ANNUAL REPORT
Growth
Fund
October 31, 1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*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
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-5072
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
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 LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
The stock market in 1997 has been anything but dull. Investors have been
treated to record-breaking performance by the Dow Jones Industrial Average,
but with record-breaking volatility. After two years of strong advances amid
relatively little volatility, the market's recent sharp drops and enormous
rebounds have caused a fair share of investor concern.
The latest round came in October and was largely due to uncertainty in
foreign markets. Southeast Asia sneezed and the rest of the world caught a
cold. On October 27, the Dow experienced its largest one-day point decline,
dropping 554 points. In percentage terms, however, that roughly 7% decline
didn't even register on the list of 10 largest drops. The next day, the
market bounced right back, as the Dow had a record one-day vault of 337
points. In short order, the U.S. market had stabilized, yet many markets
remained edgy as investors sorted out the Asian turmoil and its implications
on economic growth, interest rates and corporate earnings.
In the face of such uncertainty, a trusted investment professional can be
your best ally. Now, more than ever, your investment professional can help
you take the emotion out of investment decisions. At a time when your
instincts might have you react to the heat of the market's moment, your
investment professional can serve as an objective voice to put current events
in a longer-term perspective. He or she can also help you evaluate your
investments in any market environment to ensure that they fit your risk
tolerance and time horizons. On an ongoing basis, your investment
professional is there for you to check out new investment ideas or to get an
informed opinion about current economic and market conditions.
We encourage you to take advantage of this important resource. Working
together, you can draw up a detailed road map to help reach your financial
destination regardless of the conditions along the way.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to second
paragraph.
BY ANURAG PANDIT, CFA, PORTFOLIO MANAGER
John Hancock Growth Fund
Euphoric rallies and dramatic sell-offs characterize fiscal 1997
Shareholders of John Hancock Discovery Fund and John Hancock Disciplined
Growth Fund have approved the merger of their funds into John Hancock Growth
Fund, effective after the close of business on December 5, 1997. The Growth
Fund pursues long-term capital appreciation by investing in a diversified
portfolio of stocks that have the potential to grow twice as fast as the
economy.
Fiscal 1997 might best be remembered as a year that witnessed the breaking of
many records. Major U.S. stock indexes rallied impressively at several points
during the 12 months ended October 31, 1997. The Dow Jones Industrial Average
captured the most attention as it soared past the 7000 and 8000 marks for the
first time in February and July, respectively. Investors' overall enthusiasm
for stocks was fueled by strong corporate earnings, subdued inflation,
healthy yet manageable economic growth, and relatively stable interest rates.
Although bouts of volatility early in the period temporarily dampened the
performance of many stocks, the markets charged on through mid-October
confident that the bull market's lengthy run was far from over.
The Fund
closed fiscal
1997 with
double digit
gains.
Economic instability and a currency crisis on the opposite side of the globe,
however, soon reminded investors that the bear was merely in hibernation. As
turmoil boiled over in the Far East, stock markets around the world
plummeted. Just four days before John Hancock Growth Fund's fiscal period
came to a close, U.S. stock indexes suffered their biggest one-day point
decline in history.
A 2 1/4" x 3 1/4" photo of fund management team at bottom right. Caption
reads: "Anurag Pandit (standing) and Fund management team members: (l - r)
Rob Hallisey, Bernice Behar and Andrew Slabin."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Reading & Bates 2.5% 2) Home Depot
2.5% 3) MGIC Investment Corp. 2.3% 4) Walt Disney 2.3% 5) Diamond Offshore
Drilling 2.3%. A footnote below reads "As a percentage of net assets on
October 31, 1997."
"...technology
stocks
remained
the Fund's
largest
industry
weighting..."
Fund ends year with gains despite volatility
The "Asian Flu" took its toll on the performance of most growth funds in
October. However, the strength of the Fund's performance during the summer
helped it close fiscal 1997 with double-digit gains nevertheless. For the 12
months ended October 31, 1997, John Hancock Growth Fund's Class A shares and
Class B shares returned a total of 16.05% and 15.33%, respectively, at net
asset value. This compares to the 27.28% total return posted by the average
growth fund, according to Lipper Analytical Services, Inc.1 Longer-term
performance can be found on pages six and seven.
Table entitled "Scorecard" at bottom left hand column. The heading for the
left column is "Investment"; the heading for the center column is "Recent
performance.. and what's behind the numbers". The first listing is "America
Online" followed by an up arrow and the "Improved content and access; more
growth in market share." The second listing is "T. Rowe Price" followed by an
up arrow and the phrase "Well positioned in industry." The third listing is
"Applied Materials" followed by a down arrow and the phrase "Hurt by Asian
debacle, correction in semiconductor stocks." Footnote below reads "See
"Schedule of Investments." Investment holdings are subject to change."
We believe the Fund lagged its peers because of an untimely shift in the
types of companies we emphasized, particularly in the technology arena. In
the early months of fiscal 1997, we continued our strategic shift toward
large, well-known growth stocks, while reducing the Fund's stake in many, but
not all, smaller-company issues. This process occurred over the course of
several months, as the sector was experiencing considerable pricing pressure.
When the rotation was completed, small- cap stocks then began to rally
unexpectedly and the Fund missed out on much of that sector's outperformance.
Technology for the long term
The outstanding growth characteristics and long-term demand for technology
companies continue to make technology stocks appealing portfolio candidates,
despite the sector's ongoing growing pains. Not participating in this sector,
we believe, would pose a greater risk to the Fund's performance than owning
well-researched issues and weathering the inevitable ups and downs. While we
reduced the Fund's exposure to technology stocks by the fiscal year's
midpoint because the sector had come under considerable pressure, technology
stocks remained the Fund's largest industry weighting. Soon thereafter, share
prices became too compelling to ignore and we took the opportunity to bolster
the Fund's stake in many stocks, bringing the Fund's technology weighting
back up to roughly 27% of net assets. The move proved timely, as technology
stocks rallied handsomely in late summer. Stocks worth highlighting include
America Online, Microsoft, BMC Software, and Nokia, a digital/wireless
equipment manufacturer.
Financial and healthcare
As the period progressed, we shifted some assets out of the health-care arena
and into the financial and insurance sectors. New holdings include T. Rowe
Price Associates, Travelers Group, Fannie Mae and SLM Holding. As baby
boomers prepare for retirement, we believe financial products and services
are likely to experience increased demand. This, along with the industry's
ongoing consolidation trend, have helped propel the prices of many stocks
higher.
Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended October 31, 1997." The chart
is scaled in increments of 5% from bottom to top, with 30% at the top and 0%
at the bottom. Within the chart there are three solid bars. The first
represents the 16.05% total return for the John Hancock Growth Fund: Class A.
The second represents the 15.33% total return for the John Hancock Growth
Fund: Class B. The third represents the 27.28% total return for the average
growth fund. A footnote below reads: "The total returns for John Hancock
Growth Fund are at net asset value with all distributions reinvested. The
average growth fund is tracked by Lipper Analytical Services. See the
following two pages for historical performance information."
Despite our slight reduction in health-care names, the sector remains a
considerable component of the portfolio. Aging populations worldwide and new
technology have created a heightened demand for different types of health-
care companies. Solid performers for the Fund have been pharmaceutical giants
such as Johnson & Johnson, Pfizer -- which we sold at a profit -- and newly
acquired Eli Lilly and Warner Lambert. On the services side, Health
Management Associates and Health Care & Retirement Corp., are two holdings
well positioned for the future.
Oil and gas services boost performance
Integrated oil and gas services companies also contributed significantly to
the Fund's performance. The industry's fundamentals, such as dynamic supply
versus demand, and an upswing in the cycle for energy stocks have fueled the
performance of several holdings. Halliburton Company, Schlumberger Ltd. and
Diamond Offshore Drilling are three noteworthy names.
Cautious optimism
The most recent turbulence has not convinced us to change our strategy of
focusing on high growth, mid-to-large company stocks. We believe the quality,
fundamentals, and long-term growth opportunities presented by many larger
companies best suit the Fund's objective and we continue to seek out
companies that offer defensible niches -- such as a differentiated product or
service -- and exhibit above-average growth potential for any environment.
The only adjustment we have made was to increase our focus on companies that
are not unduly exposed to foreign currency risk.
"...we enter
fiscal 1998
with cautious
optimism..."
Holding this course, we enter fiscal 1998 with cautious optimism, viewing the
ongoing market gyrations as a potential positive for growth stock investing.
The Fed seems content to hold steady on interest rates for the time being,
allowing instead for the markets to bring prices back to fair values. For the
near term, the economy appears on stable ground, neither growing too quickly
nor too slowly; inflation remains subdued, and corporate earnings, for the
most part, are positive.
- --------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. Of course, the manager's views
are subject to change as market and other conditions warrant.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted
performance is lower.
John Hancock Funds - Growth Fund
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock Growth Fund. Total return measures
the change in value of an investment from the beginning to the end of a
period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred
sales charge (maximum 5% and declining to 0% over six years).
All figures represent past performance and are no guarantee of future
results. 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
read your prospectus carefully before you invest or send money.
CLASS A
For the period ended September 30, 1997
ONE FIVE TEN
YEAR YEARS YEARS
------ ------- -------
Cumulative Total Returns 13.63% 107.68% 190.66%
Average Annual Total Returns 13.63% 15.74% 11.26%
CLASS B
For the period ended September 30, 1997
SINCE
ONE INCEPTION
YEAR (1/3/94)
------- -------
Cumulative Total Returns 13.74% 65.88%
Average Annual Total Returns 13.74% 14.49%
John Hancock Funds - Growth Fund
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index. 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.
Past performance is not indicative of future results.
Growth Fund
Class A shares
Line chart with the heading Growth 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
hypothetical $10,000 investment made the Standard & Poor's 500 Stock
Index on October 31, 1987, and is equal to $48,661 as of October 31,
1997. The second line represents the value in the Growth Fund, before
sales charge, and is equal to $37,389 as of October 31, 1997. The third
line represents the Growth Fund, after sales charge, and is equal to
$35,519 as of October 31, 1997.
Growth Fund
Class B shares
Line chart with the heading Growth 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 $21,466 as of October 31, 1997. The second line
represents the value of the hypothetical $10,000 investment made in the
Growth Fund, before sales charge, on January 3, 1994, and is equal to
$116,106 as of October 31, 1997. The third line represents the value
of the Growth Fund, after sales charge, and is equal to $15,806 as of
October 31, 1997.
FINANCIAL STATEMENTS
John Hancock Funds - Growth 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, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $248,965,784) $334,481,702
Joint repurchase agreement (cost - $5,060,000) 5,060,000
Corporate savings account 1,219
-------------
339,542,921
Receivable for shares sold 158,213
Dividends receivable 147,463
Interest receivable 1,082
Other assets 20,599
-------------
Total Assets 339,870,278
- -------------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 7,840
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 326,265
Accounts payable and accrued expenses 38,388
-------------
Total Liabilities 372,493
- -------------------------------------------------------------------------------
Net Assets:
Capital paid-in 196,097,781
Accumulated net realized gain on investments 57,894,763
Net unrealized appreciation of investments 85,517,880
Accumulated net investment loss (12,639)
-------------
Net Assets $339,497,785
- -------------------------------------------------------------------------------
Net Asset Value Per Share:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $303,067,464/12,433,553 $24.37
===============================================================================
Class B - $36,430,321/1,537,427 $23.70
===============================================================================
Maximum Offering Price Per Share*
Class A - ($24.37 x 105.26%) $25.65
===============================================================================
* 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>
FINANCIAL STATEMENTS
John Hancock Funds - Growth 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>
<CAPTION>
Statement of Operations
Year ended October 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $8,797) $1,920,833
Interest 1,092,142
-------------
3,012,975
-------------
Expenses:
Investment management fee - Note B 2,560,785
Distribution and service fee - Note B
Class A 879,334
Class B 313,465
Transfer agent fee - Note B 854,652
Custodian fee 71,365
Financial services fee - Note B 59,616
Registration and filing fees 47,118
Printing 32,843
Auditing fee 28,503
Trustees' fees 22,855
Miscellaneous 6,594
Legal fees 3,955
-------------
Total Expenses 4,881,085
- -------------------------------------------------------------------------------
Net Investment Loss (1,868,110)
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold 70,849,140
Change in net unrealized appreciation/depreciation
of investments (21,033,620)
-------------
Net Realized and Unrealized
Gain on Investments 49,815,520
- -------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $47,947,410
===============================================================================
</TABLE>
See notes to financial statements.
FINANCIAL STATEMENTS
John Hancock Funds - Growth Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED JANUARY 1, 1996 TO YEAR ENDED
DECEMBER 31, 1995 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
----------------- ------------------- ----------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($973,581) ($1,851,051) ($1,868,110)
Net realized gain on investments sold 9,207,214 29,604,241 70,849,140
Change in net unrealized appreciation/depreciation
of investments 30,638,725 21,436,182 (21,033,620)
----------------- ------------------- ----------------
Net Increase in Net Assets Resulting from Operations 38,872,358 49,189,372 47,947,410
----------------- ------------------- ----------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
Class A - ($0.6945, none and $2.2830 per share, respectively) (8,391,968) -- (26,978,610)
Class B - ($0.6945, none and $2.2830 per share, respectively) (552,264) -- (2,737,474)
----------------- ------------------- ----------------
Total Distributions to Shareholders (8,944,232) -- (29,716,084)
----------------- ------------------- ----------------
From Fund Share Transactions - Net: * 75,837,052 (1,902,994) 16,367,439
----------------- ------------------- ----------------
Net Assets:
Beginning of period 151,847,464 257,612,642 304,899,020
----------------- ------------------- ----------------
End of period (including accumulated net investment loss
of none, $9,749 and $12,639, respectively) $257,612,642 $304,899,020 $339,497,785
================= =================== ================
* Analysis of Fund Share Transactions:
PERIOD FROM
YEAR ENDED JANUARY 1, 1996 TO YEAR ENDED
DECEMBER 31, 1995 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
----------------------- ----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ----------- ---------- ------------
CLASS A
Shares sold 1,671,481 $32,932,574 2,868,866 $62,914,842 5,919,970 $132,758,761
Shares issued in reorgnization - Note E 3,788,495 77,588,384 -- -- -- --
Shares issued to shareholders in reinvestment
of distributions 402,050 7,803,606 -- -- 1,190,442 25,034,980
---------- ----------- ---------- ----------- ---------- ------------
5,862,026 118,324,564 2,868,866 62,914,842 7,110,412 157,793,741
Less shares repurchased (2,691,827) (52,370,704) (3,252,462) (70,867,350) (6,681,624) (150,827,840)
---------- ----------- ---------- ----------- ---------- ------------
Net increase (decrease) 3,170,199 $65,953,860 (383,596) ($7,952,508) 428,788 $6,965,901
========== =========== ========== =========== ========== ============
CLASS B
Shares sold 333,335 $6,333,583 2,230,077 $49,208,673 729,300 $16,342,742
Shares issued in reorgnization - Note E 471,911 9,563,328 -- -- -- --
Shares issued to shareholders in reinvestment
of distributions 27,495 526,875 -- -- 124,391 2,559,110
---------- ----------- ---------- ----------- ---------- ------------
832,741 16,423,786 2,230,077 49,208,673 853,691 18,901,852
Less shares repurchased (246,690) (4,843,723) (1,940,975) (43,159,159) (431,864) (9,500,314)
---------- ----------- ---------- ----------- ---------- ------------
Net increase 586,051 $11,580,063 289,102 $6,049,514 421,827 $9,401,538
========== =========== ========== =========== ========== ============
CLASS C **
Shares sold 841 $15,270
Less shares repurchased (99,061) (1,712,141)
---------- -----------
Net decrease (98,220) ($1,696,871)
========== ===========
** All Class C shares were redeemed on March 31, 1995.
(1) Effective October 31, 1996, the fiscal period end changed from December 31 to October 31.
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the end of the previous
period. The difference reflects earnings less expenses, any investment gains and losses, distributions paid to shareholders and
any increase or decrease in money shareholders invested in the Fund. The footnote illustrates the number of Fund shares sold,
reinvested and repurchased during the last three periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
FINANCIAL STATEMENTS
John Hancock Funds - Growth Fund
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED
---------------------------------------------- OCTOBER 31, OCTOBER 31,
1992 1993 1994 1995 1996(9) 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $17.48 $17.32 $17.40 $15.89 $19.51 $23.28
-------- -------- -------- -------- -------- --------
Net Investment Loss (0.06) (0.11) (0.10) (0.09)(1) (0.13)(1) (0.12)(1)
Net Realized and Unrealized Gain (Loss)
on Investments 1.10 2.33 (1.21) 4.40 3.90 3.49
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.04 2.22 (1.31) 4.31 3.77 3.37
-------- -------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold (1.20) (2.14) (0.20) (0.69) -- (2.28)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $17.32 $17.40 $15.89 $19.51 $23.28 $24.37
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) 6.06% 13.03% (7.50%) 27.17% 19.32%(6) 16.05%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $153,057 $162,937 $146,466 $241,700 $279,425 $303,067
Ratio of Expenses to Average Net Assets 1.60% 1.56% 1.65% 1.48% 1.48%(7) 1.44%
Ratio of Net Investment Loss
to Average Net Assets (0.36%) (0.67%) (0.64%) (0.46%) (0.73%)(7) (0.51%)
Portfolio Turnover Rate 71% 68% 52% 68%(3) 59% 133%
Average Brokerage Commission Rate(4) N/A N/A N/A N/A $0.0695 $0.0697
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED
---------------------- OCTOBER 31, OCTOBER 31,
1994(5) 1995 1996(9) 1997
--------- -------- -------- --------
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $17.16 $15.83 $19.25 $22.83
-------- -------- -------- --------
Net Investment Loss(1) (0.20) (0.26) (0.26) (0.27)
Net Realized and Unrealized Gain (Loss) on Investments (0.93) 4.37 3.84 3.42
-------- -------- -------- --------
Total from Investment Operations (1.13) 4.11 3.58 3.15
-------- -------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold (0.20) (0.69) -- (2.28)
-------- -------- -------- --------
Net Asset Value, End of Period $15.83 $19.25 $22.83 $23.70
======== ======== ======== ========
Total Investment Return at Net Asset Value(2) (6.56%)(6) 26.01% 18.60%(6) 15.33%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $3,807 $15,913 $25,474 $36,430
Ratio of Expenses to Average Net Assets 2.38%(7) 2.31% 2.18%(7) 2.13%
Ratio of Net Investment Loss to Average Net Assets (1.25%)(7) (1.39%) (1.42%)(7) (1.20%)
Portfolio Turnover Rate 52% 68%(3) 59% 133%
Average Brokerage Commission Rate(4) N/A N/A $0.0695 $0.0697
</TABLE>
See notes to financial statements.
FINANCIAL STATEMENTS
John Hancock Funds - Growth Fund
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CLASS C (8)
Per Share Operating Performance
Net Asset Value, Beginning of Period $17.05 $17.46 $16.02
------------ ------------ ------------
Net Investment Income (Loss) (0.02) (0.01) 0.02(1)
Net Realized and Unrealized Gain (Loss) on Investments 2.57 (1.23) 1.28
------------ ------------ ------------
Total from Investment Operations 2.55 (1.24) 1.30
------------ ------------ ------------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold (2.14) (0.20) --
------------ ------------ ------------
Net Asset Value, End of Period $17.46 $16.02 $17.32
============ ============ ============
Total Investment Return at Net Asset Value(2) (15.18%)(6) (7.07%) 8.11%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,285 $1,574 $1,672
Ratio of Expenses to Average Net Assets 1.05%(7) 1.12% 1.05%(7)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.17%)(7) (0.08%) 0.44%(7)
Portfolio Turnover Rate 68% 52% 39%
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) Excludes merger activity.
(4) Per portfolio share traded. Required for fiscal years that began September 1, 1995, or later.
(5) Class B shares commenced operations on January 3, 1994.
(6) Not annualized.
(7) Annualized.
(8) 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.
(9) Effective October 31, 1996, the fiscal period changed from December 31 to October 31.
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated:
net investment income, gains (losses), dividends and total investment return of the Fund. It shows how
the Fund's net asset value for a share has changed since the end of the previous period. Additionally, important
relationships between some items presented in the financial statements are expressed in ratio form.
</TABLE>
See notes to financial statements.
FINANCIAL STATEMENTS
John Hancock Funds - Growth Fund
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1997
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Growth Fund on October 31, 1997. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
<S> <C> <C>
COMMON STOCK
Aerospace (0.28%)
Boeing Co. (The) 20,000 $957,500
------------
Banks - United States (3.04%)
Banc One Corp. 87,442 4,557,914
Chase Manhattan Corp. 50,000 5,768,750
------------
10,326,664
------------
Beverages (1.75%)
Coca-Cola Co. (The) 105,000 5,932,500
------------
Computers (18.24%)
Adaptec, Inc.* 157,500 7,628,906
America Online, Inc.* 65,000 5,005,000
Bay Networks, Inc.* 69,300 2,191,612
BMC Software, Inc.* 110,800 6,689,550
Cabletron Systems, Inc.* 95,000 2,755,000
Computer Sciences Corp.* 40,000 2,837,500
EMC Corp.* 110,000 6,160,000
Iomega Corp.* 180,000 4,826,250
McAfee Associates, Inc.* 120,000 5,970,000
Microsoft Corp.* 50,000 6,500,000
Sequent Computer Systems, Inc.* 180,000 3,768,750
Sybase, Inc.* 300,000 4,893,750
3Com Corp.* 65,000 2,693,438
------------
61,919,756
------------
Cosmetics & Personal Care (1.44%)
Gillette Co. 55,000 4,898,438
------------
Electronics (10.54%)
Applied Materials, Inc.* 182,000 6,074,250
ASM Lithography Holding N.V.*
(Netherlands) 25,000 1,831,250
Cymer, Inc.* 130,000 2,973,750
General Electric Co. 100,000 6,456,250
Intel Corp. 85,000 6,545,000
LSI Logic Corp.* 160,000 3,490,000
Novellus Systems, Inc.* 120,000 5,340,000
Xilinx, Inc.* 90,000 3,071,250
------------
35,781,750
------------
Finance (7.80%)
American Express Co. 70,000 5,460,000
Associates First Capital Corp. (Class A) 70,000 4,453,750
MBNA Corp. 217,500 5,722,969
Price (T. Rowe) Associates, Inc. 100,000 6,625,000
SLM Holding Corp. 30,000 4,211,250
------------
26,472,969
------------
Insurance (6.78%)
Ace, Ltd. (Bermuda) 60,000 5,576,250
MGIC Investment Corp. 130,000 7,840,625
Oxford Health Plans, Inc.* 40,000 1,032,500
Progressive Corp. 35,000 3,648,750
Travelers Group, Inc. 70,000 4,900,000
------------
22,998,125
------------
Leisure (3.77%)
Callaway Golf Co. 100,000 3,225,000
Disney (Walt) Co., (The) 95,000 7,813,750
Marriott International, Inc. 25,000 1,743,750
------------
12,782,500
------------
Linen Supply & Related (1.38%)
Cintas Corp. 65,000 4,696,250
------------
Media (3.17%)
Gannett Co., Inc. 110,000 5,781,875
Tribune Co. 90,000 4,961,250
------------
10,743,125
------------
Medical (10.00%)
Health Care & Retirement Corp.* 160,000 6,050,000
Health Management Associates, Inc.
(Class A)* 300,000 7,312,500
Johnson & Johnson 90,000 5,163,750
Lilly (Eli) & Co. 80,000 5,350,000
Merck & Co., Inc. 65,000 5,801,250
Warner-Lambert Co. 30,000 4,295,625
------------
33,973,125
------------
Mortgage Banking (1.85%)
Fannie Mae 130,000 6,296,875
------------
Oil & Gas (10.39%)
Diamond Offshore Drilling, Inc.* 125,000 7,781,250
Halliburton Co. 125,000 7,453,125
Reading & Bates Corp.* 200,000 8,475,000
Schlumberger, Ltd. 80,000 7,000,000
Smith International, Inc.* 60,000 4,575,000
------------
35,284,375
------------
Retail (10.59%)
Costco Cos., Inc.* 120,000 4,620,000
CVS Corp. 120,000 7,357,500
Home Depot, Inc. 150,000 8,343,750
Starbucks Corp.* 120,000 3,960,000
Walgreen Co. 140,000 3,937,500
Wal-Mart Stores, Inc. 220,000 7,727,500
------------
35,946,250
------------
Telecommunications (6.30%)
Ericsson (L.M.) Telephone Co. (Class B)
American Depositary Receipts (ADR)
(Sweden) 60,000 2,655,000
Nextel Communications, Inc. (Class A)* 230,000 6,037,500
Nokia Corp. ADR (Finland) 80,000 7,060,000
WorldCom, Inc.* 168,000 5,649,000
------------
21,401,500
------------
Textile (1.20%)
Jones Apparel Group, Inc.* 4,070,000
------------
TOTAL COMMON STOCKS
(Cost $248,965,784) (98.52%) 334,481,702
------- ------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ------------ ------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.49%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Langston & Co. -
Dated 10-31-97, Due 11-03-97
(Secured by U. S. Treasury Notes
5.00% thru 9.25% Due 2-28-98
thru 4-30-02) - Note A 5.68% $5,060 $5,060,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.95% 1,219
------------
TOTAL SHORT-TERM INVESTMENTS (1.49%) 5,061,219
------- ------------
TOTAL INVESTMENTS (100.01%) $339,542,921
======= ============
* 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.
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Growth Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Investment Trust III (the "Trust") (formerly Freedom Investment
Trust II), is an open-end management investment company, registered under the
Investment Company Act of 1940. The Trust consists of six series: John
Hancock Growth Fund (the "Fund"), John Hancock Global Fund, John Hancock
World Bond Fund, John Hancock Short-Term Strategic Income Fund, John Hancock
Special Opportunities Fund and John Hancock International Fund. The other
five series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to seek long-term capital appreciation
through investment in stocks that are diversified with regard to industries
and issuers.
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, redemptions, dividends and liquidation, except
that certain expenses, subject to the approval of the Trustees, may be
applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal
Revenue Service. Shareholders of a class which bears distribution and service
expenses under terms of a distribution plan have exclusive voting rights to
that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing
services, or, at fair value as determined in good faith in accordance with
procedures approved by the 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 for both financial
reporting and federal income tax purposes.
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.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income
on investment securities is recorded on the ex-dividend date. Interest income
on investment securities is recorded on the accrual basis. 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, if any, with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for effect of expenses that
may be applied differently to each class.
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 relative net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriated net assets of each class and the specific
expense rate(s) applicable to each class.
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 fund.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities,
revenues and expenses of the Fund. Actual results could differ from these
estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. These
agreements enable the Fund to participate with other Funds managed by the
Advisor in an unsecured line of credit with banks which permit borrowings up
to $600 million, collectively. Interest is charged to each Fund, based on its
borrowing, at a rate equal to 0.50% over the Fed Funds Rate. In addition, a
commitment fee, at a rate of 0.075% per annum based on the average daily
unused portion of the line of credit, is allocated among the participating
Funds. The Fund had no borrowing activity for the year ended October 31,
1997.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the 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 $250,000,000 of the Fund's
average daily net asset value, (b) 0.75% of the next $250,000,000 and (c)
0.70% of the Fund's average daily net asset value in excess of $500,000,000.
At a trustees meeting on September 9, 1997, the trustees approved a new
monthly investment management contract, which became effective upon the
merger, December 5, 1997, to replace the present contract. Under this new
management contract, the Fund will pay 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 $750,000,000 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 $750,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1997, JH Funds received net sales charges of $376,266. Out of this
amount, $58,043 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $121,218 was paid as sales commissions
to unrelated broker-dealers and $197,005 was paid as sales commissions to
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 ("JHMLICo") is the indirect sole shareholder of
Distributors, and was the indirect sole shareholder until November 29, 1996
of John Hancock Freedom Securities Corporation and its subsidiaries which
include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed.
Proceeds from the CDSC are paid to JH Funds and are used in whole or in part
to defray its expenses for providing distribution related services to the
Fund in connection with the sale of Class B shares. For the year ended
October 31, 1997, contingent deferred sales charges amounted to $59,459.
In addition, to reimburse 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 Class A average daily net assets and 1.00% of Class B average
daily net assets to reimburse JH Funds for its distribution and service
costs. Up to a maximum of 0.25% of such payments may be service fees as
defined by the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice, curtailment of
a portion of the Fund's 12b-1 payments could occur under certain
circumstances.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the year was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by
the Fund. 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 makes investments into other John Hancock funds,
as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are recorded
on the Fund's books as an other asset. The deferred compensation liability
and the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as any
unrealized gains or losses. At October 31, 1997, the Fund's investment to
cover the deferred compensation had unrealized appreciation of $1,962.
NOTE C ---
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the year ended October 31, 1997, aggregated $407,308,533
and $403,449,566, respectively.
The cost of investments owned at October 31, 1997 (including the joint
repurchase agreement), for Federal income tax purposes was $255,283,078.
Gross unrealized appreciation and depreciation of investments aggregated
$100,586,193 and $16,327,569, respectively, resulting in net unrealized
appreciation of $84,258,624.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1997, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments of
$12,954,111, a decrease in accumulated net investment loss
of $1,865,220 and an increase in capital paid-in of $11,088,891. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 1997. 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 net investment loss and the use of tax
equalization. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
NOTE E --
REORGANIZATION
On September 8, 1995, the shareholders of John Hancock Capital Growth Fund
(JHCGF) approved a plan of reorganization between JHCGF and the Fund
providing for the transfer of substantially all of the assets and liabilities
of JHCGF to the Fund in exchange solely for Class A and Class B shares of the
Fund. The acquisition was accounted for as a tax free exchange of 3,788,495
Class A shares, and 471,911 Class B shares of John Hancock Growth Fund for
the net assets of JHCGF, which amounted to $77,588,384 and $9,563,328 for
Class A and B shares, respectively, including $20,624,702 of unrealized
appreciation, after the close of business on September 15, 1995.
NOTE F --
SUBSEQUENT EVENT
On November 12, 1997, the shareholders of the John Hancock Disciplined Growth
Fund ("Disciplined Growth Fund") and the John Hancock Discovery Fund
("Discovery Fund") approved a vote on a proposed merger between the Fund and
the Disciplined Growth Fund and the Discovery Fund. The merger provides for a
transfer of substantially all the assets and liabilities of Disciplined
Growth Fund and Discovery Fund to the Fund on December 5, 1997. After the
close of business on December 5, 1997, the Disciplined Growth Fund and
Discovery Fund will be terminated.
John Hancock Funds - Growth Fund
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust III --
John Hancock Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the John Hancock Growth Fund (the
"Fund"), a series of John Hancock Investment Trust III, as of October 31,
1997, and the related statement of operations for the year then ended, the
statement of changes in net assets, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1997, by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
John Hancock Growth Fund, a series of John Hancock Investment Trust III, at
October 31, 1997, the results of its operations for the year then ended, the
changes in its net assets, and the financial highlights for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 11, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1997.
The Fund designated a distribution to shareholders of $29,716,084 as long-
term capital gain dividends. These amounts were reported on the 1996 U.S.
Treasury Department Form 1099-DIV.
With respect to the dividends paid by the Fund for the fiscal year ended
October 31, 1997, none of the dividends qualify for the corporate dividends
received deduction.
NOTES
John Hancock Funds - Growth Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Growth Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
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."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhancock.com/funds
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John
Hancock Growth 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." 2000A 10/97
12/97
ANNUAL REPORT
World Bond
Fund
OCTOBER 31, 1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*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
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
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 LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
The stock market in 1997 has been anything but dull. Investors have
been treated to record-breaking performance by the Dow Jones
Industrial Average, but with record-breaking volatility. After two
years of strong advances amid relatively little volatility, the
market's recent sharp drops and enormous rebounds have caused a fair
share of investor concern.
The latest round came in October and was largely due to uncertainty
in foreign markets. Southeast Asia sneezed and the rest of the world
caught a cold. On October 27, the Dow experienced its largest one-day
point decline, dropping 554 points. In percentage terms, however,
that roughly 7% decline didn't even register on the list of 10
largest drops. The next day, the market bounced right back, as the
Dow had a record one-day vault of 337 points. In short order, the
U.S. market had stabilized, yet many markets remained edgy as
investors sorted out the Asian turmoil and its implications on
economic growth, interest rates and corporate earnings.
In the face of such uncertainty, a trusted investment professional
can be your best ally. Now, more than ever, your investment
professional can help you take the emotion out of investment
decisions. At a time when your instincts might have you react to the
heat of the market's moment, your investment professional can serve
as an objective voice to put current events in a longer-term
perspective. He or she can also help you evaluate your investments in
any market environment to ensure that they fit your risk tolerance
and time horizons. On an ongoing basis, your investment professional
is there for you to check out new investment ideas or to get an
informed opinion about current economic and market conditions.
We encourage you to take advantage of this important resource.
Working together, you can draw up a detailed road map to help reach
your financial destination regardless of the conditions along the
way.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to first
paragraph.
BY LAWRENCE J. DALY, ANTHONY A. GOODCHILD AND JANET L. CLAY,
CO-PORTFOLIO MANAGERS
John Hancock
World Bond Fund
Flight to quality drives world bond markets
as Southeast Asian currency crisis erupts
World bond markets climbed higher for much of the year, but
volatility -- especially in October -- sent many investors scurrying
for safe havens. Driven by prospects of slower economic growth and
lower inflation, the United States was one of the best performing
bond markets anywhere. But uncertainty about the direction of short-
term interest rates led to recurring bond market jitters. The biggest
hiccup came last March when the Federal Reserve raised short-term
interest rates, and bond prices collapsed. However, they soon
recovered and showed strength throughout the summer and into the
fall.
Bond market results elsewhere were more mixed. Until April, European
bonds did well as yields there moved lower. But the rally ended late
last spring amid signs that the region's recession was ending.
Investors feared interest rates would rise, causing bond prices to
fall. Japan's bond market also faltered, as economic growth there
stalled and 10-year yields hovered below 2%.
By contrast, high-yielding, emerging-market bonds had a banner year
until late October. Despite a brief stumble last April, they
continued to attract huge inflows from investors worldwide. Latin
America led the charge, benefiting from increased political stability
and better economic conditions. Southeast Asian emerging markets --
like Thailand, Indonesia, Malaysia, and the Philippines -- were not
as fortunate. Beginning with Thailand in July, all experienced
widespread currency devaluations, which culminated in the fall with
reverberations felt in financial markets around the globe. A mass
exodus from all emerging Asian markets hurt bond prices as far away
as Latin America.
A 2 1/4" x 3 1/2" photo of fund management team at bottom
right. Caption reads: Anthony Goodchild, Janet Clay and
Lawrence Daly, Co-Portfolio Managers."
"...the
United States
was one
of the best
performing
bond markets
anywhere."
"...Treasuries
accounted
for 55%
of the
Fund's net
assets..."
Pie Chart with the heading "Portfolio Diversification" at top
left hand column. The chart is divided into five sections.
Going from top clockwise: Short-Term Investments & Other 13%;
Latin America 19%; United Stater 56%; Europe 12%. Footnote
below states "As a percentage of net assets on October 31,
1997."
Performance review
Despite this upheaval, the J. P. Morgan Global Government Bond Index
- -- a benchmark for global bond performance -- managed to close up
2.75% for the year ended October 31, 1997. In the same period, John
Hancock World Bond Fund's Class A and Class B shares had total
returns of 3.15% and 2.43%, respectively, at net asset value. By
comparison, the average global income fund had a total return of
4.69%, according to Lipper Analytical Services, Inc.1 Please see
pages six and seven for longer-term performance information.
The Fund benefited from investing in the United States and Latin
America, avoiding Asia, and downplaying Europe. But it lagged its
peer group for a couple reasons. First, we had about 30% of the
Fund's net assets -- near our 35% limit -- in emerging markets at
several points during the year. This stake, which was lower-than-
average for global income funds, held the Fund back for most of the
year, although it protected us from larger losses in the October
debacle. Second, while the Fund's strong bias -- 80% of net assets --
toward U.S. dollar-denominated assets helped performance, we also had
exposure to two other currencies, as mandated by our investment
policy. In this case, we held the German mark and Japanese yen. These
exposures hurt the Fund as the dollar strengthened during the spring
and summer. In the fall, however, the mark became a safe-haven
currency, given the Southeast Asian turmoil.
Shift toward U.S. bonds
During the past year, bond yields fell worldwide. As this happened,
the difference in yields between other countries and the United
States narrowed to minimal levels. Many foreign bonds no longer
offered a significant yield advantage over U.S. Treasuries. With
little prospect that bond prices in these foreign countries would
rise, we shifted our focus toward U.S. government bonds in the five-
year maturity horizon. These bonds benefited as investors chose high
quality over high yields. At the end of October, Treasuries accounted
for 55% of the Fund's net assets, up from about 36% six months
earlier.
We had our stake in emerging-market bonds at 24% of the Fund's net
assets by the end of October. Our focus was on U.S. dollar-
denominated government and corporate bonds from Latin America,
particularly Mexico,Venezuela, Argentina, and Brazil. On the
corporate side, we emphasized high-quality companies in industries
like telecommunications and steel that are central to building the
economies of developing nations. We also added a small stake in
Russian government bonds, which should benefit from improvements in
the country's economic outlook, political stability, and fiscal
situation.
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 "Stable interest rates and inflation." The
second listing is U.K. bonds followed by an up arrow and the
phrase "Falling yields." The third listing is Latin American
bonds followed by a down arrow and the phrase "Sell-off from
Asian contagion." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
Bar chart with heading "Fund Performance" at top of left hand
column. Under the heading is the footnote: "For the year
ended October 31, 1997." The chart is scaled in increments of
1% from bottom to top, with 5% at the top and 0% at the
bottom. Within the chart there are three solid bars. The
first represents the 3.15% total return for the John Hancock
World Bond Fund: Class A. The second represents the 2.43 %
total return for John Hancock World Bond Fund: Class B. The
third represents the 4.69% total return for the average
general global income fund. A footnote below reads: "Total
returns for John Hancock World Bond Fund are at net asset
value with all distributions reinvested. The average global
income fund is tracked by Lipper Analytical Services, Inc.
(1) See the following two pages for historical performance
information."
Over the summer, we continued to pare back our western European
investments to 8% of net assets, down from 30% at the end of April.
We kept a stake in U.K. bonds because yields there were higher than
the rest of Europe. This past fall, as the newly elected Labor
government signalled its inclination to join the European Economic
and Monetary Union (EMU), U.K. bonds rallied. We believe there's room
for further gains, as U.K. yields come down to align more closely
with countries already expected to join the EMU.
What's ahead
Near term, we expect continued fall-out from the Southeast Asian
crisis. The slowdown of economies in this high growth region could
hurt economic growth worldwide. In addition, currency devaluations in
Thailand, Indonesia, Malaysia, and the Philippines have already
forced investors to sell more liquid assets in other markets. As
larger countries like Korea face similar problems, we expect more
selling. Both slower growth and continued selling could continue to
put downward pressure on financial markets around the globe. The
situation won't improve until Southeast Asian countries begin making
structural changes to put their economies back on track.
For the time being, we plan on maintaining our focus on high-quality
U.S. Treasuries. They offer solid prospects, especially given low
yields and instability elsewhere. Also, U.S. economic growth
pressures are at a minimum, which means inflation and interest rates
should stay in check. By contrast, we expect European bond prices to
weaken as short-term rates rise there. As for emerging markets, we
expect continued turmoil in Latin America, believing the Southeast
Asian crisis is contagious. So we intend to opportunistically trim
our stake there for the near term. When the crisis passes, however,
we believe there will be significant upside potential in high-quality
Latin American bonds. Given the prospects elsewhere, we're
comfortable keeping a good portion of our assets at home for now.
"...we expect
continued
fallout from
the Southeast
Asian crisis."
- --------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through
the end of the Fund's period discussed in this report. Of course, the
managers' views are subject to change as market and other conditions
warrant.
International investing involves special risks such as political and
currency risks and differences in accounting standards and financial
reporting.
1Figures from Lipper Analytical Services, Inc. include reinvested
dividends and do not take into account sales charges. Actual load-
adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock World Bond Fund.
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.
Class A share total return figures include the maximum applicable
sales charge of 4.5%.
Class B share total return figures reflect the maximum contingent
deferred sales charge (maximum 5% and declining to 0% over six
years).
All figures represent past performance and are no guarantee of future
results. 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 read 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.
CLASS A
For the period ended September 30, 1997
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/92)
-------- ------- ---------
Cumulative Total Returns 0.82% 21.36% 23.49%
Average Annual Total Returns 0.82% 3.95% 3.74%
CLASS B
For the period ended September 30, 1997
ONE FIVE TEN
YEAR YEARS YEARS
-------- ------- ---------
Cumulative Total Returns (0.13%) 21.43% 100.47%
Average Annual Total Returns (0.13%) 3.96% 7.20%
YIELDS
As of October 31, 1997
SEC 30-DAY
YIELD
------------
John Hancock World Bond Fund: Class A 5.27%
John Hancock World Bond Fund: Class B 4.81%
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the
John Hancock World Bond Fund would be worth, assuming all
distributions were reinvested for the period indicated. 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.
Past performance is not indicative of future results.
World Bond Fund
Class A shares
Line chart with the heading World Bond 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
$12,240 as of October 31, 1997. The second line represents the value of
the hypothetical $10,000 investment made in the World Bond Fund on
January 3, 1992, before sales charge, and is equal to $12,817 as of
October 31, 1997. The third line represents the World Bond Fund,after
sales charge, and is equal to $12,240 as of October 31, 1997.
World Bond Fund
Class B shares
Line chart with the heading World Bond Fund 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 $23,478 as of October 31, 1997. The second line represents the value
of the hypothetical $10,000 investment made in the World Bond Fund on
December 31, 1991, before sales charge, and is equal to $19,989 as of
October 31, 1997.
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - World Bond 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, 1997. You'll also find the net asset value and the maximum
offering price per share as of that date.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1997
- ----------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Bonds (cost - $45,435,414) $46,512,899
Short-term investments (cost - $12,815,947) - Note A 12,815,947
-------------
59,328,846
Cash 928,663
Receivable for investments sold 4,521,248
Receivable for forward foreign currency exchange
contracts - Note A 529,921
Receivable for closed forward foreign currency exchange
contracts - Note A 1,656
Receivable for shares sold 725
Interest receivable 1,028,898
Other assets 9,316
-------------
Total Assets 66,349,273
- ----------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,075,889
Payable for bank borrowings - Note A 1,200,000
Dividend Payable 7,440
Payable for shares repurchased 37,332
Payable for securities on loan - Note A 10,817,947
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 56,985
Accounts payable and accrued expenses 112,340
-------------
Total Liabilities 13,307,933
- ----------------------------------------------------------------------------------
Net Assets:
Capital paid-in 53,711,687
Accumulated net realized loss on investments and
foreign currency transactions (1,646,410)
Net unrealized appreciation of investments and
foreign currency transactions 1,610,385
Distributions in excess of net investment income (634,322)
-------------
Net Assets $53,041,340
==================================================================================
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)
Class A - $28,959,442/3,206,087 $9.03
==================================================================================
Class B - $24,081,898/2,665,943 $9.03
==================================================================================
Maximum Offering Price Per Share*
Class A - ($9.03 x 104.71%) $9.46
==================================================================================
* 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.
</TABLE>
<TABLE>
<CAPTION>
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
Year ended October 31, 1997
- ----------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest (net of foreign withholding taxes of $12,047 and
including income on securities loaned of $9,614) $4,638,629
-----------
Expenses:
Investment management fee - Note B 462,654
Distribution and service fee - Note B
Class A 83,624
Class B 338,125
Transfer agent fee - Note B 169,921
Custodian fee 82,253
Auditing fee 74,000
Registration and filing fees 23,652
Printing 19,176
Financial services fee - Note B 11,364
Trustees' fees 5,677
Miscellaneous 4,227
Interest expense - Note A 204
Legal 88
-----------
Total Expenses 1,274,965
- ----------------------------------------------------------------------------------
Net Investment Income 3,363,664
- ----------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions:
Net realized loss on investments sold (987,650)
Net realized loss on foreign currency transactions (1,203,474)
Change in net unrealized appreciation/depreciation of
investments (208,858)
Change in net unrealized appreciation/depreciation of
foreign currency transactions 707,669
-----------
Net Realized and Unrealized
Loss on Investments and Foreign
Currency Transactions (1,692,313)
- ----------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $1,671,351
==================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------
1996 1997
------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $4,401,299 $3,363,664
Net realized gain (loss) on investments sold
and foreign currency transactions 1,300,834 (2,191,124)
Change in net unrealized appreciation/depreciation of investments
and foreign currency transactions (1,747,787) 498,811
-------------- --------------
Net Increase in Net Assets Resulting from Operations 3,954,346 1,671,351
-------------- --------------
Distributions to Shareholders:
Distributions from net investment income
Class A - ($0.5025 and $0.2580 per share, respectively) (1,702,011) (786,477)
Class B - ($0.4418 and $0.2269 per share, respectively) (2,613,385) (838,142)
Distributions in excess of net investment income
Class A - (none and $0.0180 per share, respectively) -- (55,023)
Class B - (none and $0.0159 per share, respectively) -- (58,638)
Distributions from capital paid-in
Class A - ($0.0100 and $0.2580 per share, respectively) (33,881) (786,847)
Class B - ($0.0088 and $0.2270 per share, respectively) (52,022) (838,537)
-------------- --------------
Total Distributions to Shareholders (4,401,299) (3,363,664)
-------------- --------------
From Fund Share Transactions - Net:* (27,053,357) (18,700,439)
-------------- --------------
Net Assets:
Beginning of period 100,934,402 73,434,092
-------------- --------------
End of period (including distributions in excess of
net investment income of $103,541 and $634,322, respectively) $73,434,092 $53,041,340
============== ==============
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1996 1997
------------------------------ ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- --------------
CLASS A
Shares sold 163,813 $1,508,925 1,140,051 $10,428,710
Shares issued to shareholders
in reinvestment of distributions 107,472 990,433 103,224 942,480
---------- ------------- ---------- --------------
271,285 2,499,358 1,243,275 11,371,190
Less shares repurchased (1,101,077) (10,123,045) (1,005,157) (9,195,414)
---------- ------------- ---------- --------------
Net increase (decrease) (829,792) ($7,623,687) 238,118 $2,175,776
========== ============= ========== ==============
CLASS B
Shares sold 237,253 $2,212,528 152,134 $1,401,591
Shares issued to shareholders
in reinvestment of distributions 132,781 1,224,626 83,206 761,099
---------- ------------- ---------- --------------
370,034 3,437,154 235,340 2,162,690
Less shares repurchased (2,474,099) (22,866,824) (2,516,064) (23,038,905)
---------- ------------- ---------- --------------
Net decrease (2,104,065) ($19,429,670) (2,280,724) ($20,876,215)
========== ============= ========== ==============
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the
end of the previous period. The difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund shares sold, reinvested
and repurchased during the last two periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the periods indicated, investment returns, key
ratios and supplemental data are as follows:
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $9.76 $9.62 $8.85 $9.30 $9.28
-------- -------- -------- -------- --------
Net Investment Income 0.76 0.64(2) 0.57(2) 0.51(2) 0.53(2)
Net Realized and Unrealized Gain
(Loss) on Investments,
Options, Financial Futures Contracts and
Foreign Currency Transactions (0.10) (0.78) 0.48 (0.02) (0.25)
-------- -------- -------- -------- --------
Total from Investment Operations 0.66 (0.14) 1.05 0.49 0.28
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.38) (0.11) (0.59) (0.50) (0.25)
Distributions in Excess of
Net Investment Income (0.04) -- -- -- (0.02)
Distributions from Capital Paid-In (0.38) (0.52) (0.01) (0.01) (0.26)
-------- -------- -------- -------- --------
Total Distributions (0.80) (0.63) (0.60) (0.51) (0.53)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.62 $8.85 $9.30 $9.28 $9.03
======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(1) 7.14% (1.30%) 12.25% 5.48% 3.15%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $12,882 $8,949 $35,334 $27,537 $28,959
Ratio of Expenses to Average Net Assets 1.46% 1.59% 1.48% 1.58% 1.68%(3)
Ratio of Net Investment Income to
Average Net Assets 7.89% 7.00% 6.43% 5.54% 5.84%
Portfolio Turnover Rate 363% 174% 263% 214% 153%
The Financial Highlights summarizes the impact of the following factors on a single share for each period
indicated: net investment income, gains, dividends and total investment return of the Fund. It shows how the
Fund's net asset value for a share has changed since the end of the previous period. Additionally, important
relationships between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $9.74 $9.62 $8.85 $9.30 $9.28
-------- -------- -------- -------- --------
Net Investment Income 0.72 0.59(2) 0.55(2) 0.45(2) 0.47(2)
Net Realized and Unrealized Gain
(Loss) on Investments,
Options, Financial Futures Contracts and
Foreign Currency Transactions (0.09) (0.78) 0.44 (0.02) (0.25)
-------- -------- -------- -------- --------
Total from Investment Operations 0.63 (0.19) 0.99 0.43 0.22
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.33) (0.06) (0.53) (0.44) (0.23)
Distributions in Excess of
Net Investment Income (0.04) -- -- -- (0.01)
Distributions from Capital Paid-In (0.38) (0.52) (0.01) (0.01) (0.23)
-------- -------- -------- -------- --------
Total Distributions (0.75) (0.58) (0.54) (0.45) (0.47)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $9.62 $8.85 $9.30 $9.28 $9.03
======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(1) 6.77% (1.88%) 11.51% 4.78% 2.43%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $197,166 $114,656 $65,600 $45,897 $24,082
Ratio of Expenses to Average Net Assets 1.91% 2.17% 2.16% 2.25% 2.38%(3)
Ratio of Net Investment Income to
Average Net Assets 7.45% 6.41% 6.03% 4.87% 5.13%
Portfolio Turnover Rate 363% 174% 263% 214% 153%
(1) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Expense ratios do not include interest expense due to bank loans which amounted to less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1997
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by World Bond Fund on October 31, 1997.
It's divided into two main categories: bonds and short-term investments. The bonds are further broken down by
currency denomination. Short-term investments, which represent the Fund's "cash" position, are listed last.
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ----------- ------------------ ------------
<S> <C> <C> <C>
BONDS
British Pound Sterling (7.81%)
United Kingdom Treasury,
Bond 06-07-02 7.000% 1,700 $2,895,134
Bond 12-07-06 7.500 700 1,248,453
--------------
4,143,587
--------------
U.S. Dollar (79.88%)
Globo Communicacoes e Participacoes
Ltda., (Brazil),
Bond 12-20-06 (R) 10.500 250 225,000
Innova S. de R.L., (Mexico),
Sr Note 04-01-07 12.875 200 203,000
Klabin Fabricadora de Papel e Celulose
S.A., (Brazil),
Gtd Deb 08-12-04 (R) 11.000 500 485,000
Net Sat Services Ltda., (Brazil),
Sr Note 08-05-04 12.750 500 500,000
OPP Petroquimica S.A., (Brazil),
Bond 10-29-04 (R) 11.000 500 482,500
Petroleo Brasileiro S.A., (Brazil),
Unsub Deb 10-17-06 (R) 10.000 500 475,000
Republic of Argentina, (Argentina),
Floating Rate Bond 03-31-05 6.688* 1,920 1,612,800
Republic of South Africa, (South Africa),
Note 06-23-17 8.500 825 800,250
Republic of Venezuela, (Venezuela),
Floating Rate Bond Ser DL 12-18-07 6.750* 3,750 3,243,750
Russian Federation Ministry of Finance, (Russia),
Unsub Deb 11-27-01 (R) 9.250 500 472,500
Unsub Deb 06-26-07 10.000 1,000 960,000
Unsub Deb 06-26-07 (R) 10.000 500 480,000
Sprint Spectrum L.P.,
Sr Note 08-15-06 11.000 500 555,000
Transportacion Maritima Mexicana S.A.
de C.V., (Mexico),
Note 05-15-03 9.250 500 485,000
United Mexican States, (Mexico),
Global Bond 02-06-01 9.750 1,000 1,065,000
Global Bond 05-15-26 11.500 1,000 1,080,000
United States Treasury,
Note 11-30-01 5.875 6,450 6,474,188
Note 02-28-02 6.250 1,600 1,628,496
Note 05-31-02 6.500 8,200 8,434,438
Note 07-31-02 6.000 3,750 3,785,738
Note 10-15-06 6.500 5,520 5,741,683
Note 05-15-07 6.625 3,020 3,179,969
--------------
42,369,312
--------------
TOTAL BONDS
(Cost $45,435,414) (87.68%) 46,512,899
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.77%)
Investment in a joint repurchase agreement
transaction with Aubrey G. Lanston & Co. --
Dated 10-31-97, Due 11-03-97
(Secured by US Treasury Notes, 5.750%
thru 7.125%,
Due 12-31-98 thru 4-30-00) -- Note A 5.680 1,998 1,998,000
--------------
Non-Cash Security Lending Collateral (5.00%)
Tri-Party Collateral which consists of
various U.S. Treasury Bonds and Notes,
5.625% thru 13.675%,
Due 10-15-98 thru 11-15-26** 2,650 2,650,369
--------------
Cash Equivalents (15.40%)
Navigator Securities Lending Prime Portfolio** 8,168 8,167,578
--------------
TOTAL SHORT-TERM INVESTMENTS (24.17%) 12,815,947
-------- --------------
TOTAL INVESTMENTS (111.85%) $59,328,846
======== ==============
NOTES TO SCHEDULE OF INVESTMENTS
* Represents rate in effect on October 31, 1997.
** Represents investment of security lending collateral - Note A.
# Par value of non US$ denominated foreign bonds is expressed in local currency for each country listed.
(R) These securities are exempt from registration under rule 144A of the Securities Act of 1933. Such securities
may be resold, normally to qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $2,620,000 or 4.94% of the Fund's net assets as of October 31, 1997.
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.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration (Unaudited)
- -------------------------------------------------------------------------------------
The Fund invests in bonds issued by the U.S. government, its agencies or
instrumentalities, foreign governments and companies. 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 October 31, 1997 assigned to the various
investment categories.
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
INVESTMENT CATEGORIES NET ASSETS
- ---------------------- ----------------
<S> <C>
Chemicals 0.91%
Government -- Foreign 26.13
Government -- U.S. 55.13
Media 0.94
Oil & Gas 0.90
Paper & Paper Products 0.91
Telecommunications 1.85
Transportation 0.91
Short-Term Investments 24.17
---------
TOTAL INVESTMENTS 111.85%
==========
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust III (the "Trust") (formerly Freedom
Investment Trust II) is an open-end management investment company,
registered under the Investment Company Act of 1940. The Trust
consists of six series: John Hancock World Bond Fund (the "Fund"),
John Hancock Global Fund, John Hancock International Fund, John
Hancock Short-Term Strategic Income Fund, John Hancock Growth Fund
and John Hancock Special Opportunities Fund. The other five series
of the Trust are reported in separate financial statements. The
investment objective of the Fund is to achieve a high total
investment return, a combination of current income and capital
appreciation, by investing in a global portfolio of government and
corporate debt securities.
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,
redemptions, dividends and liquidation, except that certain
expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class which bears
distribution and service expenses under terms of a distribution plan
have exclusive voting rights to that distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are
valued on the basis of market quotations, valuations provided by
independent pricing services or at fair value as determined in good
faith in accordance with procedures approved by the 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. 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 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 $1,621,817 of capital
loss carryforward available, to the extent provided by regulations,
to offset future net realized gains. To the extent such carryforward
is used by the Fund, no capital gains distribution will be made. The
carryforward expires as follows: October 31, 2002 - $938,808 and
October 31, 2005 - $683,009. Expired capital loss carryforwards are
reclassified to capital paid-in, in the year of expiration.
INTEREST AND DISTRIBUTIONS 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.
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.
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 relative net
assets of the respective classes. Distribution and service fees, if
any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles
incorporates estimates made by management in determining the
reported amounts of assets, liabilities, revenues, and expenses of
the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. These agreements enable the Fund to participate with
other Funds managed by the Adviser in an unsecured line of credit
with banks which permit borrowings up to $600 million, collectively.
Interest is charged to each Fund, based on its borrowings, at a rate
equal to 0.50% over the Fed Funds Rate. In addition, a commitment
fee, at a rate of 0.075% per annum based on the average daily unused
portion of the line of credit, is allocated among the participating
Funds. The maximum loan balance for the Fund during the year for
which loans were outstanding amounted to $1,200,000. At October 31,
1997, the loan outstanding was $1,200,000 with a rate of 6.1875%.
SECURITIES LENDING The Fund may lend its securities to certain
qualified brokers who pay the Fund negotiated lenders fees. These
fees are included in interest income. The loans are collateralized
at all times with cash or securities with a market value at least
equal to the market value of the securities on loan. As with other
extension of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially.
At October 31, 1997, the Fund loaned securities having a market
value of $10,231,177 collateralized by cash and securities in the
amount of $10,817,947, cash collateral was invested in a short-term
instrument.
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 PM,
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, and for
speculative purposes, as a substitute for investing in securities
denominated in that currency. 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 contracts at October 31, 1997, were as
follows:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION
CURRENCY COVERED BY CONTRACT DATE (DEPRECIATION)
- -------- ------------------- ---------- --------------
SELLS
New Zealand Dollar 3,822,205 NOV 97 $1,132
==============
BUYS
Deutsche Mark 29,200,000 NOV 97 $480,696
Japanese Yen 664,000,000 NOV 97 48,093
--------------
$528,789
==============
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. Buying futures tends to increase
the Fund's exposure to the underlying instrument. Selling futures
tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund instruments. 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 official settlement price on the
board of trade or U.S. commodities exchange on which it trades.
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, 1997, there were no open position 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 year ended October
31, 1997.
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.
John Hancock Funds, Inc. ("JH Funds"), a wholly owned subsidiary of
the Adviser, and Freedom Distributors Corporation ("FDC") acted as
Co-Distributors for shares of the Fund. For the year ended October
31, 1997, net sales charges received with regard to sales of Class A
shares amounted to $8,851. Out of this amount, $810 was retained and
used for printing prospectuses, advertising, sales literature and
other purposes, $5,652 was paid as sales commissions to unrelated
broker-dealers and $2,389 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 ("JHMLICo"), is
the indirect sole shareholder of Distributors and was the indirect
sole shareholder until November 29, 1996 of 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 year ended
October 31, 1997, contingent deferred sales charges paid to JH Funds
amounted to $97,894.
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 1.00% of Class B average daily net
assets to reimburse the Co-Distributors for their distribution and
service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the
National Association of Securities Dealers. Under the amended Rules
of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of The
Berkeley Financial Group. The Fund pays transfer agent fee based on
the number of shareholder accounts and certain out-of-pocket
expenses.
The Fund has an agreement with the Adviser to perform necessary tax
and financial management services for the Fund. The compensation for
the year ended was at an annual rate of less than 0.02% of the
average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon, and Mr. Richard S.
Scipione are trustees and/or officers of the Adviser and/or its
affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. 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 are recorded on the Fund's books as an other
asset. The deferred compensation liability and the related other
asset are always equal and are marked to market on a periodic basis
to reflect any income earned by the investment as well as any
unrealized gains or losses. At October 31, 1997, the Fund's
investments to cover the deferred compensation liability had
unrealized appreciation of $611.
NOTE C -
INVESTMENT TRANSACTIONS:
Purchases and proceeds from sales of securities, other than
obligations of the U.S. government and its agencies and short-term
securities, during the year ended October 31, 1997, aggregated
$50,173,789 and $85,997,493, respectively. Purchases and proceeds
from sales of obligations of the U.S. government its agencies
aggregated $39,715,170 and $26,447,597 respectively, during the year
ended October 31, 1997.
The cost of investments owned at October 31, 1997 (including short-
term investments) for Federal income tax purposes was $58,251,361.
Gross unrealized appreciation and depreciation of investments
aggregated $1,314,881 and $237,396, respectively, resulting in net
unrealized appreciation of $1,077,485.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1997, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized loss on
investments of $2,216,838, an increase in accumulated net investment
loss of $2,156,165 and a decrease in capital paid-in of $60,673.
This represents the amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October
31, 1997. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on
the net asset value of the Fund, are primarily attributable to
certain differences in the computation of distributable income and
capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per
share in the financial highlights excludes these adjustments.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock World Bond Fund
and the Trustees of John Hancock Investment Trust III
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 World Bond Fund (the "Fund") (a
series of John Hancock Investment Trust III) at October 31, 1997,
and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and the significant estimates made by management,
and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities
owned at October 31, 1997 by correspondence with the custodian and
the application of alternative auditing procedures where investments
purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 15, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is
furnished with respect to the distributions of the Fund for its
fiscal year ended October 31, 1997.
None of the distributions qualify for the dividends received
deduction available to corporations.
Shareholders will be mailed a 1997 U.S. Treasury Department Form
1099-DIV in January of 1998. This will reflect the tax character of
all distributions for calendar year 1997.
NOTES
John Hancock Funds - World Bond Fund
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NOTES
John Hancock Funds - World Bond Fund
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NOTES
John Hancock Funds - World Bond Fund
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This report is for the information of shareholders of the John
Hancock World Bond Fund. It may be used as sales literature when
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charges, investment objectives and operating policies.
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0900A 10/97
12/97
