John Hancock Funds
Global
Marketplace
Fund
SEMI-ANNUAL REPORT
April 30, 1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market in 1997 has given
investors its starkest reminder in a while of one of investing's basic tenets:
markets move down as well as up. It's understandable if investors had lost
sight of that fact. The bull market that began six years ago has given
investors annual double-digit returns and more modest price declines than
usual. And in the two years encompassing 1995 and 1996, the S&P 500 Index
gained more than 50%. This Pollyanna environment has tracked along with a
sustained economic recovery, now in its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder about this bull market. Since reaching
new highs in early March, the Dow Jones Industrial Average tumbled by more
than 7% at the end of March and wiped out nearly all it had gained since the
start of the year. It was the worst decline that the market had seen since
1990. In early April, the Dow was down by 9.8%, within shouting distance of a
10% correction. By the end of the month, it had bounced back into record
territory again.
As the market continues to fret over interest rates and inflation, investors
should be prepared for more volatility. It also makes sense to do something
we've always advocated: set realistic expectations. Keep in mind that the
stock market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over the
last 10 years. Remember that the kind of market volatility we've seen lately
is more like the way the market really works. Fluctuations go with the
territory. And market corrections can be healthy, serving to bring inflated
stock prices down to more reasonable levels, thereby reducing some of the
market's risk.
Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. Make sure
that your investment strategies reflect your individual time horizons,
objectives and risk tolerance, and that they are based upon your needs.
Despite turbulence, one thing remains constant. A well-constructed plan and a
cool head can be the best tools for reaching your financial goals.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGER
John Hancock
Global Marketplace Fund
Retailers struggling to attract consumers;
Fund shifting focus toward more resilient companies
In a market that overflows with shopping options, many retailers find
themselves hard-pressed to attract consumers. In order to distinguish
themselves these days, companies involved in the manufacture or distribution
of goods and services must dominate their category, offer unique goods or
services, or occupy a unique niche. Many times, the companies that best fit
the bill are small companies with aggressive- growth prospects. Since stock
prices generally follow earnings, we believe that fast-growing retail
companies tend to offer the best upside over the long term. And although
adhering to those criteria generally has rewarded us in the past, it did not
do so during the past six months.
Why? Aggressive-growth stocks of all kinds fell out of favor. While investors'
seemingly insatiable appetite for large-company stocks buoyed the big-
capitalization Dow Jones Industrial Average to consecutive new records,
aggressive- growth stocks went into a tailspin as investors were increasingly
less willing to pay the high prices for them. Rather, they tended to migrate
to large, blue-chip company stocks that they felt offered more stable and
predictable earnings at a lower price. For the six-month period ended April
30, 1997, the Dow Jones Industrials rose 17.42% while the Russell 2000 Index
- -- a broad measure of small-company stock performance -- posted a slight gain
of 1.61%. Although John Hancock Global Marketplace Fund has no market
capitalization restriction, our bias toward fast-growing growth stocks hurt us
in an environment that favored value-oriented stocks.
"Aggressive-
growth
stocks of all
kinds fell out
of favor."
A 2 1/4" x 3 1/2" photo of Fund management team at bottom right. Caption
reads: "Bernice Behar ( r ) and Fund management team members Robert Hallisey
(l) and William Maffie (center)."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) CVS Corp. 3.3% 2) Carrefour 3.0%
3) Kohl's Corp. 2.9% 4) PizzaExpress 2.8% 5) PetSmart 1.9%. A footnote below
reads "As a percentage of net assets on April 30, 1997."
Performance review
In our annual report to you six months ago, we were pleased to report returns
for the year on the order of 28%. But the past six months have served as a
reminder that aggressive-growth-company stocks are not immune to the vagaries
of the market and that they can also go down. For the six months ended April
30, 1997, John Hancock Global Marketplace Fund's Class A and Class B shares
had total returns of -6.79% and -7.03%, respectively, at net asset value,
lagging the average global fund. Please see pages six and seven for longer-
term performance information. Because of a typically higher exposure to Latin
American companies -- which posted some of the best gains across the globe --
the average global fund outpaced the Fund with a return of 6.83% for the same
period, according to Lipper Analytical Services, Inc.1
The Fund
boosted its
stake in
"defensive"
companies.
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 Avon
Products followed by a down arrow and the phrase "Weakness in Brazilian
sales." The second listing is Delia's followed by an up arrow and the phrase
"Leading catalogue company aimed at teens." The third listing is CVS followed
by an up arrow and the phrase "Acquisition of Revco = lower costs, bigger
market share." Footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."
Among our hardest-hit holdings were technology-related stocks, including
CompUSA. Even though computer sales remained healthy and the company posted
earnings and growth in line with expectations, an across-the-board sell-off
in technology stocks dragged the stock price of the nation's largest computer
retail chain down with it. Although we had cut our CompUSA holdings in half,
locking in gains prior to the downdraft, we held onto the remainder of our
position based on our view of the company's future growth prospects. Our
patience was rewarded shortly after the period ended when CompUSA's stock
price retraced some of its losses. We also were hurt by our exposure to
outdoor advertising companies, which suffered from a bout of profit taking
at the end of 1996 after soaring to astronomical heights earlier.
But the period also saw its share of winners. One of our best performers was
CVS, which sells prescription drugs and health and beauty aids in stores in
the U.S., the United Kingdom, Czech Republic, Slovakia, Mexico and Singapore.
Jones Apparel Group, the designer and manufacturer of women's sportswear, rose
on the successful introduction of the Lauren line of clothing, licensed by
Ralph Lauren. Shoe companies Converse, which we sold during the period, and
Wolverine, manufacturer of Hush Puppies, benefited from a resurgence in
popularity of their products.
Defensive moves
The current U.S. economic expansion is long by historical measures and
consumer debt is high. If the economy slows, a slowdown in consumer spending
is likely. So during the period, we sold many apparel companies and department
stores, replacing them with "defensive" companies that are more resilient in a
slower economy. In addition to CVS, we bought Costco Cos., which operates a
chain of cash-and-carry membership warehouses and sells nationally branded and
private-label merchandise, and supermarket chains Riser Foods and Quality
Foods.
Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote "For the six months ended April 30, 1997." The
chart is scaled in increments of 5% from bottom to top, with 10% at the top
and -10% at the bottom. Within the chart there are three solid bars. The first
represents the -6.79% total return for the John Hancock Global Marketplace
Fund: Class A. The second represents the -7.03% total return for the John
Hancock Global Marketplace Fund: Class B. The third represents the 6.83% total
return for the average global fund. A footnote below reads: "The total returns
for John Hancock Global Marketplace Fund are at net asset value with all
distributions reinvested. The average global fund is tracked by Lipper
Analytical Services. (1) See the following two pages for historical
performance information."
To help sidestep any potential slowdown in the U.S. and to take advantage of
faster-growing economies, we increased our international holdings. Some of our
largest holdings include supermarket chain Disco in Latin America, and French
companies Grand Optical Photoservice and Carrefour.
One area of apparel that remains particularly attractive to us is the juniors'
market. A rekindled passion for fashion has brought this sector back to life.
With the collapse of stores such as Merry Go Round earlier in the decade, the
number of stores that cater to this market has shrunk. Meanwhile, the teen
population is growing and its purchasing power has increased. To take
advantage of these trends we invested in Hot Topic, a specialty retailer of
music-licensed apparel, accessories and gifts; and dELiA*s, a juniors catalog
merchant.
Outlook
In our view, there are still lots of opportunities to be found in the global
marketplace. In the short-term, we expect that consumer spending will remain
somewhat sluggish, and could potentially fall if the economy weakens.
Nonetheless, we'll continue to pursue fast-growing retail companies worldwide.
We'll keep our focus on those with unique products, or innovative methods of
distributing their products and services, with an eye toward those that can
continue to prosper even if spending weakens. Our sense is that these
companies will be the strongest retail players in the years to come.
"...there are
still lots of
opportunities
to be found
in the global
marketplace."
- ------------------------------------------------------------------------------
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.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance
is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock 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-
deferred 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 March 31, 1997
ONE LIFE OF
YEAR FUND
---------- ----------
John Hancock Global Marketplace Fund: Class A (5.49%) 60.29%(1)
John Hancock Global Marketplace Fund: Class B (6.13%) 14.66%(2)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1997
ONE LIFE OF
YEAR FUND
---------- ----------
John Hancock Global Marketplace Fund: Class A(3) (5.49%) 20.77%(1)
John Hancock Global Marketplace Fund: Class B(3) (6.13%) 12.18%(2)
Notes to Performance
(1) Class A shares commenced on September 29, 1994.
(2) Class B shares commenced on January 22, 1996.
(3) Effective September 9, 1994, the Adviser has voluntarily undertaken
to limit the Fund's expenses, including the management fee (but not
including the transfer agent fee and 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 (5.81%) and 17.20% for Class A shares and (6.45%) and 11.09% for
Class B shares, respectively.
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 April 30, 1997, 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 Global Marketplace 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 Standard & Poor's 500 Stock Index, and is equal
to $17,946 as of April 30, 1997. The second line represents the value of the
Global Marketplace Fund, before sales charge, and is equal to $16,842 as of
April 30, 1997. The third 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 $16,000 as of April 30, 1997. The fourth
line represents the Morgan Stanley World Index and is equal to $13,881 as of
April 30, 1997.
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 Standard & Poor's 500 Stock Index
and is equal to $13,378 as of April 30, 1997. The second line represents the
value of the Global Marketplace Fund, before sales charge, and is equal to
$11,841 as of April 30, 1997. The third 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 $11,821 as of April 30,
1997. The fourth line represents the Morgan Stanley World Index and is equal
to $11,441 as of April 30, 1997.
FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $41,314,495) $ 44,524,544
Joint repurchase agreement (cost - $7,921,000) 7,921,000
-------------
52,445,544
Cash 183
Foreign currency, at value (cost - $9,444) 9,428
Receivable for shares sold 49,411
Receivable for forward foreign currency exchange
contracts sold - Note A 10
Dividends receivable 9,730
Interest receivable 1,183
Foreign tax receivable 7,916
Deferred organization expenses - Note A 3,505
Other assets 14
-------------
Total Assets 52,526,924
- -------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 936,798
Payable for shares repurchased 6,359
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 46,649
Accounts payable and accrued expenses 47,628
-------------
Total Liabilities 1,037,434
- -------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 54,878,973
Accumulated net realized loss on investments
and foreign currency transactions ( 6,291,728)
Net unrealized appreciation of investments
and foreign currency transactions 3,209,765
Accumulated net investment loss ( 307,520)
-------------
Net Assets $ 51,489,490
===============================================================================
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 - $22,378,657 / 1,568,073 $ 14.27
===============================================================================
Class B - $29,110,833 / 2,057,887 $ 14.15
===============================================================================
Maximum Offering Price Per Share *
Class A - ($14.27 x 105.26%) $ 15.02
===============================================================================
* 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.
See notes to financial statements.
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<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 1997 (Unaudited)
- -----------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $5,557) $ 130,011
Interest 109,590
-----------
239,601
Expenses:
Investment management fee - Note B 217,546
Distribution and service fee - Note B
Class A 35,554
Class B 153,419
Transfer agent fee - Note B 110,268
Custodian fee 39,659
Registration and filing fees 21,692
Auditing fee 15,125
Printing 12,057
Financial services fee - Note B 5,099
Trustees' fees 2,241
Miscellaneous 1,030
Legal fees 768
Organization expense - Note A 720
-----------
Total Expenses 615,178
- -----------------------------------------------------------------------
Less Expense Reductions - Note B ( 68,057)
- -----------------------------------------------------------------------
Net Expenses 547,121
- -----------------------------------------------------------------------
Net Investment Loss ( 307,520)
- -----------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ( 4,232,427)
Net realized gain on foreign currency transactions 2,150
Change in net unrealized appreciation/depreciation
of investments 696,280
Change in net unrealized appreciation/depreciation
of foreign currency transactions ( 8,088)
-----------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ( 3,542,085)
=======================================================================
Net Decrease in Net Assets
Resulting from Operations ( $3,849,605)
=======================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference
reflects earnings less expenses, any investment and foreign currency gains and
losses, distributions paid to shareholders, if any, and any increase or
decrease in money shareholders invested in the Fund. The footnote illustrates
the number of Fund shares sold, reinvested, if any, and repurchased during the
last three periods, along with the corresponding dollar value.
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------- ------------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 91,821) ($ 88,237) ($ 307,520)
Net realized loss on investments sold and foreign currency transactions
( 802,118) ( 1,264,001) ( 4,230,277)
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions 1,009,211 1,314,259 688,192
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 115,272 ( 37,979) ( 3,849,605)
------------ ------------ ------------
From Fund Share Transactions - Net* 38,385,073 12,741,407 3,423,722
------------ ------------ ------------
Net Assets:
Beginning of period 711,600 39,211,945 51,915,373
------------ ------------ ------------
End of period
(including net investment loss of none; none; and $307,520, respectively) $ 39,211,945 $ 51,915,373 $ 51,489,490
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold 1,349,557 $20,373,589 684,738 $10,778,771 651,621 $ 9,780,468
Less shares repurchased ( 292,024) ( 4,386,051) ( 381,164) ( 6,000,820) ( 506,601) ( 7,492,608)
--------- ----------- --------- ----------- --------- -----------
Net Increase 1,057,533 $15,987,538 303,574 $ 4,777,951 145,020 $ 2,287,860
========= =========== ========= =========== ========= ===========
Class B **
Shares sold 1,569,827 $23,824,449 555,243 $ 8,755,160 654,404 $ 9,742,597
Less shares repurchased ( 95,769) ( 1,426,914) ( 50,082) ( 791,704) ( 575,736) ($ 8,606,735)
Net Increase 1,474,058 $22,397,535 505,161 $ 7,963,456 78,668 $ 1,135,862
** Class B commenced operations on January 22, 1996.
(1) Effective October 31, 1996, the fiscal period end changed from August 31 to October 31.
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 SIX MONTHS ENDED
OF OPERATIONS) YEAR ENDED SEPTEMBER 1, 1996 APRIL 30, 1997
TO AUGUST 31, 1995 AUGUST 31, 1996 TO OCTOBER 31, 1996(8) (UNAUDITED)
------------------ --------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 $ 11.49 $ 15.16 $ 15.31
------- ------- ------- -------
Net Investment Income (Loss) (1) 0.01 ( 0.08) ( 0.02) ( 0.05)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.01 3.75 0.17 ( 0.99)
------- ------- ------- -------
Total from Investment Operations 3.02 3.67 0.15 ( 1.04)
------- ------- ------- -------
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 $1 4.27
======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 35.61%(4) 31.94% 0.99%(4) ( 6.79%)(4)
Total Adjusted Investment Return
at Net Asset Value (2,3) 28.69%(4) 29.69% 0.89%(4) ( 6.91%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 712 $16,966 $21,782 $22,379
Ratio of Expenses to Average Net Assets 1.50%(5) 1.45% 1.54%(5) 1.62%(5)
Ratio of Adjusted Expenses
to Average Net Assets (6) 9.00%(5) 3.70% 2.12%(5) 1.87%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.06%(5) ( 0.57%) ( 0.70%)(5) ( 0.74%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) ( 7.44%)(5) ( 2.82%) ( 1.28%)(5) ( 0.99%)(5)
Portfolio Turnover Rate 63% 52% 12% 76%
Average Broker Commission Rate (7) N/A $0.0140 $0.0079 $0.0144
Fee Reduction Per Share (1) $ 0.65 $ 0.31 $ 0.02 $ 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)
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD PERIOD FROM SIX MONTHS ENDED
JANUARY 22, 1996 SEPTEMBER 1, 1996 APRIL 30, 1997
TO AUGUST 31, 1996 TO OCTOBER 31, 1996(8) (UNAUDITED)
------------------ ---------------------- --------------------
<S> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.95 $ 15.09 $ 15.22
------- ------- -------
Net Investment Loss (1) ( 0.11) ( 0.04) ( 0.11)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.25 0.17 ( 0.96)
------- ------- -------
Total from Investment Operations 3.14 0.13 ( 1.07)
------- ------- -------
Net Asset Value, End of Period $ 15.09 $ 15.22 $ 14.15
======= ======= =======
Total Investment Return at Net Asset Value (2) 26.28%(4) 0.86%(4) ( 7.03%)(4)
Total Adjusted Investment Return at Net Asset Value (2,3) 25.50%(4) 0.76%(4) ( 7.15%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $22,246 $30,133 $29,111
Ratio of Expenses to Average Net Assets 2.15%(5) 2.24%(5) 2.32%(5)
Ratio of Adjusted Expenses to Average Net Assets (6) 3.49%(5) 2.82%(5) 2.57%(5)
Ratio of Net Investment Loss to Average Net Assets ( 1.28%)(5) ( 1.42%)(5) ( 1.44%)(5)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (6) ( 2.62%)(5) ( 2.00%)(5) ( 1.69%)(5)
Portfolio Turnover Rate 52% 12% 76%
Average Broker Commission Rate (7) $0.0140 $0.0079 $0.0144
Fee Reduction Per Share (1) $ 0.11 $ 0.02 $ 0.02
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestments and does not reflect the effect of sales charges.
(3) An estimated total return calculation that does not take into
consideration reductions by the Adviser during the periods shown.
(4) Not annualized.
(5) On an annualized basis.
(6) Unreimbursed, without fee reduction.
(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
April 30, 1997 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Marketplace Fund on April 30, 1997. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which represent
the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----------
<S> <C> <C>
COMMON STOCKS
Advertising (1.41%)
Outdoor Systems, Inc.* 26,250 $ 728,438
-----------
Auto - Leasing / Rentals (0.28%)
Budget Group, Inc. * 6,400 144,000
-----------
Beverages - Alcoholic (1.89%)
Mondavi (Robert) Corp. (Class A)* 26,000 975,000
-----------
Consumer Products Miscellaneous (2.60%)
Samsonite Corp.* 32,200 1,336,300
-----------
Diversified Operations (1.49%)
Moulin International Holdings Ltd.
(Hong Kong) 1,006,730 766,760
-----------
Leisure (4.99%)
Disney (Walt) Co., (The) 15,000 1,230,000
Premier Parks Inc.* 24,900 737,663
Silicon Gaming, Inc.* 44,000 599,500
-----------
2,567,163
-----------
Printing - Commercial (1.60%)
Mail-Well, Inc.* 30,000 821,250
-----------
Real Estate Operations (1.06%)
Central Parking Corp. 19,800 544,500
-----------
Retail - Apparel / Shoe Group (3.93%)
AnnTaylor Stores Corp.* 30,000 727,500
Footstar, Inc.* 3,742 77,647
Gap, Inc. (The) 22,000 701,250
Stage Stores, Inc.* 25,000 518,750
-----------
2,025,147
-----------
Retail - Consumer Electronics (1.64%)
Grupo Elektras, S.A. de C.V.,
Global Depositary Receipts
(Mexico) 45,000 $ 843,750
-----------
Retail - Department Stores (5.36%)
Kohl's Corp.* 30,000 1,466,250
Oasis Stores PLC (United Kingdom) 90,000 568,882
Proffitt's, Inc.* 15,000 560,625
Saks Holdings, Inc.* 8,700 166,388
-----------
2,762,145
-----------
Retail - Discount & Variety (4.57%)
Consolidated Stores Corp.* 23,000 920,000
Dollar General Corp. 27,500 869,687
Filene's Basement Corp* 70,000 411,250
99 Cents Only Stores * 7,100 153,538
-----------
2,354,475
-----------
Retail - Drug Stores (4.88%)
Arbor Drugs, Inc. 45,000 826,875
CVS Corp. 34,000 1,687,250
-----------
2,514,125
-----------
Retail - Home Furnishings (2.39%)
Cost Plus, Inc.* 32,000 528,000
Linens 'N Things, Inc.* 33,000 701,250
-----------
1,229,250
-----------
Retail - Mail Order / Direct (2.33%)
dELiA*s Inc.* 40,000 680,000
Micro Warehouse, Inc.* 30,000 517,500
-----------
1,197,500
-----------
Retail - Major Chains (3.06%)
Costco Cos., Inc.* 35,000 1,010,625
Wal-Mart Stores, Inc. 20,000 565,000
-----------
1,575,625
-----------
Retail - Miscellaneous/Diversified (10.88%)
Borders Group, Inc. * 30,000 637,500
Burton Group PLC (United Kingdom) 268,000 660,227
Coles Myer Ltd., American Depositary
Receipts, (ADR) (Australia) 8,000 312,000
Grand Optical Photoservice SA (France) 7,000 1,042,234
Guitar Center, Inc.* 28,500 402,562
Hibbett Sporting Goods, Inc.* 31,300 500,800
Hot Topic, Inc.* 37,500 965,625
Next, PLC (United Kingdom) 60,000 633,549
Staples, Inc.* 25,000 450,000
-----------
5,604,497
-----------
Retail - Restaurants (5.83%)
PizzaExpress PLC (United Kingdom) 130,000 1,455,916
Starbucks Corp.* 25,000 746,875
Wetherspoon (J.D.) PLC
(United Kingdom) 42,687 799,084
-----------
3,001,875
-----------
Retail - Supermarkets (11.41%)
Blue Square-Israel Ltd., (ADR) (Israel) * 50,000 931,250
Carrefour SA (France) 2,490 1,554,623
Disco S.A., (ADR) (Argentina) * 38,000 1,178,000
Quality Food Centers, Inc. * 30,000 1,203,750
Riser Foods, Inc. (Class A) 15,000 519,375
Santa Isabel S.A., (ADR) (Chile) 20,000 487,500
-----------
5,874,498
-----------
Retail / Wholesale - Building Products (3.26%)
Castorama Dubois Investissements
SA (France) 2,456 363,150
Home Centers (DIY) Ltd. (Israel) * 60,000 270,000
Home Depot, Inc. 18,000 1,044,000
-----------
1,677,150
-----------
Retail / Wholesale - Computers (1.35%)
CompUSA, Inc.* 36,200 696,850
-----------
Shoes & Related Apparel (3.06%)
Candie's, Inc.* 100,000 450,000
Wolverine World Wide, Inc. 28,000 1,127,000
-----------
1,577,000
-----------
Textiles - Apparel Manufacturing (5.96%)
Cutter & Buck, Inc.* 37,500 450,000
First Sign International Holdings Ltd.
(Hong Kong) 3,000,000 596,398
Glorious Sun Enterprises (Hong Kong) * 1,800,000 894,598
Jones Apparel Group, Inc.* 27,000 1,127,250
-----------
3,068,246
-----------
TOTAL COMMON STOCKS
(Cost $41,314,495) (86.47%) $44,524,544
========= ===========
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ---------------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (15.39%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Lanston & Co. -
Dated 4-30-97, Due 5-01-97
(Secured by US Treasury Notes,
5.500% thru 6.625%, Due
5-15-98 thru 9-30-01)
Note A 5.375% 7,921 $ 7,921,000
-----------
TOTAL SHORT-TERM INVESTMENTS (15.39%) 7,921,000
-------- -----------
TOTAL INVESTMENTS (101.86%) $52,445,544
======== ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
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 April 30, 1997 assigned to the various countries.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
Argentina 2.29%
Australia 0.61
Chile 0.95
France 5.75
Hong Kong 4.38
Israel 2.33
Mexico 1.64
United Kingdom 8.00
United States 75.91
------
101.86%
======
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Marketplace Fund
(UNAUDITED)
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. 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 a 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.
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. 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 investment, to its shareholders. Therefore, no federal income tax provision
is required. 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 that such
carryforwards are used by the Fund, no capital distribution 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 identifies 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.
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.
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.
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.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The fund had
no borrowing activity for the period ended April 30, 1997.
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 transactions, under which
it intends to take delivery of the foreign currency. Such contracts normally
involve no market risk other than that not offset by the currency amount of
the underlying transaction.
Open forward foreign currency contracts at April 30, 1997, were as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE APPRECIATION
- -------- ------------------- ---- ------------
SELLS
French Francs 55,029 May 97 $10
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 April 30, 1997, 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 option contracts to manage its exposure to the stock market.
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls 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 April 30, 1997.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% 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.
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 $68,057 for the period ended April 30, 1997. 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 April
30, 1997, net sales charges received with regard to Class A shares amounted to
$185,961. Out of this amount, $29,323 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $102,027 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$54,611 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
("JHMLICo"), is the indirect sole shareholder of Distributors and was the sole
shareholder until November 29, 1996 of John Hancock Freedom Securities
Corporation and its subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be subject
to a contingent-deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from the
CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended April 30, 1997, the
contingent-deferred sales charges paid to JH Funds amounted to $54,632.
In addition, to reimburse JH Funds for the services it provides as distributor
of shares of the Fund, the Fund has adopted a Distribution Plans with respect
to Class A and Class B pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Accordingly, the Fund will make payments to 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 Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
a transfer agent fee based on the number of shareholder accounts and
certain-out-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period
was at an annual rate of 0.01875% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon, and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser, and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by
the Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds,
as applicable, to cover its liability 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 April 30, 1997, 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 April 30, 1997, aggregated $38,400,014 and
$39,842,012, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended April 30, 1997.
The cost of investments owned at April 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $49,235,495. Gross
unrealized appreciation and depreciation of investments aggregated $5,371,767
and $2,161,718, respectively, resulting in net unrealized appreciation of
$3,210,049.
NOTES
John Hancock Funds - Global Marketplace Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhancock.com/funds
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."
300SA 4/97
6/97
John Hancock Funds
Global Rx Fund
SEMI-ANNUAL REPORT
April 30, 1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market in 1997 has given
investors its starkest reminder in a while of one of investing's basic tenets:
markets move down as well as up. It's understandable if investors had lost
sight of that fact. The bull market that began six years ago has given
investors annual double-digit returns and more modest price declines than
usual. And in the two years encompassing 1995 and 1996, the S&P 500 Index
gained more than 50%. This Pollyanna environment has tracked along with a
sustained economic recovery, now in its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder about this bull market. Since reaching
new highs in early March, the Dow Jones Industrial Average tumbled by more
than 7% at the end of March and wiped out nearly all it had gained since the
start of the year. It was the worst decline that the market had seen since
1990. In early April, the Dow was down by 9.8%, within shouting distance of a
10% correction. By the end of the month, it had bounced back into record
territory again.
As the market continues to fret over interest rates and inflation, investors
should be prepared for more volatility. It also makes sense to do something
we've always advocated: set realistic expectations. Keep in mind that the
stock market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over the
last 10 years. Remember that the kind of market volatility we've seen lately
is more like the way the market really works. Fluctuations go with the
territory. And market corrections can be healthy, serving to bring inflated
stock prices down to more reasonable levels, thereby reducing some of the
market's risk.
Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. Make sure
that your investment strategies reflect your individual time horizons,
objectives and risk tolerance, and that they are based upon your needs.
Despite turbulence, one thing remains constant. A well-constructed plan and a
cool head can be the best tools for reaching your financial goals.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
BY LINDA MILLER, CFA, PORTFOLIO MANAGER
John Hancock
Global Rx Fund
Mixed results for health-care stocks in the wake of
rising interest rates, strong U.S. dollar
Health-care stocks faced several countervailing trends over the past six
months. Among the long-term secular positives were the growing demand for
healthcare from America's aging population and the world's emerging economies.
Meanwhile, demand was further stimulated by new products and services offering
solutions to unmet medical needs. There were also a number of favorable
developments on the regulatory front. Top among them were a year-end flourish
of new product approvals from the U.S. Food and Drug Administration, and the
conclusion of the presidential election without any flare up in the rhetoric
supporting federally mandated health-care reform.
On the flip side, U.S. interest rates rose during the period, a fact that
affected not only health-care stocks, but most other industry sectors as well.
Meanwhile, the U.S. dollar continued strong, resulting in unfavorable currency
trends for many U.S.-based health-care companies doing business abroad.
Although a strong U.S. economy helped bolster health-care spending here, other
parts of the world experienced less favorable conditions. Faced with more
stringent budgetary requirements to qualify for inclusion in a common European
currency, some of the large health-care markets in Europe, including France
and Germany, curtailed their federal health-care spending. Meanwhile, Japan's
weak economy continued to keep a lid on health-care spending in that country.
"...large
health-care
users in
Europe...
curtailed
their federal
health-care
spending."
A 2 1/4" x 3 3/4" 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)".
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Warner Lambert 3.9% 2) Eli Lilly Co.
3.7% 3) Pfizer 3.7% 4)Merck 3.6% 5) SmithKline Beecham 3.6%. A footnote below
reads "As a percentage of net assets on April 31, 1997."
Large drug companies: a helpful elixir
For the six months ended April 30, 1997, John Hancock Global Rx Fund's Class A
and Class B shares posted total returns of 2.73% and 2.36%, respectively, at
net asset value. By comparison, the average health-care/biotechnology fund
returned 4.83% during the same period, according to Lipper Analytical
Services, Inc.1 Please see pages six and seven for longer-term performance
information. Even though we rebalanced the portfolio to increase the Fund's
exposure to large-company "blue-chip" drug stocks, we had less exposure than
our peers. Economic uncertainty and rising interest rates caused investors to
call into question whether strong corporate earnings could be sustained. As a
result, investors flocked to large-company stocks, where future earnings were
more predictable. That helped make large-company drug stocks the health-care
sector's winners.
"We sold
some of
our
holdings in
biotech-
nology..."
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 Warner
Lambert followed by an up arrow and the phrase "New product introductions."
The second listing is Stryker followed by an up arrow and the phrase "Profits,
sales up." The third listing is IDEXX Laboratories followed by a down arrow
and the phrase "Concerns about future growth rate." A footnote below reads
"See "Schedule of investments." Investment holdings are subject to change."
Drug company Warner Lambert was our largest holding at the end of the period
as well as one of our biggest winners. The company was buoyed by the success
of two new products: Lipitor, a cholesterol-lowering agent which quickly became
one of the fastest-growing drugs of its kind, and Rezulin, used in the
treatment of diabetes. Warner-Lambert's stock rose roughly 50% throughout the
period. Other of our large drug companies enjoyed success: SmithKline Beecham,
with its strong positions in the markets for anti-ulcer and anti-infective
medications, and Eli Lilly, the maker of Prozac and other drugs, each rose
about 22%. Pfizer, a leader in prescription medications, including a new drug
for Alzheimer's disease, posted gains of about 12%; and Johnson & Johnson, the
world's largest manufacturer of health-care products, rose 18%.
Medical device/service companies mixed
About 14% of the Fund's assets were invested in medical device companies
throughout the period, although we became increasingly selective in this area.
We focused on device companies with a proven ability to innovate, strong
distribution channels and strong relationships with hospitals. Our largest
holdings include Medtronic, which is the world's number one producer of
pacemakers and a top producer of other heart and neurological products, and
Stryker, a leader in orthopedics. While these device companies held up
relatively well during the period, others -- most notably IDEXX Laboratories
- -- did not. The company is a leading developer of diagnostic tests for use by
veterinarians and in the food processing industry. Its products are used to
identify diseases in household pets, and also to identify agricultural and
environmental contaminants. Investors recently became concerned that this
company would not be able to sustain its rapid growth, and its stock price
dropped. In our view, investors overreacted and we believe IDEXX continues to
have a growing business with a strong balance sheet.
Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended April 30, 1997." The chart is
scaled in increments of 2% 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 2.73% total return for the John Hancock Global Rx Fund: Class A. The
second represents the 2.36% total return for the John Hancock Global Rx Fund:
Class B. The third represents the 4.83% 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 the following two pages for historical
performance information."
Against a volatile stock market, investors became increasingly skittish, often
punishing stocks across an entire sector when the news about an individual
company within that sector turned sour. That was the case with physician
practice management companies such as PhyCor, which manages doctors'
practices. Several of PhyCor's smaller competitors disappointed investors with
lower-than-expected earnings, which led to the entire sector's decline. PhyCor
was caught in this downdraft despite the fact that it continued growing at 40%
annually and its financial results continued to meet or exceed expectations.
Another example of this phenomenon was HBO & Co., an information management
company that caters to the health-care sector. Its stock got dragged down in a
technology stock sell-off, even though its financial results were strong and
it met earnings expectations.
We sold some of our holdings in the biotechnology sector after the rush of
year-end FDA approvals. One exception was Amgen, the world's largest biotech
company with key therapeutic products used by dialysis and cancer patients.
Another favorite we held onto was PathoGenesis, which is developing an inhaled
drug used to prevent the respiratory infections of cystic fibrosis patients.
Prognosis
There are a number of factors that we believe will shape the near-term future
of health- care stocks. They include the strength of the world's various
economies, the direction of interest rates, the health of the stock market,
the value of the U.S. dollar and the regulatory environment. It remains to be
seen how these conditions will stack up and affect the sector. But over the
long-term, we remain optimistic about health-care stocks. We expect that
demand for health-care products and services will continue to be strong in the
wake of an aging America, and that the expansion of worldwide markets for
health services will prompt increased demands for these products and
technologies. We'll continue to perform our bottom-up fundamental research and
invest in companies that reflect our three basic investment themes of
efficient delivery of healthcare, new product opportunities and consolidation.
We think those companies offer the best opportunities for growth.
"...the
expansion of
worldwide
markets
for health
services will
prompt
increased
demand..."
- ------------------------------------------------------------------------------
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.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance
is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock 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 March 31, 1997
ONE FIVE LIFE OF
YEAR YEARS FUND
------ ------- -------
John Hancock Global Rx Fund: Class A(1) (11.41%) 70.63% 134.80%
John Hancock Global Rx Fund: Class B(2) (11.99%) N/A 36.74%
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1997
ONE FIVE LIFE OF
YEAR YEARS FUND
------ ------- -------
John Hancock Global Rx Fund: Class A(1) (11.41%) 11.28% 16.79%
John Hancock Global Rx Fund: Class B(2) (11.99%) N/A 10.73%
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 April 30, 1997, 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
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 $25,951 as of April 30, 1997. 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
$24,653 as of April 30, 1997. The third line represents the Standard & Poor's
500 Stock Index and is equal to $22,578 as of April 30, 1997.
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 $19,374 as of April 30, 1997. The
second line represents the value of the Global Rx Fund, after sales charge,
and is equal to $14,654 as of April 30, 1997. The third 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 $14,354 as of April 30,
1997.
FINANCIAL STATEMENTS
John Hancock Funds - Global Rx Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Common stocks, warrants and units
(cost -- $68,599,690) $ 79,010,298
Joint repurchase agreement (cost -- $6,435,000) 6,435,000
-------------
85,445,298
Cash 159
Receivable for investments sold 71,244
Interest receivable 961
Dividends receivable 116,414
Other assets 1,271
-------------
Total Assets 85,635,347
- -------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,869,945
Payable for shares repurchased 126,732
Foreign taxes payable 5,356
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 132,381
Accounts payable and accrued expenses 86,714
-------------
Total Liabilities 2,221,128
- -------------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 70,281,270
Accumulated net realized gain on investments
and foreign currency transactions 3,113,609
Net unrealized appreciation of investments
and foreign currency transactions 10,410,462
Accumulated net investment loss ( 391,122)
-------------
Net Assets $ 83,414,219
===============================================================================
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 -- $43,502,509 / 1,772,918 $ 24.54
===============================================================================
Class B -- $39,911,710 / 1,667,875 $ 23.93
===============================================================================
Maximum Offering Price Per Share *
Class A -- ($24.54 x 105.26%) $ 25.83
===============================================================================
* 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes
of $14,445) $ 294,276
Interest 166,543
-----------
460,819
-----------
Expenses:
Investment management fee -- Note B 326,167
Distribution and service fee -- Note B
Class A 64,402
Class B 193,035
Transfer agent fee -- Note B 151,448
Custodian fee 31,037
Registration and filing fees 26,297
Advisory Board fee -- Note B 17,002
Auditing fee 15,124
Printing 12,781
Financial services fee -- Note B 7,644
Trustees' fees 2,847
Legal fees 1,688
Miscellaneous 1,376
-----------
Total Expenses 850,848
- -------------------------------------------------------------------------------
Net Investment Loss ( 390,029)
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 3,113,758
Change in net unrealized appreciation/depreciation
of investments ( 917,674)
Change in net unrealized appreciation/depreciation
of foreign currency transactions ( 288)
-----------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions 2,195,796
- -------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $ 1,805,767
===============================================================================
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------- -------------------- ----------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 557,388) ($ 190,818) ($ 390,029)
Net realized gain on investments sold and foreign currency transactions 3,586,805 293,243 3,113,758
Change in net unrealized appreciation/depreciation
of investments and foreign currency transactions 2,092,083 ( 1,237,619) ( 917,962)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 5,121,500 ( 1,135,194) 1,805,767
------------ ------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
and foreign currency transactions
Class A - ($0.1437, none and $1.2325 per share, respectively) ( 175,093) -- ( 2,050,456)
Class B - ($0.1437, none and $1.2325 per share, respectively) ( 80,096) -- ( 1,831,686)
------------ ------------ ------------
Total Distributions to Shareholders ( 255,189) -- ( 3,882,142)
------------ ------------ ------------
From Fund Share Transactions - Net* 43,402,980 2,277,728 5,351,288
------------ ------------ ------------
Net Assets:
Beginning of period 30,727,481 78,996,772 80,139,306
------------ ------------ ------------
End of period
(including accumulated net investment loss of $1,045, $1,093 and
$391,122, respectively) $ 78,996,772 $ 80,139,306 $ 83,414,219
============ ============ ============
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 2,278,174 $57,180,069 608,177 $16,260,917 725,504 $18,219,291
Shares issued to
shareholders in
reinvestment of
distributions 7,174 170,226 -- -- 80,392 1,937,910
--------- ----------- --------- ----------- --------- -----------
2,285,348 57,350,295 608,177 16,260,917 805,896 20,157,201
Less shares repurchased (1,746,628) ( 43,511,318) ( 578,604) ( 15,504,567) ( 730,166) ( 18,293,747)
--------- ----------- --------- ----------- --------- -----------
Net increase 538,720 $13,838,977 29,573 $ 756,350 75,730 $ 1,863,454
========= =========== ========= =========== ========= ===========
CLASS B
Shares sold 1,739,644 $43,690,955 163,866 $ 4,526,283 499,693 $12,335,566
Shares issued to
shareholders in
reinvestment of
distributions 3,211 75,464 -- -- 64,647 1,523,718
--------- ----------- --------- ----------- --------- -----------
1,742,855 43,766,419 163,866 4,526,283 564,340 13,859,284
Less shares repurchased (572,508) ( 14,202,416) ( 105,746) ( 3,004,905) ( 421,534) ( 10,371,450)
--------- ----------- --------- ----------- --------- -----------
Net increase 1,170,347 $29,564,003 58,120 $ 1,521,378 142,806 $ 3,487,834
========= =========== ========= =========== ========= ===========
(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, and any increase or decrease in
money shareholders invested in the Fund. The footnote illustrates the number
of Fund shares sold, reinvested and repurchased during the last two periods,
along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are as
follows:
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM SIX MONTHS ENDED
-------------------------------------------------------- SEPTEMBER 1, 1996 TO APRIL 30, 1997
1992(1) 1993 1994 1995 1996 OCTOBER 31, 1996(9) (UNAUDITED)
------- ------- ------- ------- ------- ------------------- -----------
<S> <C> <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 $ 25.11
------- ------- ------- ------- ------- ------- -------
Net Investment Loss ( 0.03) ( 0.23) ( 0.32) ( 0.36)(2) ( 0.19)(2) ( 0.05)(2) ( 0.08)(2)
Net Realized and Unrealized Gain
on Investments and
Foreign Currency Transactions 3.37 0.27 3.45 5.46 4.15 ( 0.27) 0.74
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 3.34 0.04 3.13 5.10 3.96 ( 0.32) 0.66
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized
Gain on Investments Sold
and Foreign Currency Transactions -- -- -- -- ( 0.14) -- ( 1.23)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 13.34 $ 13.38 $ 16.51 $ 21.61 $ 25.43 $ 25.11 $ 24.54
======= ======= ======= ======= ======= ======= =======
Total Investment Return
at Net Asset Value (3) 33.40%(4) 0.30% 23.39% 30.89% 18.39% ( 1.26%)(4) 2.73%(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
(000s omitted) $ 14,702 $15,647 $18,643 $24,394 $42,405 $42,618 $43,503
Ratio of Expenses
to Average Net Assets 1.98%(6) 2.50% 2.55% 2.56% 1.80% 1.92%(6) 1.75%(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) ( 0.62%)(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% 26%
Average Broker Commission
Rate (8) N/A N/A N/A N/A $0.0181 $0.0726 $0.0697
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 SIX MONTHS ENDED
------------------------------- SEPTEMBER 1, 1996 TO APRIL 30, 1997
1994(1) 1995 1996 OCTOBER 31, 1996(9) (UNAUDITED)
------- ------- ------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value,
Beginning of Period $ 17.29 $ 16.46 $ 21.35 $ 24.94 $ 24.60
------- ------- ------- ------- -------
Net Investment Loss (2) ( 0.17) ( 0.55) ( 0.34) ( 0.08) ( 0.16)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions ( 0.66) 5.44 4.07 ( 0.26) 0.72
------- ------- ------- ------- -------
Total from Investment
Operations ( 0.83) 4.89 3.73 ( 0.34) 0.56
------- ------- ------- ------- -------
Less Distributions:
Distributions from Net
Realized Gain on Investments
Sold and Foreign Currency
Transactions -- -- ( 0.14) -- ( 1.23)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 16.46 $ 21.35 $ 24.94 $ 24.60 $ 23.93
======= ======= ======= ======= =======
Total Investment Return at
Net Asset Value (3) ( 4.80%)(4) 29.71% 17.53% ( 1.36%)(4) 2.36%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $ 1,071 $ 6,333 $36,591 $37,521 $39,912
Ratio of Expenses
to Average Net Assets 3.34%(6) 3.45% 2.42% 2.62%(6) 2.46%(6)
Ratio of Net Investment Loss
to Average Net Assets ( 2.65%)(6) ( 2.91%) ( 1.33%) ( 1.74%)(6) ( 1.33%)(6)
Portfolio Turnover Rate 52% 38% 68% 24% 26%
Average Broker Commission
Rate (8) N/A N/A $0.0181 $0.0726 $0.0697
(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 end changed from August 31
to October 31.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
April 30, 1997 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Rx Fund on April 30, 1997. It's divided into two main categories:
common stocks and short-term investments. Common stocks are further broken
down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----------
<S> <C> <C>
COMMON STOCKS
Drugs - Biotechnology (7.57%)
Affymetrix, Inc.* 17,500 $ 437,500
Amgen, Inc.* 25,000 1,471,875
Biogen, Inc.* 13,000 416,000
Guilford Pharmaceuticals, Inc. 20,000 462,500
Human Genome Sciences, Inc.* 10,000 313,750
ICOS Corp. 15,000 104,063
ILEX Oncology Inc.* 40,000 490,000
Incyte Pharmaceuticals, Inc.* 5,000 212,500
PathoGenesis Corp. 40,000 1,050,000
Protein Design Labs, Inc.* 15,000 376,875
SangStat Medical Corp. * 17,000 291,125
Serologicals Corp.* 27,750 447,469
Sonus Pharmaceuticals, Inc.* 10,000 237,500
------------
6,311,157
------------
Drugs - Generic (2.18%)
Dura Pharmaceuticals, Inc.* 40,000 1,160,000
Teva Pharmaceutical Industries Ltd.,
American Depositary Receipts (ADR),
(Israel) 7,000 355,250
Watson Pharmaceuticals, Inc.* 8,500 303,875
------------
1,819,125
------------
Drugs - Diversified (14.12%)
Abbott Laboratories 27,000 1,647,000
American Home Products Corp. 27,000 1,788,750
Bristol-Myers Squibb Co. 34,000 2,227,000
Johnson & Johnson 47,000 2,878,750
Warner-Lambert Co. 33,000 3,234,000
------------
11,775,500
------------
Drugs - Major - Domestic (13.35%)
Lilly, (Eli) & Co. 35,000 3,075,625
Merck & Co., Inc. 33,000 2,986,500
Pfizer, Inc. 32,000 3,072,000
Schering-Plough Corp. 25,000 2,000,000
------------
11,134,125
------------
Drugs - Major - International (11.70%)
Astra AB ADR (Sweden) * 11,000 451,000
Novartis AG, ADR (Switzerland) 42,000 2,767,807
Roche Holding AG (Switzerland) 100 844,583
SmithKline Beecham PLC, ADR
(United Kingdom) 37,000 2,983,125
Zeneca Group PLC, ADR
(United Kingdom) 30,000 2,711,250
------------
9,757,765
------------
Drugs & Sundries - Wholesale (4.12%)
AmeriSource Health Corp. (Class A) * 27,000 1,204,875
Cardinal Health, Inc. 42,000 2,236,500
------------
3,441,375
------------
Healthcare - Alternate Site (5.35%)
Assisted Living Concepts, Inc. * 45,000 990,000
Fresenius Medical Care AG, ADR
(Germany) 10,000 237,500
HEALTHSOUTH Corp.* 100,000 1,975,000
National Surgery Centers, Inc.* 32,000 960,000
RehabCare Group, Inc. * 10,000 300,000
------------
4,462,500
------------
Healthcare - Management (6.08%)
CRA Managed Care, Inc.* 36,000 1,269,000
OccuSystems, Inc. * 32,000 660,000
Oxford Health Plans, Inc.* 7,000 461,125
PacifiCare Health Systems, Inc. * 4,500 361,125
PhyCor, Inc.* 52,500 1,397,813
United Healthcare Corp. 12,000 583,500
Wellpoint Health Networks, Inc. * 8,000 338,000
------------
5,070,563
------------
Healthcare - Software/Services (6.63%)
HBO & Co. 36,000 1,926,000
HPR Inc. * 50,000 706,250
Parexel International Corp. 60,000 1,680,000
Quintiles Transnational Corp.* 24,000 1,221,000
------------
5,533,250
------------
Healthcare - Supplies (5.15%)
American Medserve Corp. * 20,000 217,500
NCS HealthCare, Inc. (Class A)* 42,500 966,875
Omnicare, Inc. 80,000 1,950,000
Schein (Henry), Inc.* 42,000 1,165,500
------------
4,299,875
------------
Hospitals Management (2.97%)
Columbia/HCA Healthcare Corp. 25,000 875,000
Health Management Associates, Inc.
(Class A) * 60,000 1,605,000
------------
2,480,000
------------
Medical vices and Products (14.36%)
Baxter International, Inc. 10,000 478,750
Boston Scientific Corp.* 12,000 579,000
DePuy, Inc.* 12,000 252,000
Dionex Corp * 8,500 415,438
ESC Medical Systems, Ltd. (Israel) * 37,000 994,375
IDEXX Laboratories, Inc. * 30,000 390,000
Medtronic, Inc. 33,000 2,285,250
Molecular Devices Corp.* 32,000 452,000
Perclose, Inc. * 4,000 99,000
Physio-Control International Corp. * 42,000 525,000
Sigma-Aldrich Corp. 25,000 750,000
Stryker Corp. 65,000 2,136,875
US Surgical Corp. 26,000 890,500
Ventana Medical Systems, Inc. * 25,000 246,875
Waters Corp. 50,000 1,481,250
------------
11,976,313
------------
Nursing Homes (1.14%)
Health Care & Retirement Corp. * 30,000 948,750
------------
TOTAL COMMON STOCKS
(Cost $68,599,690) 94.72% 79,010,298
-------- ------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ---------------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (7.71%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Lanston & Co. -
Dated 4-30-97, Due 5-01-97
(Secured by US Treasury Notes,
5.500% thru 6.625%, Due
5-15-98 thru 9-30-01)
Note A 5.375 6,435 $ 6,435,000
------------
TOTAL SHORT-TERM INVESTMENTS ( 7.71%) 6,435,000
-------- ------------
TOTAL INVESTMENTS ( 102.43%) $ 85,445,298
======== ============
* 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>
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
April 30, 1997 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ---------------
Germany 0.28%
Israel 1.62
Sweden 0.54
Switzerland 4.33
United Kingdom 6.83
United States 88.83
------
TOTAL INVESTMENTS 102.43%
======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Rx Fund
(UNAUDITED)
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 Fund and John Hancock Global Marketplace Fund. 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. 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.
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 identifies 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.
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.
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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities,
revenues and expenses of the Fund. Actual results could differ from these
estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The fund had
no borrowing activity for the period ended April 30, 1997.
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 that not offset by the currency
amount of the underlying transaction.
There were no open forward foreign currency contracts at April 30, 1997.
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 April 30, 1997, there were no open positions in financial futures
contracts.
OPTIONS The Fund may purchase option contracts. Listed options will be valued
at the last quoted sales price on the exchange on which they are primarily
traded. Purchased put or call over-the-counter options will be valued at the
average of the "bid" prices obtained from two independent brokers. Written put
or call over-the-counter options, will be valued at the average of the "asked"
prices obtained from two independent brokers. Upon the writing of a call or
put option, an amount equal to the premium received by the Fund 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 changing security
prices. 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 April 30, 1997.
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE SERVICES AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a quarterly
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 Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended April
30, 1997, net sales charges received with regard to Class A shares amounted to
$149,501. Out of this amount, $22,911 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $93,539 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$33,051 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
("JHMLICo"), is the indirect sole shareholder of Distributors and was the
indirect sole shareholder until November 29, 1996 of John Hancock Freedom
Securities Corporation and its subsidiaries, which include Tucker Anthony and
Sutro.
Class B shares which are redeemed within six years of purchase will be subject
to a contingent-deferred sales charge ("CDSC") at declining rates beginning at
5.0% of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from the
CDSC are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in connection
with the sale of Class B shares. For the period ended April 30, 1997,
contingent-deferred sales charges paid to JH Funds amounted to $101,498.
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 Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund
pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period
was 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., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser, and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by
the Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds,
as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are recorded
on the Fund's books as an other asset. The deferred compensation liability and
the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as any
unrealized gains or losses. At April 30, 1997, 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 April 30, 1997, aggregated $32,519,718 and
$19,942,128, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended April 30, 1997.
The cost of investments owned at April 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $75,034,690. Gross
unrealized appreciation and depreciation of investments aggregated $13,911,567
and $3,500,959, respectively, resulting in net unrealized appreciation of
$10,410,608.
NOTES
John Hancock Funds - Global Rx Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page.
A box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhancock.com/funds
This report is for the information of shareholders of the John Hancock Global
Rx 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."
280SA 4/97
6/97
John Hancock Funds
Pacific
Basin
Equities
Fund
SEMI-ANNUAL REPORT
April 30,1997
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and
Compliance Officer
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market in 1997 has given
investors its starkest reminder in a while of one of investing's basic tenets:
markets move down as well as up. It's understandable if investors had lost
sight of that fact. The bull market that began six years ago has given
investors annual double-digit returns and more modest price declines than
usual. And in the two years encompassing 1995 and 1996, the S&P 500 Index
gained more than 50%. This Pollyanna environment has tracked along with a
sustained economic recovery, now in its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder about this bull market. Since reaching
new highs in early March, the Dow Jones Industrial Average tumbled by more
than 7% at the end of March and wiped out nearly all it had gained since the
start of the year. It was the worst decline that the market had seen since
1990. In early April, the Dow was down by 9.8%, within shouting distance of a
10% correction. By the end of the month, it had bounced back into record
territory again.
As the market continues to fret over interest rates and inflation, investors
should be prepared for more volatility. It also makes sense to do something
we've always advocated: set realistic expectations. Keep in mind that the
stock market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over the
last 10 years. Remember that the kind of market volatility we've seen lately
is more like the way the market really works. Fluctuations go with the
territory. And market corrections can be healthy, serving to bring inflated
stock prices down to more reasonable levels, thereby reducing some of the
market's risk.
Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. Make sure
that your investment strategies reflect your individual time horizons,
objectives and risk tolerance, and that they are based upon your needs.
Despite turbulence, one thing remains constant. A well-constructed plan and a
cool head can be the best tools for reaching your financial goals.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
BY MARIAN LI FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Pacific Basin
Equities Fund
Japan, south Asian nations lead downturn
in Pacific region performance
It was a difficult six months for the Pacific region, driven in large part by
Japan's continuing struggle with a weak economy, banking problems and a
falling yen that hurt U.S. dollar-based investors. Only a handful of the major
markets advanced, including Australia, Hong Kong and Taiwan. Many others,
particularly the south Asian nations of Singapore, Malaysia and Thailand,
fell along with a continuing economic slowdown as exports remained stalled.
A strong U.S. dollar compounded the problem for several Asian exporters whose
currencies closely track the dollar. What's more, local problems in a number
of countries further hampered results. These factors proved to be enough to
keep foreign investors on the sidelines, which further hurt performance.
For the six months ended April 30, 1997, John Hancock Pacific Basin Equities
posted a total return for its Class A and Class B shares of -0.51% and -0.87%,
respectively, at net asset value. That compared to the -0.29% return of the
average Pacific region fund, according to Lipper Analytical Services, Inc.1
Please see pages six and seven for longer-term performance information.
"It was a
difficult six
months for
the Pacific
region..."
A 2 1/4" x 3 3/4" photo of the International Equity Team. Caption reads:
"Marian Li (standing center) and members of John Hancock Funds' International
equity team, including team leader Miren Etcheverry (seated left).
Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into 12 sections. Going from top left to right:
Short-Term Investments and Other 13%; Australia 7%; Hong Kong 22%; India 3%;
Indonesia 3%; Japan 23%; Malaysia 12%; Philippines 3%; Singapore 6%; South
Korea 1%; Taiwan 3%; Thailand 4%. Footnote below reads: "As a percentage of
net assets on April 30, 1997."
"...we're more
optimistic
about Japan's
prospects
now."
Japan
Disappointment over Japan's still-stalled economy, concerns over a slowdown in
government spending and problems in the financial sector caused the benchmark
Nikkei 225-stock index to fall 6.5% in the period, with the decline even worse
- -- 16% -- for U.S. dollar investors. Our favorite market sector remains the
large export companies, including Toyota and Sony, that continue to benefit
from the weak yen, which makes their products cheaper away from home. But with
the first signs of economic life, we'll turn some of our attention to select
domestic retailers, property stocks and cyclical companies. One disappointment
was our Nomura Securities stock, which we sold because it was hit by
management scandals.
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 Shanghai
Industrial Holdings followed by an up arrow and the phrase "Acquisition of
high-quality Chinese Assets." The second listing is Shinawatra followed by a
down arrow and the phrase "Increased competition erodes market share." The
third listing is SK Telecom followed by a down arrow and the phrase "Concerns
about increasing competition." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
The Fund's weighting in Japan stood at 23% of net assets by the end of April,
down from 27% six months earlier. But we may increase our exposure, depending
on May's earnings results and their impact on investor sentiment. Even though
Japan's recovery has been slower than expected, we're more optimistic about
Japan's prospects now. We are starting to see a return of both Japanese
pensions and foreign buyers, long underweighted in the world's second largest
equity market, to Japan's stock market after a long absence.
Hong Kong
Hong Kong remains our second strongest weighting at 22% of the Fund's assets.
It was a stellar performer last year and a bright spot earlier in the period,
until concerns about an overheating real estate market and rising U.S.
interest rates sparked a downturn in February and March. But the market
rebounded in April and we remain optimistic about Hong Kong's prospects. Our
property conglomerate Cheung Kong continues to perform well. We anticipate a
smooth transition to Chinese rule in June, and concerns over the new Chinese
leadership have subsided. Despite a slip in foreign investments during the
period, the market continues to benefit from a steady inflow of funds from
China. And our China-related "red-chip" holdings held up well, particularly
the conglomerate Shanghai Industrial Holdings. We plan to keep one third of
our Hong Kong holdings in "red-chip" stocks, not only because China's economy
is rebounding, but also because these stocks' performances are less tied to
moves in U.S. interest rates than is the rest of the Hong Kong market.
South Asia
The south Asian markets of Singapore, Malaysia, Thailand and the Philippines
all suffered during the period from either persistent or new concerns over the
local property or banking sectors. The economies of these countries are driven
in part by the strength of exports, which have been in a longer-than-expected
trough due to a slowdown in the electronics sector. Singapore, long considered
a safe-haven market, was one of the worst performers during the period, along
with Thailand. Malaysia also stumbled after several restrictive moves by its
central bank. As a result, we reduced our stakes in Singapore and Malaysia
during the period. At the end of April, our combined holdings in Singapore,
Malaysia and Thailand stood at one quarter of the Fund's assets, down from one
third six months earlier. In their place, we established a position in India,
currently at 3% of net assets. Its market rose strongly in the second half of
the period on the strength of government-sponsored economic reforms and pro-
business incentives. What's more, valuations are compelling there, at the same
time that earnings growth rates are strong. One of our top holdings is the
State Bank of India, the nation's largest bank, whose stock price was
attractive relative to its earnings.
Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the six months ended April 30, 1997." The
chart is scaled in increments of -1% with -1% at the bottom and 0% at the top.
Within the chart there are three solid bars. The first represents the -0.51%
total return for the John Hancock Pacific Basin Equities Fund: Class A. The
second represents the -0.87% total return for the John Hancock Pacific Basin
Equities Fund: Class B. The third represents the -0.29% total return for the
average Pacific region fund. A footnote below reads: "The total returns for
John Hancock Pacific Basin Equities Fund are at net asset value with all
distributions reinvested. The average pacific region fund is tracked by Lipper
Analytical Services. (1) See the following two pages for historical
performance information."
Australia
The Australian market was one of the strongest during the period, reaping the
rewards of a favorable interest rate environment and strong performance from
banks, such as our largest holding National Australia Bank. We cut back our
metals and commodities holdings, but we plan to increase our current 7%
position up to 10% as a defensive measure, given Australia's established
market and relative stability.
Outlook
In the short term, we expect the Asian markets to remain in the doldrums while
investors wait to see real signs of a return to economic life. In south Asia,
we'll be watching for a rebound in the electronics sector and a pickup in
exports as the key sparks to jump-start their economies and corporate earnings
growth. We'll also be watching U.S. interest-rate moves, the U.S. dollar and
the strength of China's economy. In our view, the day is coming closer when
investors will shed their negative sentiment and turn again toward the Pacific
region. After lagging other regions for several years, Asian stock prices are
compelling compared to other regions, like the U.S. and Latin America, where
stock prices have soared. Because we continue to believe in the region's long-
term prospects for superior growth, we'll stick to our guns. That means
investing in a balanced portfolio of Asian stocks with a focus on markets that
have high growth potential to reward patient investors.
"...Asian
stock
prices are
compelling
compared
to other
regions..."
- ----------------------------------------------------------------------------
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.
1 Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance
is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average
annual total returns for the John Hancock 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 March 31, 1997
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- --------- ----------
John Hancock Pacific Basin
Equities Fund: Class A(1) (10.20%) 64.53% 79.55%
John Hancock Pacific Basin
Equities Fund: Class B(2) (10.81%) N/A (5.52%)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1997
ONE FIVE LIFE OF
YEAR YEARS FUND
--------- --------- ----------
John Hancock Pacific Basin
Equities Fund: Class A(1) (10.20%) 10.47% 6.31%
John Hancock Pacific Basin
Equities Fund: Class B(2) (10.81%) N/A (1.83%)
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 April 30, 1997, 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 $18,814 as
of April 30, 1997. 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 $17,873 as of April 30, 1997.
The third line represents the Morgan Stanley Capital International Pacific
Index and is equal to $10,147 as of April 30, 1997.
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 $9,685 as of
April 30, 1997. The second line represents the value of the hypothetical
$10,000 investment made in the Pacific Basin Equities Fund on March 7, 1994,
after sales charge, and is equal to $9,394 as of April 30, 1997. The third
line represents the value of the Morgan Stanley Capital International Pacific
Index and is equal to $8,569 as of April 30, 1997.
FINANCIAL STATEMENTS
John Hancock Funds - Pacific Basin Equities Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what
the Fund owns, is due and owes on April 30, 1997. You'll also find the net asset value and the
maximum offering price per share as of that date.
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
- -----------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks and warrant (cost - $50,156,383) $ 52,546,861
Joint repurchase agreement (cost - $5,677,000) 5,677,000
------------
58,223,861
Cash 416
Foreign currency, at value (cost - $1,257,118) 1,254,333
Receivable for investments sold 419,834
Receivable for forward foreign currency
contracts sold - Note A 35,038
Dividends receivable 164,780
Interest receivable 848
Other Assets 2,095
------------
Total Assets 60,101,205
- -----------------------------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 17,967
Payable for investments purchased 222,657
Payable for forward foreign currency
contracts sold - Note A 437
Foreign taxes payable 32,007
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 111,801
Accounts payable and accrued expenses 68,140
------------
Total Liabilities 453,009
- -----------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in $57,322,198
Accumulated net realized gain on investments
and foreign currency transactions 285,982
Net unrealized appreciation of investments
and foreign currency transactions 2,405,813
Accumulated net investment loss ( 365,797)
------------
Net Assets $59,648,196
===============================================================================================
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 - $33,945,155 / 2,376,092 $ 14.29
===============================================================================================
Class B - $25,703,041 / 1,839,719 $ 13.97
===============================================================================================
Maximum Offering Price Per Share *
Class A - ($14.29 x 105.26%) $ 15.04
===============================================================================================
* 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 1997 (Unaudited)
- -----------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $50,755) $390,065
Interest 26,374
--------
416,439
--------
Expenses:
Investment management fee -- Note B 261,338
Distribution and service fee -- Note B
Class A 55,487
Class B 141,716
Transfer agent fee -- Note B 166,001
Custodian fee 82,839
Registration and filing fees 24,903
Auditing fee 15,125
Printing 13,294
Financial service fee -- Note B 6,125
Trustees' fees 2,666
Legal fees 1,247
Miscellaneous 1,076
--------
Total Expenses 771,817
- -----------------------------------------------------------------------------------------------
Net Investment Loss ( 355,378)
- -----------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 190,277
Net realized gain on foreign currency transactions 115,698
Change in net unrealized appreciation/depreciation
of investments 453,992
Change in net unrealized appreciation/depreciation
of foreign currency transactions 50,020
--------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions 809,987
- -----------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $454,609
===============================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
--------------- ------------------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($ 286,709) ($ 139,847) ($ 355,378)
Net realized gain on investments sold and foreign currency transactions 484,871 485,068 305,975
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions 1,979,326 ( 1,583,701) 504,012
----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 2,177,488 ( 1,238,480) 454,609
----------- ----------- -----------
Distributions to shareholders:
Distributions from net realized gain on investments sold and
foreign currency transactions
Class A -- (none; none; and $0.1114 per share, respectively) -- -- ( 298,861)
Class B -- (none; none; and $0.1114 per share, respectively) -- -- ( 226,927)
----------- ----------- -----------
Total Distributions to Shareholders -- -- ( 525,788)
----------- ----------- -----------
From Fund Share Transactions -- Net* 20,330,528 ( 4,213,348) ( 9,121,702)
----------- ----------- -----------
Net Assets:
Beginning of period 51,784,889 74,292,905 68,841,077
----------- ----------- -----------
End of period (including accumulated net investment loss
of $188,377, $10,419 and $365,797, respectively) $74,292,905 $68,841,077 $59,648,196
=========== =========== ===========
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 1, 1996 TO APRIL 30, 1997
AUGUST 31, 1996 OCTOBER 31, 1996(1) (UNAUDITED)
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 5,439,721 $80,924,479 1,081,326 $16,035,337 3,991,834 $59,045,127
Shares issued to shareholders
in reinvestment of distributions -- -- -- -- 18,683 278,745
--------- ----------- --------- ----------- --------- -----------
5,439,721 80,924,479 1,081,326 16,035,337 4,010,517 59,323,872
Less shares repurchased (5,246,580) ( 78,427,912) (1,251,853) ( 18,610,457) (4,308,994) ( 64,152,090)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) 193,141 $ 2,496,567 ( 170,527) ($ 2,575,120) ( 298,477) ($ 4,828,218)
========= =========== ========= =========== ========= ===========
CLASS B
Shares sold 3,821,397 $56,351,704 454,392 $ 6,590,658 1,262,305 $18,345,089
Shares issued to shareholders in
reinvestment of distributions -- -- -- -- 12,199 178,482
--------- ----------- --------- ----------- --------- -----------
3,821,397 56,351,704 454,392 6,590,658 1,274,504 18,523,571
Less shares repurchased (2,618,144) ( 38,517,743) ( 563,407) ( 8,228,886) (1,558,152) ( 22,817,055)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) 1,203,253 $17,833,961 ( 109,015) ($ 1,638,228) ( 283,648) ($ 4,293,484)
========= =========== ========= =========== ========= ===========
(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, and any increase or decrease in money shareholders invested in the Fund. The
footnote illustrates the number of Fund shares sold, reinvested and redeemed 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,
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <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
------- ------- ------- ------- -------
Net Investment Income (Loss)(2) ( 0.07) ( 0.11) ( 0.10) 0.02(3) ( 0.02)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ( 0.11) 4.51 3.12 ( 1.24) 0.65
------- ------- ------- ------- -------
Total from Investment Operations ( 0.18) 4.40 3.02 ( 1.22) 0.63
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign
Currency Transactions -- -- ( 0.41) ( 0.55) --
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 8.87 $ 13.27 $ 15.88 $ 14.11 $ 14.74
------- ------- ------- ------- -------
Total Investment Return at
Net Asset Value(4) ( 1.99%) 49.61% 22.82% ( 7.65%) 4.47%
Total Adjusted Investment Return
at Net Asset Value(4,6) ( 5.57%) 48.31% -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 3,222 $14,568 $50,261 $37,417 $41,951
Ratio of Expenses to Average Net Assets 2.73% 2.94% 2.43% 2.05% 1.97%
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%)
Ratio of Adjusted Net Investment Loss
to Average Net Assets(8) ( 4.40%) ( 2.28%) -- -- --
Portfolio Turnover Rate 179% 171% 68% 48% 73%
Expense Reimbursement Per Share $ 0.31 $ 0.14 -- -- --
Average Brokerage Commission Rate(9) N/A N/A N/A N/A $0.0183
<CAPTION>
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
SEPTEMBER 1, 1996 TO APRIL 30, 1997
OCTOBER 31, 1996(10) (UNAUDITED)
-------------------- -----------------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 14.74 $ 14.47
------- -------
Net Investment Income (Loss)(2) ( 0.02) ( 0.06)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ( 0.25) ( 0.01)(11)
------- -------
Total from Investment Operations ( 0.27) ( 0.07)
------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign
Currency Transactions -- ( 0.11)
------- -------
Net Asset Value, End of Period $ 14.47 $ 14.29
------- -------
Total Investment Return at
Net Asset Value(4) ( 1.83%)(5) ( 0.51%)(5)
Total Adjusted Investment Return
at Net Asset Value(4,6) --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $38,694 $33,945
Ratio of Expenses to Average Net Assets 2.21%(7) 2.06%(7)
Ratio of Adjusted Expenses to
Average Net Assets(8) -- --
Ratio of Net Investment Income (Loss)
to Average Net Assets ( 0.83%)(7) ( 0.79%)(7)
Ratio of Adjusted Net Investment Loss
to Average Net Assets(8) -- --
Portfolio Turnover Rate 15% 44%
Expense Reimbursement Per Share -- --
Average Brokerage Commission Rate(9) $0.0221 $0.0111
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.
<CAPTION>
Financial Highlights (continued)
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED AUGUST 31, PERIOD FROM SIX MONTHS ENDED
AUGUST 31, ----------------------- SEPTEMBER 1, 1996 TO APRIL 30, 1997
1994(1) 1995 1996 OCTOBER 31, 1996(10) (UNAUDITED)
------- ------- -------- -------------------- --------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 15.11 $ 15.84 $ 13.96 $ 14.49 $ 14.20
------- ------- -------- -------- --------
Net Investment Loss(2) ( 0.09) ( 0.09) ( 0.13) ( 0.04) ( 0.11)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions 0.82 ( 1.24) 0.66 ( 0.25) ( 0.01)(11)
------- ------- -------- -------- --------
Total from Investment Operations 0.73 ( 1.33) 0.53 ( 0.29) ( 0.12)
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign
Currency Transactions -- ( 0.55) -- -- ( 0.11)
------- ------- -------- -------- --------
Net Asset Value, End of Period $ 15.84 $ 13.96 $ 14.49 $ 14.20 $ 13.97
======= ======= ======== ======== ========
Total Investment Return at Net Asset Value(4) 4.83%(5) ( 8.38%) 3.80% ( 2.00%)(5) ( 0.87%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 9,480 $14,368 $ 32,342 $ 30,147 $ 25,703
Ratio of Expenses to Average Net Assets 3.00%(7) 2.77% 2.64% 2.90%(7) 2.76%(7)
Ratio of Net Investment Loss to
Average Net Assets ( 1.40%)(7) ( 0.66%) ( 0.86%) ( 1.52%)(7) ( 1.48%)(7)
Portfolio Turnover Rate 68% 48% 73% 15% 44%
Average Brokerage Commission Rate(9) N/A N/A $ 0.0183 $ 0.0221 $ 0.0111
(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 tofluctuating 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.
(11) The amount shown for each share outstanding throughout the period may not accord with the change in the aggregate
gains and losses in the portfolio securities for the period because of the timing of purchases and withdrawals of
shares in relation to the fluctuating market value of the portfolio.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Pacific Basin Equities Fund on April 30, 1997. It's divided into three main
categories: common stocks, warrants and short-term investments. Common stocks
are further broken down by country. Short-term investments, which represent
the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----------
<S> <C> <C>
COMMON STOCKS
Australia (7.34%)
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) 55,000 $ 775,482
Hoyts Cinemas Group (Leisure)* 303,200 709,350
National Australia Bank Ltd.
(Banks -- Foreign) 110,000 1,505,498
News Corp. Ltd. (The) (Media) 129,000 594,549
Woodside Petroleum Ltd. (Oil & Gas) 100,000 795,446
-----------
4,380,325
-----------
Hong Kong (21.51%)
Cheung Kong (Holdings) Ltd.
(Real Estate Operations) 210,000 1,843,413
Cheung Kong Infrastructure
Holdings Ltd. (Building) 263,000 745,220
CITIC Pacific Ltd. (Diversified Operations) 112,000 605,796
Goldlion Holdings Ltd. (Retail) 435,000 256,906
Great Eagle Holdings Ltd.
(Real Estate Operations) 150,000 448,267
Guangzhou Investment Co., Ltd.
(Diversified Operations) 1,900,000 901,375
Hang Seng Bank Ltd. (Banks -- Foreign) 57,000 642,000
Hong Kong Telecommunications Ltd.
(Telecommunications) 388,000 666,159
HSBC Holdings Ltd. (Banks -- Foreign) 28,413 718,899
Hutchison Whampoa Ltd.
(Diversified Operations) 299,000 2,219,389
Ng Fung Hong Ltd. (Food) 224,000 300,729
Shanghai Industrial Holdings Ltd.
(Diversified Operations)* 143,000 804,854
Shun Shing Holdings Ltd. (Building)* 468,000 311,134
Sun Hung Kai Properties Ltd.
(Real Estate Operations) 100,000 1,084,361
Union Bank of Hong Kong Ltd.
(Banks -- Foreign) 330,000 479,249
Wheelock & Co., Ltd.
(Diversified Operations) 386,000 802,246
-----------
12,829,997
-----------
India (3.41%)
Hindalco Industries Ltd. Global Depositary
Receipts, (GDR) (Metal) (R) 33,600 1,087,632
State Bank of India (GDR)
(Banks -- Foreign)* 39,000 948,675
-----------
2,036,307
-----------
Indonesia (3.24%)
PT Astra International
(Automobile / Trucks) 110,000 402,881
PT Bank Internasional Indonesia
(Banks -- Foreign) 1,165,258 863,154
PT Bank Negara Indonesia
(Banks -- Foreign) 1,200,000 666,667
-----------
1,932,702
-----------
Japan (23.42%)
Canon Inc. (Office Equipment & Supplies) 30,000 711,388
Denso Corp. (Automobile / Trucks) 43,000 979,005
Matsushita Electric Industrial Co., Ltd.
(Electronics) 57,000 911,569
Minebea Co., Ltd. (Machinery) 70,000 584,551
Mitsubishi Estate Co., Ltd. (Real Estate
Operations) 94,000 1,184,858
NTT Data Corp. (Computer Services) 49 1,432,150
Ricoh Co., Ltd. (Office Equipment &
Supplies) 60,000 713,751
Rohm Co., Ltd. (Electronics) 12,000 930,240
Sharp Corp. (Electronics) 64,000 831,922
Sony Corp. (Electronics) 17,300 1,259,322
Sumitomo Electric Industries, Ltd.
(Wire & Cable Products) 68,000 921,416
Sumitomo Trust & Banking Co., Ltd.
(Banks -- Foreign) 45,000 372,238
Takeda Chemical Industries, Ltd.
(Medical-Drugs) 40,000 923,307
Toho Titanium Co., Ltd. (Metal)* 104,000 1,286,328
Toyota Motor Corp. (Automobile / Trucks) 32,000 927,719
-----------
13,969,764
-----------
Malaysia (11.99%)
Konsortium Perkapalan Berhad
(Transport) 125,000 741,795
Lingkaran Trans Kota Holdings Berhad
(Building)* 100,000 217,062
Malakoff Berhad (Energy) 142,000 565,557
Malayan Banking Berhad
(Banks -- Foreign) 135,000 1,344,193
Rashid Hussain Berhad (Banks -- Foreign) 104,000 691,732
Road Builder (M) Holdings Berhad
(Building) 138,000 670,543
Sime Darby Berhad (Diversified
Operations) 162,000 500,040
Sungei Way Holdings Berhad (Building) 300,000 687,032
Tan Chong Motor Holdings Berhad
(Automobile / Trucks) 360,000 668,154
United Engineers Ltd. (Building) 150,000 1,063,406
-----------
7,149,514
-----------
Philippine Islands (3.38%)
Belle Corp. (Real Estate Operations)* 1,182,000 282,389
Manila Electric Co. (B Shares) (Utilities) 93,340 580,499
Metropolitan Bank & Trust Co.
(Banks -- Foreign) 22,308 456,819
Philippine Long Distance Telephone Co.,
American Depositary Receipts (ADR)
(Utilities) 12,500 696,875
-----------
2,016,582
-----------
Singapore (5.55%)
City Developments Ltd. (Real Estate
Operations) 100,000 808,290
NatSteel Ltd. (Steel) 100,000 270,812
Oversea-Chinese Banking Corp., Ltd.
(Banks -- Foreign) 70,000 817,271
Singapore Airlines Ltd. (Transport) 75,000 663,212
United Overseas Bank Ltd.
(Banks -- Foreign) 80,000 751,641
-----------
3,311,226
-----------
South Korea (1.28%)
Korea Electric Power Corp. (Utilities) 11,000 328,027
Pohang Iron & Steel Co., Ltd. (Steel) 7,000 420,628
SK Telecom Co., Ltd. (ADR)
(Telecommunications) 1,491 14,164
-----------
762,819
-----------
Taiwan (2.56%)
China Steel Corp. (GDR) (Steel) 25,000 561,875
ROC Taiwan Fund (Finance -- Public
Investment Fund) 75,000 965,625
-----------
1,527,500
-----------
Thailand (4.35%)
Bangkok Bank (Banks -- Foreign) 112,000 1,037,573
Electricity Generating Public Co., Ltd.
(Utilities) 230,000 616,327
Krung Thai Bank Public Co., Ltd.
(Banks -- Foreign) 170,000 213,130
Shinawatra Computer and Communication
PLC (Telecommunications) 57,000 388,401
Siam City Bank (Banks -- Foreign) 420,000 341,659
-----------
2,597,090
-----------
TOTAL COMMON STOCKS
(Cost $50,156,383) (88.03%) 52,513,826
-------- -----------
WARRANT
Indonesia (0.06%)
PT Bank Internasional Indonesia
(Banks -- Foreign)* 103,580 33,035
-----------
TOTAL WARRANT
(Cost $0) (0.06%) 33,035
-------- -----------
TOTAL COMMON STOCKS AND WARRANT
(Cost $50,156,383) (88.09%) 52,546,861
-------- -----------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ------ ---------------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.52%)
Investment in a joint repurchase
agreement transaction with
Aubrey G. Lanston & Co. -
Dated 04-30-97, Due
05-01-97 (secured by U.S.
Treasury Notes, 5.50% thru
6.625%, Due 05-15-98 thru
9-30-01) - Note A. 5.38% $5,677 $ 5,677,000
-----------
TOTAL SHORT-TERM INVESTMENTS ( 9.52%) 5,677,000
-------- -----------
TOTAL INVESTMENTS (97.61%) $58,223,861
======= ===========
* Non-income producing security.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $1,087,632 as of April 30, 1997.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
<CAPTION>
Industry Diversification
April 30, 1997 (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 April 30, 1997 assigned
to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- ------------------
Automobile/Trucks 4.99%
Banks - Foreign 19.93
Building 6.19
Computer Services 2.40
Diversified Operations 11.09
Electronics 6.59
Energy 0.95
Finance - Public Investment Fund 1.62
Food 0.50
Leisure 1.19
Machinery 0.98
Media 1.00
Medical-Drugs 1.55
Metal 3.98
Office Equipment & Supplies 2.39
Oil & Gas 1.33
Real Estate Operations 9.47
Retail 0.43
Steel 2.10
Telecommunications 1.79
Transport 2.36
Utilities 3.72
Wire & Cable Services 1.54
Short-Term Investments 9.52
-----
Total Investments 97.61%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
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 primarily 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.
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class level
based on the appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable
to an individual fund. Expenses which are not readily identifiable to a
specific fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amount of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The Fund had
no borrowing activity for the period ended April 30, 1997.
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.
Open forward foreign currency exchange contracts sold at April 30, 1997 were
as follows:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ------ --------------
Japanese Yen 512,500,000 Jun 97 $35,038
Malaysian Ringgit 500,000 May 97 (437)
-------
$34,601
=======
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 quarterly
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).
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended April
30, 1997, net sales charges received with regard to sales of Class A shares
amounted to $53,969. Of this amount, $7,513 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $26,781 was
paid as sales commissions to unrelated broker-dealers and $19,675 was paid as
sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., ("Sutro"), all of which are broker-dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company ("JHMLICo"), is the
indirect sole shareholder of Distributors and was the indirect sole
shareholder until November 29, 1996 of John Hancock Freedom Securities
Corporation and its subsidiaries, which include 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 April 30, 1997,
contingent-deferred sales charges paid to JH Funds amounted to $59,859.
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 Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period
was at an annual rate of 0.01875% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. Trustee Edward J. Boudreau, Jr. is Managing Director
of the Sub-Adviser. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds,
as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability 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 April 30, 1997 , 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 April 30, 1997 aggregated $27,487,116 and
$44,323,257, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended April 30, 1997.
The cost of investments owned at April 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $55,833,383. Gross
unrealized appreciation and depreciation of investments aggregated $6,534,997
and $4,144,519, respectively, resulting in net unrealized appreciation of
$2,390,478.
NOTES
John Hancock Funds - Pacific Basin Equities Fund
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