<PAGE> 1
John Hancock Funds
- --------------------------------------------------------------------------------
GLOBAL
INCOME
FUND
ANNUAL REPORT
October 31, 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
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" photo of Edward J. Boudreau Jr., Chairman and Chief Executive Officer,
flush right, next to first paragraph.]
Investors around the world have been watching Wall Street in awe
for the better part of 1995. Through October, the Standard & Poor's 500-Stock
Index, a widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY LAWRENCE J. DALY AND ANTHONY A. GOODCHILD,
CO-PORTFOLIO MANAGERS
JOHN HANCOCK
GLOBAL INCOME FUND
Slower growth in the U.S. and Europe, declining interest rates
and good news on inflation spur global bond market rally
The global bond market has improved dramatically since the start of the Fund's
fiscal year in November 1994. Conditions then were poor. Interest rates were
rising in the United States and Europe, sending bond prices lower. The Federal
Reserve was still in a restrictive mode, hoping to slow down the pace of U.S.
economic growth and prevent an outbreak of inflation. In November 1994, the Fed
raised the federal funds rate -- the interest rate banks charge each other for
overnight loans -- three-quarters of a percentage point; it followed with a
half-point increase in February 1995, the seventh in a series of restrictive
moves dating back to February 1994. The dollar, meanwhile, was slumping against
most world currencies.
[A 2 1/4" x 3 1/2" photo of Lawrence Daly and Anthony Goodchild at bottom right.
Caption reads: "Lawrence Daly and Anthony Goodchild, Co-Portfolio Mangers."]
Since then, however, growth has slowed dramatically in most of the world's
developed economies, putting downward pressure on interest rates. In July, the
Fed lowered the federal funds rate one-quarter of a percentage point. Stable to
declining wages -- due mainly to competitive pressures from developing economies
in Asia and Latin America -- have convinced many market participants that
inflation in the United States is unlikely to be a threat anytime soon. The
dollar, meanwhile, has rebounded sharply versus the yen. Together
[CAPTION]
"THE GLOBAL BOND MARKET HAS IMPROVED DRAMATICALLY..."
3
<PAGE> 4
John Hancock Funds - Global Income Fund
[Chart with heading "Top Five Countries" at top of left hand column. The chart
lists five countries: 1) United States 52.1% 2) Germany 11.9% 3) France 7.7%
4) United Kingdom 6.2% 5) Australia 4.2%. A footnote below reads "As percentage
of net assets on October 31, 1995."]
those factors contributed to an attractive environment for global bond
investors.
The upshot was a positive year for the Fund. During the year ended
October 31, 1995, John Hancock Global Income Fund's Class A and Class B shares
had total returns of 12.25% and 11.51%, respectively at net asset value,
compared to 11.52% for the average general world income fund, according to
Lipper Analytical Services.(1)
STRATEGY RECAP
The Fund's average duration when the period began was less than five years, and
on its way down to two years. Average duration measures how much a fund's share
price will vary with changes in interest rates -- the longer the duration, the
greater the variation. As long as rates were rising and bond prices falling, a
defensive duration strategy made sense. But when long-term rates peaked in late
1994, we moved quickly and aggressively to extend the Fund's average duration,
mainly by adding long-term U.S. Treasury securities. The Fund's duration reached
seven years by the halfway point in the period. Since then we've kept duration
at the aggressive end of the scale, between six and eight years. For most of the
period we were longer than many of our competitors, and that boosted the Fund's
relative performance.
Our currency strategy had a mixed effect on performance during the period.
Last spring, for example, because we had almost no exposure to Japanese
currency, we missed the sharp rally in the yen, and that hurt us. Later in the
summer, however, as the dollar climbed from a low of 80 yen to a high of around
105, not owning any yen helped us avoid losses. Overall, the net impact of the
yen on the Fund's relative performance was probably slightly negative. Since
then we've built about a 5% stake in yen, although that's still less than most
of our competitors.
In Europe, where political pressures to keep local currencies in check are
not as strong as in Japan, we've taken a more aggressive approach. After the
dollar rallied, we built about a 40% stake in various currencies -- mainly
French francs, German marks and British sterling as well as Italian lira,
Spanish pesetas and Swedish crone. They'd become so attractive over the summer
that it made sense to own them again. Part of what makes foreign currencies a
good bet now is that we're heading into an election year. The Clinton
administration has a clear interest in promoting domestic prosperity by keeping
a lid on the value of the dollar.
At the end of the period, about 52% of the Fund's net assets were invested in
the United
[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 U.S.
Treasuries followed by an up arrow and the phrase "Rates fall as growth slows."
The second listing is Germany followed by an up arrow and the phrase "Core
markets outperform." The third listing is Japanese yen followed by a down arrow
and the phrase "No exposure during spring rally" Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."]
[CAPTION]
"...ABOUT 52% OF THE FUND'S NET ASSETS WERE INVESTED IN THE UNITED STATES."
4
<PAGE> 5
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 year ended October 31, 1995." The chart is
scaled in increments of 5% from bottom to top, with 15% at the top and 0% at
the bottom. Within the chart there are three solid bars. The first represents
the 12.25% total return for the John Hancock Global Income Fund, Class A.
The second represents the 11.51% total return for John Hancock Global Income
Fund, Class B. The third represents the 11.52% total return for the average
general world income fund. A footnote below reads: "Total returns for John
Hancock Global Income Fund are at net asset value with all distributions
reinvested. The average general world income fund is tracked by Lipper
Analytical Services.(1) See following page for historical performance
information."]
States. That's up from less than 20% a year ago. Initially the buildup was
mainly the result of buying long-term U.S. Treasury securities to take advantage
of declining interest rates. In Europe, while we finished the period with small
investments in Italy, Spain and Denmark, our focus was on the continent's core
economies: Germany, with 12% of the Fund's assets at the end of October; France,
almost 8%; and the U.K., 6%. Declining interest rates there and in Australia,
where the Fund had about a 4% stake at the end of October, raised bond prices
and boosted performance.
OUTLOOK
The outlook for the global bond market remains favorable. Interest rates in many
of the world's developed economies, including the United States, remain high in
real terms, adjusted for inflation. That's likely to put a damper on economic
growth in the coming year and force still lower rates. Moreover, inflation is
unlikely to become a threat anytime soon, given that wages are by far the
biggest component of corporate costs and wages continue to fall. Those factors
are all part of what we believe is a larger deflationary cycle affecting the
United States, Japan and Europe as they face growing competition from the
world's emerging markets. It's a process filled with opportunities as well as
pitfalls, and will require careful choices in the months ahead. We'll be keeping
a close eye on budget negotiations in Washington. If the U.S. can show
leadership by reducing spending and cutting the deficit, others may follow,
significantly improving the outlook for the global bond markets.
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"...INFLATION IS UNLIKELY TO BECOME A THREAT ANYTIME SOON."
5
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Global Income Fund. Total return is a
performance measure that equals the sum of all dividends and capital gains,
assuming reinvestment of these distributions and the change in the price of the
Fund's shares, expressed as a percentage of the Fund's average net assets.
Performance figures include the maximum applicable sales charge of 4.50% for
Class A shares. The effect of the maximum contingent deferred sales charge for
Class B shares (maximum 5% and declining to 0% over six years) is included in
Class B performance. Remember that all figures represent past performance and
are no guarantee of how the Fund will perform in the future. Also, keep in mind
that the total return and share price of the Fund's investments will fluctuate.
As a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please see your prospectus for a
discussion of the risks associated with international investing, including
currency and political risks and differences in accounting standards and
financial reporting.
Note: Participant-directed defined-contribution plans with at least 100
eligible employees at inception of the Fund account may purchase Class A
shares without an initial sales charge as of March 15, 1995. If those
shares are redeemed, however, during the year following the calendar year
end during which they were purchased, a contingent deferred sales charge
will be assessed.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Global Income Fund: Class A 7.66% N/A 10.72%(1)
John Hancock Global Income Fund: Class B 6.95% 31.24% 113.86%
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Global Income Fund: Class A 7.66% N/A 2.76%(1)
John Hancock Global Income Fund: Class B 6.95% 5.59% 9.04%
YIELDS
AS OF OCTOBER 31, 1995
<CAPTION>
SEC 30-DAY
YIELD
----------
<S> <C>
John Hancock Global Income Fund: Class A 5.80%
John Hancock Global Income Fund: Class B 5.21%
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on January 3, 1992; Class B shares started on
December 17, 1986.
6
<PAGE> 7
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John Hancock
Global Income Fund would be worth on October 31, 1995, assuming you had invested
on the day each class of shares started and reinvested all distributions. For
comparison, we've shown the same $10,000 investment in the Salomon Brothers
World Government Bond Index -- an unmanaged index that provides a benchmark bond
market performance on a worldwide basis.
[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 $14,251 as of October 31, 1995. The second line
represents the value of the hypothetical $10,000 investment made in the Global
Income Fund on January 3, 1992, before sales charge, and is equal to $11,785 as
of October 31, 1995. The third line represents the Global Income Fund after
sales charge and is equal to $11,253 as of October 31, 1995.]
[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 $24,260 as of October 31, 1995. The second line
represents the value of the hypothetical $10,000 investment made in the Global
Income Fund on December 17, 1986, before contingent deferred sales charge, and
is equal to $21,719 as of October 31, 1995.]
* No contingent deferred sales charge applicable.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Global Income 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 OCTOBER 31, 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
October 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $94,928,370)........................................................................ $ 97,871,238
Options (premium paid - $100,400)................................................................. 61,440
Joint repurchase agreement (cost - $1,781,000).................................................... 1,781,000
------------
99,713,678
Cash............................................................................................... 1,255
Interest receivable................................................................................ 2,008,394
Foreign tax receivable............................................................................. 80,926
Other assets....................................................................................... 5,547
------------
Total Assets..................................................................... 101,809,800
===============================================================================================
LIABILITIES:
Payable for closed forward foreign currency exchange contracts - Note A............................ 553,791
Dividend payable................................................................................... 14,582
Payable for shares repurchased..................................................................... 37,393
Payable for open forward foreign currency exchange contracts - Note A.............................. 61,906
Payable to John Hancock Advisers, Inc. and affiliates - Note B..................................... 91,481
Accounts payable and accrued expenses.............................................................. 116,245
------------
Total Liabilities................................................................ 875,398
===============================================================================================
NET ASSETS:
Capital paid-in.................................................................................... 105,805,124
Accumulated net realized loss on investments, options, foreign currency transactions
and financial futures contracts.................................................................... ( 6,383,189)
Net unrealized appreciation of investments, options and foreign currency transactions.............. 2,859,361
Distributions in excess of net investment income................................................... ( 1,346,894)
------------
Net Assets....................................................................... $100,934,402
===============================================================================================
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 - $35,334,449/3,797,761.................................................................... $ 9.30
=================================================================================================================
Class B - $65,599,953/7,050,732.................................................................... $ 9.30
=================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($9.30 x 104.71%)........................................................................ $ 9.74
=================================================================================================================
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Global Income 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
Year ended October 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $50,188)............................................. $ 9,125,784
-----------
Expenses:
Distribution/service fee - Note B
Class A......................................................................................... 58,434
Class B......................................................................................... 917,508
Investment management fee - Note B................................................................ 840,527
Transfer agent fee - Note B....................................................................... 243,567
Auditing fee...................................................................................... 73,000
Custodian fee..................................................................................... 70,711
Trustees' fees.................................................................................... 26,685
Registration and filing fees...................................................................... 26,452
Printing.......................................................................................... 25,876
Miscellaneous..................................................................................... 9,211
-----------
Total Expenses................................................................... 2,291,971
-----------------------------------------------------------------------------------------------
Net Investment Income............................................................ 6,833,813
-----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY TRANSACTIONS
AND FINANCIAL FUTURES CONTRACTS
Net realized gain on investments sold.............................................................. 394,294
Net realized loss on foreign currency transactions................................................. ( 2,502,803)
Net realized loss on financial futures contracts................................................... (98,550)
Change in net unrealized appreciation/depreciation of investments.................................. 8,452,758
Change in net unrealized appreciation/depreciation of foreign currency transactions................ ( 368,758)
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.................................... 5,665,156
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............................. $12,498,969
===============================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1995 1994
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................ $ 6,833,813 $ 10,542,529
Net realized loss on investments sold, foreign currency
transactions and financial futures contracts ....................................... ( 2,207,059) ( 8,918,471)
Change in net unrealized appreciation/depreciation of
investments, foreign currency transactions and financial futures contracts.......... 7,872,215 ( 6,180,526)
------------ ------------
Net Increase (Decrease)in Net Assets Resulting from Operations...................... 12,498,969 ( 4,556,468)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.5914 and $0.1140 per share, respectively)............................. ( 1,232,555) ( 133,439)
Class B - ($0.5322 and $0.0605 per share, respectively)............................. ( 5,493,085) ( 1,025,278)
Distributions from capital paid-in
Class A - ($0.0095 and $0.5200 per share, respectively)............................. ( 19,824) ( 607,771)
Class B - ($0.0086 and $0.5200 per share, respectively)............................. ( 88,349) ( 8,776,041)
------------ ------------
Total Distributions to Shareholders............................................... ( 6,833,813) ( 10,542,529)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... ( 28,335,863) ( 71,343,632)
------------ ------------
NET ASSETS:
Beginning of period.................................................................. 123,605,109 210,047,738
------------ ------------
End of period (including distributions in excess of net investment
income of ($1,346,894) and undistributed net investment income of
$506,675, respectively) ............................................................ $100,934,402 $123,605,109
============ ============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1995 1994
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold......................................................... 3,261,257 $29,997,448 224,553 $ 2,054,490
Shares issued to shareholders in reinvestment of distributions...... 82,340 752,217 48,398 440,545
---------- ----------- ---------- ------------
3,343,597 30,749,665 272,951 2,495,035
Less shares repurchased............................................. ( 556,804) ( 5,095,717) ( 600,757) ( 5,483,405)
---------- ----------- ---------- ------------
Net increase (decrease)............................................. 2,786,793 $25,653,948 ( 327,806) ($ 2,988,370)
========== =========== ========== ============
CLASS B
Shares sold......................................................... 304,724 $ 2,763,541 912,315 $ 8,546,729
Shares issued to shareholders in reinvestment of distributions...... 306,687 2,775,841 520,773 4,747,762
---------- ----------- ---------- ------------
611,411 5,539,382 1,433,088 13,294,491
Less shares repurchased............................................. (6,520,105) ( 59,529,193) (8,973,138) ( 81,649,753)
---------- ----------- ---------- ------------
Net decrease........................................................ (5,908,694) ($53,989,811) (7,540,050) ($68,355,262)
========== =========== ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Global 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>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
1995 1994 1993 1992(a) 1991
------- --------- --------- --------- -------
<S> <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 ............................................ 0.57** 0.64** 0.76 0.64
Net Realized and Unrealized Gain (Loss) on Investments, Options,
Financial Futures Contracts and Foreign Currency Transactions .. 0.48 ( 0.78) ( 0.10) ( 0.74)
------- --------- --------- ---------
Total from Investment Operations .............................. 1.05 ( 0.14) 0.66 ( 0.10)
------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ............................. ( 0.59) ( 0.11) ( 0.38) ( 0.71)
Distributions in Excess of Net Investment Income ................. -- -- ( 0.04) --
Distributions from Capital Paid-In ............................... ( 0.01) ( 0.52) ( 0.38) --
------- --------- --------- ---------
Total Distributions ........................................... ( 0.60) ( 0.63) ( 0.80) ( 0.71)
------- --------- --------- ---------
Net Asset Value, End of Period ................................... $ 9.30 $ 8.85 $ 9.62 $ 9.76
======= ========= ========= =========
Total Investment Return at Net Asset Value (b) ................... 12.25% ( 1.30%) 7.14% ( 0.88%)*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ........................ $35,334 $ 8,949 $ 12,882 $ 12,880
Ratio of Expenses to Average Net Assets .......................... 1.48% 1.59% 1.46% 1.41%*
Ratio of Net Investment Income to Average Net Assets ............. 6.43% 7.00% 7.89% 7.64%*
Portfolio Turnover Rate .......................................... 263% 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
------- --------- --------- --------- --------
Net Investment Income............................................. 0.55** 0.59** 0.72 0.78 0.90
Net Realized and Unrealized Gain (Loss) on Investments, Options,
Financial Futures Contracts and Foreign Currency Transactions... 0.44 ( 0.78) ( 0.09) ( 0.59) 0.13
------- --------- --------- --------- --------
Total from Investment Operations............................... 0.99 ( 0.19) 0.63 0.19 1.03
------- --------- --------- --------- --------
Less Distributions:
Dividends from Net Investment Income.............................. ( 0.53) ( 0.06) ( 0.33) ( 0.89) ( 0.73)
Distributions from Net Realized Gain on Investments............... -- -- -- -- ( 0.24)
Distributions in Excess of Net Investment Income.................. -- -- ( 0.04) -- --
Distributions from Capital Paid-In................................ ( 0.01) ( 0.52) ( 0.38) -- --
------- --------- --------- --------- -------
Total Distributions............................................ ( 0.54) ( 0.58) ( 0.75) ( 0.89) ( 0.97)
------- --------- --------- --------- -------
Net Asset Value, End of Period.................................... $ 9.30 $ 8.85 $ 9.62 $ 9.74 $10.44
======= ========= ========= ========= =======
Total Investment Return at Net Asset Value (b).................... 11.51% (1.88)% 6.77% 1.72% 10.44%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $65,600 $114,656 $197,166 $199,102 $192,687
Ratio of Expenses to Average Net Assets........................... 2.16% 2.17% 1.91% 1.91% 1.90%
Ratio of Net Investment Income to Average Net Assets.............. 6.03% 6.41% 7.45% 7.59% 8.74%
Portfolio Turnover Rate........................................... 263% 174% 363% 476% 159%
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
The Schedule of Investments is a complete list of all securities owned by the
Global Income Fund on October 31, 1995. It's divided into three main categories:
bonds, options and short-term investments. The bonds are further broken down by
currency denomination.
<TABLE>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER RATE OMITTED)# VALUE
- ------ -------- --------- ------
<S> <C> <C> <C>
BONDS
Australia (4.15%)
Government of Australia, 02-15-06............................................... 10.000% 5,110* $ 4,192,832
-----------
Canada (2.71%)
Government of Canada, 04-01-02.................................................. 8.500 3,450* 2,731,531
-----------
Denmark (2.67%)
Kingdom of Denmark, 12-15-04.................................................... 7.000 15,500* 2,694,196
-----------
France (7.73%)
Government of France, 04-25-05.................................................. 7.500 37,572* 7,803,682
-----------
Germany (11.90%)
Federal Republic of Germany, 07-22-02........................................... 8.000 11,500 8,998,934
Federal Republic of Germany, 01-03-05........................................... 7.375 4,000* 3,008,671
-----------
12,007,605
-----------
Italy (3.83%)
Republic of Italy, 12-01-99..................................................... 9.500 6,500,000* 3,861,071
-----------
Spain (3.59%)
Government of Spain, 03-25-00................................................... 12.250 418,290* 3,624,575
-----------
Sweden (2.04%)
Kingdom of Sweden, 04-20-09..................................................... 9.000 14,000* 2,057,645
-----------
United Kingdom (6.21%)
United Kingdom Treasury Bonds, 09-25-09......................................... 8.000 4,000* 6,271,740
-----------
United States (52.14%)
Government National Mortgage Association
30 Yr SF Pass Thru Ctf, 11-15-23............................................... 6.500 2,074* 2,016,732
30 Yr SF Pass Thru Ctf, 12-15-23............................................... 6.500 3,751* 3,647,611
Norsk Hydro, 04-15-12........................................................... 9.000 6,000 7,089,132
United States Treasury Bonds, 08-15-25.......................................... 6.875 9,390* 10,078,099
United States Treasury Notes, 08-15-05##........................................ 6.500 28,770* 29,794,787
-----------
52,626,361
-----------
TOTAL BONDS
(Cost $94,928,370) (96.97)% 97,871,238
====== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXPIRATION
CURRENCY CURRENCY DATE/STRIKE MARKET
PURCHASED SOLD PRICE VALUE
- --------- -------- ----------- ------
OPTIONS
CAD 16,640,000..................................... USD 12,800,000 February 96/1.30 $ 61,440
---------
TOTAL OPTIONS
(Premium paid $100,400) (0.06)% 61,440
--------- ---------
PAR VALUE
INTEREST (000'S
RATE OMITTED)#
-------- ---------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.76%)
Investment in a joint repurchase agreement
transaction with SBC Capital Markets -
Dated 10-31-95, Due 11-01-95 (secured by
U.S. Treasury Bond, 8.750% Due 05-15-17, and
by U.S. Treasury Note, 5.75% Due 09-30-97)
Note A......................................................................... 5.89% 1,781 1,781,000
-----------
TOTAL SHORT-TERM INVESTMENTS ( 1.76)% 1,781,000
--------- -----------
TOTAL INVESTMENTS ( 98.79)% $99,713,678
========= ===========
* Securities other than short-term investments, newly added to the portfolio
during the year ended October 31, 1995.
# Par value of foreign bonds are expressed in local currency.
## A portion of this security is segregated as collateral for an open forward
currency contract.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
CAD Canadian Dollar
USD US Dollar
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
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 OCTOBER 31, 1995 ASSIGNED TO
THE VARIOUS INVESTMENT CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
--------------------- --------------------------
<S> <C>
Governmental - Foreign.................................... 44.83%
Governmental - United States.............................. 45.12
Utilities................................................. 7.02
Options................................................... 0.06
Short-term investments.................................... 1.76
-----
TOTAL INVESTMENTS 98.79%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
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, the 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, redemptions, dividends, and liquidation, except that
certain expenses subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission. Shareholders of a class which bears
distribution/service expenses under terms of a distribution plan, have exclusive
voting rights to such distribution plan. Significant accounting policies of the
Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. 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 large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
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 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 gains and losses for accounting purposes. The Fund
has $3,413,372 of a capital loss carryforward available, to the extent provided
by regulations, to offset future net realized capital gains. If such
carryforward is used by the Fund, no capital gains distribution will be made.
The carryforward expires October 31, 2002.
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 principals.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
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.
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 or 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.
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 foreign currency forward buy contracts at October 31, 1995 were as
follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE DEPRECIATION
- -------- ------------------- ---------- ------------
<S> <C> <C> <C>
Japanese Yen 739,687,500 NOV 95 $(61,906)
========
</TABLE>
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 is valued at the
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
official settlement price on 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", will be 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 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
fluctuation 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 October 31, 1995, there were no open positions in financial futures
contracts.
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.
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 contract's
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 October 31,
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.
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.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
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 October 31, 1995, net
sales charges received with regard to sales of Class A shares amounted to
$23,002. Out of this amount, $1,220 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $5,766 was paid
as sales commissions to unrelated brokers-dealers and $16,016 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., ("Sutro"), all of which are broker dealers. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries which include FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995, contingent deferred sales charges paid to JH Funds amounted to $205,763.
In addition, to reimburse the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments 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 0.95% (1.00% prior to
August 1, 1995) of Class B average daily net assets to reimburse the
Co-Distributors for their distribution/service costs. Effective November 1,
1995, the rate was increased back to 1.00%. Up to a maximum of 0.25% of such
payments may be service fees as defined by the amended Rules of Fair Practice of
the National Association of Securities Dealers. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc.
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 Fund Services on behalf of the Fund. For
the period January 1, 1995 through September 30, 1995 Class A and Class B shares
paid transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses. For the eleven months ended September 30, 1995 the
transfer agent expense, calculated as a class specific expense was $37,916 for
Class A and $182,740 for Class B, respectively. Effective October 1, 1995
transfer agent expense is being treated as a fund expense based on the number of
shareholder accounts in the Fund and certain out-of-pocket expenses.
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 10,772 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 for 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
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Income Fund
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 then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $136,853,065 and $200,711,522, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $146,047,710 and $107,529,709, respectively, during the
period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $98,144,750. Gross
unrealized appreciation and depreciation of investments aggregated $1,576,334
and $68,846, respectively, resulting in net unrealized appreciation of
$1,507,488.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1995, the Fund reclassified amounts to reflect
a decrease in accumulated net realized loss on investments of $455,395, a
decrease in accumulated net investment income of $1,853,569 and an increase in
capital paid-in of $1,398,174. This represents the amount necessary to report
these balances on a tax basis, excluding certain temporary differences, as of
October 31, 1995. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to the treatment of net operating losses in
the computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles.
19
<PAGE> 20
John Hancock Funds - Global Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Income Fund and the Trustees of
Freedom Investment Trust II
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Global Income Fund
(the "Fund") (formerly known as John Hancock Freedom Global Income Fund) (a
portfolio of Freedom Investment Trust II) at October 31, 1995, and the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 18, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended October
31, 1995.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for calendar year 1995.
20
<PAGE> 21
NOTES
John Hancock Funds - Global Income Fund
21
<PAGE> 22
NOTES
John Hancock Funds - Global Income Fund
22
<PAGE> 23
NOTES
John Hancock Funds - Global Income Fund
23
<PAGE> 24
Bulk Rate
[LOGO] JOHN HANCOCK FUNDS U.S. Postage
A GLOBAL INVESTMENT MANAGEMENT FIRM PAID
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 Brockton, MA
Permit No. 582
[A 1/2" x 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 caption "Printed on Recycled
Paper."]
24
