9,873,017
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments sold and foreign
currency transactions
Class A - ($1.3307 and $1.3069 per share, respectively) ........................... (9,441,512) (8,324,136)
Class B - ($1.3307 and $1.3069 per share, respectively) ........................... (3,043,184) (1,992,338)
Class C** - ($1.3307 and $1.3069 per share, respectively) ......................... (73,482) (39,722)
------------- -------------
Total Distributions to Shareholders .............................................. (12,558,178) (10,356,196)
------------- -------------
FROM FUND SHARE TRANSACTIONS-- NET* .................................................. 6,459,159 23,496,918
------------- -------------
NET ASSETS:
Beginning of period ................................................................. 133,547,053 110,533,314
------------- -------------
End of period (including accumulated net investment loss of $195,372
and none, respectively) ............................................................ $ 121,238,791 $ 133,547,053
============= =============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994
------------------------ --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold .................................................. 356,273 $ 4,376,859 1,101,077 $ 15,133,189
Shares issued to shareholders in reinvestment of
distributions .............................................. 781,727 9,169,632 600,746 8,080,042
--------- ------------ --------- ------------
1,138,000 13,546,491 1,701,823 23,213,231
Less shares repurchased ...................................... (648,424) (7,859,153) (917,934) (12,478,014)
--------- ------------ --------- ------------
Net increase ................................................. 489,576 $ 5,687,338 783,889 $ 10,735,217
========= ============ ========= ============
CLASS B
Shares sold .................................................. 305,879 $ 3,650,721 1,382,515 $ 18,646,101
Shares issued to shareholders in reinvestment of
distributions .............................................. 239,797 2,760,059 126,915 1,687,968
--------- ------------ --------- ------------
545,676 6,410,780 1,509,430 20,334,069
Less shares repurchased ...................................... (423,935) (5,009,135) (590,659) (7,901,948)
--------- ------------ --------- ------------
Net increase ................................................. 121,741 $ 1,401,645 918,771 $ 12,432,121
========= ============ ========= ============
CLASS C**
Shares sold .................................................. 10,813 $ 130,313 21,769 $ 293,927
Shares issued to shareholders in reinvestment of
distributions .............................................. 6,201 73,482 2,938 39,640
--------- ------------ --------- ------------
17,014 203,795 24,707 333,567
Less shares repurchased ...................................... (69,733) (833,619) (303) (3,987)
--------- ------------ --------- ------------
Net increase (decrease) ...................................... (52,719) ($ 629,824) 24,404 $ 329,580
========= ============ ========= ============
</TABLE>
** All Class C shares were redeemed on March 31, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 29
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ---------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 14.16 $ 14.30 $ 10.55 $ 11.31
------- ------- -------- -------
Net Investment Loss .......................... (0.01) (0.07)(b) (0.10)(b) (0.04)(b)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions ................................ (0.67) 1.24 3.85 (0.72)
------- ------- -------- -------
Total from Investment Operations ............ (0.68) 1.17 3.75 (0.76)
------- ------- -------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ............................... (1.33) (1.31) -- --
------- ------- -------- -------
Net Asset Value, End of Period ............... $ 12.15 $ 14.16 $ 14.30 $ 10.55
======= ======= ======== =======
Total Investment Return at Net Asset Value ... (4.46%) 8.64% 35.55% (6.72%)
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $92,618 $100,973 $ 90,787 $76,980
Ratio of Expenses to Average Net Assets ...... 1.92%* 1.98% 2.12% 2.47%*
Ratio of Net Investment Loss to Average Net
Assets ...................................... (0.17%)* (0.54%) (0.86%) (0.60%)*
Portfolio Turnover Rate ...................... 20% 61% 108% 69%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 13.93 $ 14.17 $ 10.50 $ 10.92 $ 9.94 $ 13.58
------- ------- -------- ------- -------- --------
Net Investment Loss .......................... (0.05) (0.15)(b) (0.15)(b) (0.12)(b) (0.01)(b) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.65) 1.22 3.82 (0.30) 1.35 (1.12)
------- ------- -------- ------- -------- --------
Total from Investment Operations ............ (0.70) 1.07 3.67 (0.42) 1.34 (1.14)
------- ------- -------- ------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ............................... (1.33) (1.31) -- -- (0.36) (2.50)
------- ------- -------- ------- -------- --------
Net Asset Value, End of Period ............... $ 11.90 $ 13.93 $ 14.17 $ 10.50 $ 10.92 $ 9.94
======= ======= ======== ======= ======== ========
Total Investment Return at Net Asset Value ... (4.70%) 7.97% 34.95% (3.85%) 14.04% (10.42%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $28,621 $ 31,822 $ 19,340 $11,475 $ 28,686 $ 33,281
Ratio of Expenses to Average Net Assets ...... 2.58%* 2.59% 2.49% 2.68% 2.60% 2.46%
Ratio of Net Investment Loss to Average Net
Assets ...................................... (0.84%)* (1.12%) (1.25%) (1.03%) (0.12%) (0.59%)
Portfolio Turnover Rate ...................... 20% 61% 108% 69% 106% 58%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 30
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
FINANCIAL HIGHLIGHTS (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED OCTOBER 31,
MARCH 31, 1995 ------------------------
(UNAUDITED) 1994 1993
-------------- ------ ------
<S> <C> <C> <C>
CLASS C (c)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ....................................... $ 14.27 $ 14.34 $ 11.75
------- ------- -------
Net Investment Loss ........................................................ -- -- (0.02)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions ............................................. (0.97) 1.24 2.61
------- ------- -------
Total from Investment Operations .......................................... (0.97) 1.24 2.59
------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions ............................................. (1.33) (1.31) --
------- ------- -------
Net Asset Value, End of Period ............................................. $ 11.97 $ 14.27 $ 14.34
======= ======= =======
Total Investment Return at Net Asset Value ................................. (6.70%) 9.15% 22.04%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................................. $ 795 $ 752 $ 406
Ratio of Expenses to Average Net Assets .................................... 1.37%* 1.42% 1.43%*
Ratio of Net Investment Income (Loss) to Average Net Assets ................ 0.06%* 0.03% (0.35%)*
Portfolio Turnover Rate .................................................... 20% 61% 108%
</TABLE>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On average month end shares outstanding.
(c) Class C shares commenced operations on May 7, 1993. Net asset value and net
assets at the end of the period reflect amounts prior to the redemption of
all shares on March 31, 1995.
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DISTRIBUTIONS 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 - Global Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
COMMON STOCKS
AUSTRALIA (6.18%)
Amcor Ltd. (Paper) ........................... 150,000 $1,101,978
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) ................... 90,000 1,309,281
BTR Nylex Ltd. (Diversified Operations) ...... 400,000* 779,750
News Corp. Ltd. (The) (Publishing) ........... 295,000 1,433,372
Odin Mining & Investment Co., Ltd.
(Gold Mining & Products)** ................. 105,000* 42,006
Renison Goldfields Consolidated Ltd.
(Metal Processing & Products) .............. 320,000 1,105,615
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products) .............. 303,750 1,718,923
----------
7,490,925
----------
CHILE (0.36%)
Madeco, SA, American Depositary
Receipts (ADR) (Metal Processing
& Products) ................................ 15,000* 436,875
----------
CHINA (0.18%)
Huaneng Power International, Inc.,
(ADR) (Utilities)** ........................ 15,000 217,500
----------
COLUMBIA (0.39%)
Cementos Paz del Rio, S.A. (ADR)
(Building Products)** ...................... 30,000 480,000
----------
DENMARK (0.86%)
Tele Danmark AS (Telecommunications) ......... 20,000* 1,043,830
----------
FINLAND (0.67%)
Metra Oy (Machinery) ......................... 20,000* 811,445
----------
FRANCE (3.83%)
LVMH Moet Henessey Louis Vuitton
(Beverages) ................................ 9,250 1,756,626
Lyonnaise Des Eaux Dumez
(Diversified Operations) ................... 13,000 1,290,627
Societe Nationale Elf Aquitaine
(Oil & Gas) ................................ 20,000 1,595,207
----------
4,642,460
----------
GERMANY (3.03%)
Bayer AG (Chemicals) ......................... 4,000 983,417
Bayerische Hypotheken-Und
Wechsel-Bank Aktiengesellschaft
(Banks)** .................................. 400 104,340
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
GLOBAL FUND ON APRIL 30, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES: COMMON
STOCKS, RIGHTS, BONDS AND SHORT-TERM INVESTMENTS. COMMON STOCKS AND BONDS ARE
FURTHER BROKEN DOWN BY COUNTRY. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
GERMANY (CONTINUED)
Bayerische Motoren Werke AG
(Automobile/Trucks) .......................... 2,400* $1,228,551
Mannesmann AG (Diversified Operations) ......... 5,000* 1,355,443
----------
3,671,751
----------
HONG KONG (5.18%)
Cheung Kong (Holdings) Ltd. ....................
(Real Estate) ................................ 250,000 1,052,836
CITIC Pacific Ltd. (Diversified Operations) .... 450,000 1,101,602
Hongkong Electric Holdings Ltd. (Utilities) .... 400,000 1,227,232
HSBC Holdings Ltd. (Banks) ..................... 125,200 1,451,582
Swire Pacific Ltd. (Diversified Operations) .... 150,000 1,002,777
Yizheng Chemical Fibre Co., Ltd.
(Chemicals) .................................. 1,350,000 449,070
----------
6,285,099
----------
INDONESIA (1.79%)
PT Bank International Indonesia (Banks) ........ 498,600 1,161,093
PT Indonesia Satellite (ADR)
(Telecommunications)** ....................... 10,000 361,250
PT Tri Polyta Indonesia (ADR)
(Chemicals)** ................................ 30,000 645,000
----------
2,167,343
----------
JAPAN (17.79%)
Daido Steel Co., Ltd. (Steel) .................. 215,000 1,186,983
Denki Kagaku Kogyo K.K. (Chemicals)** .......... 300,000 1,388,542
Fanuc Ltd. (Machinery) ......................... 35,000 1,582,486
Fujisawa Pharmaceutical Co., Ltd. (Drugs) ...... 55,000* 706,764
Itochu Corp. (Diversified Operations) .......... 270,000 1,831,162
Jusco Co., Ltd (Retail) ........................ 60,000 1,227,914
Kamigumi Co., Ltd. (Transportation) ............ 130,000 1,291,570
Marui Co., Ltd. (Retail) ....................... 70,000 1,074,424
Matsushita Electric Industrial Co., Ltd.
(Electronics) ................................ 120,000 2,013,207
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 32
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
JAPAN (CONTINUED)
NKK Corp. (Steel)** ........................ 500,000 $ 1,398,061
Seino Transportation Co., Ltd.
(Transportation) ......................... 100,000 1,903,742
Sony Corp. (Electronics) ................... 32,000 1,614,373
Sumitomo Forestry Co., Ltd.
(Building Products) ...................... 65,000* 1,152,359
Sumitomo Osaka Cement Co., Ltd.
(formally Sumitomo Cement Co., Ltd.)
(Building Products) ...................... 230,000 1,075,495
Sumitomo Trust & Banking Co., Ltd.
(The) (Banks) ............................ 50,000* 755,548
TDK Corp. (Electronics) .................... 30,000* 1,370,694
-----------
21,573,324
-----------
LUXEMBOURG (1.08%)
Scandinavian Broadcasting System
(Broadcasting)** ......................... 55,000 1,306,250
-----------
MALAYSIA (2.80%)
Aokam Perdana Berhad (Building
Products) ................................ 235,000 1,055,432
Land & General Berhad (Diversified
Operations) .............................. 480,000 1,388,630
Resorts World Berhad (Leisure
& Recreation) ............................ 180,000 946,793
-----------
3,390,855
-----------
MEXICO (1.10%)
Cemex S.A. (Ser A) (Building Products) ..... 168,750 524,436
Grupo Televisa, S.A. de C.V. (ADR)
(Broadcasting) ........................... 18,000 357,750
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications) ..................... 15,000 453,750
-----------
1,335,936
-----------
NETHERLANDS (2.83%)
Koninklijke P.T.T. Nederland
(Telecommunications) ..................... 46,800 1,630,736
Polygram N.V. (Audio/Video) ................ 32,000 1,800,000
-----------
3,430,736
-----------
NEW ZEALAND (2.51%)
Carter Holt Harvey Ltd. (Paper) ............ 700,000 1,778,584
Telecom Corporation of New Zealand
(Telecommunications) ..................... 300,000 1,260,335
-----------
3,038,919
-----------
NORWAY (0.51%)
Den norske Bank AS (Banks) ................. 235,000* 622,142
-----------
PAKISTAN (0.16%)
Crescent Textile Mills (Textile)** ......... 246,675 194,033
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
SINGAPORE (5.26%)
Fraser & Neave Ltd. (Diversified
Operations) ................................ 130,000 $ 1,427,341
Jardine Matheson Holdings Ltd.
(Diversified Operations) ................... 130,000* 1,033,500
Keppel Corp. (Diversified Operations) ........ 168,000 1,362,325
Singapore Press Holdings Ltd. (Publishing) ... 74,000 1,274,489
United Overseas Bank Ltd. (Banks) ............ 123,000* 1,279,871
------------
6,377,526
------------
SPAIN (3.02%)
Banco Popular Espanol SA (Banks) ............. 10,000 1,365,256
Fomento de Construcciones y
Contratas SA (Construction) ................ 6,000 550,323
Repsol SA (Oil & Gas) ........................ 55,000 1,749,996
------------
3,665,575
------------
SWEDEN (2.81%)
Atlas Copco AB (Machinery) ................... 127,500 1,751,783
Telefonaktiebolaget (LM) Ericsson
(Telecommunications) ....................... 25,000 1,652,171
------------
3,403,954
------------
SWITZERLAND (3.69%)
BBC Brown Boveri AG (Engineering) ............ 8,000 1,542,354
Ciba-Geigy AG (Drugs) ........................ 2,000 1,367,879
Nestle S.A. (Food) ........................... 1,600 1,561,895
------------
4,472,128
------------
THAILAND (1.20%)
Bangkok Bank (Banks) ......................... 150,000 1,451,515
------------
UNITED KINGDOM (10.05%)
Cable & Wireless PLC
(Telecommunications) ....................... 300,000 1,934,395
Carlton Communications PLC
(Broadcasting) ............................. 110,000 1,669,722
General Cable PLC
(Telecommunications)** ..................... 237,000* 678,341
Great Universal Stores PLC ( Retail) ......... 50,000* 475,157
Reed International PLC (Publishing) .......... 135,000* 1,736,614
Smithkline Beecham (Drugs) ................... 250,000 1,973,790
TeleWest Communications PLC (ADR)
(Telecommunications)** ..................... 47,000* 1,163,250
Thorn EMI PLC (Leisure & Recreation) ......... 140,000 2,559,575
------------
12,190,844
------------
UNITED STATES (20.06%)
Adaptec, Inc. (Computers)** .................. 40,000 1,280,000
Bell Sports Corp. (Leisure
& Recreation)** ............................ 32,000 440,000
cisco Systems, Inc. (Computers)** ............ 24,000 957,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 33
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
United States (continued)
Cobra Golf, Inc. (Leisure & Recreation)** ... 15,000 $ 326,250
Coca-Cola Co. (The) (Beverages) ............. 40,000 2,325,000
CUC International Inc. (Retail)** ........... 43,750 1,782,812
Disney (Walt) Co. (The) (Leisure
& Recreation) ............................. 21,600 1,196,100
Gaylord Entertainment Co. (Class A)
(Leisure & Recreation) .................... 29,000 685,125
Home Depot, Inc. (The) (Retail) ............. 35,000 1,461,250
Johnson & Johnson (Drugs) ................... 40,000 2,600,000
LDDS Communications Inc.
(Telecommunications)** .................... 64,766 1,554,384
Nabisco Holdings Corp. (Class A)
(Food)** .................................. 25,000* 696,875
Office Depot, Inc. (Retail)** ............... 82,600 1,879,150
Scientific-Atlanta, Inc.
(Telecommunications) ...................... 40,000 910,000
Tele-Communications, Inc. (Class A)
(Broadcasting)** .......................... 30,000 573,750
Tommy Hilfiger Corp. (Retail)** ............. 74,400 1,711,200
Viacom, Inc. (Class A) (Broadcasting)** ..... 4,000 187,500
Viacom, Inc. (Class B) (Broadcasting)** ..... 30,307 1,390,334
Viking Office Products, Inc. (Office
Equipment & Supplies)** ................... 53,000 1,457,500
Wal-Mart Stores, Inc. (Retail) ............. 38,000 902,500
------------
24,316,730
------------
TOTAL COMMON STOCKS
(Cost $98,352,029) ........... (97.34%) 118,017,695
------------ ------------
RIGHTS
AUSTRALIA (0.07%)
Renison Goldfields Consolidated Ltd. ........
(Metal Processing & Products)** ........... 74,240* 78,301
UNITED STATES (0.05%)
Viacom, Inc. (Broadcasting)** ............... 50,000 65,625
------------
TOTAL RIGHTS
(Cost $68,750) ............. (0.12%) 143,926
------------ ------------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $98,420,779) ............. (97.46%) 118,161,621
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ----------
<S> <C> <C> <C>
BONDS
PERU (0.36%)
Tele 2000 S.A. (Telecommunications)
Conv. Note 04-14-97..... 9.750% $ 450 $ 429,750
-----------
TOTAL BONDS
(Cost $450,000) (0.36%) 429,750
------- -----------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.10%)
Investment in a joint repurchase
agreement transaction with BT
Securities Corp. - Dated 04-28-95,
Due 05-01-95 (secured by
U.S. Treasury Bond, 13.875%
Due 05-15-11, and by
U.S. Treasury Note, 6.875%
Due 10-31-96) Note A.... 5.930 1,335 1,335,000
------------
TOTAL SHORT-TERM INVESTMENTS (1.10%) 1,335,000
------- ------------
TOTAL INVESTMENTS (98.92%) $119,926,371
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 34
FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
INDUSTRY DIVERSIFICATION (UNAUDITED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE FUND PRIMARILY INVESTS IN SECURITIES ISSUED BY COMPANIES OF OTHER COUNTRIES.
THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN
THE COUNTRIES IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY COUNTRY FOR
INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
INDUSTRY GROUPS. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS
AT APRIL 30, 1995 ASSIGNED TO THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES AS A
INVESTMENT CATEGORIES % OF FUNDS NET ASSETS
- --------------------- -------------------------------
<S> <C>
Audio/Video..................................................................... 1.49%
Automobile/Trucks............................................................... 1.01
Banks........................................................................... 6.76
Beverages....................................................................... 3.37
Broadcasting.................................................................... 4.58
Building Products............................................................... 3.54
Chemicals....................................................................... 2.86
Computers....................................................................... 1.85
Construction.................................................................... 0.45
Diversified Operations.......................................................... 11.45
Drugs........................................................................... 5.48
Electronics..................................................................... 4.12
Engineering..................................................................... 1.27
Food............................................................................ 1.86
Gold Mining & Products.......................................................... 0.03
Leisure & Recreation............................................................ 5.08
Machinery....................................................................... 3.42
Metal Processing & Products..................................................... 2.75
Office Equipment & Supplies..................................................... 1.20
Oil & Gas....................................................................... 2.76
Paper........................................................................... 2.38
Publishing...................................................................... 3.67
Real Estate..................................................................... 0.87
Retail.......................................................................... 8.67
Steel........................................................................... 2.13
Telecommunications.............................................................. 10.78
Textile......................................................................... 0.16
Transportation.................................................................. 2.64
Utilities....................................................................... 1.19
Short-Term Investments.......................................................... 1.10
-----
TOTAL INVESTMENTS 98.92%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Global Fund (the "Fund"), John Hancock
Global Income Fund, John Hancock Special Opportunities Fund, John Hancock
Short-Term Strategic Income Fund and John Hancock International Fund. Prior to
January 2, 1995, John Hancock Global Fund was known as John Hancock Freedom
Global Fund, John Hancock Global Income Fund was known as John Hancock Freedom
Global Income Fund and John Hancock International Fund was known as John Hancock
Freedom International Fund.
The Trustees have authorized the issuance of two 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, redemption, dividends, and liquidation, except that
certain expenses, subject to the approval of the Trustess, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Class C shares were outstanding in the current fiscal year
during the period from November 1, 1994 through March 31, 1995, but were
abolished by the Trustees on May 1, 1995. 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. 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 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. 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. It
will not be subject to federal income tax on taxable earnings which are
distributed to shareholders. 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 capital gains and losses for
accounting purposes.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. 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
15
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
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 Trust 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 sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees, if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also have
a sub-investment management contract with John Hancock Advisers International
Limited (the "Sub-Adviser"), a wholly-owned subsidiary of the Adviser, under
which the Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment management
services and advice with respect to that portion of the Fund's assets invested
in countries other than the United States and Canada.
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 1.00% of the first $100,000,000 of the
Fund's average daily net asset value, (b) 0.80% of the next $200,000,000, (c)
0.75% of the next $200,000,000 and (d) 0.625% of the Fund's average daily net
asset value in excess of $500,000,000. The Adviser pays the Sub-Adviser a fee
equivalent, on an annual basis to the sum of (a) 0.70% of the first $200,000,000
of the Fund's average daily net asset value and (b) 0.6375% of the Fund's
average daily net asset value in excess of $200,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc.
16
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
For the period ended April 30, 1995 net sales charges received with regard to
sales of Class A shares amounted to $83,106. Out of this amount, $7,143 was
retained and used for printing prospectuses, advertising, sales literature and
other purposes, $20,026 was paid as sales commissions to unrelated
broker-dealers and $55,937 was paid as sales commissions to sales personnel of
John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). Distributors is a
wholly-owned subsidiary of The Berkeley Financial Group. 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 FDC, Tucker Anthony and Sutro, all of which are
broker-dealers.
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 year ended April 30, 1995
contingent deferred sales charges paid to JH Funds amounted to $31,728.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors, for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse the Co-Distributors for their distribution/service costs.
Up to a maximum of 0.25% of these 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. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid a monthly transfer agent fee equivalent,
on an annual basis, to 0.36%, 0.30% and 0.10% of the average daily net asset
value of Class A, Class B and Class C shares of the Fund, respectively, plus out
of pocket expenses incurred by Investor Services on behalf of the Fund for proxy
mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
17
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1995, aggregated $24,730,060 and
$28,946,378, respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for federal income tax purposes was $100,205,779. Gross
unrealized appreciation and depreciation of investments aggregated $23,680,497
and $3,959,905 respectively, resulting in net unrealized appreciation of
$19,720,592.
18
<PAGE> 39
NOTES
John Hancock Funds - Global Fund
19
<PAGE> 40
JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock Global
Fund. It may be used as sales literature when preceded or accompanied by the
current prospectus, which details charges, investment objectives and operating
policies.
Printed on Recycled Paper JHF 030SA 4/95
[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."
A recycled logo in lower left hand corner with the caption "Printed on Recycled
Paper."]
<PAGE> 41
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
International
Fund
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 42
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Frederick L. Cavanaugh, Jr.
Senior Vice President
Michael P. DiCarlo
Senior Vice President
James K. Ho
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
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENTS
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
INVESTMENT SUB-ADVISER
John Hancock Advisers International Limited
34 Dover Street
London, England W1X3RA
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
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.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 43
BY DAVID S. BECKWITH FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
INTERNATIONAL FUND
Profit-taking, political uncertainty, regional crises
hurt returns; outlook improves as foreign
economic growth rates outpace U.S.
Most foreign markets produced disappointing returns during the past six
months. Stocks overall were down about 15% in the emerging markets of the
Pacific Basin; about 25% to 30% in Latin America; and, for U.S. investors who
benefited from the strength of the dollar, about 5% in Japan. Europe was the
only region of the world other than the U.S. to post gains during the period,
rising about 7%.
Among the many reasons for the poor performance were continued profit-taking
after dramatic gains in 1993; the growing strength of the yen, which threatened
to undermine Japan's fragile recovery; and political uncertainty in Europe.
There were also a series of unsettling regional crises, including the sharp drop
in the Mexican peso, the Kobe earthquake in Japan, and the collapse of Barings
Bank in the U.K. Together, those factors contributed to a shift in market
sentiment, away from foreign markets and toward the perceived safety of the
U.S. market.
John Hancock International Fund was hurt by the negative factors affecting
foreign markets. For the six months ended April 30, 1995, the Fund's total
return was -6.60% for Class A shares and -6.95% for Class B shares at net
[CAPTION]
"MOST FOREIGN MARKETS PRODUCED DISAPPOINTING RETURNS..."
[A 2 1/2" x 3 1/2" photo of David S. Beckwith at bottom right. Caption reads:
"David S. Beckwith, Portfolio Manager"]
3
<PAGE> 44
John Hancock Funds - International Fund
[Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from left to right:
Latin America 3%; Pacific Rim 33%; United Kingdom 11%; Japan 25%; and
Continental Europe 28%. A footnote below states "As a percentage of net
assets on April 30, 1995."]
- --------------------------------------------------------------------------------
asset value. Those compared to a return of -4.55% for the average international
fund, according to Lipper Analytical Services.(1)
[CAPTION]
"CLOSE TO 40% OF THE FUND'S ASSETS WERE IN EUROPE...
EMERGING MARKETS A DRAG ON PERFORMANCE
The main reason for the Fund's below-average performance was its 25% stake in
emerging markets. That was down from 33% at the beginning of the period, but it
wasn't enough to avoid injury. Emerging markets have outperformed other foreign
markets in the past and have the potential to outperform them again in the
future. But December was an especially difficult month. The sudden devaluation
of the peso was a blow not just to Latin America -- which accounted for less
than 3% of the Fund's total investments at the end of April -- but also the
Pacific Rim as chastened investors fled the world's peripheral economies.
At the end of the period, about 8% of the Fund was invested in Hong Kong.
That's less than six months ago, but still more than any other emerging market.
Our focus in Hong Kong remains on companies such as Swire Pacific, Hutchison
Whampoa and CITIC Pacific -- conglomerates that are well-placed to profit from
economic growth in China and throughout the Pacific Rim. The same might also be
said of two of the Fund's largest holdings in Singapore: Fraser & Neave, a
bottler, and Keppel, a conglomerate involved in shipping, banking and real
estate.
EUROPE
Close to 40% of the Fund's assets were in Europe at the end of April. The
largest single-country concentration -- about 11% -- was in Britain. The
economic recovery in Europe has lagged the U.S., but Britain is ahead of the
rest of Europe. That's why we like the so-called soft cyclicals there -- stocks
that tend to do well in the mature phase of a recovery. These include large
holdings such as the pharmaceutical company SmithKline Beecham and two
entertainment companies: Thorn EMI, a music retailer, and Carlton
Communications, a broadcaster.
Elsewhere in Europe, where the recovery is not as advanced, we own more
early-phase cyclicals. For example, Mannesmann, a German conglomerate that we've
added during the past six months. In Sweden, as elsewhere in Scandinavia, our
focus has been on growth stocks, including Atlas Copco, a large supplier of
industrial compressors. Finally, LVMH of France, a maker of luggage and spirits,
was among the Fund's best-performing investments.
[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 Thorn EMI
followed by an up arrow and the phrase "Growing interest in record business."
The second listing is Carter Holt Harvey followed by an up arrow and the phrase
"Possible takeover target." The third listing is Sony followed by a down arrow
and the phrase "Rising yen, declining consumer confidence." Footnote below
reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
4
<PAGE> 45
John Hancock - International Funds
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart is
scaled in increments of 2% from bottom to top, with 8% at the top and -8% at the
bottom. Within the chart, there are three solid bars. The first represents the
- -6.60% total return for John Hancock International Fund: Class A. The second
represents the -6.95% total return for John Hancock International Fund: Class B.
The third represents the -4.55% total return for the average international fund.
Footnote below reads: "Total returns for John Hancock International Fund are at
net asset value with all distributions reinvested. The average international
fund is tracked by Lipper Analytical Services. (1) See following page for
historical performance information."]
JAPAN
Unlike the Fund's stake in Europe, which has risen sharply during the past six
months, Japan has stayed level at about 25% of the Fund's total assets. The
sharp rise in the value of the yen, especially during the second half of the
period, helped turn what would have been a loss in Japan into a modest gain for
U.S. investors.
On the other hand, worry over the yen contributed to a sharp sell-off of
major exporters, including two of the Fund's largest holdings, Sony and
Matsushita Electric. A while ago, we began buying cyclicals such as Sumitomo
Osaka Cement, Daido Steel, and NKK, another steel company, on the theory that
they would be among the first to benefit from a Japanese recovery. Those stocks
received an unexpected boost in the wake of the tragedy in Kobe as investors
anticipated more than $200 billion worth of infrastructure spending over the
next year or two.
AUSTRALIA AND NEW ZEALAND
While both markets have been hot and cold in recent months, the region remains
attractive, thanks to solid economic growth, low inflation and strong corporate
earnings. We've kept large stakes in Western Mining, an Australian metals
company, and Carter Holt Harvey, a New Zealand forest products company that
recently became a takeover target of International Paper. Lately, though, we've
been paring back our mining and natural resources holdings in favor of
industrial stocks, including BTR Nylex, which makes plastics-related materials.
OUTLOOK REMAINS PROMISING
So far in 1995, we've seen a dramatic and positive shift in market sentiment.
Despite losses for the six-month period covered by this report, most foreign
markets are up year-to-date and we expect that trend will continue. While the
U.S. economy is slowing down, the rest of the world is growing at a faster pace
than it did in 1994. Moreover, earnings are strong, inflation remains under
control, and most stocks are cheaper today than they were a year ago. We believe
that bodes well for the Fund's prospects in the months ahead.
[CAPTION]
"So far in 1995, we've seen a dramatic and positive shift in market sentiment."
- -------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE> 46
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - International Fund
The following data are supplied for the period ended March 31, 1995, with all
distributions reinvested in shares. The average annual total returns for the
1-year period and since inception on January 3, 1994, for Class A shares were
(6.49%) and (10.23%), respectively and reflects payment of the maximum 5% sales
charge. The average annual total return for the 1-year period and since
inception on January 3, 1994, for Class B shares were (7.15%) and (10.74%),
respectively and reflects the applicable contingent deferred sales charge
(maximum contingent deferred sales charge is 5% and declines to 0% over 6
years.) Without the limitation of expenses, the average annualized total returns
for the 1-year period and since inception would have been (8.59%) and (12.44%)
for Class A shares and (9.25%) and (12.95%) for Class B shares. 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. See the prospectus for a discussion of the risks
associated with international investing, including currency and political risks
and differences in accounting standards and financial reporting.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
[International Fund
Class A shares
Line chart with the heading International 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 Morgan Stanley EAFE Index and is
equal to $11,433* as of April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the International Fund on January 3,
1994, before sales charge, and is equal to $9,505 as of April 30, 1995. The
third line represents the International Fund after sales charge and is equal to
$9,027 as of April 30, 1995.
International Fund
Class B shares
Line chart with the heading International 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 Morgan Stanley EAFE Index and is
equal to $11,433* as of April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the International Fund on January 3,
1994, before sales charge, and is equal to $9,426 as of April 30, 1995. The
third line represents the International Fund after sales charge and is equal to
$8,955 as of April 30, 1995.
*The Morgan Stanley EAFE Index is an unmanaged index that measures the
performance of stock markets in Europe, Australia and the Far East.]
6
<PAGE> 47
FINANCIAL STATEMENTS
John Hancock Funds - International 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 APRIL 30, 1995. 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
April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and units (cost - $7,818,143)........................................................... $7,692,626
Bonds (cost - $50,000)................................................................................ 47,750
----------
7,740,376
Foreign currency, at value (cost - $97,963)............................................................. 97,932
Receivable for shares sold.............................................................................. 5,993
Foreign tax receivable.................................................................................. 989
Interest receivable..................................................................................... 203
Dividends receivable.................................................................................... 37,536
Receivable from John Hancock Advisers, Inc. - Note B.................................................... 124,950
Deferred organization expenses - Note A................................................................. 84,882
----------
Total Assets......................................................................... 8,092,861
-------------------------------------------------------------------------------------------------
LIABILITIES:
Temporary overdraft of cash............................................................................. 17,729
Payable for shares repurchased.......................................................................... 9,501
Payable to John Hancock Advisers, Inc. and affiliates - Note B.......................................... 228,305
Accounts payable and accrued expenses................................................................... 124,176
----------
Total Liabilities.................................................................... 379,711
-------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in......................................................................................... 8,087,625
Accumulated net realized loss on investments and foreign currency transactions.......................... (255,675)
Net unrealized depreciation of investments and foreign currency transactions............................ (126,764)
Undistributed net investment income..................................................................... 7,964
----------
Net Assets........................................................................... $7,713,150
=================================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value, respectively)
Class A - $4,329,811/541,040............................................................................ $ 8.00
=====================================================================================================================
Class B - $3,383,339/424,980............................................................................ $ 7.96
=====================================================================================================================
Maximum Offering Price Per Share *
Class A - ($8.00 x 105.26%)............................................................................. $ 8.42
=====================================================================================================================
<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.
</TABLE>
See notes to financial statements.
7
<PAGE> 48
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
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
Six months ended April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $8,490).................................................. $ 69,956
Interest................................................................................................ 13,164
--------
83,120
--------
Expenses:
Custodian fee......................................................................................... 39,104
Investment management fee - Note B.................................................................... 38,918
Distribution/service fee - Note B
Class A.............................................................................................. 6,269
Class B.............................................................................................. 18,023
Registration and filing fees.......................................................................... 13,397
Organization expense - Note A......................................................................... 11,288
Printing.............................................................................................. 8,378
Transfer agent fee - Note B
Class A.............................................................................................. 7,888
Class B.............................................................................................. 7,950
Auditing fee.......................................................................................... 3,967
Legal fees............................................................................................ 1,356
Trustees' fees........................................................................................ 412
Miscellaneous......................................................................................... 357
--------
Total Expenses....................................................................... 157,307
Less expenses reimbursable by John Hancock Advisers, Inc. - Note B................... (82,151)
--------
Net Expenses......................................................................... 75,156
-------------------------------------------------------------------------------------------------
Net Investment Income................................................................ 7,964
-------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold................................................................... (250,629)
Net realized loss on foreign currency transactions...................................................... (5,047)
Change in net unrealized appreciation/depreciation of investments....................................... (363,704)
Change in net unrealized appreciation/depreciation of Foreign Currency Transactions..................... 4,421
--------
Net Realized and Unrealized Loss on Investments and Foreign Currency Transactions.... (614,959)
-------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations................................. $(606,995)
=================================================================================================
</TABLE>
See notes to financial statements.
8
<PAGE> 49
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1994
SIX MONTHS ENDED (COMMENCEMENT
APRIL 30, 1995 OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................ $ 7,964 $ 31,295
Net realized gain (loss) on investments sold and foreign currency transactions....... (255,676) 26,883
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions.............................................................. (359,283) 232,519
---------- ----------
Net Increase (Decrease) in Net Assets Resulting from Operations.................... (606,995) 290,697
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income Class A - ($0.0268 and none per share,
respectively)...................................................................... (14,822) --
Distributions from net realized gain on investments sold
Class A - ($0.0512 and none, respectively)......................................... (28,343) --
Class B - ($0.0512 and none, respectively)......................................... (25,719) --
---------- ----------
Total Distributions to Shareholders............................................... (68,884) --
---------- ----------
FROM FUND SHARE TRANSACTIONS -- NET*................................................... 15,523 7,582,809
---------- ----------
NET ASSETS:
Initial investment by John Hancock Advisers, Inc. - Note A........................... -- 500,000
Beginning of period.................................................................. 8,373,506 --
---------- ----------
End of period (including undistributed net investment income of $7,964 and $14,822,
respectively)...................................................................... $7,713,150 $8,373,506
========== ==========
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE PERIOD JANUARY 3, 1994
APRIL 30, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold....................................................... 176,402 $ 1,389,366 535,016 $4,456,147
Shares issued to shareholders in reinvestment of distribtuions.... 4,863 38,128 -- --
-------- ----------- ------- ----------
181,265 1,427,494 535,016 4,456,147
Less shares repurchased........................................... (152,005) (1,170,001) (82,060) (683,928)
-------- ----------- ------- ----------
Net increase...................................................... 29,260 257,493 452,956 3,772,219
Initial Investment by John Hancock Advisers, Inc. - Note A........ -- -- 58,824 500,000
-------- ----------- ------- ----------
Net increase...................................................... 29,260 $ 257,493 511,780 $4,272,219
======== =========== ======= ==========
CLASS B
Shares sold....................................................... 99,047 $ 787,414 512,942 $4,260,033
Shares issued to shareholders in reinvestment of distribtuions.... 2,888 22,582 -- --
-------- ----------- ------- ----------
101,935 809,996 512,942 4,260,033
Less shares repurchased........................................... (135,669) (1,051,966) (54,228) (449,443)
-------- ----------- ------- ----------
Net increase (decrease)........................................... (33,734) $ (241,970) 458,714 $3,810,590
======== =========== ======= ==========
</TABLE>
See notes to financial statements.
9
<PAGE> 50
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE PERIOD JANUARY 3, 1994
APRIL 30, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
----------- -------------------
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................................... $ 8.65 $ 8.50
------- -------
Net Investment Income.................................................. 0.02 0.07(b)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions....................................... (0.59) 0.08
------- -------
Total from Investment Operations...................................... (0.57) 0.15
------- -------
Less Distributions:
Dividends from Net Investment Income................................... (0.03) --
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions....................................... (0.05) --
------- -------
Total Distributions................................................... (0.08) --
------- -------
Net Asset Value, End of Period......................................... $ 8.00 $ 8.65
======= =======
Total Investment Return at Net Asset Value ............................ (6.60%) 1.77%
Total Adjusted Investment Return at Net Asset Value (a)(c)............. (7.64%) (0.52%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).............................. $ 4,330 $ 4,426
Ratio of Expenses to Average Net Assets **............................. 1.58%* 1.50%*
Ratio of Adjusted Expenses to Average Net Assets (a)................... 3.69%* 3.79%*
Ratio of Net Investment Income to Average Net Assets................... 0.59%* 1.02%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)...... (1.52%)* (1.27%)*
Portfolio Turnover Rate................................................ 26% 50%
** Expense Reimbursement Per Share..................................... $ 0.09(b) $ 0.16(b)
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, AND TOTAL
INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A
SHARE HAS CHANGED SINCE THE COMMENCEMENT OF OPERATIONS. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE
FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
See notes to financial statements.
10
<PAGE> 51
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED FOR THE PERIOD JANUARY 3, 1994
APRIL 30, 1995 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1994
----------- -------------------
CLASS B
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................................... $ 8.61 $ 8.50
------- -------
Net Investment Income (Loss)........................................... (0.01)(b) 0.02(b)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions.................................... (0.59) 0.09
------- -------
Total from Investment Operations................................. (0.60) 0.11
------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold and
Foreign Currency Transactions.................................... (0.05) --
------- -------
Net Asset Value, End of Period......................................... $ 7.96 $ 8.61
======= =======
Total Investment Return at Net Asset Value............................. (6.95%) 1.29%
Total Adjusted Investment Return at Net Asset Value (a)(c)............. (7.99%) (1.00%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................... $ 3,383 $ 3,948
Ratio of Expenses to Average Net Assets **.......................... 2.34%* 2.22%*
Ratio of Adjusted Expenses to Average Net Assets (a)................ 4.45%* 4.51%*
Ratio of Net Investment Income (Loss) to Average Net Assets......... (0.24%)* 0.31%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)... (2.35%)* (1.98%)*
Portfolio Turnover Rate............................................. 26% 50%
** Expense Reimbursement Per Share.................................. $ 0.09(b) $ 0.16(b)
<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) On average month end shares outstanding.
(c) Unaudited.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 52
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
INTERNATIONAL FUND ON APRIL 30, 1995. IT'S DIVIDED INTO THREE MAIN CATEGORIES:
COMMON STOCKS, UNITS AND BONDS. COMMON STOCKS, UNITS AND BONDS ARE FURTHER
BROKEN DOWN BY COUNTRY.
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- --------
<S> <C> <C>
COMMON STOCKS
ARGENTINA (0.49%)
Telefonica de Argentina, American
Depositary Receipts (ADR) (Utilities)........ 1,600 $ 37,600
----------
AUSTRALIA (7.46%)
Amcor Ltd. (Paper)............................. 15,000 110,198
Broken Hill Proprietary Co., Ltd.
(Diversified Operations)..................... 8,500 123,654
BTR Nylex Ltd. (Diversified Operations)........ 50,000* 97,469
News Corp. Ltd. (The) (Publishing)............. 29,900 145,281
Odin Mining & Investment Co., Ltd.
(Gold Mining & Products)**................... 7,750* 3,100
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products)................ 16,875 95,496
----------
575,198
----------
DENMARK (1.35%)
Tele Danmark AS (Telecommunications)........... 2,000* 104,383
----------
FRANCE (7.70%)
LVMH Moet Henessey Louis Vuitton
(Beverages).................................. 780 148,126
Lyonnaise Des Eaux Dumez
(Diversified Operations)..................... 1,500 148,918
Renault SA (ADR) (Automobile/Trucks)**......... 3,000* 102,000
Societe Centrale Union des Assurances
de Paris (Insurance)......................... 5,000 135,676
Technip (ADR) (Engineering).................... 2,000 59,000
----------
593,720
----------
GERMANY (3.88%)
Bayer AG (Chemicals)........................... 400 98,342
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft (Banks)**................. 15 3,913
Bayerische Motoren Werke AG
(Automobile/Trucks).......................... 200* 102,379
Mannesmann AG (Diversified Operations)......... 350* 94,881
----------
299,515
----------
HONG KONG (8.09%)
Cheung Kong (Holdings) Ltd. (Real Estate)...... 15,000 63,170
CITIC Pacific Ltd. (Diversified Operations).... 40,000 97,920
Hongkong Electric Holdings Ltd. (Utilities).... 30,000 92,042
HSBC Holdings Ltd. (Banks)..................... 11,800 136,810
Hutchison Whampoa Ltd..
(Diversified Operations)..................... 22,000 95,492
Swire Pacific Ltd. (Diversified Operations).... 12,000 80,222
Yizheng Chemical Fibre Co., Ltd.
(Chemicals).................................. 175,000 58,213
----------
623,869
----------
INDONESIA (0.91%)
PT Bank International Indonesia (Banks)........ 30,000* 69,861
----------
JAPAN (24.64%)
Daido Steel Co., Ltd. (Steel).................. 20,000 110,417
Denki Kagaku Kogyo K.K. (Chemicals)**.......... 30,000 138,854
Fanuc Ltd. (Machinery)......................... 3,000* 135,642
Fujisawa Pharmaceutical Co., Ltd. (Drugs)...... 10,000* 128,503
Itochu Corp. (Diversified Operations).......... 15,000 101,731
Jusco Co., Ltd. (Retail)....................... 6,000 122,791
Kamigumi Co., Ltd. (Transportation)............ 10,000* 99,351
Marui Co., Ltd. (Retail)....................... 5,000 76,745
Matsushita Electric Industrial Co., Ltd.
(Electronics)................................ 10,000 167,767
NKK Corp. (Steel)**............................ 40,000 111,845
Seino Transportation Co., Ltd.
(Transportation)............................. 7,000 133,262
Sony Corp. (Electronics)....................... 3,000 151,347
Sumitomo Forestry Co., Ltd.
(Building Products).......................... 4,000* 70,914
Sumitomo Osaka Cement Co., Ltd.
(formally Sumitomo Cement Co., Ltd.)
(Building Products).......................... 20,000 93,521
Sumitomo Trust & Banking Co., Ltd.
(The) (Banks)................................ 8,000* 120,888
TDK Corp. (Electronics)........................ 3,000* 137,069
----------
1,900,647
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 53
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -------
<S> <C> <C>
MALAYSIA (4.19%)
Aokam Perdana Berhad
(Building Products)......................... 15,000 $ 67,368
Land & General Berhad
(Diversified Operations).................... 31,500 91,129
Resorts World Berhad
(Leisure & Recreation)...................... 15,000 78,899
United Engineers Berhad (Engineering)......... 15,000* 86,182
---------
323,578
---------
MEXICO (1.66%)
Cemex S.A. (Ser A) (Building Products)........ 1,687 5,243
Cemex S.A. (Ser B) (Building Products)........ 3,375 10,816
Grupo Televisa, S.A. de C.V. (ADR)
(Broadcasting).............................. 1,000 19,875
Grupo Tribasa, S.A. de C.V. (ADR)
(Construction)**............................ 1,500 13,125
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications)........................ 2,600 78,650
----------
127,709
----------
NETHERLANDS (4.00%)
Koninklijke P.T.T. Nederland
(Telecommunications)........................ 4,000* 139,379
Polygram N.V. (Audio/Video)................... 3,000 169,264
----------
308,643
----------
NEW ZEALAND (2.88%)
Carter Holt Harvey Ltd. (Paper)............... 46,200 117,387
Telecom Corporation of New Zealand
(Telecommunications)........................ 25,000 105,028
----------
222,415
----------
NORWAY (1.03%)
Den norske Bank AS (Banks).................... 15,000* 39,711
Den norske Bank AS (ADR) (Banks)**............ 1,500 39,750
----------
79,461
----------
PAKISTAN (0.22%)
Cresent Textile Mills (Textile)**............. 21,850 17,187
----------
PHILIPPINES (0.90%)
San Miguel Corp. (Beverages).................. 19,500* 69,804
----------
SINGAPORE (7.91%)
DBS Land Ltd. (Real Estate)................... 30,000 82,670
Fraser & Neave Ltd.
(Diversified Operations).................... 12,000 131,755
Hongkong Land Holdings Ltd.
(Real Estate)............................... 35,000 65,800
Jardine Matheson Holdings Ltd.
(Diversified Operations).................... 10,000 79,500
Keppel Corp. (Diversified Operations)......... 10,000 81,091
Singapore Press Holdings Ltd. (Publishing).... 5,000 86,114
United Overseas Bank Ltd. (Banks)............. 8,000* 83,244
----------
610,174
----------
SPAIN (2.71%)
Banco Popular Espanol SA (Banks).............. 600 81,915
Repsol SA (Oil & Gas)......................... 4,000 127,272
----------
209,187
----------
SWEDEN (2.83%)
Atlas Copco AB (Machinery).................... 6,250 85,872
Telefonaktiebolaget (LM) Ericsson
(Telecommunications)........................ 2,000 132,174
----------
218,046
----------
SWITZERLAND (4.47%)
BBC Brown Boveri AG (Engineering)............. 750 144,596
Ciba-Geigy AG (Drugs)......................... 200 136,788
Nestle S.A. (Food)............................ 65 63,452
----------
344,836
----------
THAILAND (1.13%)
Bangkok Bank (Banks).......................... 9,000* 87,091
----------
UNITED KINGDOM (11.05%)
Cable & Wireless PLC
(Telecommunications)........................ 25,000 161,200
Carlton Communications PLC
(Broadcasting).............................. 10,000 151,793
General Cable PLC (Telecommunications)**...... 26,000* 74,417
Reed International PLC (Publishing)........... 10,000* 128,638
Smithkline Beecham (Drugs).................... 10,000 78,952
TeleWest Communications PLC (ADR)
(Telecommunications)**...................... 3,000* 74,250
Thorn EMI PLC (Leisure & Recreation).......... 10,000 182,827
----------
852,077
----------
TOTAL COMMON STOCKS
(Cost $7,778,138) (99.50%) 7,675,001
------- ----------
UNITS
INDIA (0.23%)
CESC Ltd. (Utilities)**....................... 750 17,625
----------
TOTAL UNITS
(Cost $40,005) (0.23%) 17,625
------- ----------
TOTAL COMMON STOCKS AND UNITS
(Cost $7,818,143) (99.73%) 7,692,626
------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 54
FINANCIAL STATEMENTS
John Hancock Funds - International Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000's OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
BONDS
PERU (0.62%)
Tele 2000 S.A. (Telecommunications)
Conv. Note 04-14-97................ 9.750% $ 50 $ 47,750
-------- ----------
TOTAL BONDS
(Cost $50,000) (0.62%) 47,750
-------- ----------
TOTAL INVESTMENTS (100.35%) $7,740,376
======== ==========
</TABLE>
*Securities, newly added to the portfolio during the period ended April 30,
1995.
**Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
INDUSTRY DIVERSIFICATION (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE FUND PRIMARILY INVESTS IN SECURITIES ISSUED BY COMPANIES OF OTHER COUNTRIES.
THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN
THE COUNTRIES IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY COUNTRY FOR
INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
INDUSTRY GROUPS. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS
AT APRIL 30, 1995 ASSIGNED TO THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES AS A
INVESTMENT CATEGORIES % OF FUNDS NET ASSETS
- --------------------- ---------------------
<S> <C>
Audio/Video................................... 2.19%
Automobile/Trucks............................. 2.65
Banks......................................... 8.60
Beverages..................................... 2.83
Broadcasting.................................. 2.23
Building Products............................. 3.21
Chemicals..................................... 3.83
Construction.................................. 0.17
Diversified Operations........................ 15.87
Drugs......................................... 4.46
Electronics................................... 5.91
Engineering................................... 3.76
Food.......................................... 0.82
Gold Mining & Products........................ 0.04
Insurance..................................... 1.76
Leisure & Recreation.......................... 3.39
Machinery..................................... 2.87
Metal Processing & Products................... 1.24
Oil & Gas..................................... 1.65
Paper......................................... 2.95
Publishing.................................... 4.67
Real Estate................................... 2.74
Retail........................................ 2.59
Steel......................................... 2.88
Telecommunications............................ 11.89
Textile....................................... 0.22
Transportation................................ 3.02
Utilities..................................... 1.91
------
TOTAL INVESTMENTS 100.35%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - International Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock International Fund (the "Fund"), John
Hancock Global Fund, John Hancock Global Income Fund, John Hancock Special
Opportunities Fund, and John Hancock Short-Term Strategic Income Fund. Prior to
January 1, 1995, John Hancock International Fund was known as John Hancock
Freedom International Fund, John Hancock Global Fund was known as John Hancock
Freedom Global Fund and John Hancock Global Income Fund was known as John
Hancock Freedom Global Income Fund.
The Trustees 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, redemption, dividends, and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. 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 instruments 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 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. 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
investments, 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 capital gains and losses for accounting purposes.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. 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
15
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - International Fund
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 Trust 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 sizes of the Funds.
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/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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. These
contracts involve market or credit risk in excess of the unrealized gain or loss
reflected in the Fund's Statement of Assets and Liabilities. The Fund may also
purchase and sell forward contracts to facilitate the settlement of foreign
currency denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no market risk
other than that offset by the currency amount of the underlying transaction.
There were no open forward foreign currency exchange contracts at April 30,
1995.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
16
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - International Fund
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30,
1995.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it
will be required to deposit with its custodian a specified amount of cash or
U.S. government securities, known as "initial margin", equal to a certain
percentage of the value of the financial futures contract being traded. Each
day, the futures contract will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", will be made to and from the broker on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
There were no open financial futures contracts at April 30, 1995.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that began with the
commencement of investment operations of the Fund.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada. The Fund and the Adviser also have
a sub-investment management contract with John Hancock Advisers International
Limited (the "Sub-Adviser"), a wholly-owned subsidiary of the Adviser, under
which the Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment management
services and advice with respect to the portion of the Fund's assets invested in
countries other than the United States and Canada.
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 1.00% of the first $250,000,000 of the
Fund's average daily net asset value, (b) 0.80% of the next $250,000,000, (c)
0.75% of the
17
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - International Fund
next $250,000,000 and (d) 0.625% of the Fund's average daily net asset value in
excess of $750,000,000. The Adviser pays the Sub-Adviser a fee equivalent, on an
annual basis to the sum of (a) 0.70% of the first $200,000,000 of the Fund's
average daily net asset value and (b) 0.6375% of the Fund's average daily net
asset value in excess of $200,000,000. The Fund is not responsible for payment
of the Sub-Adviser's fee.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
The Adviser has voluntarily agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the 12b-1 fee), to
0.90% of the Fund's average daily net assets. Accordingly, the reduction in the
Adviser's fee amounted to $82,151 for the period ended April 30, 1995. The
Adviser reserves the right to terminate this voluntary limitation in the future.
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 April 30, 1995, JH Funds received net sales charges of $13,512 with
regard to sales of Class A shares. Out of this amount, $2,148 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, $990 was paid as sales commissions to unrelated broker-dealers and
$10,374 was paid as sales commissions 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, which are broker-dealers.
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 April 30, 1995,
contingent deferred sales charges received by JH Funds amounted to $17,942.
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 shares 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 the Fund's average daily net assets attributable to Class A shares and
1.00% of the Fund's average daily net assets attributable to Class B shares to
reimburse JH Funds for its distribution/service costs. Up to a maximum of 0.25%
of these 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. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.30% and 0.32% of the average
daily net asset value of Class A and Class B shares
18
<PAGE> 59
of the Fund, respectively, plus out of pocket expenses incurred by Fund Services
on behalf of the Fund for proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustee of the Fund. The Adviser owns 58,824 Class A
shares of beneficial interest of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability as regards to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $2,763,753 and
$2,013,696, respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for federal income tax purposes was $7,868,143. Gross
unrealized appreciation and depreciation of investments aggregated $466,972 and
$594,739, respectively, resulting in net unrealized depreciation of $127,767.
19
<PAGE> 60
[JOHN HANCOCK FUNDS LOGO] Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
This report is for the information of shareholders of the John Hancock
International Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[RECYCLE LOGO] Printed on Recycled Paper
<PAGE> 61
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHORT-TERM
STRATEGIC INCOME
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 62
TRUSTEES
Edward J. Boudreau, Jr
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Frederick L. Cavanaugh, Jr.
Senior Vice President
Lawrence J. Daly
Senior Vice President
Michael P. DiCarlo
Senior Vice President
Anthony A. Goodchild
Senior Vice President
James K. Ho
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
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
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.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 63
BY LAWRENCE J. DALY AND ANTHONY A. GOODCHILD,
CO-PORTFOLIO MANAGERS
JOHN HANCOCK
SHORT-TERM STRATEGIC
INCOME FUND
SEARCH FOR YIELD LEADS TO EMERGING MARKET BONDS AND
U.S. GOVERNMENT AGENCY SECURITIES; LESS RELIANCE ON
DOMESTIC HIGH-YIELD CORPORATE BONDS
The six months from last November through the end of April were especially
challenging. Global bond investors faced volatility and opportunity in equal
doses. After a devastating year marked by rising interest rates, sinking bond
prices and a weakening U.S. dollar, conditions appeared to have stabilized
around the beginning of the period. Long-term interest rates were peaking and
the dollar was gaining strength. Then in December, the new Mexican government
suddenly stopped supporting the peso, a move that undermined emerging markets
all over the world as investors scurried for the perceived safety of more stable
currencies. If, at first, the United States failed to benefit as much as Japan
and Germany, that was because the dollar was again losing ground -- a trend that
was exacerbated by the $50 billion bailout of Mexico. Finally, toward the end of
the period, growing signs of an economic slowdown in the United States ignited
what has developed into a dramatic rally in domestic markets.
[A 2 1/4" x 3 1/4" photo of Lawrence Daly and Anthony Goodchild. Caption reads:
"Lawrence Daly and Anthony Goodchild, Co-Portfolio Managers."]
Overall, conditions were as treacherous as any we've encountered in a long
time. For the six months ended April 30, 1995, John Hancock
[CAPTION]
"GLOBAL BOND INVESTORS FACED VOLATILITY AND OPPORTUNITY IN EQUAL DOSES."
3
<PAGE> 64
John Hancock Funds - Short-Term Strategic Income Fund
[Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from left to right: U.S.
Government/Agency Bonds 30%; High-Yield, U.S. Corporate Bonds 10%; Short-Term
Investments & Other 2%; Emerging Market Bonds 48%; High-Quality Foreign
Government Bonds 10%. A footnote below states "As a percentage of net assets on
April 30, 1995."]
Short-Term Strategic Income Fund's Class A and B shares had total returns of
3.47% and 3.05%, respectively, at net asset value. Those compared to a 3.66%
return for the average short-term investment grade bond fund, according to
Lipper Analytical Services.(1)
STRATEGIC HIGHLIGHTS
The Fund's average duration -- which measures how much its share price will vary
with changes in interest rates -- was fairly stable throughout the period at
around one year. At the end of April, about 82% of the Fund was invested in
dollar-denominated securities. We avoided making large investments in bonds
denominated in foreign currencies. That's because in a short-term fund such as
this one, which has limited potential for large price gains, we'd want to hedge
against currency fluctuations and hedging would cost us too much yield. Instead,
we tried to gather yield for the Fund by investing mainly in short-term emerging
market bonds pegged to the dollar and in U.S. government agency securities.
EMERGING MARKETS
While the Fund underperformed other short-term investment grade bond funds, the
comparison is probably not very useful. All the funds in the category aim for an
average portfolio credit rating of single A, but we go about it in a different
way. We offset lower-rated, emerging market bonds with higher-rated U.S. bonds.
Emerging market bonds were 48% of the Fund's total assets at the end of the
period, compared to 22% six months earlier. We look for countries -- and
companies within countries -- that have strong balance sheets and may be
candidates for a higher credit rating someday. That would make their bonds more
valuable. The largest chunk was in Mexico, about 10%, all of which we added in
the wake of the currency debacle in December. We took the opportunity to buy
high-yielding short-term government securities at prices substantially below
par. Those bonds -- known as tesobonos -- have so far been top performers.
A key component of our emerging-market investment strategy is
diversification, not only among countries and regions of the world but within
countries as well, where we seek a broad mix of investment vehicles. At the end
of the period, the Fund had fairly large stakes in both Mexico and Brazil, but
otherwise our investments were widely spread across many countries, including
Chile, Columbia, Costa Rica, Barbados, Panama, the Czech Republic, South Africa
and India. Diversification helps protect the Fund from possible sharp
fluctuations in
[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 Czech
Republic followed by an up arrow and the phrase "Linked to rising Deutsche
mark." The second listing is Sallie Mae Bonds followed by an up arrow and the
phrase "Floating rates rise with market." The third listing is Latin America
followed by a down arrow and the phrase "Hurt by Mexican currency crisis."
Footnote below reads: "See "Schedule of Investments." Investment holdings are
subject to change."]
[CAPTION]
"WE AVOIDED MAKING LARGE INVESTMENTS
IN BONDS DENOMINATED IN FOREIGN CURRENCIES."
4
<PAGE> 65
John Hancock Funds - Short-Term Strategic Income Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart is
scaled in increments of 2% from bottom to top, with 4% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
3.47% total return for John Hancock Short-Term Strategic Income Fund: Class A.
The second represents the 3.05% total return for John Hancock Short-Term
Strategic Income Fund: Class B. The third represents the 3.66% total return for
the average short-term investment grade bond fund. Footnote below reads: "Total
returns for John Hancock Short-Term Strategic Income Fund are at net asset value
with all distributions reinvested. The average short-term investment grade bond
fund is tracked by Lipper Analytical Services. (1) See following page for
historical performance information."]
bond prices and interest rates, but it can't prevent losses. We
saw evidence of that in December, when plunging prices in Mexico dragged down
other emerging markets around the world and hurt our holdings in those areas. In
the past, emerging markets investments, with their superior income potential,
have helped us outperform our peers. We think they can do the same for us in the
future.
UNITED STATES AND EUROPE
Six months ago, the Fund's domestic holdings were divided among so-called junk
bonds, which have credit ratings of BB or lower; and government bonds, which, of
course, have the highest possible credit ratings. Lately, though, with so many
attractive high-yield opportunities available in emerging markets, we've paid
scant attention to domestic junk bonds, and their percentage of the Fund's total
assets has fallen, from 16% to about 10%. That has left us with a domestic
portfolio dominated by government agency bonds, which totaled about 30% of the
Fund's assets at the end of April. Those included mortgage-backed securities
issued by Fannie Mae, the Federal National Mortgage Association; and a basket of
floating-rate securities issued by Sallie Mae, the Student Loan Marketing
Association. Finally, the Fund had a small stake in foreign government bonds and
high-quality corporate bonds, divided between Britain, Denmark and New Zealand
and totaling about 10% of the Fund's assets.
OUTLOOK
All the reasons that it made sense in the past to invest in global bond markets
still apply. Simply put, the rest of the world's economies are growing at a
faster rate than the United States. As that trend continues, the demand for
capital will likely grow, and overseas bond markets will become even more
attractive. Emerging markets, with their improving balance sheets, are
especially attractive. That's the big picture, and it's a comforting one.
Short-term, however, it's likely to be a bumpy ride. For that reason, we'll
likely want to stay on the track we've established over the past several months
- -- a short average duration, plenty of diversification, and a sizable stake in
floating-rate securities. The key to top performance during the past year or two
has been avoiding the pitfalls, and we think that's going to remain the key in
the months ahead.
- -------------
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"ALL THE REASONS THAT IT MADE SENSE IN THE PAST
TO INVEST IN GLOBAL BOND MARKETS STILL APPLY."
5
<PAGE> 66
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Short-Term Strategic Income Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on January
3, 1992, were 0.55% and 2.58%, respectively, and reflect payment of the maximum
sales charge of 3%. The average annualized total return for Class B shares for
the 1-year period and since inception on December 28, 1990, were (0.03%) and
3.70%, respectively, and reflect applicable contingent deferred sales charge
(maximum contingent deferred sales charges of 3% and declines to 0% over 4
years). The SEC standard yield for the 30-day period ended April 30, 1995, for
Class A and Class B shares were 9.76% and 9.30%, respectively. 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. See the prospectus for a discussion of risks
associated with international investing, including currency and political risks
and differences in accounting standards and financial reporting.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
[Short-Term Strategic Income Fund
Class A shares
Line chart with the heading Short-Term Strategic Income 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 Salomon World Money Market Index and
is equal to $13,102* as of April 30, 1995. The second line represents the value
of the hypothetical $10,000 investment made in the Short-Term Strategic Income
Fund on January 3, 1992, before sales charge, and is equal to $11,449 as of
April 30, 1995. The third line represents the Short-Term Strategic Income Fund
after sales charge and is equal to $11,111 as of April 30, 1995.
Short-Term Strategic Income Fund
Class B shares
Line chart with the heading Short-Term Strategic Income 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 Salomon World Money Market Index and
is equal to $14,317* as of April 30, 1995. The second line represents the value
of the hypothetical 410,000 investment made in the Short-Term Strategic Income
Fund on December 28, 1990, before contingent deferred sales charge, and is equal
to $12,039 as of April 30, 1995. The third line represents the Short-Term
Strategic Income Fund after contingent deferred sales charge and is equal to
$11,939 as of April 30, 1995.
* The Salomon World Money Market Index is an unmanaged index that is composed of
various Non-U.S.-currency -denominated bonds, usually with an average maturity
of three years or less.]
6
<PAGE> 67
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $100,066,907)....................................................................... $ 99,910,567
Joint repurchase agreement (cost - $1,675,000).................................................... 1,675,000
------------
101,585,567
Cash................................................................................................ 57
Receivable for shares sold.......................................................................... 43,256
Interest receivable................................................................................. 1,781,593
Deferred organization expenses - Note A............................................................. 16,624
Other assets........................................................................................ 15,638
------------
Total Assets..................................................................... 103,442,735
-----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for foreign currency purchased.............................................................. 848,428
Dividend payable.................................................................................... 437,662
Payable for shares repurchased...................................................................... 178,235
Payable to John Hancock Advisers, Inc. and affiliates - Note B...................................... 62,370
Accounts payable and accrued expenses............................................................... 73,820
------------
Total Liabilities................................................................ 1,600,515
-----------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in..................................................................................... 133,800,623
Accumulated net realized loss on investments and foreign currency transactions...................... (30,542,289)
Net unrealized depreciation of investments and foreign currency transactions........................ (140,295)
Distributions in excess of net investment income.................................................... (1,275,819)
------------
Net Assets....................................................................... $101,842,220
===============================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value, respectively)
Class A - $16,095,198 / 1,931,959................................................................... $ 8.33
===================================================================================================================
Class B - $85,747,022 / 10,305,309.................................................................. $ 8.32
===================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($8.33 x 103.09%)......................................................................... $ 8.59
===================================================================================================================
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price
is reduced.
</TABLE>
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 APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE PER SHARE AND THE MAXIMUM OFFERING PRICE AS OF THAT
DATE.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 68
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ........................................................................................... $5,523,787
----------
Expenses:
Distribution/service fee - Note B
Class A ......................................................................................... 22,195
Class B ......................................................................................... 446,885
Investment management fee - Note B ............................................................... 338,565
Transfer agent fee - Note B
Class A ......................................................................................... 9,407
Class B ......................................................................................... 78,135
Custodian fee .................................................................................... 54,294
Auditing fee ..................................................................................... 35,065
Registration and filing fees ..................................................................... 13,620
Trustees' fees ................................................................................... 12,317
Printing ......................................................................................... 10,672
Organization expense - Note A .................................................................... 7,701
Legal fees ....................................................................................... 5,837
Miscellaneous .................................................................................... 3,145
----------
Total Expenses .................................................................. 1,037,838
----------------------------------------------------------------------------------------------
Net Investment Income ........................................................... 4,485,949
----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold .............................................................. (5,565,409)
Net realized loss on foreign currency transactions ................................................. (407,935)
Change in net unrealized appreciation/depreciation of investments .................................. 3,087,012
Change in net unrealized appreciation/depreciation of foreign currency transactions ................ 1,023,244
----------
Net Realized and Unrealized Loss on Investments and Foreign Currency Transactions (1,863,088)
----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ............................ $2,622,861
==============================================================================================
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 69
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................. $ 4,485,949 $ 9,910,079
Net realized loss on investments sold and foreign currency transactions............... (5,973,344) (5,810,926)
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions................................................................ 4,110,256 (1,902,026)
------------ ------------
Net Increase in Net Assets Resulting from Operations................................ 2,622,861 2,197,127
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3783 and $0.6224 per share, respectively)............................. (684,905) (693,087)
Class B - ($0.3477 and $0.5649 per share, respectively)............................. (3,801,044) (7,303,157)
Distributions in excess of net investment income
Class A - (none and $0.0428 per share, respectively)............................... .... (47,616)
Class B - (none and $0.0393 per share, respectively)................................ .... (508,661)
Distributions in excess of net realized gain on investments sold
Class A - (none and $0.1154 per share, respectively)................................ .... (114,916)
Class B - (none and $0.1154 per share, respectively)................................ .... (1,691,979)
Distributions from capital paid-in
Class A - (none and $0.0966 per share, respectively)................................ .... (107,572)
Class B - (none and $0.0966 per share, respectively)................................ .... (1,249,943)
------------ ------------
Total Distributions to Shareholders................................................ (4,485,949) (11,716,931)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*.................................................... (7,775,571) (33,002,925)
------------ ------------
NET ASSETS:
Beginning of period................................................................... 111,480,879 154,003,608
------------ ------------
End of period (including distributions in excess of net investment income of
$1,275,819, applicable for both periods)............................................ $101,842,220 $111,480,879
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL30, 1995 OCTOBER 31,
(UNAUDITED) 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................... 871,267 $ 7,262,347 932,145 $ 8,040,859
Shares issued to shareholders in reinvestment
of distributions............................................ 60,567 505,312 74,101 644,945
--------- ----------- --------- -----------
931,834 7,767,659 1,006,246 8,685,804
Less shares repurchased........................................ (544,959) (4,517,332) (681,111) (6,037,753)
--------- ----------- --------- -----------
Net increase................................................... 386,875 $ 3,250,327 325,135 $ 2,648,051
========= =========== ========= ===========
CLASS B
Shares sold.................................................... 1,031,727 $ 8,597,273 1,599,938 $13,816,191
Shares issued to shareholders in reinvestment
of distributions............................................ 250,970 2,088,935 681,528 5,955,744
--------- ----------- ----------- -----------
1,282,697 10,686,208 2,281,466 19,771,935
Less shares repurchased........................................ (2,604,785) (21,712,106) (6,332,319) (55,422,911)
--------- ----------- ----------- -----------
Net decrease................................................... (1,322,088) ($11,025,898) (4,050,853) ($35,650,976)
========= =========== ========= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 70
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income 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
listed as follows:
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ------------------------------------
(UNAUDITED) 1994 1993 1992(a)
---------------- -------- -------- ---------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................... $ 8.47 $ 9.12 $ 9.32 $ 9.86
------- ------- ------- -------
Net Investment Income .......................................... 0.38** 0.76** 0.83** 0.65
Net Realized and Unrealized Loss on Investments and
Foreign Currency Transactions ................................... (0.14) (0.53) (0.20) (0.55)
------- ------- ------- -------
Total from Investment Operations ............................. 0.24 0.23 0.63 0.10
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ........................... (0.38) (0.62) (0.83) (0.64)
Distributions in Excess of Net Investment Income ............... .... (0.04) .... ....
Distributions in Excess of Net Realized Gain on
Investments Sold.............................................. .... (0.12) .... ....
Distributions from Capital Paid-in ............................. .... (0.10) .... ....
Total Distributions .......................................... (0.38) (0.88) (0.83) (0.64)
------- ------- ------- -------
Net Asset Value, End of Period ................................. $ 8.33 $ 8.47 $ 9.12 $ 9.32
======= ======= ======= =======
Total Investment Return at Net Asset Value ..................... 3.47% 2.64% 6.78% 1.16%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ...................... $16,095 $13,091 $11,130 $20,468
Ratio of Expenses to Average Net Assets ........................ 1.36%* 1.26% 1.21% 1.37%*
Ratio of Net Investment Income to Average Net Assets ........... 9.32%* 8.71% 8.59% 8.09%*
Portfolio Turnover Rate ........................................ 143% 150% 306% 86%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT LOSS, GAINS (LOSSES),
AND TOTAL INVESTMENT RETURN OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE
FOR A SHARE HAS CHANGED SINCE THE COMMENCEMENT OF OPERATIONS. ADDITIONALLY,
IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS
ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 71
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ---------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991(b)
---------------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $ 8.46 $ 9.11 $ 9.31 $ 10.01 $ 10.00(c)
------- ------- -------- -------- --------
Net Investment Income......................................... 0.35** 0.70** 0.75** 0.87 0.76+
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions............................... ( 0.14) ( 0.53) ( 0.20) ( 0.80) 0.01
------- ------- -------- -------- --------
Total from Investment Operations............................ 0.21 0.17 0.55 0.07 0.77
------- ------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ......................... ( 0.35) ( 0.56) ( 0.75) ( 0.77) ( 0.76)
Distributions in Excess of Net Investment Income.............. .... ( 0.04) .... .... ....
Distributions in Excess of Net Realized Gain on Investments
Sold........................................................ .... ( 0.12) .... .... ....
Distributions from Capital Paid-in............................ .... ( 0.10) .... .... ....
-------- ------- -------- -------- -------
Total Distributions......................................... ( 0.35) ( 0.82) ( 0.75) ( 0.77) ( 0.76)
------- ------- -------- -------- -------
Net Asset Value, End of Period................................ $ 8.32 $ 8.46 $ 9.11 $ 9.31 $ 10.01
======= ======= ======== ======== ========
Total Investment Return at Net Asset Value ................... 3.05% 1.93% 5.98% 0.64% 8.85%*+
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)..................... $85,747 $98,390 $142,873 $236,059 $218,562
Ratio of Expenses to Average Net Assets....................... 2.11%* 1.99% 2.01% 2.07% 1.89%*+
Ratio of Net Investment Income to Average Net Assets.......... 8.55%* 8.00% 7.81% 8.69% 8.72%*+
Portfolio Turnover Rate....................................... 143% 150% 306% 86% 22%
<FN>
* On an annualized basis.
** On average month end shares outstanding.
+ Reflects expense limitation in effect for the period ended October 31, 1991 (see Note B). As a result of such limitation,
expenses for Class B shares reflect a reduction of $0.0039 per share. Absent of such reduction, for the year ended October 31,
1991 the ratio of expenses to average net assets would have been 1.93% and the ratio of net investment income to average net
assets would have been 8.68%. Without the reimbursement, total investment return would have been 8.81%.
(a) Class A shares commenced operations on January 3, 1992.
(b) Class B shares commenced operations on December 28, 1990.
(c) Initial price to commence operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 72
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SHORT-TERM STRATEGIC INCOME FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: BONDS AND SHORT-TERM INVESTMENTS. BONDS ARE FURTHER BROKEN DOWN BY
CURRENCY DENOMINATION.
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED)# MARKET VALUE
- ------------------- -------- --------- ------------
<S> <C> <C> <C>
BONDS
CHILEAN PESO (5.21%)
*Chilean Time Deposit
11-09-95 (Time deposit
with redemption linked to
CLP Fx rates)*** ............. 12.900% 827,000 $ 2,131,444
*Chilean Time Deposit
11-20-95 (Time deposit
with redemption linked to
CLP Fx rates)*** ............. 12.500 414,400 1,068,041
*Chilean Time Deposit
03-15-96 (Time deposit
with redemption linked to
CLP Fx rates)*** ............. 13.000 817,000 2,105,670
-----------
5,305,155
-----------
CZECH KORUNA (1.53%)
*SKOFIN, Foreign Corp.
Bond 02-09-98................. 11.625 40,000 1,558,522
-----------
NEW ZEALAND DOLLAR (3.28%)
*Government of New
Zealand, Government
Bond 11-15-95................. 8.000 5,000 3,346,293
-----------
SLOVAK KORUNA (3.17%)
ING Capital Holdings,
Foreign Corp Bond
10-10-95 (r) (Slovak
Koruna linked note)*** ....... 0.000 100,000 3,227,152
-----------
SOUTH AFRICAN RAND (2.71%)
*Republic of South Africa,
Government Bond
09-21-98...................... 13.620** 10,000 2,763,347
-----------
UNITED STATES DOLLAR (82.20%)
*Abbey National Treasury
Services, (United Kingdom),
Floating Rate Euronotes
03-10-99...................... 6.250** 3,000 2,992,350
Anacomp, Inc., Sub Note
11-01-00...................... 15.000 1,000 700,000
*Banco Central De Costa
Rica, Series A, (Costa Rica),
Foreign Corp Bond
05-21-05...................... 7.063** 1,532 1,102,925
*Banco Central De Costa
Rica, Series B, (Costa Rica),
Foreign Corp Bond
05-21-05...................... 7.063%** 1,532 1,056,970
Banco Central Do Brazil,
(Brazil), Foreign Corp
Bond 10-15-99................. 7.250** 9,161 7,924,014
*Empresas ICA Sociedad
Controladora, (Mexico),
Foreign Corp Bond
08-02-96...................... 8.563** 2,000 1,460,000
Essar Gujarat Ltd., (India),
Foreign Agency
07-15-99 (R).................. 9.400** 4,000 3,980,000
*Federal National Mortgage
Association, Government
Agency 10-30-95............... 5.975** 8,000 7,984,000
*Financiera Energetica
Nacional, (Columbia),
Foreign Corp Bond
12-13-96...................... 6.625 2,000 1,920,000
Government of Barbados,
(Barbados), Government
Bond 06-09-97 (R)............. 10.500 1,000 1,015,000
IMO Industries, Inc.,
Sub Deb 08-15-97.............. 12.250 1,467 1,489,005
*Kingdom of Denmark,
(Denmark), Government
Bond 09-10-97................. 6.188** 4,000 3,998,600
*Mexican Tesobonos,
(Mexico), Government
Bond 07-27-95................. 0.000 2,000 1,925,400
*Mexican Tesobonos,
(Mexico), Government
Bond 08-03-95................. 0.000 1,093 1,052,231
*Mexican Tesobonos,
(Mexico), Government
Bond 12-21-95................. 0.000 2,779 2,518,608
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 73
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED)# MARKET VALUE
- ------------------- -------- --------- ------------
<S> <C> <C> <C>
UNITED STATES DOLLAR (CONTINUED)
NWA Inc., Note 11-30-00 ........ 12.092% 4,688 $ 4,688,081
*Petroleo Brasileiro,
(Brazil), Foreign Corp
Bond 06-08-98................. 11.338** 1,000 950,000
*Republic of Panama,
(Panama), Government
Bond 05-10-02................. 7.125** 5,250 3,832,500
*Republic of Venezuela,
(Venezuela),
Note 09-20-95................. 6.750 1,000 971,875
Republic of Venezuela,
(Venezuela), Var Rate
Note 12-29-95................ 8.313** 2,644 2,551,199
*Student Loan Marketing
Association, Government
Agency 09-28-98............... 6.030** 6,000 6,020,160
*Student Loan Marketing
Association, Government
Agency 12-01-95............... 5.955** 17,000 16,969,400
*Transportacion Maritima
Mexicana, (Mexico), Foreign
Corp Bond 10-28-97............ 8.375 1,500 1,395,000
*Tubos de Acero de Mexico,
(Mexico), 12-08-99............ 13.750 2,500 1,875,000
USAfrica Airways, Inc., Unit
(Sr Note 05-31-99 and
Warrant), (r)................ 12.000 1,000 937,780
USAir, Inc., Sr Notes
07-01-03..................... 10.000 3,000 2,400,000
------------
83,710,098
------------
TOTAL BONDS
(Cost $100,066,907) (98.10%) 99,910,567
------ ------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.65%)
Investment in a joint repurchase
agreement transaction with BT
Securities Corp. - Dated 04-28-95,
Due 05-01-95 (secured by U.S.
Treasury Bond, 13.875%
Due 05-15-11, and by
U.S. Treasury Note, 6.875%
Due 10-31-96) Note A.......... 5.930 1,675 1,675,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,675,000) ( 1.65%) 1,675,000
------ ------------
TOTAL INVESTMENTS (99.75%) $101,585,567
====== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Represents rate in effect on April 30, 1995.
*** An indexed security's value is linked to changes in foreign currencies,
interest rates or other reference instruments. Indexed securities amounted
to $8,532,307 or 8.38% as of April 30, 1995.
# Par value of non US$ denominated foreign bonds is expressed in local
currency for each country listed.
(R) 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
$4,995,000 or 4.90% as of April 30, 1995.
(r) Direct placement securities are restricted to resale. They have been
valued using procedures approved 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 witrh
respect to these restricted securities.
Additional information on each restricted security is as follows:
<TABLE>
<CAPTION>
VALUE AS A
PERCENTAGE VALUE AT
ACQUISITION ACQUISITION OF FUND'S APRIL 30,
DATE COST NET ASSETS 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ING Capital Holdings,
(Slovak Republic)
Foreign Corp Bond
10-10-95 10-05-94 $2,773,069 3.17% $3,227,152
USAfrica Airways,
Inc., Unit (Sr Note
05-31-99 and
Warrant) 10-13-94 1,000,000 0.92 937,780
</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.
13
<PAGE> 74
FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- --------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN BONDS ISSUED BY COMPANIES AND GOVERNMENTS OF OTHER
COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITION
WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY
CURRENCY DENOMINATION FOR INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE
SCHEDULE OF INVESTMENTS. IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE
AGGREGATED BY VARIOUS INVESTMENT CATEGORIES. THE TABLE BELOW SHOWS THE
PERCENTAGES OF THE FUND'S INVESTMENTS AT APRIL 30, 1995 ASSIGNED TO THE VARIOUS
INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A
INVESTMENT CATEGORIES % OF NET ASSETS
--------------------- -----------------
<S> <C>
Automobile/Truck............................................................................... 1.53%
Banks.......................................................................................... 21.22
Computer - Software............................................................................ 0.69
Construction................................................................................... 1.43
Electronics.................................................................................... 1.46
Governmental - Foreign......................................................................... 25.43
Governmental - U.S. Agencies................................................................... 30.41
Oil & Gas...................................................................................... 0.93
Steel.......................................................................................... 5.75
Transportation................................................................................. 9.25
Short-term investments......................................................................... 1.65
-----
TOTAL INVESTMENTS 99.75%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Short-Term Strategic Income Fund (the
"Fund"), John Hancock Special Opportunities Fund, John Hancock Global Income
Fund, John Hancock Global Fund and John Hancock International Fund. Prior to
January 1, 1995, John Hancock Global Income Fund was known as John Hancock
Freedom Global Income Fund, John Hancock Global Fund was known as John Hancock
Freedom Global Fund and John Hancock International Fund was known as John
Hancock Freedom International Fund.
The Trustees have authorized the issuance of two 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, redemption, dividends, and liquidation except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. 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. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below. The Fund may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
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. 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
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $24,112,418 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. Of these, $1,001,257 expire October 31, 1999,
$17,243,199 expire October 31, 2000, $3,127,414 expire October 31, 2001 and
$2,740,548 expire October 31, 2002. To the extent that capital loss carryovers
are used to offset realized capital gains it is unlikely that gains so offset
will be distributed to shareholders. For federal income tax purposes, net
currency exchange gains and losses from sales of foreign debt securities may be
treated as ordinary income even though such items are capital gains and losses
for accounting purposes.
15
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 Trust 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 sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve
no market risk other than that offset by the currency amount of the underlying
transaction.
Open forward foreign currency exchange contracts at April 30, 1995 are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT MONTH DEPRECIATION
- ----------------- ------------------- ---------- ------------
<S> <C> <C> <C>
Portuguese Escudo 1,300,000,000 Jun 95 ($ 848,428)
==========
</TABLE>
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities resulting
from changes in the exchange rate.
16
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income 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 will be valued at the average of the "bid" prices obtained from two
independent brokers. Written put or call over-the-counter options will be valued
at the average of the "asked" prices obtained from two independent brokers. Upon
the writing of a call or put option, an amount equal to the premium received by
the Fund 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 option 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 tends to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased option 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.
There were no written option transactions for the period ended April 30,
1995.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash of U.S.
government securities, known as "initial margin", equal to a certain percentage
of the value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange. Subsequent payments, known as "variation
margin", to and from the broker are made on a daily basis as the market price of
the financial futures contract fluctuates. Daily variation margin adjustments,
arising from this "mark to market", are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, there were no open positions in financial futures
contracts.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or date of purchase over the life of the security,
as required by the Internal Revenue Code.
17
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent on
an annual basis, to the sum of (a) 0.65% of the first $500,000,000 of the Fund's
average daily net asset value and (b) 0.60% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, net
sales charges received on sales of Class A shares of the Fund amounted to
$85,435. Out of this amount, $8,749 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $20,199 was paid
as sales commissions to unrelated broker-dealer and $56,487 was paid as sales
commissions 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 FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
Class B shares which are redeemed within four years of purchase (three years
for purchases prior to January 1, 1994) will be subject to a contingent deferred
sales charge ("CDSC") at declining rates beginning at 3.0% of the lesser of the
current market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSC are paid to JH Funds and are
used in whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of Class B
shares. For the period ended April 30, 1995, contingent deferred sales charges
received by JH Funds amounted to $46,920.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors 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 the Co-Distributors for their distribution/
service costs. Up to a maximum of 0.25% of these 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. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.10% and 0.13% of the average
daily net asset value of 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.
18
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Short-Term Strategic Income Fund
Edward J. Boudreau, Jr. is a director and officer of the Adviser,
and its affiliates, as well as a Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock funds,
as applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be recorded
on the Fund's books as an other asset. The deferred compensation liability will
be marked to market on a periodic basis and income earned by the investment will
be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than the joint repurchase
agreement, during the period ended April 30, 1995, aggregated $126,195,572 and
$130,290,833.
The cost of investments owned at April 30, 1995 (including short-term
investments), for Federal income tax purposes was $100,066,907. Gross unrealized
appreciation and depreciation of investments aggregated $1,852,932 and
$2,009,272, respectively, resulting in net unrealized depreciation of $156,340.
19
<PAGE> 80
[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
Short-Term Strategic Income 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."]
JHF 320SA 04/95
<PAGE> 81
John Hancock Funds
---------------------------------------------------------
GLOBAL
INCOME
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 82
===============================================================================
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Frederick L. Cavanaugh, Jr.
Senior Vice President
Lawrence J. Daly
Senior Vice President
Michael P. DiCarlo
Senior Vice President
Anthony A. Goodchild
Senior Vice President
James K. Ho
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
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
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.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 83
===============================================================================
BY LAWRENCE J. DALY AND ANTHONY A. GOODCHILD
FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
GLOBAL INCOME FUND
U.S. BOND MARKET TURNS CORNER; CORE GLOBAL MARKETS BENEFIT
FROM VOLATILITY ON THE PERIPHERY AND "FLIGHT TO QUALITY"
There were three distinct phases in the global bond market during the past six
months. The first -- lasting roughly from the beginning of November through
mid-December -- was characterized by a firm U.S. dollar and gradually declining
interest rates, following what had been until then a devastating year for global
bonds.
Then in December, with the collapse of the Mexican peso, we saw an exodus of
capital out of what were perceived to be unstable markets -- not only in Mexico
and the rest of Latin America but in Asia, too -- and into the world's major
markets and currencies. If, at first, the United States failed to benefit as
much as Japan and Germany, that was due to the sliding value of the dollar, a
development exacerbated by the $50 billion bailout of Mexico.
[A 2 1/2" x 3 1/4" photo of the Global Income investment team at bottom right.
Caption reads: "The Global Income investment team: (l-r) Lawrence Daly and
Anthony Goodchild, Co-Portfolio Managers]
Finally, toward the end of the period, growing signs of an economic slowdown
in the United States ignited what has become a dramatic bond rally in domestic
markets.
Overall, market conditions were as treacherous as any we've encountered in a
long time. Happily, John Hancock Global Income Fund did much better than many of
its competitors in this challenging environment. For the six months ended April
30, 1995, the Fund's total return was 7.51% for Class A shares and 7.14% for
[CAPTION]
"...MARKET CONDITIONS WERE AS TREACHEROUS AS ANY WE'VE ENCOUNTERED..."
3
<PAGE> 84
John Hancock Funds - Global Income Fund
[Chart with heading "Top Five Countries" at top of left hand column. The chart
lists the top five countries: 1) United States 50% 2) Germany 20% 3) Great
Britian 10% 4) New Zealand 9% 5) Spain 3%. A footnote below reads: "As a
percentage of net assets on April 30, 1995."]
[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 Ginnie Maes
followed by an up arrow and the phrase "U.S. bond market turns corner." The
second listing is Major European Currencies followed by an up arrow and the
phrase "Mexico bailout pushes U.S. dollar lower." The third listing is Spain
followed by a down arrow and the phrase "Investors shun peripheral economies."
Footnote below reads: "See "Schedule of Investments." Investment holdings are
subject to change."]
Class B shares at net asset value. Those compared to a 3.84% return for the
average general world income fund, according to Lipper Analytical Services.(1)
MANAGING DURATION, DIVERSIFICATION AND CURRENCIES
Three main traits characterized the Fund at the beginning of the period. The
first was a relatively short duration. Duration measures the degree to which a
fund's share price will fluctuate with changes in interest rates. The longer its
duration, the more its share price will move up as rates fall, or down as rates
rise. We'd been lowering the duration since we began managing the Fund last
summer. By the end of October, it was about 4.5 years. As long as interest rates
were rising, it made sense to maintain a defensive duration. In the weeks that
followed, the Fund's duration fell to as low as 2 years. But as it became clear
to us that Treasury bond yields had peaked above 8%, we moved aggressively to
extend the Fund's duration to around 7 years. By moving quickly, we were able to
profit from falling rates and rising bond prices.
The second trait was a heavy concentration in well-established, core markets:
18% in the United States, 14% in Germany and 14% in Britain. That emphasis has
become even more pronounced in recent months as we've moved 50% of the Fund's
assets into U.S. bonds, mainly Ginnie Mae mortgage securities yielding 8%. The
Ginnie Maes have performed well, rising in price to face value after we bought
them at a steep discount.
In Germany, where we had about 20% of the Fund's assets at the end of the
period, most of our holdings were in the 10-year maturity range. In Britain,
where the economic recovery was farther along, our 10% stake was mostly in
five-year bonds.
In addition, the Fund had an approximately 9% stake in New Zealand, divided
between short-term and long-term bonds. New Zealand, while not a core economy,
has benefited from the policies of a strict central bank, resulting in low
inflation, a budget surplus and diminishing national debt.
Third, when the period began in November, the Fund was largely hedged against
fluctuations in the value of foreign currencies compared to the U.S. dollar.
That's because we believed the dollar had bottomed out and was about to head
back up. A rising dollar would have eroded the value of our foreign holdings,
hence the hedge. Instead, the scenario we had envisioned failed to unfold and
the dollar continued to fall -- slowly at first, then more dramatically as time
went on. In response, we gradually increased
[CAPTION]
"...WE'VE MOVED 50% OF THE FUND'S ASSETS INTO U.S. BONDS..."
4
<PAGE> 85
===============================================================================
John Hancock Funds - Global Income Fund
Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." 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
7.51% total return for John Hancock Global Income Fund: Class A. The second
represents the 7.14% total return for John Hancock Global Income Fund: Class B.
The third represents the 3.84% total return for the average global income fund.
Footnote below reads: "Total returns for John Hancock Global Income Fund are at
net asset value with all distributions reinvested. The average global income
fund is tracked by Lipper Analytical Services. (1) See following page for
historical performance information."
our direct exposure to European currencies; perhaps too gradually, in
retrospect. Even so, we were able to capture most of the gains to be had at that
stage from the falling dollar.
OUTLOOK: AVOIDING PITFALLS
All the reasons that it may have made sense in the past to invest in global bond
markets still apply. Simply put, the rest of the world's economies are growing
faster than the U.S. As that trend continues, the demand for capital will likely
grow, leading to stronger currencies and rising stock and bond markets overseas.
That's the big picture, and it's a comforting one.
Short-term, however, it's likely to be a bumpy ride. The key to above-average
performance during the past year or two has been avoiding the pitfalls, and we
think that's going to remain the key in the months ahead. Right now, we don't
think the potential rewards of investing heavily overseas compensate for the
added risk, which is why the Fund's asset mix is weighted in favor of the United
States.
On the other hand, it's unlikely that even in this country, bonds will
continue to post the kind of dramatic price gains we saw during the first
quarter of 1995. So for the time being, we'll be looking mainly to protect the
Fund's share price, with coupon payments probably making up the bulk of total
return. To expect much more than that in the current climate would be to assume
more risk than is reasonable, and risk is something we watch closely. Our goal
is solid performance, but on a risk-adjusted basis.
- -------------------------------------------------------------------------------
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjustment performance is
lower.
[CAPTION]
"...THE REST OF THE WORLD'S ECONOMIES ARE GROWING FASTER THAN THE U.S."
5
<PAGE> 86
===============================================================================
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Global Income Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ended March 31,
1995, with all distributions reinvested in shares. The average annual total
returns for the 1-year period and since inception on January 3, 1992, for Class
A shares were 2.79% and 1.78%, respectively and reflect payment of the maximum
sales charge of 4.5% for Class A shares. For the 1-year and 5-year periods and
since inception on December 17, 1986, the average annualized total returns for
Class B shares were 2.01%, 6.55% and 9.07%, respectively and reflect the
applicable contingent deferred sales charge (maximum contingent deferred sales
charge is 5% and declines to 0% over 6 years). The SEC standard yields for the
30-day period ended April 30, 1995, for Class A and Class B shares were 6.13%
and 5.77%, respectively. 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. See
the prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
[Global Income Fund
Class A Shares
Line chart with the heading Global Income 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 Salomon Brothers World Government
Bond Index and is equal to $13,823* as of April 30, 1995. The second line
represents the value of the hypothetical $10,000 investment made in Global
Income fund on January 3, 1992, before sales charge, and is equal to $11,244 as
of April 30, 1995. The third line represents the Global Income Fund after sales
charge and is equal to $10,734 as of April 30, 1995.
Global Income Fund
Class B Shares
Line chart with the heading Global Income Fund: Class B, representing the growth
of a hypothetical $10,000 investment over the life of the fund. Within the chart
are two lines.
The first line represents the value of the Salomon Brothers World Government
Bond Index and is equal to $23,531* as of April 20, 1995. The second line
represents the value of the hypothetical $10,000 investment made in the Global
Income Fund on December 17, 1986 and is equal to $21,377* as of April 30, 1995.]
*The Salomon Brothers World Government Bond Index is an unmanaged index that
provides a benchmark bond market performance on a worldwide basis.
**No contingent deferred sales charge applicable.
6
<PAGE> 87
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $105,012,260)........................................................................ $108,384,858
Joint repurchase agreement (cost - $3,465,000)..................................................... 3,465,000
------------
111,849,858
Cash................................................................................................. 4,712,397
Receivable for shares sold........................................................................... 83,075
Receivable for investments sold...................................................................... 11,341,997
Interest receivable.................................................................................. 1,524,118
Foreign tax receivable............................................................................... 12,597
Other assets......................................................................................... 5,547
------------
Total Assets...................................................................... 129,529,589
-------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for foreign currency purchased............................................................... 494,531
Dividend payable..................................................................................... 332,650
Payable for shares repurchased....................................................................... 99,687
Payable for investments purchased.................................................................... 14,640,491
Payable to John Hancock Advisers, Inc. and affiliates - Note B....................................... 90,287
Accounts payable and accrued expenses................................................................ 96,194
------------
Total Liabilities................................................................. 15,753,840
-------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in...................................................................................... $118,923,977
Accumulated net realized loss on investments, options, foreign currency
transactions and financial futures contracts....................................................... ( 9,072,277)
Net unrealized appreciation of investments and foreign currency transactions......................... 3,417,374
Undistributed net investment income.................................................................. 506,675
------------
Net Assets........................................................................ $113,775,749
=================================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value, respectively)
Class A - $10,743,230/1,172,672...................................................................... $ 9.16
====================================================================================================================
Class B - $103,032,519/11,251,659.................................................................... $ 9.16
=====================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($9.16 x 104.71%).......................................................................... $ 9.59
=====================================================================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
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 APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 88
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ............................................................................................ $4,926,496
----------
EXPENSES:
Investment management fee - Note B................................................................. 434,590
Distribution/service fee - Note B
Class A........................................................................................... 14,638
Class B........................................................................................... 530,660
Transfer agent fee - Note B
Class A........................................................................................... 12,268
Class B........................................................................................... 105,443
Custodian fee...................................................................................... 57,080
Auditing fee....................................................................................... 36,522
Trustees' fees..................................................................................... 13,848
Registration and filing fees....................................................................... 13,240
Printing........................................................................................... 8,842
Miscellaneous...................................................................................... 4,306
----------
Total Expenses.................................................................... 1,231,437
-----------------------------------------------------------------------------------------------
Net Investment Income............................................................. 3,695,059
-----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY TRANSACTIONS AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold................................................................ (4,232,319)
Net realized loss on foreign currency transactions................................................... ( 122,958)
Net realized loss on financial futures contracts..................................................... ( 85,475)
Change in net unrealized appreciation/depreciation of investments.................................... 9,065,331
Change in net unrealized appreciation/depreciation of foreign currency transactions.................. ( 423,318)
Change in net unrealized appreciation/depreciation of financial futures contracts.................... ( 211,785)
----------
Net Realized and Unrealized Gain on Investments, Foreign Currency Transactions
and Financial Futures Contracts................................................... 3,989,476
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.............................. $7,684,535
===============================================================================================
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 89
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
--------------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.................................................................. $ 3,695,059 $ 10,542,529
Net realized loss on investments sold, foreign currency transactions and financial
futures contracts..................................................................... ( 4,440,752) ( 8,918,471)
Change in net unrealized appreciation/depreciation of investments, foreign currency
transactions and financial futures contracts.......................................... 8,430,228 ( 6,180,526)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations...................... 7,684,535 ( 4,556,468)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3088 and $0.1140 per share, respectively).............................. ( 336,070) ( 133,439)
Class B - ($0.2801 and $0.0605 per share, respectively).............................. ( 3,358,989) ( 1,025,278)
Distributions from capital paid-in
Class A - (none and $0.52 per share, respectively)................................... -- ( 607,771)
Class B - (none and $0.52 per share, respectively)................................... -- ( 8,776,041)
------------ ------------
Total Distributions to Shareholders................................................. ( 3,695,059) ( 10,542,529)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*.................................................... ( 13,818,836) ( 71,343,632)
------------ ------------
NET ASSETS:
Beginning of period.................................................................... 123,605,109 210,047,738
------------ ------------
End of period (including undistributed net investment income of $506,675, applicable
for both periods) $113,775,749 $123,605,109
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold..................................................... 254,680 $ 2,263,758 224,553 $ 2,054,490
Shares issued to shareholders in reinvestment of distributions.. 23,832 213,703 48,398 440,545
--------- ----------- --------- -----------
278,512 2,477,461 272,951 2,495,035
Less shares repurchased......................................... ( 116,808) ( 1,045,978) ( 600,757) ( 5,483,405)
--------- ----------- --------- -----------
Net increase (decrease)......................................... 161,704 $ 1,431,483 ( 327,806) ($ 2,988,370)
========= =========== ========= ===========
CLASS B
Shares sold..................................................... 166,075 $ 1,488,882 912,315 $ 8,546,729
Shares issued to shareholders in reinvestment of distributions.. 182,321 1,630,955 520,773 4,747,762
--------- ----------- --------- -----------
348,396 3,119,837 1,433,088 13,294,491
Less shares repurchased......................................... (2,056,163) ( 18,370,156) ( 8,973,138) ( 81,649,753)
--------- ----------- --------- -----------
Net decrease.................................................... (1,707,767) ($15,250,319) ( 7,540,050) ($68,355,262)
========= =========== ========= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 90
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ------------------------------------------------------------
(UNAUDITED) 1994 1993 1992(a) 1991 1990
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....... $ 8.85 $ 9.62 $ 9.76 $ 10.57
-------- -------- -------- --------
Net Investment Income...................... 0.31 0.64** 0.76 0.64
Net Realized and Unrealized Gain (Loss)
on Investments, Options, Financial
Futures Contracts and Foreign Currency
Transactions.............................. 0.31 ( 0.78) ( 0.10) ( 0.74)
-------- -------- -------- --------
Total from Investment Operations........ 0.62 ( 0.14) 0.66 ( 0.10)
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income....... ( 0.31) ( 0.11) ( 0.38) ( 0.71)
Distributions in Excess of Net
Investment Income......................... -- -- ( 0.04) --
Distributions from Capital Paid-In......... -- ( 0.52) ( 0.38) --
-------- -------- -------- --------
Total Distributions..................... ( 0.31) ( 0.63) ( 0.80) ( 0.71)
-------- -------- -------- --------
Net Asset Value, End of Period............. $ 9.16 $ 8.85 $ 9.62 $ 9.76
======== ======== ======== ========
Total Investment Return at Net
Asset Value............................... 7.51% ( 1.30%) 7.14% ( 0.88%)*
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).. $ 10,743 $ 8,949 $ 12,882 $ 12,880
Ratio of Expenses to Average Net Assets.... 1.53%* 1.59% 1.46% 1.41%*
Ratio of Net Investment Income to Average
Net Assets................................ 6.93%* 7.00% 7.89% 7.64%*
Portfolio Turnover Rate.................... 116% 174% 363% 476%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....... $ 8.85 $ 9.62 $ 9.74 $ 10.44 $ 10.38 $ 10.21
-------- -------- -------- -------- -------- --------
Net Investment Income...................... 0.28 0.59** 0.72 0.78 0.90 0.85
Net Realized and Unrealized Gain (Loss)
on Investments, Options, Financial
Futures Contracts and Foreign Currency
Transactions.............................. 0.31 ( 0.78) ( 0.09) ( 0.59) 0.13 0.28
-------- -------- -------- -------- -------- ------
Total from Investment Operations........ 0.59 ( 0.19) 0.63 0.19 1.03 1.13
-------- -------- -------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income....... ( 0.28) ( 0.06) ( 0.33) ( 0.89) ( 0.73) ( 0.85)
Distributions from Net Realized Gain
on Investments............................ -- -- -- -- ( 0.24) --
Distributions in Excess of Net
Investment Income......................... -- -- ( 0.04) -- -- --
Distributions from Capital Paid-In......... -- ( 0.52) ( 0.38) -- -- ( 0.11)
-------- -------- -------- -------- -------- --------
Total Distributions..................... ( 0.28) ( 0.58) ( 0.75) ( 0.89) ( 0.97) ( 0.96)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period............. $ 9.16 $ 8.85 $ 9.62 $ 9.74 $ 10.44 $ 10.38
======== ======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value........................... 7.14% ( 1.88%) 6.77% 1.72% 10.44% 11.84%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).. $103,033 $114,656 $197,166 $199,102 $192,687 $186,524
Ratio of Expenses to Average Net Assets.... 2.19%* 2.17% 1.91% 1.91% 1.90% 1.82%
Ratio of Net Investment Income to Average
Net Assets................................ 6.36%* 6.41% 7.45% 7.59% 8.74% 8.67%
Portfolio Turnover Rate.................... 116% 174% 363% 476% 159% 186%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 91
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY GLOBAL
INCOME FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN CATEGORIES: BONDS AND
SHORT-TERM INVESTMENTS. THE BONDS ARE FURTHER BROKEN DOWN BY CURRENCY
DENOMINATION.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER RATE OMITTED)# VALUE
- ------ ---- --------- -----
<S> <C> <C> <C>
BONDS
CANADA (2.30%)
Government of Canada, 04-01-02................................................ 8.500% 3,500* $ 2,614,893
-----------
DENMARK (2.21%)
Kingdom of Denmark, 11-15-01.................................................. 8.000 14,000* 2,522,650
------------
GERMANY (19.85%)
Federal Republic of Germany, 07-22-02......................................... 8.000 11,500 8,813,627
Federal Republic of Germany, 01-03-05......................................... 7.375 4,000* 2,956,020
International Bank Reconstruction and Development, 04-12-05................... 7.125 15,000* 10,817,952
------------
22,587,599
------------
GREAT BRITAIN (9.78%)
United Kingdom Treasury Bonds, 12-07-00....................................... 8.000 7,000* 11,125,678
------------
NEW ZEALAND (8.95%)
Government of New Zealand, 11-15-96........................................... 9.000 4,000* 2,714,002
Government of New Zealand, 03-15-02........................................... 10.000 10,000* 7,466,115
------------
10,180,117
------------
SPAIN (3.03%)
Government of Spain, 03-25-00................................................. 12.250 418,290* 3,445,112
------------
UNITED STATES (49.14%)
Barclays North American Capital Corp, 05-15-21................................ 9.750 5,000 5,592,350
Government National Mortgage Association
30 Yr SF Pass Thru Ctf, 07-15-24.............................................. 8.000 4,759* 4,756,213
30 Yr SF Pass Thru Ctf, 10-15-24.............................................. 8.000 4,975* 4,971,555
30 Yr SF Pass Thru Ctf, 11-15-24.............................................. 8.000 27,897* 27,879,287
Norsk Hydro, 04-15-12......................................................... 9.000 6,000 6,518,490
Royal Bank of Scotland Capital Corp., 03-01-04................................ 10.125 5,000 5,687,350
United States Treasury Bonds, 08-15-05........................................ 10.750 400 503,564
------------
55,908,809
------------
TOTAL BONDS
(Cost $105,012,260) ( 95.26%) 108,384,858
------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 92
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER RATE OMITTED) VALUE
- ------ ---- --------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (3.05%)
Investment in a joint repurchase agreement
transaction with BT Securities Corp. -
Dated 04-28-95, Due 05-01-95 (secured by U.S.
Treasury Bond, 13.875% Due 05-15-11, and by
U.S. Treasury Note, 6.875% Due 10-31-96)
Note A........................................................................ 5.930% 3,465 $ 3,465,000
------------
TOTAL SHORT-TERM INVESTMENTS ( 3.05%) 3,465,000
------ ------------
TOTAL INVESTMENTS ( 98.31%) $111,849,858
======= ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
# Par value of foreign bonds are expressed in local currency.
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> 93
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
Portfolio Concentration (Unaudited)
- -------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN BONDS ISSUED BY COMPANIES AND GOVERNMENTS OF OTHER
COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC
CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION OF
INVESTMENT BY COUNTRY OF DENOMINATION FOR INDIVIDUAL SECURITIES HELD BY THE FUND
IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN ADDITION, THE CONCENTRATION OF
INVESTMENTS CAN BE AGGREGATED BY VARIOUS INVESTMENT CATEGORIES. THE TABLE BELOW
SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT APRIL 30, 1995 ASSIGNED TO
THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
- --------------------- --------------------------
<S> <C>
Banking.................................................................................... 19.42%
Governmental - Foreign..................................................................... 36.61
Governmental - United States............................................................... 33.50
Utilities.................................................................................. 5.73
Short-term investments..................................................................... 3.05
------
TOTAL INVESTMENTS 98.31%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust II (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Global Income Fund (the "Fund"), John
Hancock Global Fund, John Hancock International Fund, John Hancock Short-Term
Strategic Income Fund and John Hancock Special Opportunities Fund. Prior to
January 1, 1995 John Hancock Global Income was known as John Hancock Freedom
Global Income Fund, John Hancock Global Fund was known as John Hancock Freedom
Global Fund and John Hancock International Fund was known as John Hancock
Freedom International Fund.
The Trustees have authorized the issuance of two 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, redemption, dividends, and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. 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 instruments 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. The Fund may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
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. 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. Therfore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities may be treated as ordinary income
even though such items are capital gains and losses for accounting purposes. The
Fund has $4,488,199 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains. If such
carryforwards are used by the Fund, no capital gains distributions will be made.
The carryforward expires October 31, 2002.
14
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 Trust 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 sizes of the Funds.
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/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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. These
contracts involve market or credit risk in excess of the unrealized gain or loss
reflected in the Fund's Statement of Assets and Liabilities. The Fund may also
purchase and sell forward contracts to facilitate the settlement of foreign
currency denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no market risk
other than that offset by the currency amount of the underlying transaction.
There were no open forward foreign currency exchange contracts at April 30,
1995.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of the operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interests, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities resulting
from changes in the exchange rate.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the mean between the last bid and
asked prices. Written put or call over-the-counter options
15
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a put or call option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30,
1995.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it
will be required to deposit with its custodian a specified amount of cash or
U.S. government securities, known as "initial margin", equal to a certain
percentage of the value of the financial futures contract being traded. Each
day, the futures contract will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", will be made to and from the broker on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
There were no open positions in finacial futures contracts for the period
ended April 30, 1995.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.75% of the first $250,000,000 of the
Fund's average daily net asset value and (b) 0.70% of the Fund's average daily
net asset value in excess of $250,000,000.
16
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income 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, of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, JH Funds
received net sales charges of $15,786 with regard to sales of Class A shares.
Out of this amount, $517 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $4,250 was paid as sales
commissions to unrelated broker-dealers and $11,019 was paid as sales
commissions 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 FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
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 April 30, 1995
contingent deferred sales charges received by JH Funds amounted to $137,692.
In addition, to compensate the Co-Distributors for the services they provide
as distributors 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 the
Co-Distributors, for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares to reimburse the Co-Distributors for their distribution/service costs. Up
to a maximum of 0.25% of these 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. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.21% and 0.16% of the average
daily net asset value of 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.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustees of the Fund. The Adviser owns 10,772 Class A
shares of beneficial interest of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on
17
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
the Fund's books as an other asset. The deferred compensation liability will be
marked to market on a periodic basis and income earned by the investment will be
recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995, aggregated $130,528,442 and
$142,547,940, respectively.
The cost of investments owned at April 30, 1995 for federal income tax
purposes was $109,963,217. Gross unrealized appreciation and depreciation of
investments aggregated $2,596,016 and $709,375, respectively, resulting in net
unrealized appreciation of $1,886,641.
18
<PAGE> 99
NOTES
John Hancock Funds - Global Income Fund
19
<PAGE> 100
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM 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 Global
Income 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."]
JHF 090SA 04/95
