John Hancock Funds
Pacific
Basin
Equities
Fund
ANNUAL REPORT
October 31, 1996
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 & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK INVESTOR SERVICES CORPORATION
P.O. BOX 9116
BOSTON, MASSACHUSETTS 02205-9116
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
INDEPENDENT AUDITORS
PRICE WATERHOUSE LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to first paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although
it seems a long way off, the issue is serious enough that at least
one group has already studied the problem, and experts and politicians
alike have weighed in with a slew of prescriptions. Legislative action
could be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this:
in 1950, there were 16 workers paying into the Social Security
system for each retiree collecting benefits. Today, there are three
workers for each retiree and by 2019 there will be two. Starting
then, the Social Security Administration estimates that the amount
paid out in Social Security benefits will start to be greater than
the amount collected in Social Security taxes. Compounding the issue
is the fact that people are retiring earlier and living longer.
The state of the system has already left many people, especially
younger and middle-aged workers, feeling insecure about Social
Security. A recent survey by the Employee Benefits Research
Institute (EBRI) found that 79% of current workers polled had little
confidence in the ability of Social Security to maintain the same
level of benefits as those received by today's retirees. Instead,
they said they expect to use their own savings or employer-sponsored
pensions for their retirement. Yet, remarkably, another EBRI survey
revealed that only slightly more than half of America's current
workers are saving money for retirement. Fewer than half own IRAs or
participate in employer-sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is
clear. Americans need to rely on themselves for accumulating the
bulk of their retirement savings. There's no law that says you
should have to reduce your standard of living once you stop working.
So we encourage you to save all that you can now, so you can live
the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY MARIAN LI, FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Pacific Basin Equities Fund
Pacific market performance varies widely
Recently, the Fund's fiscal year end changed from August to October.
What follows is a discussion of the Fund's performance for the 12
months ended October 31, 1996.
During the first six months of the Fund's fiscal year, Asian markets
provided investors with some of their best returns in several years.
But as the period progressed, there were setbacks in some Asian
markets. A sharp drop in the yen hurt U.S. dollar-based investors in
Japan, and in the smaller Southeast Asian countries, economies
slumped. The upshot was a result that was somewhat disappointing.
Across the region results varied widely, from a strong 31% gain in
Hong Kong, to a tough 28% drop in Thailand. For the year ended
October 31, 1996, John Hancock Pacific Basin Equities Fund posted
total returns for its Class A and Class B shares of 3.51% and 2.75%
respectively at net asset value, compared to 5.10% for the average
Pacific region fund, according to Lipper Analytical Services.1
Please see pages six and seven for longer-term performance
information.
"A sharp
drop in the
yen hurt
U.S.-dollar
based
investors
in Japan..."
A 2" x 2" photo of Marian Li at bottom center. Caption reads: "Marian
Li."
Performance and strategy review
We attribute the Fund's relative underperformance to several
factors, most significantly its investments in Japan, which felt the
effects of a 10% drop in the yen against the U.S. dollar in the
second half of the period. What's more, our decision to focus more
on Southeast Asia and some of the smaller Asian countries like
Korea, rather than on Australia, was also a contributing factor.
While Singapore, Malaysia, Thailand and Korea suffered through a
longer-than-expected economic slump caused in part by falling
semiconductor prices, the Australian market and its currency gained
ground. But we believe this may be a short-term phenomenon. Long
term, we still believe the potential for growth and market advances
is greater among the Southeast Asian nations. And finally, while our
21% stake in Hong Kong helped to partially offset these drags, some
of our peers may have taken an even more aggressive position in the
country. That leads us to a final point. Because the Fund is well
diversified within the Asian and Pacific region, with positions in
some smaller countries such as Taiwan and Korea, we are taking an
active approach to managing risk. The flip side is that when
individual countries deliver stand-out performances, we stand to
lose some ground compared to funds that have larger positions in
fewer countries. In the sections that follow, we'll take a closer
look at various countries where the Fund had significant holdings.
A pie chart with the heading "Portfolio Diversification" at top of left
hand column. The chart is divided into eleven sections. Going from top
left to right: Other 1%; Australia/New Zealand 9%; Hong Kong 21%; Japan
27%; South Korea 4%; Malaysia 13%; Indonesia 2%; Philippines 3%;
Singapore 10%; Taiwan 3%; Thailand 7%. A footnote states: "As a
percentage of net assets on October 31, 1996."
Japan
The Japanese economy has finally begun to awaken from its several
years of economic slumber, although some concerns that have given
the market pause remain in place. They include uncertainties about
government policies and spending, and fears that the strong economic
growth earlier in the year would cause interest rates to rise, which
they haven't yet. But overall, trends in Japan continue to favor a
gradually improving economy. Exports in Japan have continued to rise
as the yen has weakened, contributing to higher corporate profits,
especially recently among auto companies, including Toyota Motor
Corp. During the period, we shifted our emphasis first away from
basic materials, which were burdened by excess inventories, toward
manufacturers, many of them large exporters such as Sony and
Mitsubishi Heavy Industries. More recently, we have moved toward
domestic sectors, focusing on companies that will benefit from the
next stages of Japan's growth. They include real estate company
Mitsubishi Estate, computer networking company NTT Data Corp. and
telecommunications giant Sumitomo Electric Industries, the largest
producer of optic fiber cable in a country currently building its
information infrastructure. We're also taking a closer look at the
industrial electronics sector, now that the bad news is priced into
semiconductor stocks. Our favorite is Toshiba. The Fund's stake in
Japan was 27% of net assets by the end of October.
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 Toyota followed by an up arrow and the phrase "Weak yen, new models
boost car sales and exports." The second listing is HSBC Holdings
followed by an up arrow and the phrase "Hong Kong bank delivers strong
earnings." The third listing is Italian-Thai Development Public Co.
followed by a down arrow and the phrase "Slow economy stumps Thai
builder." Footnote below reads: "See Schedule of Investments.
Investment holdings are subject to change."
"Overall,
trends
in Japan
continue to
favor a
gradually
improving
economy."
Hong Kong
As Hong Kong awaits its transfer to China next summer, there's been
a significant influx of Chinese investment capital, much of it into
real estate, which has benefited developers such as Cheung Kong
Holdings. Chinese investment capital also helped the performance of
HSBC Holdings, Hong Kong's largest bank and the Fund's largest Hong
Kong holding. We've also had success investing in companies that do
most of their business in China, including Guangdong Investments, a
large conglomerate, and Guangnan Holdings, a food retailer.
Hutchison Whampoa is another conglomerate, and one of the Fund's top
holdings, that has good exposure to China.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended October 31,
1996." The chart is scaled in increments of 3% from bottom to top, with
6% at the top and 0% at the bottom. Within the chart there are three
solid bars. The first represents the 3.51% total return for the John
Hancock Pacific Basin Fund: Class A. The second represents the 2.75%
total return for John Hancock Pacific Basin Fund: Class B. The third
represents the 5.10% total return for the average Pacific region fund. A
footnote below reads: "Total returns for John Hancock Pacific Basin Fund
are at net asset value with all distributions reinvested. The average
Pacific region fund is tracked by Lipper Analytical Services. (1) See
following two pages for historical performance information."
Singapore/Malaysia/Thailand
Together, Singapore, Malaysia and Thailand accounted for about one
third of the Fund's net assets during the period. In Singapore,
local manufacturers suffered during the period from excess
inventories of one of the country's main exports, computer hard
drives, although recently the trend appears to be reversing. There,
our largest holding is Oversea-Chinese Banking Corp., Singapore's
bluest chip and a bellwether of the country's economy. Thailand was
our biggest disappointment, as investors' expectations of a pickup
in exports have yet to be realized, and the market was dogged by
political uncertainty. Our largest holding remains Bangkok Bank and
our biggest disappointment was construction company Italian-Thai
Development. But we're sticking with our holdings because we believe
we're close to the bottom of the cycle. In Malaysia our focus is
diversified across construction, infrastructure and energy stocks,
with our largest holdings in United Engineers, Malayan Banking and
Sime Darby, a large conglomerate.
Australia/New Zealand
Australia and New Zealand accounted for about 9% of the Fund's net
assets. Our one New Zealand holding is Telecom Corp. of New Zealand,
the country's largest stock and a strong performer. In Australia,
our largest holding, National Australia Bank, also did well in
anticipation of falling interest rates, a slow-growing economy and
benign inflation.
A strong
U.S. economy
could help
Asian
exporters.
Outlook
As we have said before, Pacific Basin funds are best suited for
investors who are looking to diversify a portfolio of domestic
investments, and who understand that international funds carry risks
that may make them more volatile than domestic funds. Having said
that, we remain optimistic about the chances for a strong turnaround
in the Pacific region in 1997. On a relative basis, the Asian
markets of Japan and Southeast Asia appear to be emerging from their
down cycles at a time when U.S. corporate earnings which have been
growing at such breakneck speed for several years now, could begin
to slow down. And if the U.S. economy strengthens even slightly,
that could be a boost to the fortunes of Asian exporters responding
to heightened U.S. demand for imports.
- --------------------------------------------------------------------
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's views are subject to change as market and other
conditions warrant.
International investing involves special risks, including currency
and political risks and differences in accounting standards and
financial reporting.
1Figures from Lipper Analytical Services 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 Pacific Basin
Equities Fund. Total return is a performance measure that equals the
sum of all income and capital gains dividends, assuming reinvestment
of these distributions, and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per
share. Performance figures include the maximum applicable sales
charge of 5% for Class A shares. The effect of the maximum
contingent deferred sales charge for Class B shares (maximum 5% and
declining to 0% over six years) is included in Class B performance.
Remember that all figures represent past performance and are no
guarantee of how the Fund will perform in the future. Also, keep in
mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or
less than their original cost, depending on when you sell them.
Please see your prospectus for a discussion of the risks associated
with international investing, including currency and political risks
and differences in accounting standards and financial reporting.
CUMULATIVE TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- -------- -------
John Hancock Pacific Basin
Equities Fund: Class A 0.73% 65.48% 87.90%(1)
John Hancock Pacific Basin
Equities Fund: Class B 0.24% N/A (0.69%)(2)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- -------- -------
John Hancock Pacific Basin
Equities Fund: Class A 0.73% 10.60% 7.21%(1)
John Hancock Pacific Basin
Equities Fund: Class B 0.24% N/A (0.27%)(2)
Notes to Performance
(1) Class A shares commenced on September 8, 1987.
(2) Class B shares commenced on March 7, 1994.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John
Hancock Pacific Basin Equities Fund would be worth on October 31,
1996, assuming you invested on the day each class of shares started
and have reinvested all distributions. For comparison, we've shown
the same $10,000 investment in the Morgan Stanley Capital
International Pacific Index -- an unmanaged index that measures
performance for a diverse range of global stock markets, including
Australia, Hong Kong, Japan, New Zealand, and Singapore/Malaysia.
Pacific Basin Equities Fund
Class A shares
Line chart with the heading Pacific Basin Equities 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 Pacific Basin Equities Fund, before sales
charge, and is equal to $18,910 as of October 31, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Pacific Basin Equities Fund, after sales charge, on September 8, 1987,
and is equal to $17,958 as of October 31, 1996. The third line
represents the Morgan Stanley Capital International Pacific Index and is
equal to $11,322 as of October 31, 1996.
Pacific Basin Equities Fund
Class B shares
Line chart with the heading Pacific Basin Equities 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 Pacific Basin Equities Fund, before sales
charge, and is equal to $9,770 as of October 31, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Morgan Stanley Capital International Pacific Index on March 7, 1994, and
is equal to $9,582 as of October 31, 1996. The third line represents
the value of the Pacific Basin Equities Fund, after sales charge, and is
equal to $9,479 as of October 31, 1996.
FINANCIAL STATEMENTS
John Hancock Funds - Pacific Basin Equities Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1996
- -----------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $66,803,182) $ 68,739,668
Foreign currency, at value (cost - $1,864,104) 1,865,399
Receivable for shares sold 14,900
Receivable for investments sold 951,689
Dividends receivable 105,951
Other Assets 2,096
-------------
Total Assets 71,679,703
- -----------------------------------------------------------------------------------------
Liabilities:
Due to custodian 846,113
Payable for shares repurchases 614,485
Payable for investments purchased 1,113,055
Foreign taxes payable 44,329
Payable to John Hancock Advisers, Inc. and affiliates - Note B 132,044
Accounts payable and accrued expenses 88,600
-------------
Total Liabilities 2,838,626
- -----------------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 66,443,900
Accumulated net realized gain on investments
and foreign currency transactions 505,795
Net unrealized appreciation of investments
and foreign currency transactions 1,901,801
Accumulated net investment loss ( 10,419)
-------------
Net Assets $ 68,841,077
=========================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares authorized
with no par value, respectively)
Class A - $38,693,699/2,674,569 $ 14.47
=========================================================================================
Class B - $30,147,378/2,123,367 $ 14.20
=========================================================================================
Maximum Offering Price Per Share *
Class A - ($14.47 x 105.26%) $ 15.23
=========================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value
of what the Fund owns, is due and owes on October 31, 1996. You'll also find the net
asset value and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ------------------------------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 1, 1996
YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1996 1996 (1)
------------------------ ------------------------
<S> <C> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $98,605
and $43,805, respectively) $ 1,099,280 $ 165,104
Interest 122,834 5,783
----------- ------------
1,222,114 170,887
----------- ------------
Expenses:
Investment management fee -- Note B 542,565 99,055
Distribution/service fee -- Note B
Class A 125,170 21,015
Class B 260,971 53,770
Transfer agent fee -- Note B 264,695 59,728
Custodian fee 170,793 30,000
Registration and filing fees 64,657 10,493
Auditing fee 31,500 21,172
Printing 30,583 11,990
Financial services fee -- Note B 9,488 2,322
Trustees' fees 5,337 29
Miscellaneous 3,064 348
Legal fees -- 812
----------- ------------
Total Expenses 1,508,823 310,734
----------- ------------
Net Investment Loss ( 286,709) ( 139,847)
- ------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 851,139 583,578
Net realized loss on foreign currency transactions ( 366,268) ( 98,510)
Change in net unrealized appreciation/depreciation
of investments 1,932,317 ( 1,725,171)
Change in net unrealized appreciation/depreciation
of foreign currency transactions 47,009 141,470
----------- ------------
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions 2,464,197 ( 1,098,633)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 2,177,488 ($ 1,238,480)
======================================================================================================
(1) Effective October 31, 1996, the fiscal period changed from August 31 to October 31.
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in
operating the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
-------------------------------- SEPTEMBER 1, 1996
1995 1996 TO OCTOBER 31, 1996 (1)
----------------- --------------- ----------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 26,724) ($ 286,709) ($ 139,847)
Net realized gain (loss) on investments sold
and foreign currency transactions ( 808,993) 484,871 485,068
Change in net unrealized appreciation/depreciation
of investments and foreign currency transactions ( 3,796,418) 1,979,326 ( 1,583,701)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ( 4,632,135) 2,177,488 ( 1,238,480)
------------ ------------ ------------
Distributions to shareholders:
Distributions from net realized gain on investments
sold and foreign currency transactions
Class A -- ($0.5482, none and none
per share, respectively) ( 1,615,390) -- --
Class B -- ($0.5482, none and none
per share, respectively) (485,450) -- --
------------ ------------ ------------
Total Distributions to Shareholders ( 2,100,840) -- --
------------ ------------ ------------
From Fund Share Transactions -- Net* ( 1,223,114) 20,330,528 ( 4,213,348)
------------ ------------ ------------
Net Assets:
Beginning of period 59,740,978 51,784,889 74,292,905
------------ ------------ ------------
End of period (including accumulated net
investment loss of none, $188,377 and
$10,419, respectively) $ 51,784,889 $ 74,292,905 $ 68,841,077
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM
--------------------------------------------------- SEPTEMBER 1, 1996
1995 1996 TO OCTOBER 31, 1996 (1)
-------------------------- ------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 1,831,046 $25,781,273 5,439,721 $80,924,479 1,081,326 $16,035,337
Shares issued to shareholders in
reinvestment of distributions 112,000 1,558,965 -- -- -- --
--------- ----------- --------- ----------- --------- -----------
1,943,046 27,340,238 5,439,721 80,924,479 1,081,326 16,035,337
Less shares repurchased (2,455,590) ( 34,756,404) (5,246,580) ( 78,427,912) (1,251,853) (18,610,457)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) ( 512,544) ($ 7,416,166) 193,141 $ 2,496,567 ( 170,527) ($ 2,575,120)
========= =========== ========= =========== ========= ===========
CLASS B
Shares sold 1,880,511 $26,138,987 3,821,397 $56,351,704 454,392 $ 6,590,658
Shares issued to shareholders in
reinvestment of distributions 31,341 434,079 -- -- -- --
--------- ----------- --------- ----------- --------- -----------
1,911,852 26,573,066 3,821,397 $56,351,704 454,392 $ 6,590,658
Less shares repurchased (1,481,266) ( 20,380,014) (2,618,144) ( 38,517,743) ( 563,407) (8,228,886)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) 430,586 $ 6,193,052 1,203,253 $17,833,961 ( 109,015) ($ 1,638,228)
========= =========== ========= =========== ========= ===========
(1) Effective October 31, 1996, the fiscal period changed from August 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 and foreign currency gains and losses,
distributions paid to shareholders, if any, 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>
<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:
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
----------------------------------------------------------- SEPTEMBER 1, 1996
1992(1) 1993 1994 1995 1996 TO OCTOBER 31, 1996 (10)
------- ------- -------- ------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 9.05 $ 8.87 $ 13.27 $ 15.88 $ 14.11 $14.74
------- ------- -------- ------- ------- ------
Net Investment Income (Loss)(2) ( 0.07) ( 0.11) ( 0.10) 0.02(3) ( 0.02) ( 0.02)
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions ( 0.11) 4.51 3.12 ( 1.24) 0.65 ( 0.25)
------- ------- -------- ------- ------- ------
Total from Investment Operations ( 0.18) 4.40 3.02 ( 1.22) 0.63 ( 0.27)
------- ------- -------- ------- ------- ------
Less Distributions:
Dividends from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- -- ( 0.41) ( 0.55) -- --
------- ------- -------- ------- ------- ------
Total Distributions -- -- ( 0.41) ( 0.55) -- --
------- ------- -------- ------- ------- ------
Net Asset Value, End of Period $ 8.87 $ 13.27 $ 15.88 $ 14.11 $ 14.74 $14.47
======= ======= ======== ======= ======= ======
Total Investment Return
at Net Asset Value (4) ( 1.99%) 49.61% 22.82% ( 7.65%) 4.47% ( 1.83%)(5)
Total Adjusted Investment Return
at Net Asset Value (4)(6) ( 5.57%) 48.31% -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $ 3,222 $14,568 $ 50,261 $37,417 $41,951 $38,694
Ratio of Expenses to Average
Net Assets 2.73% 2.94% 2.43% 2.05% 1.97% 2.21%(7)
Ratio of Adjusted Expenses
to Average Net Assets (8) 6.31% 4.24% -- -- -- --
Ratio of Net Investment Income (Loss)
to Average Net Assets ( 0.82%) ( 0.98%) ( 0.66%) 0.13%(3) ( 0.15%) ( 0.83)(7)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (8) ( 4.40%) ( 2.28%) -- -- -- --
Portfolio Turnover Rate 179% 171% 68% 48% 73% 15%
Expense Reimbursement Per Share $ 0.31 $ 0.14 -- -- -- --
Average Brokerage Commission Rate (9) N/A N/A N/A N/A $0.0183 $0.0221
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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------
PERIOD PERIOD FROM
ENDED YEAR ENDED AUGUST 31, SEPTEMBER 1, 1996
AUGUST 31, -------------------------- TO OCTOBER 31,
1994(1) 1995 1996 1996(10)
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 15.11 $ 15.84 $ 13.96 $ 14.49
------- ------- -------- --------
Net Investment Income (2) ( 0.09) ( 0.09) ( 0.13) ( 0.04)
Net Realized and Unrealized Loss
on Investments and Foreign
Currency Transactions 0.82 ( 1.24) 0.66 ( 0.25)
------- ------- -------- --------
Total from Investment Operations 0.73 ( 1.33) 0.53 ( 0.29)
------- ------- -------- --------
Less Distributions:
Dividends from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- ( 0.55) -- --
------- ------- -------- --------
Total Distributions -- ( 0.55) -- --
------- ------- -------- --------
Net Asset Value, End of Period $ 15.84 $ 13.96 $ 14.49 $ 14.20
======= ======= ======== ========
Total Investment Return
at Net Asset Value (4) 4.83%(5) ( 8.38%) 3.80% ( 2.00%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 9,480 $14,368 $ 32,342 $ 30,147
Ratio of Expenses to Average Net Assets 3.00%(7) 2.77% 2.64% 2.90%(7)
Ratio of Net Investment Loss
to Average Net Assets ( 1.40%)(7) ( 0.66%) ( 0.86%) ( 1.52%)(7)
Portfolio Turnover Rate 68% 48% 73% 15%
Average Brokerage Commission Rate (9) N/A N/A $ 0.0183 $ 0.0221
(1) Class B shares commenced operations on March 7, 1994.
(2) Based on average of shares outstanding at the end of each month.
(3) May not accord to amounts shown elsewhere in the financial statements due to the timing of sales and repurchases of
fund shares in relation to fluctuating market values of the investments of the fund.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration fee reductions by the adviser during
the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(10) Effective October 31, 1996, the fiscal period changed from August 31 to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1996
- --------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Pacific Basin
Equities Fund on October 31, 1996. It is comprised of common stocks which are further
broken down by country.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
<S> <C> <C>
COMMON STOCKS
Australia (6.72%)
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) 55,000 $ 730,224
Hoyts Cinemas Group. (Leisure)* 203,200 465,479
Lihir Gold Ltd. (Metal)* 320,000 573,240
National Australia Bank Ltd.
(Banks -- Foreign) 110,000 1,207,594
WMC Ltd. (Metal) 150,000 942,850
Woodside Petroleum Ltd. (Oil & Gas) 100,000 705,453
-----------
4,624,840
-----------
Hong Kong (21.10%)
Bank of East Asia, Ltd. (Banks - Foreign) 304,219 1,188,202
Cheung Kong (Holdings) Ltd.
(Real Estate Operations) 235,000 1,884,328
Great Eagle Holdings Ltd.
(Real Estate Operations) 250,000 803,458
Guangdong Investments
(Diversified Operations) 1,032,000 740,747
Guangnan (Holdings) (Retail) 700,000 475,285
HSBC Holdings Ltd. (Banks -- Foreign) 136,013 2,770,498
Hutchison Whampoa Ltd.
(Diversified Operations) 299,000 2,088,151
New World Development Co., Ltd.
(Real Estate Operations) 125,000 727,477
Sun Hung Kai Properties Ltd.
(Real Estate Operations) 128,000 1,456,765
Swire Pacific Ltd.
(Diversified Operations) 80,000 706,138
Wharf (Holdings) Ltd.
(Real Estate Operations) 190,000 783,865
Wheelock & Co., Ltd.
(Diversified Operations) 400,000 900,132
-----------
14,525,046
-----------
Indonesia (1.85%)
Bank Negara Indonesia
(Banks -- Foreign)*# 304,000 110,935
PT Bank Internasional Indonesia
(Banks -- Foreign) 349,574 562,788
PT Indonesian Satellite, American
Depositary Receipts (ADR)
(Telecommunications) 20,000 602,500
-----------
1,276,223
-----------
Japan (27.36%)
Bank of Tokyo-Mitsubishi, Ltd.
(Banks -- Foreign) 33,000 672,434
Canon Inc. (Office) 20,000 382,943
Jusco Co., Ltd. (Retail) 27,000 801,546
Marui Co., Ltd. (Retail) 49,000 908,085
Matsushita Electric Industrial Co., Ltd.
(Electronics) 119,000 1,902,244
Minebea Co., Ltd. (Machinery) 84,000 707,532
Mitsubishi Estate Co., Ltd.
(Real Estate Operations) 72,000 897,984
Mitsubishi Heavy Industries, Ltd.
(Machinery) 30,000 230,556
Mitsui Home Co., Ltd. (Building) 42,000 560,713
NKK Corp. (Steel)* 240,000 602,872
Nomura Securities Co., Ltd. (Finance) 69,000 1,139,344
NTT Data Corp. (Computers) 49 1,450,354
Rohm Co., Ltd. (Electronics) 8,000 474,287
Sharp Corp. (Electronics) 64,000 972,465
Shimizu Corp. (Construction) 25,000 226,165
Sony Corp. (Electronics) 23,000 1,379,737
Sumitomo Electric Industries, Ltd.
(Electronics) 68,000 895,876
Sumitomo Trust & Banking Co., Ltd.
(Banks -- Foreign) 30,000 332,001
Toho Titanium Co., Ltd. (Metal)* 86,000 1,435,159
Toshiba Corp. (Electronics) 155,000 969,303
Toyota Motor Corp. (Automobile / Trucks) 80,000 1,890,123
-----------
18,831,723
-----------
Malaysia (13.41%)
Genting Berhad (Leisure) 150,000 1,122,106
Hicom Holdings Berhad
(Diversified Operations) 270,000 721,354
Hong Leong Credit Berhad (Finance) 73,000 404,512
Magnum Corp. Berhad (Leisure) 400,000 690,283
Malakoff Berhad (Energy) 142,000 640,728
Malayan Banking Berhad
(Banks -- Foreign) 135,000 1,335,840
MBF Capital Berhad (Finance) 316,000 435,258
Road Builder Holdings Berhad
(Construction) 138,000 710,073
Sime Darby Berhad
(Diversified Operations) 300,000 1,062,735
Tan Chong Motor Holdings Berhad
(Automobile / Trucks) 400,000 680,784
United Engineers Ltd. (Construction) 180,000 1,424,896
-----------
9,228,569
-----------
New Zealand (1.87%)
Telecom Corp. of New Zealand
(Telecommunications) 248,000 1,289,565
-----------
Philippine Islands (3.35%)
Bank of the Philippine Islands
(Banks -- Foreign)*# 33,700 166,705
Manila Electric Co. (B Shares) (Utilities) 93,340 685,488
Philippine Long Distance Telephone Co.
(ADR) (Utilities) 12,500 748,438
Pilipino Telephone Corp.
(Telecommunications)* 800,000 707,763
-----------
2,308,394
-----------
Singapore (9.65%)
City Developments Ltd.
(Real Estate Operations) 100,000 788,072
Cycle & Carriage Ltd.
(Automobile / Trucks) 30,000 315,229
Fraser & Neave Ltd. (Beverages) 77,000 765,353
Jardine Matheson Holdings Ltd.
(Diversified Operations) 130,000 734,500
Keppel Corp., Ltd.
(Diversified Operations) 100,000 745,474
Oversea-Chinese Banking Corp., Ltd.
(Banks -- Foreign)* 93,500 1,068,761
Singapore Airlines Ltd. (Transport) 75,000 660,277
United Overseas Bank Ltd.
(Banks -- Foreign) 80,000 778,133
Wing Tai Holdings Ltd.
(Real Estate Operations) 320,000 786,084
-----------
6,641,883
-----------
South Korea (4.40%)
Kookmin Bank, Global Depositary
Receipts (GDR) (Banks -- Foreign)* 8,500 177,438
Korea Electric Power Corp. (Utilities) 22,000 647,020
Korea Electric Power Corp. (ADR)
(Utilities) 30,000 540,000
Korea Exchange Bank (Banks -- Foreign) 39,800 390,654
Korea Mobile Telecommunications
(ADR) (Telecommunications)* 49,700 621,250
Pohang Iron & Steel Co., Ltd. (Steel) 9,000 441,150
Samsung Electronics Co. (Electronics) 3,000 210,953
-----------
3,028,465
-----------
Taiwan (3.15%)
Lite-on Technology Corp. (GDR)
(Computers)* 31,600 494,540
ROC Taiwan Fund (Finance) 75,000 731,250
Taiwan Fund, Inc. (Finance) 44,200 944,775
-----------
2,170,565
-----------
Thailand (6.99%)
Bangkok Bank (Banks -- Foreign) 112,000 1,194,901
Electricity Generating Public Co., Ltd.
(Utilities) 230,000 667,582
Finance One Public Co., Ltd. (Finance) 109,500 309,237
Italian-Thai Development Public Co., Ltd.
(Building) 64,000 338,890
Krung Thai Bank Public Co., Ltd.
(Banks -- Foreign) 170,000 460,090
Land & House Public Co., Ltd.
(Real Estate Operations) 53,000 440,714
Shinawatra Computer and
Communication Public Co., Ltd.
(Telecommunications) 57,000 921,122
Siam City Bank (Banks -- Foreign) 420,000 481,859
-----------
4,814,395
-----------
TOTAL COMMON STOCKS
(Cost $66,803,182) ( 99.85%) 68,739,668
----- -----------
TOTAL INVESTMENTS ( 99.85%) $68,739,668
===== ===========
* Non-income producing security.
# Security purchased on a delayed delivery basis. The price of the underlying security and the date when
the security will be delivered and paid for are fixed at the time the transaction is negotiated.
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>
Industry Diversification (Unaudited)
- ------------------------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries, primarily in
the Pacific Basin region. The performance of the Fund is closely tied to the economic conditions
within the countries it invests. The concentration of investments by country for individual
securities held by the Fund is shown in the schedule of investments. In addition, the
concentration of investments can be aggregated by various industry groups. The table below shows
the percentages of the Fund's investments at October 31, 1996 assigned to the various investment
categories.
MARKET VALUE
OF SECURITIES
AS A
PERCENTAGE OF
INVESTMENT CATEGORIES NET ASSETS
- --------------------- ---------------------
<S> <C>
Automobile/Trucks 4.19%
Banks - Foreign 18.74
Beverages 1.11
Building 1.31
Computers 2.83
Construction 3.43
Diversified Operations 12.24
Electronics 9.87
Energy 0.93
Finance 5.76
Leisure 3.31
Machinery 1.36
Metals 4.29
Office 0.56
Oil & Gas 1.02
Real Estate Operations 12.45
Retail 3.17
Steel 1.52
Telecommunications 6.02
Transport 0.96
Utilities 4.78
-----
Total Investments 99.85%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Pacific Basin Equities Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of
1940. The Trust consists of three series: John Hancock Pacific Basin
Equities Fund (the "Fund"), John Hancock Global Rx Fund and John
Hancock Global Marketplace Fund. On May 21, 1996, the Board of
Trustees voted to change the fiscal period end from August 31 to
October 31. This change is effective October 31, 1996. The other two
series of the Trust are reported in separate financial statements.
The Fund's investment objective is to seek long-term growth of
capital through investment in a diversified portfolio of stocks of
companies located in countries bordering the Pacific Ocean.
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.
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. For federal income tax purposes, net currency exchange
gains and losses from sales of foreign debt securities must be
treated as ordinary income even though such items are gains and
losses for accounting purposes.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of
some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently 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.
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.
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 amount of assets, liabilities, revenues, and expenses of
the Fund. Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00
p.m., London time, on the date of any determination of the net asset
value of the Fund. Transactions affecting statement of operations
accounts and net realized gain/(loss) on investments are translated
at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of foreign currency, currency gains or losses realized between
the trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked-to-market
daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the
determination of the Fund's daily net assets. The Fund records
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may
arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative
to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets
and Liabilities. The Fund may also purchase and sell forward
contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no
market risk other than that offset by the currency amount of the
underlying transaction.
There were no open forward foreign currency exchange contracts at
October 31, 1996.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
The Adviser is solely responsible for advising the Fund with respect
to investments in the United States and Canada.
The Fund and the Adviser also have a sub-investment management
contract with John Hancock Advisers International Limited (the "Sub-
Adviser"), a wholly-owned subsidiary of the Adviser, under which the
Sub-Adviser, subject to the review of the Trustees and overall
supervision of the Adviser, provides the Fund with investment
management services and advice with respect to that portion of the
Fund's assets invested in countries other than the United States and
Canada. The Adviser and Indosuez Asia Advisers Limited ("IAAL") have
a second subadvisory contract. Pursuant to such contract, IAAL will
serve as co-subadviser to the Fund with JHAI. IAAL provides
additional expertise in Asian and Pacific Basin countries.
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of
the first $200,000,000 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 $200,000,000. The Adviser pays the Sub-Adviser a quarterly
management fee equivalent, on an annual basis, to the sum of (a)
0.50% of the first $200,000,000 of the Fund's average daily net
asset value and (b) 0.4375% of the Fund's average daily net asset
value in excess of $200,000,000. As of September 1, 1994, the Sub-
Adviser has waived all but 0.05% of their fee. The Adviser pays IAAL
quarterly a subadvisory fee at the annual rate of (a) 0.30% of the
first $100,000,000 of the Fund's average daily net assets managed by
IAAL plus (b) 40% percent of the gross management fee received by
the Adviser pursuant to the investment management contract with
respect to the Fund's average daily net assets in excess of
$100,000,000 which are managed by IAAL (the rate increases to 50% on
net assets in excess of $250,000,000).
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000, and 1.5% of the remaining average daily net asset
value.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. For the
period ended October 31, 1996, net sales charges received with
regard to sales of Class A shares amounted to $23,075. Of this
amount, $3,415 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $12,108 was paid
as sales commissions to unrelated broker-dealers and $7,552 was paid
as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony")
and Sutro & Co., ("Sutro"), all of which are broker dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company,
is the indirect sole shareholder of Distributors and John Hancock
Freedom Securities Corporation and its subsidiaries, which include
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 period ended October 31,
1996, contingent deferred sales charges paid to JH Funds amounted to
$17,562.
In addition, to reimburse JH Funds for the services it provides as
distributors of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments to JH Funds for distribution and service
expenses, at an annual rate not exceed 0.30% of Class A average
daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution and service costs. Up to a
maximum of 0.25% of such payments may be service fees as defined by
the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned
subsidiary of The Berkeley Financial Group. The Fund pays transfer
agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
On March 5, 1996 the Board of Trustees approved retroactively to
January 1, 1996, an agreement with the Adviser to perform necessary
tax and financial management services for the Fund. The compensation
for 1996 is estimated to be at an annual rate of 0.01875% of the
average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors and/or officers of the Adviser and/or its
affiliates, as well as Trustees of the Fund. Trustee Edward J.
Boudreau, Jr. is Managing Director of the Sub-Adviser. The
compensation of unaffiliated Trustees is borne by the Fund.
Effective with the fees paid for 1995, the unaffiliated Trustees may
elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund 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 will
be recorded on the Fund's books as an other asset. The deferred
compensation liability and the related other asset are always equal
and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses.
At October 31, 1996, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $211.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-
term securities, during the period ended October 31, 1996 aggregated
$10,885,800 and $13,436,262 respectively. There were no purchases or
sales of obligations of the U.S. government and its agencies during
the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 for federal income
tax purposes was $66,831,511. Gross unrealized appreciation and
depreciation of investments aggregated $7,432,413 and $5,524,256,
respectively, resulting in net unrealized appreciation of
$1,908,157.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized gain on
investments of $189,317, a decrease in accumulated net investment
loss of $317,805 and a decrease in capital paid-in of $128,488. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
1996. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to the treatment
of net operating losses in the computation of distributable income
and capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per
share in the financial highlights excludes these adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Pacific Basin Equities Fund
and the Trustees of John Hancock World Fund
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 Pacific Basin Equities Fund (the
"Fund") (a series of John Hancock World Fund) at October 31, 1996,
and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and the significant estimates made by management,
and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities
at October 31, 1996 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is
furnished with respect to the distributions of the Fund during the
fiscal year ended October 31, 1996.
The Fund has not paid any distributions of ordinary income dividends
or net long-term capital gains during the fiscal year ended October
31, 1996. It is anticipated that there will be a distribution from
sales of securities to shareholders of record on December 23, 1996
and payable December 30, 1996. Shareholders will receive a 1996 U.S.
Treasury Department Form 1099-DIV in January 1997 representing their
proportionate share.
None of the distributions qualify for the dividends received
deduction available to corporations.
NOTES
John Hancock Funds - Pacific Basin Equities Fund
NOTES
John Hancock Funds - Pacific Basin Equities Fund
NOTES
John Hancock Funds - Pacific Basin Equities Fund
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This report is for the information of shareholders of the John
Hancock Pacific Basin Equities Fund. It may be used as sales
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John Hancock Funds
Global
Marketplace
Fund
Annual Report
October 31, 1996
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 Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to second
paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although
it seems a long way off, the issue is serious enough that at least
one group has already studied the problem, and experts and
politicians alike have weighed in with a slew of prescriptions.
Legislative action could be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this:
in 1950, there were 16 workers paying into the Social Security
system for each retiree collecting benefits. Today, there are three
workers for each retiree and by 2019 there will be two. Starting
then, the Social Security Administration estimates that the amount
paid out in Social Security benefits will start to be greater than
the amount collected in Social Security taxes. Compounding the issue
is the fact that people are retiring earlier and living longer.
The state of the system has already left many people, especially
younger and middle-aged workers, feeling insecure about Social
Security. A recent survey by the Employee Benefits Research
Institute (EBRI) found that 79% of current workers polled had little
confidence in the ability of Social Security to maintain the same
level of benefits as those received by today's retirees. Instead,
they said they expect to use their own savings or employer-sponsored
pensions for their retirement. Yet, remarkably, another EBRI survey
revealed that only slightly more than half of America's current workers
are saving money for retirement. Fewer than half own IRAs or participate
in employer-sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is
clear. Americans need to rely on themselves for accumulating the
bulk of their retirement savings. There's no law that says you
should have to reduce your standard of living once you stop working.
So we encourage you to save all that you can now, so you can live
the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGER
John Hancock
Global Marketplace Fund
Fund outpaces retail sector;
focus on niche players with unique methods
Recently, the Fund's fiscal year end changed from August to October.
What follows is a discussion of the Fund's performance for the 12
months ended October 31, 1996.
Despite a relatively tough operating environment for retailers,
improved economic conditions helped John Hancock Global Marketplace
Fund post strong absolute and relative performance for the year
ended October 31, 1996. The Fund's Class A shares had a total return
of 28.76% at net asset value. The Fund's Class B shares, which began
on January 22, 1996, had a total return of 27.36% at net asset value
through October 31, 1996. By comparison, the average global fund
returned 15.52% for the same period, according to Lipper Analytical
Services1 and the Merrill Lynch Retail Index returned 24.10%. Please
see pages six and seven for longer-term performance information. The
key to the Fund's outperformance is that we focus on finding the
strongest players in various categories, as well as on companies
that have an innovative distribution channel, a unique product,
service or competitive advantage or innovative marketing or sales
methods.
The key to
the Fund's
outperformance
is a focus on
the strongest
players in a
category.
A 2" x 3 1/2" photo of the portfolio management team. Caption
reads: Bernice Behar and Fund management team members William
Maffie (r) and Robert Hallisey (l)".
Dominant market players win store wars
Even though we've seen some recent consolidation among stores, U.S.
retail space per capita remains extremely high and has nearly
doubled over the past 20 years. To survive in today's difficult
retailing environment, companies generally must dominate their
category, offer unique goods or services, or occupy a unique niche
in order to distinguish themselves. If they don't, they find
themselves hard-pressed to attract consumers in a marketplace that
is literally glutted with stores. That helps explain why retailer
Tommy Hilfiger was so successful during a period when other apparel
makers were suffering. The company's early acknowledgment of the
trend toward business casual wear and its successful launch of a
women's clothing line have helped immunize it from the difficulties
facing many other apparel manufacturers and marketers. In another
arena, PETsMART, the nation's largest pet supply chain, has
dominated its rivals by offering an almost unrivaled number of pet
care products and services. Unfortunately, Urban Outfitters, which
sells trendy apparel and home accessories targeted at the youth
market, didn't fare as well. The stock stumbled when the company
disappointed investors by failing to meet expansion plans.
Chart with heading "Top Five Common Stock Holdings" at top of
left hand column. The chart lists five holdings: 1) CompUSA
2.0%; 2) Neiman Marcus Group 1.8%; 3) JDA Software Group
1.8%; 4) Quality Food Centers 1.8%; 5) Kohl's Corp. 1.7%.
Footnote below states "As a percentage of total net assets on
October 31, 1996."
"During the
past six
months we
increased
our holdings
in super-
markets."
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 Gucci followed by an up
arrow and the phrase "Broader distribution of this popular
brand. The second listing is CompUSA followed by an up arrow
and the phrase "Strong computer sales." The third listing is
Urban Outfitters followed by a down arrow and the phrase
"Unable to meet expansion plans". Footnote below reads: "See
Schedule of Investments. Investment holdings are subject
to change."
Companies catering to an affluent consumer proved to be among the
Fund's best performers over the past year. Consumer confidence was
its strongest among affluent Americans, thanks in part to a U.S.
bull equity market and rising wages for this group. Those trends
benefited "high-end" retailers and helped them buck the negative
trends that faced middle-market and discount stores. Gucci Group,
Neiman Marcus and Saks Holdings Group, the parent company of Saks
Fifth Avenue, were all strong performers during the year. Italian-
based Gucci, which designs, produces and distributes leather goods,
apparel and accessories, continues to leverage its brand name by
opening a number of new stores and striking up agreements with high-
end U.S. department stores to distribute its goods. Neiman Marcus
and Saks Holdings both benefited from higher sales of designer and
high-end apparel, as well as less competition in the high-end
sector.
Apart from increased spending on high-end goods, there were other
pockets of strength. Computers sales were quite healthy throughout
the year, which boosted the Fund's top holding CompUSA, the nation's
largest computer retail chain. While the stock faltered a bit at the
end of the period as market participants worried about the company's
Christmas sales, we believe that holiday spending on computers will
be good. In the leisure area, one of the Fund's strongest performers
was Family Golf Centers, which runs entertainment-oriented driving
ranges in metropolitan areas and caters to the growing popularity of
golf in the United States. The rising market share and acquisitions
have helped its profits.
New additions
During the past six months we increased our holdings in
supermarkets. In some areas of the country, grocery stores and
larger chains have benefited from a somewhat better pricing
environment. Vons is in acquisition talks with a larger chain,
while Quality Food Centers, a Seattle-based chain, rose on
improving profits and on the news that it was undertaking a
big growth initiative.
Bar chart with heading "Fund Performance" at top of left hand
column. Under the heading is the footnote "For Class A shares
and the average global fund, returns are for the year ended
October 31, 1996. For Class B shares, return is from January
22, 1996 through October 31, 1996." The chart is scaled in
increments of 10% from top to bottom with 30% at the top and
0% at the bottom. Within the chart, there are three solid
bars. the first represents the 28.76% total return for John
Hancock Global Marketplace Fund: Class A. The second
represents the 27.36% total return for the John Hancock
Global Marketplace Fund: Class B. The third represents the
15.52% total return for the average global fund. A footnote
below states "The total returns for John Hancock Global
Marketplace Fund are at net asset value with all reinvested.
the average global fund is tracked by Lipper Analytical
Services (1). See following two pages for historical
performance information."
Companies that provide goods and services to the retailing industry
also performed well. Catalina Marketing, which generates database
information about consumers for marketers by analyzing cash register
information, has experienced strong profit growth. Universal Outdoor
Holdings Inc., which sells billboard space, has profited from an
improving pricing environment for outdoor advertising.
International opportunities
At the end of the period, roughly 24% of the Fund's investments were
in overseas companies. In Asia, we emphasized companies that cater
to the rising middle class population in the region including
Giordano International, a Gap-like chain which offers attractive
mid-priced clothing, and Glorious Sun, which sells the popular Jeans
West brand, distributed in Australia and New Zealand as well. We
also added to our holdings in Chaifa Holdings and First Sign, Hong-
Kong-based retailers that sell popular licensed apparel in China. In
Europe we've favored restaurateurs PizzaExpress and Wetherspoon
(J.D.), as well as Dixons, a large U.K. computer retailer, which we
sold during the period.
"...economic
growth
appears to
be strong
enough to
keep
consumer
confidence
healthy..."
Outlook
Although the U.S. economy is flashing mixed signals, economic growth
appears to be strong enough to keep consumer confidence healthy, at
least over the near term. That will probably be positive for most
retailers going into the holiday season. On the other hand, competition
among stores shows no signs of abating. Until there's a bigger shakeout
among the players, the retailing environment will continue to be
intensely competitive. Our sense is that only the strongest players
will thrive in the years to come. So we'll continue to focus on
those retailers that show the most strength -- here or abroad -- by
offering unique products or services or dominating specialized areas,
and on those that can continue to take market share from their competitors.
- --------------------------------------------------------------------
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.
International investing involves special risks such as political and
currency risks and differences in accounting standards and financial
reporting. Sector investing is subject to greater risks than the
market as a whole.
1Figures from Lipper Analytical Services 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 Global Marketplace
Fund. Total return is a performance measure that equals the sum of
all income and capital gains dividends, assuming reinvestment of
these distributions, and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per
share. Performance figures include the maximum applicable sales
charge of 5% for Class A shares. The effect of the maximum
contingent sales charge for Class B shares (5% and declining to 0%
over six years) is included in Class B performance. Remember that
all figures represent past performance and are no guarantee of how
the Fund will perform in the future. Also, keep in mind that the
total return and share price of the Fund's investments will
fluctuate. As a result, your Fund's shares may be worth more or less
than their original cost, depending on when you sell them.
CUMULATIVE TOTAL RETURNS
For the period ended September 30, 1996
One Life of
Year Fund
---------- -----------
John Hancock Global Marketplace
Fund: Class A 27.54% 80.13%(1)
John Hancock Global Marketplace
Fund: Class B N/A 28.89%(2)
AVERAGE ANNUAL TOTAL RETURNS
One Life of
Year Fund
---------- -----------
John Hancock Global Marketplace
Fund: Class A 27.54% 34.21%(1,3)
John Hancock Global Marketplace
Fund: Class B N/A 28.89%(2,3)
Notes to Performance
(1) Class A shares commenced on September 29, 1994.
(2) Class B shares commenced on January 22, 1996.
(3) Effective September 29, 1994, the Adviser has voluntarily
undertaken to limit the Fund's expenses, including the
management fee (but not including the transfer agent fee and the
12b-1 fee) to 0.90% of the Fund's daily net asset value.
Without the limitations of expenses, the average annual total
return for the one-year period and since inception would have
been 26.88% and 29.84% for Class A shares, respectively. For
Class B shares, the total return since inception would have been
27.78%.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John
Hancock Global Marketplace Fund would be worth on October 31, 1996,
assuming you invested on the day each class of shares started and
have reinvested all distributions. For comparison, we've shown the
same $10,000 investment in both the Standard & Poor's 500 Stock
Index and the Morgan Stanley World Index. The Standard & Poor's 500
Stock Index is an unmanaged index that includes 500 widely traded
common stocks and is often used as a measure of stock market
performance. The Morgan Stanley World Index is an unmanaged index
that measures the performance of a diverse range of global stock
markets.
Global Marketplace Fund
Class A shares
Line chart with the heading Disciplined Growth Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are four lines.
The first line represents the value of the Global Marketplace Fund,
before sales charge, and is equal to $18,069 as of October 31, 1996.
The second line represents the value of the hypothetical $10,000
investment made in the Global Marketplace Fund on September 29, 1994,
after sales charge, and is equal to $17,161 as of October 31, 1996. The
third line represents the Standard & Poor's 500 Stock Index, and is
equal to $16,037 as of October 31, 1996. The fourth line represents the
Morgan Stanley World Index and is equal to $13,223 as of October 31,
1996.
Global Marketplace Fund
Class B shares
Line chart with the heading Global Marketplace Fund, representing the
growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are four lines.
The first line represents the value of the Global Marketplace Fund,
before sales charge, and is equal to $12,736 as of October 31, 1996.
The second line represents the value of the hypothetical $10,000
investment made in the Global Marketplace Fund, after sales charge, on
January 22, 1996, and is equal to $12,236 as of October 31, 1996. The
third line represents the value of the Standard & Poor's 500 Stock Index
and is equal to $11,662 as of October 31, 1996. The fourth line
represents the Morgan Stanley World Index and is equal to $10,967 as of
October 31, 1996.
FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1996
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $46,988,920) $ 49,502,689
Joint repurchase agreement (cost - $835,000) 835,000
-------------
50,337,689
Cash 27,131
Receivable for shares sold 294,873
Receivable for investments sold 1,570,404
Dividends receivable 20,458
Foreign tax receivable 2,480
Deferred organization expense - Note A 4,225
Other Assets 14
-------------
Total Assets 52,257,274
- -------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 217,794
Payable for shares repurchased 34,671
Payable to John Hancock Advisers, Inc. and affiliates - Note B 38,870
Accounts payable and accrued expenses 50,566
-------------
Total Liabilities 341,901
- -------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 51,455,251
Accumulated net realized loss on investments and foreign currency transactions ( 2,061,451)
Accumulated net unrealized appreciation of investments and foreign currency transactions 2,521,573
-------------
Net Assets $ 51,915,373
=======================================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding - unlimited
number of shares authorized with no par value, respectively) Class A - $21,782,280
(divided by) 1,423,053 $ 15.31
=======================================================================================================
Class B - $30,133,093 (divided by) 1,979,219 $ 15.22
=======================================================================================================
Maximum Offering Price Per Share *
Class A - ($15.31 x 105.26%) $ 16.12
=======================================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the Fund
owns, is due and owes on October 31, 1996. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ---------------------------------------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 1, 1996
YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1996 1996 (1)
----------------- -----------------
<S> <C> <C>
Investment Income:
Interest $ 44,926 $ 12,247
Dividends (net of foreign withholding taxes of $4,847 and $1,633, respectively) 41,556 54,722
----------- -----------
86,482 66,969
----------- -----------
Expenses:
Investment management fee - Note B 79,077 63,995
Registration and filing fees 66,454 12,078
Distribution/service fee - Note B
Class A 14,626 10,359
Class B 50,092 45,464
Custodian fee 59,574 14,500
Auditing fee 30,030 21,642
Transfer agent fee - Note B 24,624 27,389
Printing 21,071 3,339
Legal fees 3,458 190
Financial services fee - Note B 1,805 1,500
Organization expense - Note A 1,457 243
Miscellaneous 502 429
Trustees' fees 311 100
----------- -----------
Total Expenses 353,081 201,228
- ------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note B ( 174,778) ( 46,022)
- ------------------------------------------------------------------------------------------------------------------
Net Expenses 178,303 155,206
- ------------------------------------------------------------------------------------------------------------------
Net Investment Loss ( 91,821) ( 88,237)
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized loss on investments sold ( 794,705) ( 1,254,430)
Net realized loss on foreign currency transactions ( 7,413) ( 9,571)
Change in net unrealized appreciation/depreciation of investments 1,009,133 1,306,530
Change in net unrealized appreciation/depreciation of foreign currency transactions 78 7,729
----------- -----------
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions 207,093 50,258
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 115,272 ($ 37,979)
==================================================================================================================
(1) Effective October 31, 1996, the fiscal period end changed from August 31 to October 31.
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994 PERIOD FROM
(COMMENCEMENT SEPTEMBER 1, 1996
OF OPERATIONS) TO YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1995 AUGUST 31, 1996 1996(1)
------------------ --------------- -----------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $ 321 ($ 91,821) ($ 88,237)
Net realized loss on investments sold and foreign
currency transactions ( 12,743) ( 802,118) ( 1,264,001)
Change in net unrealized appreciation/depreciation of
investments and foreign currency transactions 198,103 1,009,211 1,314,259
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 185,681 115,272 ( 37,979)
------------ ------------ ------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0133, none, and none per share, respectively) ( 803) -- --
Dividends in excess of net investment income
Class A - ($0.0140, none, and none per share, respectively) ( 844) -- --
------------ ------------ ------------
Total Distributions ( 1,647) -- --
------------ ------------ ------------
From Fund Share Transactions - Net* 27,566 38,385,073 12,741,407
------------ ------------ ------------
Net Assets:
Initial Investment by John Hancock Advisers, Inc. -
Note B / Beginning of period 500,000 711,600 39,211,945
------------ ------------ ------------
End of period $ 711,600 $ 39,211,945 $ 51,915,373
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1994 PERIOD FROM
(COMMENCEMENT SEPTEMBER 1, 1996
OF OPERATIONS) TO YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1995 AUGUST 31, 1996 1996(1)
-------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold 4,064 $ 36,313 1,349,557 $20,373,589 684,738 $10,778,771
Shares issued to shareholders in
reinvestment of distributions 5 44 -- -- -- --
------ ----------- --------- ----------- ------- -----------
4,069 $ 36,357 1,349,557 $20,373,589 684,738 $10,778,771
Less shares repurchased ( 947) ( 8,791) ( 292,024) ( 4,386,051) ( 381,164) ( 6,000,820)
------ ----------- --------- ----------- ------- -----------
Net increase 3,122 27,566 1,057,533 $15,987,538 303,574 $ 4,777,951
------ ----------- ========= =========== ======= ===========
Initial Investment by John Hancock
Advisers, Inc. - Note B 58,824 500,000
------ -----------
Net increase and shares outstanding
end of period 61,946 $ 527,566
====== ===========
Class B **
Shares sold 1,569,827 $23,824,449 555,243 $ 8,755,160
Less shares repurchased ( 95,769) ( 1,426,914) ( 50,082) ( 791,704)
--------- ----------- ------- -----------
Net increase 1,474,058 $22,397,535 505,161 $ 7,963,456
========= =========== ======= ===========
** Class B commenced operations on January 22, 1996.
(1) Effective October 31, 1996, the fiscal period end changed from August 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 and foreign currency gains and losses, distributions paid
to shareholders, if any, 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>
<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:
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994
(COMMENCEMENT PERIOD FROM
OF OPERATIONS) YEAR ENDED SEPTEMBER 1, 1996
TO AUGUST 31, 1995 AUGUST 31, 1996 TO OCTOBER 31,1996(8)
-------------------- ------------------ --------------------
<S> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50(1) $ 11.49 $ 15.16
------- ------- -------
Net Investment Income (Loss) 0.01(2) ( 0.08)(2) ( 0.02)(2)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.01 3.75 0.17
------- ------- -------
Total from Investment Operations 3.02 3.67 0.15
------- ------- -------
Less Distributions:
Dividends from Net Investment Income ( 0.01) -- --
Distributions in Excess of Net Investment Income ( 0.02) -- --
------- ------- -------
Total Distributions ( 0.03) -- --
------- ------- -------
Net Asset Value, End of Period $ 11.49 $ 15.16 $ 15.31
======= ======= =======
Total Investment Return at Net Asset Value (5) 35.61%(4) 31.94% 0.99%(4)
Total Adjusted Investment Return at Net Asset Value (5)(6) 28.69%(4) 29.69% 0.89%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 712 $16,966 $21,782
Ratio of Expenses to Average Net Assets 1.50%* 1.45% 1.54%*
Ratio of Adjusted Expenses to Average Net Assets (3) 9.00%* 3.70% 2.12%*
Ratio of Net Investment Income (Loss) to Average Net Assets 0.06%* ( 0.57%) ( 0.70%)*
Ratio of Adjusted Net Investment Loss to
Average Net Assets (3) ( 7.44%)* ( 2.82%) ( 1.28%)*
Portfolio Turnover Rate 63% 52% 12%
Average Broker Commission Rate (7) N/A $0.0140 $0.0079
Fee Reduction Per Share (2) $ 0.65 $ 0.31 $ 0.02
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated: net
investment income, gains (losses), distributions of the Fund 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)
- -----------------------------------------------------------------------------------------------------------
PERIOD FROM
FOR THE PERIOD JANUARY 22, 1996 SEPTEMBER 1, 1996
TO AUGUST 31, 1996 TO OCTOBER 31, 1996(8)
------------------------------- ----------------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.95(1) $ 15.09
------- -------
Net Investment Loss ( 0.11)(2) ( 0.04)(2)
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 3.25 0.17
------- -------
Total from Investment Operations 3.14 0.13
------- -------
Net Asset Value, End of Period $ 15.09 $ 15.22
======= =======
Total Investment Return at Net Asset Value (5) 26.28%(4) 0.86%(4)
Total Adjusted Investment Return at Net Asset Value (5)(6) 25.50%(4) 0.76%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 22,246 $ 30,133
Ratio of Expenses to Average Net Assets 2.15%* 2.24%*
Ratio of Adjusted Expenses to Average Net Assets (3) 3.49%* 2.82%*
Ratio of Net Investment Loss to Average Net Assets ( 1.28%)* ( 1.42%)*
Ratio of Adjusted Net Investment Loss to
Average Net Assets (3) ( 2.62%)* ( 2.00%)*
Portfolio Turnover Rate 52% 12%
Average Broker Commission Rate (7) $ 0.0140 $ 0.0079
Fee Reduction Per Share (2) $ 0.11 $0.02
* On an annualized basis.
(1) Initial price to commence operations.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Unreimbursed, without fee reduction.
(4) Not annualized.
(5) Total investment return assumes dividend reinvestments and does not reflect the effect of sales charges.
(6) An estimated total return calculation that does not take into consideration reductions by the Adviser
during the periods shown.
(7) Per portfolio share traded. Required for fiscal years that began September 1, 1995, or later.
(8) Effective October 31, 1996 the fiscal period end changed from August 31 to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1996
- ------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Global Marketplace Fund
on October 31, 1996. It's divided into two main categories: common stock and short-term investments.
The common stocks are further broken down by industry groups. Under each industry group is a list of
stocks owned by the Fund. 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
Advertising (5.96%)
Catalina Marketing Corp. * 17,000 $ 864,875
Lamar Advertising Co. (Class A) * 27,000 729,000
Outdoor Systems, Inc. * 17,500 774,375
Universal Outdoor Holdings, Inc. * 25,000 725,000
------------
3,093,250
------------
Automobile / Trucks (1.14%)
Cross-Continent Auto Retailers, Inc. * 20,000 512,500
United Auto Group, Inc. * 2,300 79,063
------------
591,563
------------
Business Services (1.06%)
APAC Teleservices, Inc. * 12,000 550,500
------------
Computer (3.06%)
HNC Software, Inc. * 18,000 562,500
JDA Software Group, Inc. * 27,200 924,800
Midway Games, Inc. * 5,100 102,000
------------
1,589,300
------------
Cosmetics & Personal Care (1.57%)
Avon Products, Inc. 15,000 813,750
------------
Electronics (1.24%)
Ultrak, Inc. * 25,000 643,750
------------
Finance (2.11%)
Medallion Financial Corp. * 36,000 499,500
PMT Services, Inc. * 30,000 596,250
------------
1,095,750
------------
Leisure (10.92%)
Bandai Co., Ltd. (Japan) 16,000 462,342
Dover Downs Entertainment, Inc. * 16,000 322,000
Family Golf Centers, Inc.* 30,000 877,500
Gargoyles, Inc.* 15,000 195,000
Grand Optical Photoservice SA (France) 6,000 871,980
HFS, Inc. * 9,000 659,250
Oakley, Inc. * 30,000 446,250
Premier Parks Inc. * 9,900 309,375
Regal Cinemas, Inc. * 30,000 768,750
Silicon Gaming, Inc. * 54,000 756,000
------------
5,668,447
------------
Medical (0.97%)
CNS, Inc. * 30,000 502,500
------------
Paper & Paper Products (1.08%)
American Pad & Paper Co. * 30,000 562,500
------------
Pollution Control - Services (0.72%)
Republic Industries, Inc. * 12,000 372,000
------------
Real Estate Operations (1.32%)
Central Parking Corp. 19,800 685,575
------------
Retail - Apparel / Shoe Group (9.91%)
AnnTaylor Stores Corp. * 40,000 725,000
Footstar, Inc. * 3,743 82,339
Giordano International Ltd. (Hong Kong) 600,000 605,261
Gucci Group, NV (Netherlands) 9,000 621,000
Joyce Boutique Holdings Ltd. (Hong Kong) 794,000 195,106
Loehmann's Holdings, Inc. * 12,500 329,688
Melville Corp. 13,000 484,250
Men's Wearhouse, Inc. (The) * 34,000 697,000
Nike, Inc. (Class B) 6,000 353,250
Stage Stores, Inc. * 25,000 456,250
Vans, Inc. * 36,000 594,000
------------
5,143,144
------------
Retail - Department Stores (6.20%)
Kohl's Corp. * 25,000 900,000
Neiman Marcus Group, Inc. (The) * 29,200 952,650
Oasis Stores PLC (United Kingdom) 90,000 539,063
Saks Holdings, Inc. * 23,700 829,500
------------
3,221,213
------------
Retail - Drug Stores (1.44%)
Eckerd Corp. * 27,000 749,250
------------
Retail - Mail Order / Direct (3.01%)
CUC International, Inc. * 26,625 652,312
Global DirectMail Corp. * 9,900 487,575
Seattle Filmworks, Inc. * 22,200 424,575
------------
1,564,462
------------
Retail - Misc./Diversified (9.03%)
Burton Group PLC (United Kingdom) 268,000 652,116
Cost Plus, Inc. * 32,000 560,000
Hibbett Sporting Goods, Inc. * 21,300 436,650
Hot Topic Inc. * 22,500 523,125
Next, PLC (United Kingdom) 60,000 544,922
PETsMART, Inc. * 28,000 742,000
Ryohin Keikaku Co., Ltd. (Japan) 10,000 802,775
Urban Outfitters, Inc. * 28,000 427,000
------------
4,688,588
------------
Retail - Restaurants (7.38%)
Landry's Seafood Restaurants, Inc. * 23,000 454,250
Papa John's International, Inc. * 13,550 674,113
PizzaExpress PLC (United Kingdom) 100,000 834,961
PJ America, Inc. * 20,000 320,000
Rainforest Cafe, Inc. * 18,300 594,750
Starbucks Corp. * 10,000 325,000
Wetherspoon (J.D.) PLC
(United Kingdom) 32,687 630,438
------------
3,833,512
------------
Retail - Supermarkets (8.57%)
Albertson's, Inc. 15,000 515,625
Blue Square-Israel Ltd., American
Depositary Receipt, ADR (Israel) * 45,000 708,750
Carrefour SA (France) 1,490 826,822
Disco S.A. ADR (Argentina) * 30,000 675,000
Quality Food Centers, Inc. 25,000 912,500
Santa Isabel S.A. ADR (Chile) 15,000 421,875
Vons Co., Inc. (The) * 7,000 387,625
------------
4,448,197
------------
Retail / Wholesale - Building Products (4.12%)
Castorama Dubois Investissements
SA (France) 2,456 420,342
Central Garden & Pet Co. * 23,000 540,500
Home Centers (DIY) Ltd. (Israel) * 60,000 300,000
Home Depot, Inc. 16,000 876,000
------------
2,136,842
------------
Retail / Wholesale - Computers (1.96%)
CompUSA, Inc.* 22,000 1,017,500
------------
Retail / Wholesale - Food (0.04%)
Wild Oats Markets, Inc. * 1,000 21,250
------------
Retail / Wholesale - Jewelry (2.07%)
Marks Bros. Jewelers, Inc. * 30,000 667,500
Zale Corp. * 21,000 406,875
------------
1,074,375
------------
Schools / Education (1.33%)
Apollo Group, Inc. (Class A) * 25,650 692,550
------------
Telecommunications (0.36%)
RMH Teleservices, Inc. * 25,700 186,325
------------
Textiles (7.80%)
Chaifa Holdings Ltd. (Hong Kong) 2,420,090 727,698
Cutter & Buck, Inc. * 57,500 603,750
First Sign International Holdings Ltd.
(Hong Kong) 2,400,000 814,775
Glorious Sun Enterprises (Hong Kong) * 1,200,000 554,823
North Face, Inc. (The)* 28,000 563,500
Tommy Hilfiger Corp.* 15,100 785,200
------------
4,049,746
------------
Tobacco (0.98%)
Consolidated Cigar Holdings Inc. * 18,600 506,850
------------
TOTAL COMMON STOCK
(Cost $46,988,920) (95.35%) $ 49,502,689
===== ============
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- --------- ------------- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase
Agreement (1.61%)
Investment in a joint
repurchase agreement
transaction with
SBC Capital Markets,
Inc. -Dated 10-31-96,
due 11-01-96 (secured
by US Treasury Bonds,
7.25% due 5-15-16,
and 6.25% due 8-15-23)
Note A 5.54% $ 835 $ 835,000
------------
TOTAL SHORT-TERM INVESTMENTS 1.61% 835,000
-------- ------------
TOTAL INVESTMENTS 96.96% $ 50,337,689
======== ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Country Diversification (Unaudited)
- ---------------------------------------------------------------------------------------------
The concentration of investments by industry group for individual securities held by the
Fund is shown in the schedule of investments. In addition, the concentration of investments
can be aggregated by the countries in which the Fund invests. The table below shows the
percentage of the Fund's investments at October 31, 1996 assigned to the various countries.
MARKET VALUE
OF SECURITIES AS
A PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- ------------------
<S> <C>
Argentina 1.30
Chile 0.81
France 4.08
Hong Kong 5.58
Israel 1.94
Japan 2.44
Netherlands 1.20
United Kingdom 6.17
United States 73.44
-----
96.96%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of
1940. The Trust consists of three series: John Hancock Global
Marketplace Fund (the "Fund"), John Hancock Pacific Basin Equities
Fund and John Hancock Global Rx Fund. Prior to December 11, 1995,
the Fund was known as John Hancock Global Retail Fund. On May 21,
1996, the Board of Trustees voted to change the fiscal period end
from August 31 to October 31. This change is effective October 31,
1996. The other two series of the Trust are reported in separate
financial statements. The investment objective of the Fund is to
achieve long-term capital appreciation through investment primarily
in foreign and U.S. stocks of companies that merchandise goods and
services to consumers or to consumer companies.
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. On January 22, 1996, Class B shares of
beneficial interest were sold to commence class activity. 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 sources or, at fair value as determined in good
faith in accordance with procedures approved by the Trustees.
Securities traded on NASDAQ are valued at last available bid price.
Short-term debt investments maturing within 60 days or less are
valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign Currency Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with
John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, may participate in a
joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more 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 intends to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders. Therefore, no federal income tax provision is
required. For Federal income tax purposes, net currency exchange
gains and losses from sales of foreign debt securities may be
treated as ordinary income even though such items are gains and
losses for accounting purposes. For federal income tax purposes, the
Fund has $2,061,437 of capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized
capital gains. To the extent such carryforwards are used by the
Fund, no capital gain distributions will be made. The carryforwards
expire as follows: October 31, 2003 -- $849, and October 31, 2004 --
$2,060,588.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date, or, in the case of
some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not
identifiable to a specific fund are allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the funds.
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 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.
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 amount of assets, liabilities, revenues, and expenses of
the Fund. Actual results could differ from these estimates.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged
to the Fund's operations ratably over a five year period that
commenced with the investment operations of the Fund.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00
p.m., London time, on the date of any determination of the net asset
value of the Fund. Transactions affecting statement of operations
accounts and net realized gain/(loss) on investments are translated
at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of foreign currency, currency gains or losses realized between
the trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked-to-market
daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the
determination of the Fund's daily net assets. The Fund records
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may
arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative
to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets
and Liabilities. The Fund may also purchase and sell forward
contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no
market risk other than the offset by the currency amount of the
underlying transaction.
There were no open forward foreign currency contracts at October 31,
1996.
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 is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin", equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments,
known as "variation margin", to and from the broker are made on a
daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this
"mark to market", are recorded by the Fund as unrealized gains or
losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility
that there may be an illiquid market and/or that a change in the
value of the contracts may not correlate with changes in the value
of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of
futures contracts.
At October 31, 1996, there were no open positions in financial
futures contracts.
OPTIONS Listed options are valued at the last quoted sales price on
the exchange on which they are primarily traded. Over-the-counter
options are valued at the mean between the last bid and asked
prices. Upon the writing of a call or put option, an amount equal to
the premium received by the Fund is included in the Statement of
Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect
the current market value of the written option.
The Fund may use options contracts to manage its exposure to the
stock market. Writing puts and buying calls tend to increase the
Fund's exposure to the underlying instrument and buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options 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
reflects the maximum exposure of the Fund in these contracts, but
the actual exposure will be limited to the change in value of the
contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with
a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk
in highly unusual market conditions. To minimize credit risk and
liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or
credit risk may involve amounts in excess of those reflected in the
Fund's period-end Statement of Assets and Liabilities.
There were no written option transactions for the period ended
October 31, 1996.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of
the first $250,000,000 of the Fund's average daily net asset value
and (b) 0.70% of the Fund's average daily net asset value in excess
of $250,000,000.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess, and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000, and 1.5% of the remaining average daily net asset
value.
The Adviser has agreed to limit Fund expenses, including the
management fee (but not including the transfer agent fee and the
12b-1 fee), to 0.90% of the Fund's daily net assets. Accordingly,
the reduction in the Adviser's fee amounted to $46,022 for the
period ended October 31, 1996. The Adviser reserves the right to
terminate this limit in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. For the
period ended October 31, 1996, net sales charges received with
regard to Class A shares amounted to $128,244. Out of this amount,
$19,376 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $82,288 was paid as sales
commissions to sales personnel of unrelated broker-dealers and
$26,580 was paid as sales commissions to personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are
broker dealers. The Adviser's indirect parent, John Hancock Mutual
Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
declining rates beginning at 5.0% of the lesser of the current
market value at the time of redemption or the original purchase cost
of the shares being redeemed. Proceeds from the CDSC are paid to JH
Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended October 31,
1996, the contingent deferred sales charges paid to JH Funds
amounted to $24.
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 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 these payments may be service fees as
defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair
Practice, curtailment of a portion of the Fund's 12b-1 payments
could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services, Corp. ("Investor Services"), a wholly-owned subsidiary of
The Berkeley Financial Group. The Fund pays a fee to Investors
Services fee based on the number of shareholder accounts and
certain-out-pocket expenses.
On March 5, 1996 the Board of Trustees approved retroactively to
January 1, 1996, and agreement with the Adviser to perform necessary
tax and financial management services for the Fund. The compensation
for 1996 is estimated to be at an annual rate of 0.01875% of the
average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors 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. Effective with the fees
paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover
its liability with regard to the deferred compensation. Investments
to cover the Fund's deferred compensation liability are recorded on
the Fund's books as an other asset. The deferred compensation
liability and the related other asset are marked to market on a
periodic basis to reflect any income earned by the investment as
well as any unrealized gain or losses. At October 31, 1996, the
Fund's investments to cover the deferred compensation liability had
unrealized appreciation of $1.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-
term securities, during the period ended October 31, 1996,
aggregated $16,471,399 and $5,390,349 respectively. There were no
purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 (including the
joint repurchase agreement) for federal income tax purposes was
$47,823,920. Gross unrealized appreciation and depreciation of
investments aggregated $4,931,115 and $2,417,346, respectively,
resulting in net unrealized appreciation of $2,513,769.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized loss on
investments of $9,678, a decrease in accumulated net investment loss
of $88,237 and a decrease in capital paid-in of $97,915. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
1996. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to 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 in the
financial highlights excludes these adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Marketplace Fund
and the Trustees of John Hancock World Fund
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of John Hancock Global Marketplace Fund (the
"Fund") (a series of John Hancock World Fund) at October 31, 1996,
and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and the significant estimates made by management,
and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities
at October 31, 1996 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1996
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
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triangle in upper left, a circle in upper right, a cube in
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Permit No. 75
This report is for the information of shareholders of the John
Hancock Global Marketplace 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." 3000A 10/96
12/96
John Hancock Funds
Global Rx
Fund
Annual Report
October 31, 1996
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 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 & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK INVESTOR SERVICES CORPORATION
P.O. BOX 9116
BOSTON, MASSACHUSETTS 02205-9116
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
INDEPENDENT AUDITORS
PRICE WATERHOUSE LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although
it seems a long way off, the issue is serious enough that at
least one group has already studied the problem, and experts and
politicians alike have weighed in with a slew of prescriptions.
Legislative action could be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this:
in 1950, there were 16 workers paying into the Social Security
system for each retiree collecting benefits. Today, there are three
workers for each retiree and by 2019 there will be two. Starting
then, the Social Security Administration estimates that the amount
paid out in Social Security benefits will start to be greater than
the amount collected in Social Security taxes. Compounding the issue
is the fact that people are retiring earlier and living longer.
The state of the system has already left many people, especially
younger and middle-aged workers, feeling insecure about Social
Security. A recent survey by the Employee Benefits Research
Institute (EBRI) found that 79% of current workers polled had little
confidence in the ability of Social Security to maintain the same
level of benefits as those received by today's retirees. Instead,
they said they expect to use their own savings or employer-sponsored
pensions for their retirement. Yet, remarkably, another EBRI survey
revealed that only slightly more than half of America's current
workers are saving money for retirement. Fewer than half own IRAs or
participate in employer-sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is
clear. Americans need to rely on themselves for accumulating the
bulk of their retirement savings. There's no law that says you
should have to reduce your standard of living once you stop working.
So we encourage you to save all that you can now, so you can live
the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY LINDA MILLER, CFA, PORTFOLIO MANAGER
John Hancock
Global Rx Fund
Health-care stocks continue to deliver
despite rising interest rates and political concerns
Recently, the Fund's fiscal year end changed from August to October.
What follows is a discussion of the Fund's performance for the 12
months ended October 31, 1996.
Overall, the environment for health-care stocks remained positive
during the past year. The U.S. Food and Drug Administration kept up
its accelerated pace of approving new and innovative drugs and
products, and fears of government-mandated draconian changes in the
U.S. health-care system faded. Beyond that, the demand for health-
care services remained steadfast, bolstered by new technologies
offering solutions to unmet medical needs, by increased demands for
health-care services in emerging markets and by an aging population
in the Western world.
A 2 1/2 " x 3 1/2" photo of Fund management team at bottom right.
Caption reads: "Linda Miller (seated) and Fund management team members
Anurag Pandit (l) and Ben Hock (r)".
"... the environment
for health-care
stocks
remained
positive
during the
past year."
But it wasn't a completely pain-free period and some health-care
sectors experienced more volatility than others over the last 12
months. The causes included cutbacks in government-funded health-
care expenditures in Europe and Japan, heightened competition,
continued cost concerns and unfavorable currency trends for many
U.S.-based health-care companies. In the United States, signs of a
stronger-growing economy sent investors away from smaller growth-
oriented stocks to large-capitalization holdings. Rising interest
rates and fears of inflation also sent many technology stocks --
including health-care related ones -- into a tailspin in July and
August. And finally, the sector was hurt in October by some
disappointing third-quarter earnings reports and heightened
political concerns about the elections at hand and the potential
repercussions for health-care reform were control of Congress to
change hands.
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) HEALTHSOUTH 2.6% 2) Cardinal
Health 2.5% 3) Pfizer 2.4% 4)Eli Lilly Co. 2.3% 5) Omnicare 2.2%. A
footnote below reads "As a percentage of net assets on October 31,
1996."
"We've
tripled
our stake
in drug
stocks..."
Service companies: under the weather
In this mixed environment John Hancock Global Rx Fund had a good
absolute result, although our relative performance wasn't as good as
we would have hoped. For the 12 months ended October 31, 1996, the
Fund's Class A and Class B shares posted total returns of 13.23% and
12.45% respectively, at net asset value. By comparison, the average
health-care/biotechnology fund returned 19.12% for the same period,
according to Lipper Analytical Services.1 Please see pages six and
seven for longer-term performance information. Even though we have
spent the last year rebalancing the portfolio to increase the Fund's
exposure to drug and medical-device companies, we had less exposure
than our peers. Stock prices for these two groups have gotten pricey
as they've continued to perform well, so we've been adding them
admittedly slowly. That cost us some performance because both of
these sectors performed very well during the period. What's more,
our relatively high cash balances, which stemmed from the strong
inflow of funds, moderated overall returns.
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 Sandoz AG followed by an up arrow and the phrase "Merger
announcement boosts stock." The second listing is Medtronic followed by
an up arrow and the phrase "New products enhance medical device
franchise." The third listing is HCIA followed by a down arrow and the
phrase "Disappointing third quarter results." Footnote below reads: "See
Schedule of Investments. Investment holdings are subject to change."
In contrast, the service sector underperformed during the period.
This area includes cost-efficient providers of medical services,
like physician practice management companies and the technology-
based health information systems companies. These stocks were under
pressure during the July tech stock sell-off. That cost us, too,
because some of our larger holdings are in these sectors. Some of
them suffered not because their fundamentals changed, but simply
because they were dragged down with the entire group. PhyCor, a
solid physician practice management company, is a good example. Its
strategy of helping doctors improve efficiency, often through
consolidations, is working smoothly and earnings are on target. But
problems among other management companies rippled throughout the
sector, hurting PhyCor's stock. Another is HCIA, a technology
company providing practitioners with huge medical and analytical
databases. Its stock, which we sold during the period, plunged 50%
after missing one quarter's earnings because of an acquisition that
took longer than expected to absorb. Overall, we have reduced our
stake in the service sector, particularly in health maintenance
organizations (HMOs), nursing homes and home healthcare-related
companies.
Investment themes
Long term, we continue to invest in companies that reflect our three
investment themes, which are the efficient delivery of health care,
new product opportunities and consolidation, an influential trend
across many industry sectors. We believe that solid companies with
strong management and leading market positions involved in these
areas stand the best chance for superior growth over time.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended October 31,
1996." The chart is scaled in increments of 5% from bottom to top, with
20% at the top and 0% at the bottom. Within the chart there are three
solid bars. The first represents the 13.23% total return for the John
Hancock Global Rx Fund: Class A. The second represents the 12.45% total
return for the John Hancock Global Rx Fund: Class B. The third
represents the 19.12% total return for the average health-
care/biotechnology fund. A footnote below reads: "Total returns for John
Hancock Global Rx Fund are at net asset value with all distributions
reinvested. The average health-care/biotechnology fund is tracked by
Lipper Analytical Services. (1) See following two pages for historical
performance information."
We've tripled our stake in drug stocks, from 10% of the Fund's net
assets a year ago to 30% at the end of October. We continued to buy
stock in Pfizer, which has a strong new product flow, including new
cardiovascular and central nervous system drugs yet to be launched.
Some of their existing drugs have been well received and approved
for wider use, including two popular antibiotic and allergy drugs.
One recent addition is the British drug company Zeneca Group, whose
stock rose with the introduction of some new cancer-fighting drugs
and which is also viewed as an attractive takeover candidate.
Another U.K. addition is SmithKline Beecham, which has a strong
vaccine program, including one for Lyme disease. We also did well
with Sandoz, a Swiss drug company whose stock soared after its
proposed merger with Swiss counterpart Ciba Geigy was announced. On
the medical device side, we added to our position in Stryker, a
leader in orthopedics, and added Medtronic, a well-managed company
which has a strong new cardiovascular product line. We continue to
keep a long-standing position in Boston Scientific, although we've
recently taken some profits there.
Among health-care delivery companies, one of our favorites is drug
distributor Cardinal Health, which has seen its earnings rise as it
has increased the services it offers pharmacies and hospitals. It's
a well-run company playing right into our themes of efficiency and
service enhancement. It also has taken the upper hand in the
consolidation move going on in the sector. Another is Omnicare,
which provides pharmaceutical services to nursing home patients.
Prognosis
Our long-term outlook for health-care stocks remains positive.
There's still plenty of room for the U.S. health-care system to trim
its costs, which should provide opportunity for those companies
involved in the process. With the graying of America, markets
continue to grow at a rapid pace. That will keep demand for health-
care services up and prompt even more advances in products and
technology to serve them. Worldwide, as younger economies grow,
their citizens, too, will seek expanded health-care coverage. Nearer
term, the prospects will be shaped by the direction of interest
rates, the growth of the economy and the health-care rhetoric coming
out of Washington. If any combination of these factors drives
health-care stock prices lower, we'll use the opportunity to buy
shares in companies we like at better prices.
"With the
graying of
America,
markets
continue to
grow at a
rapid pace."
- -------------------------------------------------------------------
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.
International investing involves special risks such as political and
currency risks and differences in accounting standards and financial
reporting. Sector investing is subject to greater risks than the
market as a whole.
1Figures from Lipper Analytical Services 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 Global Rx Fund.
Total return is a performance measure that equals the sum of all
income and capital gains distributions, assuming reinvestment of
these distributions, and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per
share. Performance figures include the maximum applicable sales
charge of 5% for Class A shares. The effect of the maximum
contingent deferred sales charge for Class B shares (maximum 5% and
declining to 0% over six years) is included in Class B performance.
Remember that all figures represent past performance and are no
guarantee of how the Fund will perform in the future. Also, keep in
mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or
less than their original cost, depending on when you sell them.
Please see your prospectus for a discussion of the risks associated
with international investing, including currency and political risks
and differences in accounting standards and financial reporting.
CUMULATIVE TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- ---------- ----------
John Hancock Global
Rx Fund: Class A 15.58% 163.98% 163.98%(1)
John Hancock Global
Rx Fund: Class B 15.77% N/A 54.59%(2)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended September 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- ---------- ----------
John Hancock Global
Rx Fund: Class A 15.58% 21.43% 21.43%(1)
John Hancock Global
Rx Fund: Class B 15.77% N/A 18.47%(2)
Notes to Performance
(1) Class A shares started on October 1, 1991.
(2) Class B shares started on March 7, 1994.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John
Hancock Global Rx Fund would be worth on October 31, 1996, assuming
you invested on the day each class of shares started and have
reinvested all distributions. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance.
Global Rx Fund Fund
Class A shares
Line chart with the heading Global Rx 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 Global Rx Fund, before sales charge, and is equal to $25,262 as of
October 31, 1996. The second line represents the value of the
hypothetical $10,000 investment made in the Global Rx Fund , after sales
charge, on October 1, 1991 , and is equal to $23,991 as of October 31,
1996. The third line represents the Standard & Poor's 500 Stock Index
and is equal to $20,857 as of October 31, 1996.
Global Rx Fund
Class B shares
Line chart with the heading Global Rx 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 $16,155 as of
October 31, 1996. The second line represents the value of the
hypothetical $10,000 investment made in the Global Rx Fund, before sales
charge, on March 7, 1994, and is equal to $14,315 as of October 31,
1996. The third line represents the value of the Global Rx Fund, after
sales charge, and is equal to $14,015 as of October 31, 1996.
FINANCIAL STATEMENTS
John Hancock Funds - Global Rx Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $52,924,822) $ 64,253,104
Joint repurchase agreement (cost - $11,583,000) 11,583,000
-------------
75,836,104
Cash 60
Receivable for investments sold 8,767,632
Receivable for shares sold 232,893
Interest receivable 1,782
Dividends receivable 26,711
Foreign tax receivable 726
Other assets 576
-------------
Total Assets 84,866,484
- ----------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 4,505,699
Payable for shares repurchased 9,188
Payable to John Hancock Advisers, Inc. and affiliates - Note B 141,103
Accounts payable and accrued expenses 71,188
-------------
Total Liabilities 4,727,178
- ----------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 64,929,982
Accumulated net realized gain on investments and foreign currency transactions 3,881,993
Net unrealized appreciation of investments and foreign currency transactions 11,328,424
Accumulated net investment loss ( 1,093)
-------------
Net Assets $ 80,139,306
====================================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding - unlimited
number of shares authorized with no par value, respectively)
Class A - $42,618,133/1,697,188 $25.11
====================================================================================================
Class B - $37,521,173/ 1,525,069 $24.60
====================================================================================================
Maximum Offering Price Per Share *
Class A - ($25.11 x 105.26%) $26.43
====================================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the
Fund owns, is due and owes on October 31, 1996. You'll also find the net asset value and the maximum
offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ---------------------------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 1, 1996
YEAR ENDED TO OCTOBER 31,
AUGUST 31, 1996 1996 (1)
----------------- -----------------
<S> <C> <C>
Investment Income:
Interest $ 512,036 $ 89,971
Dividends (net of foreign withholding taxes of $5,733
and $1,067, respectively) 95,414 33,675
----------- -----------
607,450 123,646
----------- -----------
Expenses:
Investment management fee - Note B 457,352 112,225
Distribution/service fee - Note B
Class A 104,576 22,721
Class B 223,104 64,545
Transfer agent fee - Note B 167,783 45,598
Registration and filing fees 58,794 12,287
Custodian fee 49,156 13,200
Advisory Board fee - Note B 32,500 5,714
Auditing fee 31,530 19,842
Printing 16,573 13,437
Financial services fee - Note B 8,407 2,630
Organization expense - Note A 8,228 675
Trustees' fees 3,401 528
Miscellaneous 1,987 200
Legal fees 1,447 862
----------- -----------
Total Expenses 1,164,838 314,464
- ------------------------------------------------------------------------------------------------------
Net Investment Loss ( 557,388) ( 190,818)
- ------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 3,587,850 294,185
Net realized gain (loss) on foreign currency transactions ( 1,045) ( 942)
Change in net unrealized appreciation/depreciation of investments 2,087,678 ( 1,233,211)
Change in net unrealized appreciation/depreciation of foreign
currency transactions 4,405 ( 4,408)
----------- -----------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions 5,678,888 ( 944,376)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 5,121,500 ($ 1,135,194)
======================================================================================================
(1) Effective October 31, 1996, the fiscal period changed from August 31 to October 31.
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in
operating the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
-------------------------------- SEPTEMBER 1, 1996
1995 1996 TO OCTOBER 31, 1996 (1)
-------------------------------- -----------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 506,007) ($ 557,388) ($ 190,818)
Net realized gain on investments sold and
foreign currency transactions 1,224,533 3,586,805 293,243
Change in net unrealized appreciation/depreciation
of investments and foreign currency transactions 5,931,154 2,092,083 ( 1,237,619)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations 6,649,680 5,121,500 ( 1,135,194)
------------ ------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments
sold and foreign currency transactions
Class A -- (none, $0.1437, and none per share,
respectively) -- ( 175,093) --
Class B -- (none, $0.1437, and none per share,
respectively) -- ( 80,096) --
------------ ------------ ------------
Total Distributions to Shareholders -- ( 255,189) --
------------ ------------ ------------
From Fund Share Transactions -- Net* 4,364,193 43,402,980 2,277,728
------------ ------------ ------------
Net Assets:
Beginning of period 19,713,608 30,727,481 78,996,772
------------ ------------ ------------
End of period (including accumulated net investment
loss of none, $1,045 and $1,093, respectively) $ 30,727,481 $ 78,996,772 $ 80,139,306
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM
--------------------------------------------------- SEPTEMBER 1, 1996
1995 1996 TO OCTOBER 31, 1996 (1)
-------------------------- ------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 517,942 $ 9,800,086 2,278,174 $57,180,069 608,177 $16,260,917
Shares issued to shareholders in
reinvestment of distributions -- -- 7,174 170,226 -- --
------- ----------- --------- ----------- ------- -----------
517,942 9,800,086 2,285,348 57,350,295 608,177 16,260,917
Less shares repurchased ( 517,990) ( 9,686,022) (1,746,628) ( 43,511,318) ( 578,604) ( 15,504,567)
------- ----------- --------- ----------- ------- -----------
Net increase (decrease) ( 48) $ 114,064 538,720 $13,838,977 29,573 $ 756,350
======= =========== ========= =========== ======= ===========
CLASS B
Shares sold 451,492 $ 8,376,819 1,739,644 $43,690,955 163,866 $ 4,526,283
Shares issued to shareholders in reinvestment
of distributions -- -- 3,211 75,464 -- --
------- ----------- --------- ----------- ------- -----------
451,492 8,376,819 1,742,855 43,766,419 163,866 4,526,283
Less shares repurchased ( 219,936) ( 4,126,690) ( 572,508) ( 14,202,416) ( 105,746) ( 3,004,905)
------- ----------- --------- ----------- ------- -----------
Net increase 231,556 $ 4,250,129 1,170,347 $29,564,003 58,120 $ 1,521,378
======= =========== ========= =========== ======= ===========
(1) Effective October 31, 1996, the fiscal period changed from August 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 and foreign currency gains and losses, distributions paid
to shareholders, if any, 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>
<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 as follows:
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
----------------------------------------------------------- SEPTEMBER 1, 1996
1992(1) 1993 1994 1995 1996 TO OCTOBER 31, 1996 (9)
------- ------- -------- ------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 10.00 $ 13.34 $ 13.38 $ 16.51 $ 21.61 $ 25.43
------- ------- -------- ------- ------- -------
Net Investment Loss ( 0.03) ( 0.23) ( 0.32) ( 0.36)(2) ( 0.19)(2) ( 0.05)(2)
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 3.37 0.27 3.45 5.46 4.15 (0.27)
------- ------- -------- ------- ------- -------
Total from Investment Operations 3.34 0.04 3.13 5.10 3.96 (0.32)
------- ------- -------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- -- -- -- ( 0.14) --
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period $ 13.34 $ 13.38 $ 16.51 $ 21.61 $ 25.43 $ 25.11
======= ======= ======== ======= ======= =======
Total Investment Return at Net Asset
Value (3) 33.40%(4) 0.30% 23.39% 30.89% 18.39% ( 1.26%)(4)
Total Adjusted Investment Return
at Net Asset Value (3)(5) 32.11%(4) 0.04% -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $ 14,702 $15,647 $ 18,643 $24,394 $42,405 $42,618
Ratio of Expenses to Average
Net Assets 1.98%(6) 2.50% 2.55% 2.56% 1.80% 1.92%(6)
Ratio of Adjusted Expenses
to Average Net Assets (7) 3.39%(6) 2.76% -- -- -- --
Ratio of Net Investment Loss
to Average Net Assets ( 0.51%)(6) ( 1.67%) ( 2.01%) ( 1.99%) ( 0.75%) ( 1.04%)(6)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (7) ( 1.92%)(6) ( 1.93%) -- -- -- --
Portfolio Turnover Rate 48% 93% 52% 38% 68% 24%
Average Broker Commission Rate (8) N/A N/A N/A N/A $0.0181 $0.0726
Fee reduction per share $ 0.085 $ 0.035 -- -- -- --
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated:
net investment loss, gains (losses), distributions and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period. Additionally, important relationships
between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
-------------------------------------- SEPTEMBER 1, 1996
1994(1) 1995 1996 TO OCTOBER 31, 1996(9)
------- ------- ------- ----------------------
<S> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 17.29 $ 16.46 $ 21.35 $ 24.94
------- ------- ------- -------
Net Investment Loss (2) ( 0.17) ( 0.55) ( 0.34) ( 0.08)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ( 0.66) 5.44 4.07 ( 0.26)
------- ------- ------- -------
Total from Investment Operations ( 0.83) 4.89 3.73 ( 0.34)
------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain
on Investments Sold and Foreign
Currency Transactions -- -- ( 0.14) --
------- ------- ------- -------
Net Asset Value, End of Period $ 16.46 $ 21.35 $24.94 $24.60
======= ======= ======= =======
Total Investment Return at Net
Asset Value (3) ( 4.80%)(4) 29.71% 17.53% ( 1.36%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 1,071 $ 6,333 $36,591 $37,521
Ratio of Expenses to Average Net Assets 3.34%(6) 3.45% 2.42% 2.62%(6)
Ratio of Net Investment Loss
to Average Net Assets ( 2.65%)(6) ( 2.91%) ( 1.33%) ( 1.74%)(6)
Portfolio Turnover Rate 52% 38% 68% 24%
Average Broker Commission Rate (8) N/A N/A $0.0181 $0.0726
(1) Class A and Class B shares commenced operations on October 1, 1991 and March 7, 1994, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into consideration fee reductions by the adviser
during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(9) Effective October 31, 1996, the fiscal period changed from August 31 to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 1996
- -------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Global Rx Fund
on October 31, 1996. 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> <C>
COMMON STOCKS
Drugs - Biotechnology (6.61%)
Affymetrix, Inc.* 33,000 $ 602,250
Amgen, Inc.* 25,000 1,531,250
ArQule, Inc.* 25,000 300,000
Biogen, Inc.* 5,000 372,500
Ligand Pharmaceuticals (Class B)* 5,000 61,875
Myriad Genetics, Inc.* 5,000 123,750
PathoGenesis Corp.* 27,000 560,250
Serologicals Corp.* 55,000 1,595,000
Transkaryotic Therapies, Inc.* 10,000 146,250
-----------
5,293,125
-----------
Drugs - Generic (1.98%)
Dura Pharmaceuticals, Inc.* 46,000 1,587,000
-----------
Drugs - Major (21.32%)
Abbott Laboratories 5,000 253,125
American Home Products Corp. 22,000 1,347,500
Bristol-Myers Squibb Co. 5,000 528,750
Johnson & Johnson 35,000 1,723,750
Lilly, (Eli) & Co. 26,000 1,833,000
Merck & Co., Inc. 20,000 1,482,500
Pfizer, Inc. 23,000 1,903,250
Roche Holding AG (Switzerland) 100 756,329
Sandoz AG American Depositary
Receipt (ADR) (Switzerland) 28,000 1,624,000
Schering-Plough Corp. 10,000 640,000
SmithKline Beecham PLC (ADR)
(United Kingdom) 27,000 1,690,875
Warner-Lambert Co. 25,000 1,590,625
Zeneca Group PLC (ADR)
(United Kingdom) 21,000 1,711,500
-----------
17,085,204
-----------
Drugs & Sundries -- Wholesale (3.77%)
AmeriSource Health Corp. (Class A)* 25,000 1,059,375
Cardinal Health, Inc. 25,000 1,962,500
-----------
3,021,875
-----------
Healthcare - Alternate Site (8.55%)
Assisted Living Concepts Inc.* 54,000 877,500
HEALTHSOUTH Corp.* 55,000 2,062,500
National Surgery Centers, Inc.* 30,000 780,000
Renal Treatment Centers, Inc.* 37,500 1,003,125
Sterling House Corp.* 10,000 126,250
Total Renal Care Holdings, Inc.* 35,000 1,365,000
Vivra, Inc.* 20,000 637,500
-----------
6,851,875
-----------
Healthcare - Management (4.38%)
CRA Managed Care, Inc.* 32,000 1,608,000
OccuSystems, Inc.* 17,000 465,375
PhyCor, Inc.* 47,000 1,439,375
-----------
3,512,750
-----------
Healthcare - Software/Services (9.17%)
Cohr, Inc.* 18,000 441,000
HBO & Co. 29,000 1,740,000
Health Management Systems, Inc.* 33,000 767,250
HPR Inc.* 80,000 1,100,000
MDL Information Systems, Inc.* 27,700 415,500
Parexel International Corp.* 35,000 1,706,250
Quintiles Transnational Corp.* 18,000 1,179,000
-----------
7,349,000
-----------
Healthcare - Supplies (5.93%)
NCS HealthCare, Inc. (Class A)* 40,000 1,205,000
Omnicare, Inc. 65,000 1,771,250
Schein (Henry), Inc.* 40,000 1,585,000
Suburban Ostomy Supply Co., Inc.* 16,000 194,000
-----------
4,755,250
-----------
Hospital Management (2.66%)
EmCare Holdings Inc.* 15,000 367,500
Health Management Associates, Inc.
(Class A) * 80,000 1,760,000
-----------
2,127,500
-----------
Medical Devices and Products (14.89%)
Boston Scientific Corp.* 18,000 978,750
CN Biosciences, Inc.* 25,000 378,125
Dionex Corp.* 5,000 191,250
Esaote S.p.A.(ADR) (Italy)* (R) 10,000 333,400
ESC Medical Systems Ltd. (Israel)* 29,000 797,500
Gargoyles, Inc.* 10,000 130,000
IDEXX Laboratories, Inc.* 41,000 1,599,000
Medtronic, Inc. 26,000 1,673,750
Molecular Devices Corp.* 35,000 485,625
Nitinol Medical Technologies, Inc.* 26,000 273,000
Physio-Control International Corp.* 38,750 755,625
Sigma-Aldrich Corp. 10,000 585,000
Stryker Corp. 51,000 1,517,250
US Surgical Corp. 20,000 837,500
Waters Corp.* 45,000 1,395,000
-----------
11,930,775
-----------
Nursing Homes (0.92%)
Health Care and Retirement Corp.* 30,000 738,750
-----------
TOTAL COMMON STOCKS
(Cost $52,924,822) (80.18%) 64,253,104
----- -----------
INTEREST PAR VALUE MARKET
RATE (000'S OMITTED) VALUE
-------- --------------- -------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (14.45%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets Inc.
Dated 10-31-96, due
11-01-96 (secured by
U.S. Treasury Bonds, 7.25%
due 5-15-16; and 6.25%,
due 08-15-23) - Note A 5.540% $11,583 $11,583,000
-----------
TOTAL SHORT-TERM INVESTMENTS ( 14.45%) 11,583,000
----- -----------
TOTAL INVESTMENTS ( 94.63%) $75,836,104
===== ===========
* Non-income producing security.
(R) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $333,400 as of October 31, 1996.
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 Global Rx Fund invests primarily in equity securities of issuers in the health care industry in the
United States and abroad. The concentration of investments by industry category for individual securities
held by the Fund is shown in the schedule of investments.
In addition, concentration of investments can be aggregated by various countries. The table below shows the
percentage of the Fund's investment at October 31, 1996 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- -----------------
<S> <C>
Israel 0.99%
Italy 0.42
Switzerland 2.97
United Kingdom 4.25
United States 86.00
-----
TOTAL INVESTMENTS 94.63%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of
1940. The Trust consists of three series: John Hancock Global Rx
Fund (the "Fund"), John Hancock Pacific Basin Equities Fund and John
Hancock Global Marketplace Fund. On May 21, 1996, the Board of
Trustees voted to change the fiscal period end from August 31 to
October 31. This change was effective October 31, 1996. The other
two series of the Trust are reported in separate financial
statements. The investment objective of the Fund is to achieve long-
term growth of capital by investing primarily in stocks of foreign
and U.S. health care companies.
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.
Securities traded on NASDAQ are valued at last available bid price.
Short-term debt investments maturing within 60 days are valued at
amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with
John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, may participate in a
joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more 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.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date, or, in the case of
some foreign securities, on the date thereafter when the Fund is
made aware of the dividend. Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to
foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not
identifiable to a specific fund are allocated in such a manner as
deemed equitable, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged
to the Fund's operations ratably over a five-year period that
commenced with the investment operations of the Fund.
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 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.
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.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00
p.m., London time, on the date of any determination of the net asset
value of the Fund. Transactions affecting statement of operations
accounts and net realized gain/(loss) on investments are translated
at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Reported net realized
foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets
and liabilities other than investments in securities at fiscal year
end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked-to-market
daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the
determination of the Fund's daily net assets. The Fund records
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may
arise upon entering these contracts from potential inability of
counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative
to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets
and Liabilities. The Fund may also purchase and sell forward
contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no
market risk other than the offset by the currency amount of the
underlying transaction.
There were no open forward foreign currency contracts at October 31,
1996.
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 is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin", equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the
futures contract is valued at the official settlement price of the
board of trade or U.S. 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", are recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility
that there may be an illiquid market and/or that a change in the
value of the contracts may not correlate with changes in the value
of the underlying securities.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of
futures contracts.
At October 31, 1996, there were no open positions in financial
futures contracts.
OPTIONS Listed options are valued at the last quoted sales price on
the exchange on which they are primarily traded. Over-the-counter
options are valued at the mean between the last bid and asked
prices. Upon the writing of a call or put option, an amount equal to
the premium received by the Fund is included in the Statement of
Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect
the current market value of the written option.
The Fund may use options contracts to manage its exposure to the
stock market. Writing puts and buying calls tend to increase the
Fund's exposure to the underlying instrument and buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options 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
reflects the maximum exposure of the Fund in these contracts, but
the actual exposure will be limited to the change in value of the
contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms, or if the Fund is unable to offset a contract with
a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk
in highly unusual market conditions. To minimize credit risk and
liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or
credit risk may involve amounts in excess of those reflected in the
Fund's period-end Statement of Assets and Liabilities.
There were no written option transactions for the period ended
October 31, 1996.
NOTE B ---
MANAGEMENT FEE, ADMINISTRATIVE SERVICES
AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of
the first $200,000,000 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 $200,000,000.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess, and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000, and 1.5% of the remaining average daily net asset
value.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. For the
period ended October 31, 1996, net sales charges received with
regard to Class A shares amounted to $105,287. Out of this amount,
$36,747 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $48,489 was paid as sales commissions
to sales personnel of unrelated broker-dealers and $20,051 was paid as
sales commissions to personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and
Sutro & Co., Inc. ("Sutro"), all of which are broker dealers. The
Adviser's indirect parent, John Hancock Mutual Life Insurance Company,
is the indirect sole shareholder of Distributors and John Hancock
Freedom Securities Corporation and its subsidiaries, which include
Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
declining rates beginning at 5.0% of the lesser of the current
market value at the time of redemption or the original purchase cost
of the shares being redeemed. Proceeds from the CDSC are paid to JH
Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended October 31,
1996, contingent deferred sales charges paid to JH Funds amounted to
$24,381.
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 pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments to JH Funds at an annual rate not to
exceed 0.30% of Class A average daily net assets and 1.00% of Class
B average daily net assets to reimburse JH Funds for its
distribution and service costs. Up to a maximum of 0.25% of such
payments may be service fees as defined by the amended Rules of Fair
Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the
Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned
subsidiary of The Berkeley Financial Group. The Fund pays transfer
agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
On March 5, 1996 the Board of Trustees approved retroactively to
January 1, 1996, an agreement with the Adviser to perform necessary
tax and financial management services for the Fund. The compensation
for 1996 is estimated to be at an annual rate of 0.01875% of the
average net assets of the Fund.
The Fund has an independent advisory board composed of scientific
and medical experts who provide the investment officers of the Fund
with advice and consultation on health care developments, for which
the Fund pays the advisory board a fee.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors 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. Effective with the fees
paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover
its liability for the deferred compensation. Investments to cover
the Fund's deferred compensation liability are recorded on the
Fund's books as an other asset. The deferred compensation liability
and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the
investment as well as any unrealized gains or losses. At October 31,
1996, the Fund's investments to cover the deferred compensation
liability had unrealized appreciation of $86.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-
term securities, during the period ended October 31, 1996,
aggregated $17,137,891 and $21,107,143 respectively. There were no
purchases or sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1996.
The cost of investments owned at October 31, 1996 (including the
joint repurchase agreement) for federal income tax purposes was
$64,507,822. Gross unrealized appreciation and depreciation of
investments aggregated $12,154,080 and $825,798 respectively,
resulting in net unrealized appreciation of $11,328,282.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the period ended October 31, 1996, the Fund has reclassified
amounts to reflect an increase in accumulated net realized gain on
investments of $942, a decrease in accumulated net investment loss
of $190,770 and a decrease in capital paid-in of $191,712. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
1996. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to the treatment
of net operating losses in the computation of distributable income
and capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per
share in the financial highlights excludes these adjustments.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Rx Fund
and the Trustees of John Hancock World Fund
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of John Hancock Global Rx (the "Fund") (a series
of John Hancock World Fund) at October 31, 1996, and the results of
its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31,
1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations
from brokers were not received, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is
furnished with respect to the distributions of the Fund during the
fiscal year ended October 31, 1996.
The Fund has not paid any distributions of ordinary income dividends
or net long-term capital gains during the fiscal year ended October
31, 1996. It is anticipated that there will be a distribution from
sales of securities to shareholders of record on December 23, 1996
and payable December 30, 1996. Shareholders will receive a 1996 U.S.
Treasury Department Form 1099-DIV in January 1997 representing their
proportionate share.
None of the distributions qualify for the dividends received
deduction available to corporations.
NOTES
John Hancock Funds - Global Rx Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Global Rx Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
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This report is for the information of shareholders of the John
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