SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Pacific Basin Equities Fund
APRIL 30, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
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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 and Chief Operating Officer
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
SUB-INVESTMENT ADVISER
INDOCAM ASIA ADVISERS LIMITED
ONE EXCHANGE SQUARE
HONG KONG
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109-1803
------------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year
wondering what the market would do for an encore in 1998. The answer so far has
been more of the same. This achievement continues to bolster many investors'
convictions that the market will produce these results forever, or, in the worst
case, that market declines will always be short-lived. While the economy remains
solid and the environment favorable, history and reason tell us it's a highly
unlikely scenario.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to third paragraph.]
This doesn't mean we know what the market will do next, or that it's
riding for a fall. But after such a run, even in this "new era" of strong
economic growth with low inflation, we believe it would be wise for investors to
set more realistic expectations. As we've said before, markets do indeed move in
two directions, even though we've seen "up" much more than "down" recently. Over
the long term, the market's historical results have been more in the 10% per
year range, which is still a solid result, considering it has been produced
despite wars, depressions and other social upheavals along the way.
In addition to adjusting, or at least re-examining, expectations, now
could also be a good time to review with your investment professional how your
assets are diversified, perhaps with an eye toward a more conservative approach.
Stocks, especially with their outsized gains of the last three years, might have
grown to represent a larger piece of your portfolio than you had originally
intended, given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial
objectives and maintain wealth. One way we can do that is by helping you keep
your feet on the ground as you pursue your dreams.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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BY AYAZ EBRAHIM FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Pacific Basin
Equities Fund
Economic turmoil keeps Pacific Basin volatile
Currency turmoil and financial crisis continued to plague the Pacific Basin
markets over the last six months. During the fourth quarter of 1997, sharp
currency devaluations led to steep stock market declines across the region. By
year end, for example, the Malaysian stock market had fallen in U.S. dollar
terms by 69%, Thailand by 76% and Indonesia by 74%.
With the announcement of Japan's economic stimulus package in January,
Asian stock markets bounced back temporarily. As the details of the government's
program become better understood, however, investors lost confidence in the
plan's ability to address Japan's long-term economic ills. Because Japan is
critical to the region's economic recovery, worries about the Japanese economy
triggered another round of stock market declines throughout the region.
Performance
Not surprisingly, the market turmoil has negatively impacted the performance of
all Pacific region funds. For the six months ended April 30, 1998, John Hancock
Pacific Basin Equities Fund Class A and Class B shares had total returns of
- -13.07% and -13.34%, respectively, at net asset value. Keep in mind that your
net asset value return will be different from this performance if you were not
invested in the Fund for the entire period and did not reinvest all
distributions. In the same period, the average Pacific region fund returned
- -9.11%, according to Lipper Analytical Services, Inc.1 Please see pages six and
seven for longer-term performance information.
We believe the Fund lagged its peers due to our defensive investment
posture. When the Asian markets rebounded early in the year, we
"...sharp currency devaluations led to steep stock market declines..."
[A 2 1/4" x 2 3/4" photo at the bottom of right hand column of Fund portfolio
manager Ayaz Ebrahim.]
3
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John Hancock Funds - Pacific Basin Equities Fund
[Pie chart at top of left hand column with the heading "Portfolio
Diversification". The chart is divided into 11 sections from top, left to right:
Short-Term Investments & Other 8%; Thailand 1%; Philippines 1%; India 2%; Taiwan
3%; South Korea 4%; Malaysia 5%; Singapore 7%; Australia 12%; Hong Kong 28% and
Japan 29%. A note below the chart reads "As a percentage of net assets on April
30, 1998".]
did not benefit as much as other funds with more aggressive investment
strategies. Given the region's economic woes, however, we are confident that
this defensive stance will pay off during the remainder of the year.
Hong Kong
Hong Kong is one of the few fundamentally sound economies in the Pacific region.
Given that, it remains one of our top country weightings at 28% of the Fund's
net assets. That's not to say, however, that Hong Kong has escaped Asia's
financial crisis. Certainly, tremendous currency pressure has sent interest
rates soaring and stock prices falling. We are confident, however, that the
government has the ability to maintain the Hong Kong dollar's all-important link
to the U.S. dollar.
Although higher interest rates are likely to put pressure on the economy
in the near term, the good news is that Hong Kong is likely to be buoyed by
China's strong long-term growth prospects. That's because Hong Kong serves as
the financial and trade service center for China. For that reason, our
investments here focus on China "red chips" -- those Chinese companies that are
listed on Hong Kong's Hang Seng Stock Index. One example is power company
Beijing Datang Power Generation Co., which is well positioned to benefit from
China's improving infrastructure and growing industrial sectors.
Japan
We have gradually increased our weighting in Japan to nearly 29% of net assets,
up from 18% six months ago. The main reason is that we believe the Japanese
government will be forced to deal with the country's economic troubles. Although
it certainly did not go far enough, the economic stimulus package announced in
January was the government's first step toward making the tough fiscal changes.
Having said that, we realize that it will take time to pass the necessary
economic reforms, given the pervasive bureaucracy in the Japanese government. As
a result, we are moving cautiously in Japan, staying relatively underweighted.
Our focus remains on the one bright spot in the Japanese economy: exporters,
such as NEC and Sony.
Australia
As we discussed in the annual report, Australia, at 12% of the Fund's net
assets, has held up best during the region's market turmoil. Part of the reason
is that the Australian stock market tends to be more closely correlated with the
U.S. stock market than it does with other Pacific region markets. The strong
performance of U.S. stocks during the last six months has certainly
"Hong Kong is one of the few fundamentally sound economies in the Pacific
region."
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Philippine
Long Distance Telephone followed by an up arrow with the phrase "Strong U.S.
dollar revenue growth". The second listing is Development Bank of Singapore
followed by a down arrow with the phrase "Concerns over Indonesian corporate
exposure". The third listing is Ricoh followed by a down arrow with the phrase
"Domestic Sales hurt by deteriorating economy". A note below the table reads
"See "Schedule of Investments." Investment holdings are subject to change."]
4
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John Hancock Funds - Pacific Basin Equities Fund
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the six months ended April 30, 1998". The
chart is scaled in increments of 5% with -15% at the bottom and 0% at the top.
The first bar represents the -13.07% total return for John Hancock Pacific Basin
Equities Fund Class A. The second bar represents the -13.34% total return for
John Hancock Pacific Basin Equities Fund Class B. The third bar represents the
- -9.11% total return for the average Pacific region fund. A note below the chart
reads "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, Inc. (1). See the following two pages
for historical performance information."]
buoyed Australian stocks. Another reason is that a series of interest-rate cuts
have spurred steady growth in the Australian economy. Banks such as National
Australia Bank and Westpac Banking Corp. have been among our top performers,
driven by falling interest rates and increased takeover speculation throughout
the banking industry.
Selectivity is key in emerging Asia
Because the region's financial crisis hit the Southeast Asian economies the
hardest, we've remained very selective about our investments in these emerging
market countries, keeping only 14% of the Fund's assets in Singapore, Malaysia,
Indonesia, Thailand and the Philippines. We've recently taken profits in
Malaysia because the government there has been slow to implement the necessary
economic reforms. Elsewhere, we're also staying light in Taiwan for the time
being, due to concerns about deteriorating market liquidity and weakness in the
country's dominant electronics sector. One bright spot in more developed north
Asia is South Korea. With the government significantly restructuring the
economy, we're finding some interesting opportunities. Finally, we also like
India, which offers the strongest earnings growth in the region at attractive
valuations.
Outlook
Looking ahead, we believe that the major currency risks in the Asian markets
have subsided. However, the Asian markets are now moving from a currency crisis
to an economic crisis. Several countries -- notably Thailand and Indonesia --
are likely to experience an economic contraction this year, while growth rates
elsewhere in the region will be extremely low by historical standards.
Investors are hoping that an export-led recovery will bring the Pacific
region out of its economic doldrums. Although many current account deficits have
been reversed in recent months, this is due to collapsing imports rather than
accelerating exports. In our opinion, it will take some time before an export
recovery leads Asian growth. What's more, a weak Japanese economy is likely to
put pressure on export growth. Given that, market volatility is likely to
continue to plague the Pacific Basin markets. As a result, we plan to maintain
our relatively defensive investment strategy for now.
"...we plan to maintain our relatively defensive investment strategy..."
- --------------------------------------------------------------------------------
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 such as political and currency
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.
5
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John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Pacific Basin Equities Fund. Total return
measures the change in value of an investment from the beginning to the end of a
period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended March 31, 1998
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
Cumulative Total Returns (30.01%) (0.99%) 23.77%
Average Annual Total Returns (30.01%) (0.20%) 2.16%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended March 31, 1998
SINCE
ONE INCEPTION
YEAR (3/7/94)
---- --------
Cumulative Total Returns (30.56%) (30.16%)
Average Annual Total Returns (30.56%) (8.45%)
6
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John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Pacific Basin Equities Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley Capital International (MSCI) 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. Past performance is not indicative of future results.
[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 $14,823 as of
April 30, 1998. 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 $14,082 as of April 30, 1998. The third line
represents the Morgan Stanley Capital International Pacific Index and is equal
to $8,334 as of April 30, 1998.]
[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
hypothetical $10,000 investment made in the Morgan Stanley Capital International
Pacific Index on March 7, 1994, and is equal to $7,038 as of April 30, 1998. The
second line represents the value of the Pacific Basin Equities Fund, before
sales charge, and is equal to $6,801 as of April 30, 1998. The third line
represents the value of the Pacific Basin Equities Fund, after sales charge, and
is equal to $6,601 as of April 30, 1998.]
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1998. 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks and rights (cost - $28,370,413) ............. $29,129,363
Short-term investments (cost - $5,865,244) ................ 5,865,244
------------
34,994,607
Cash ....................................................... 454,622
Foreign currency, at value (cost - $522,362) ............... 523,023
Foreign taxes receivable ................................... 1,785
Receivable for investments sold ............................ 1,932,804
Receivable for shares sold ................................. 1,884
Receivable for forward foreign currency exchange
contracts purchased - Note A .............................. 3,405
Dividends receivable ....................................... 67,207
Interest receivable ........................................ 959
Other assets ............................................... 2,459
------------
Total Assets ............................. 37,982,755
-----------------------------------------------------------
Liabilities:
Payable for investments purchased .......................... 763,584
Payable for shares repurchased ............................. 16,623
Payable upon return of securities on loan - Note A ......... 5,429,119
Payable for forward foreign currency exchange
contracts sold - Note A ................................... 14,987
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 74,215
Accounts payable and accrued expenses ...................... 85,471
------------
Total Liabilities ........................ 6,383,999
-----------------------------------------------------------
Net Assets:
Capital paid-in ............................................ 41,414,739
Accumulated net realized loss on investments and
foreign currency transactions ............................. (10,499,201)
Net unrealized appreciation of investments and
foreign currency transactions ............................. 746,262
Accumulated net investment loss ............................ (63,044)
------------
Net Assets ............................... $31,598,756
===========================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding -
unlimited number of shares authorized
with no par value)
Class A - $17,446,256 / 1,725,046 .......................... $10.11
=============================================================================
Class B - $14,152,500 / 1,442,034 .......................... $9.81
=============================================================================
Maximum Offering Price Per Share*
Class A - ($10.11 x 105.26%) ............................... $10.64
=============================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
The Statement of 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (net of foreign withholding taxes of $18,163) .... $307,597
Interest (including income on securities loaned of
$23,419, net of foreign withholding taxes of $161) ........ 97,733
------------
405,330
------------
Expenses:
Investment management fee - Note B ........................ 137,107
Distribution and service fee - Note B
Class A ................................................. 28,407
Class B ................................................. 76,693
Transfer agent fee - Note B ............................... 121,933
Custodian fee ............................................. 51,933
Registration and filing fees .............................. 20,037
Auditing fee .............................................. 15,125
Printing .................................................. 7,075
Financial services fee - Note B ........................... 3,025
Miscellaneous ............................................. 2,067
Legal fees ................................................ 1,122
Trustees' fees ............................................ 1,110
------------
Total Expenses ........................... 465,634
-----------------------------------------------------------
Net Investment Loss ...................... (60,304)
-----------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ...................... (7,128,744)
Net realized loss on foreign currency transactions ......... (2,899,309)
Change in net unrealized appreciation/depreciation
of investments ............................................ 5,745,522
Change in net unrealized appreciation/depreciation
of foreign currency transactions .......................... (9,876)
------------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ............ (4,292,407)
-----------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ................ ($4,352,711)
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
---------------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ...................................... ($493,112) ($60,304)
Net realized loss on investments sold and foreign
currency transactions .................................. (323,389) (10,028,053)
Change in net unrealized appreciation/depreciation
of investments and foreign currency transactions ....... (6,891,185) 5,735,646
------------ ------------
Net Decrease in Net Assets Resulting from Operations ... (7,707,686) (4,352,711)
------------ ------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold
and foreign currency transactions
Class A - ($0.1114 and none per share, respectively) ... (298,861) --
Class B - ($0.1114 and none per share, respectively) ... (226,927) --
------------ ------------
Total Distributions to Shareholders .................... (525,788) --
------------ ------------
From Fund Share Transactions - Net:* ........................ (22,178,367) (2,477,769)
------------ ------------
Net Assets:
Beginning of period ...................................... 68,841,077 38,429,236
------------ ------------
End of period (including accumulated net investment
loss of $2,740 and $63,044, respectively) .............. $38,429,236 $31,598,756
============ ============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ......................................... 7,033,995 $104,411,972 2,838,724 $29,323,107
Shares issued to shareholders in reinvestment
of distributions .................................. 18,734 279,606 -- --
------------- ------------- ------------- -------------
7,052,729 104,691,578 2,838,724 29,323,107
Less shares repurchased ............................. (7,912,293) (118,130,220) (2,928,683) (30,777,147)
------------- ------------- ------------- -------------
Net decrease ........................................ (859,564) ($13,438,642) (89,959) ($1,454,040)
============= ============= ============= =============
CLASS B
Shares sold ......................................... 1,927,628 $28,233,034 847,693 $7,915,201
Shares issued to shareholders in reinvestment
of distributions .................................. 12,216 178,751 -- --
------------- ------------- ------------- -------------
1,939,844 28,411,785 847,693 7,915,201
Less shares repurchased ............................. (2,533,663) (37,151,510) (935,207) (8,938,930)
------------- ------------- ------------- -------------
Net decrease ........................................ (593,819) ($8,739,725) (87,514) ($1,023,729)
============= ============= ============= =============
</TABLE>
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.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
SEPTEMBER 1, YEAR ENDED
YEAR ENDED AUGUST 31, 1996 TO ENDED APRIL 30,
------------------------------------------ OCTOBER 31, OCTOBER 31, 1998
1993 1994 995 1996 1996(9) 1997 (UNAUDITED)
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ...... $8.87 $13.27 $15.88 $14.11 $14.74 $14.47 $11.63
------- ------- ------- ------- ------- ------- -------
Net Investment Income (Loss)(2) ........... (0.11) (0.10) 0.02(3) (0.02) (0.02) (0.07) (0.00)(10)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ........................... 4.51 3.12 (1.24) 0.65 (0.25) (2.66) (1.52)
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 4.40 3.02 (1.22) 0.63 (0.27) (2.73) (1.52)
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ........................... -- (0.41) (0.55) -- -- (0.11) --
------- ------- ------- ------- ------- ------- -------
Total Distributions ................... -- (0.41) (0.55) -- -- (0.11) --
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............ $13.27 $15.88 $14.11 $14.74 $14.47 $11.63 $10.11
======= ======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset
Value(4) ............................... 49.61% 22.82% (7.65%) 4.47% (1.83%)(5) (19.03%) (13.07%)(5)
Total Adjusted Investment Return at
Net Asset Value(4,6) ................... 48.31% -- -- -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .. $14,568 $50,261 $37,417 $41,951 $38,694 $21,109 $17,446
Ratio of Expenses to Average Net Assets ... 2.94% 2.43% 2.05% 1.97% 2.21%(7) 2.06% 2.40%(7)
Ratio of Adjusted Expenses to Average
Net Assets(8) .......................... 4.24% -- -- -- -- -- --
Ratio of Net Investment Income (Loss)
to Average Net Assets .................. (0.98%) (0.66%) 0.13%(3) (0.15%) (0.83%)(7) (0.49%) (0.03%)(7)
Ratio of Adjusted Net Investment Loss
to Average Net Assets(8) ............... (2.28%) -- -- -- -- -- --
Portfolio Turnover Rate ................... 171% 68% 48% 73% 15% 118% 125%
Expense Reimbursement Per Share(2) ........ $0.14 -- -- -- -- -- --
</TABLE>
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.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED AUGUST 31, PERIOD FROM
AUGUST 31, -------------------- SEPTEMBER 1, 1996 TO
1994(1) 1995 1996 OCTOBER 31, 1996(9)
------- ------ ------- -------------------
<S> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ........ $15.11 $15.84 $13.96 $14.49
------ ------- ------- -------
Net Investment Loss(2) ...................... (0.09) (0.09) (0.13) (0.04)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ............................. 0.82 (1.24) 0.66 (0.25)
------ ------- ------- -------
Total from Investment Operations ......... 0.73 (1.33) 0.53 (0.29)
------ ------- ------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ............................. -- (0.55) -- --
------ ------- ------- -------
Total Distributions ...................... -- (0.55) -- --
------ ------- ------- -------
Net Asset Value, End of Period .............. $15.84 $13.96 $14.49 $14.20
====== ======= ======= =======
Total Investment Return at Net Asset
Value(4) ................................. 4.83%(5) (8.38%) 3.80% (2.00%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .... $9,480 $14,368 $32,342 $30,147
Ratio of Expenses to Average Net Assets ..... 3.00%(7) 2.77% 2.64% 2.90%(7)
Ratio of Net Investment Loss to Average
Net Assets ............................... (1.40%)(7) (0.66%) (0.86%) (1.52%)(7)
Portfolio Turnover Rate ..................... 68% 48% 73% 15%
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
OCTOBER 31, APRIL 30, 1998
1997 (UNAUDITED)
------- -----------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ........ $14.20 $11.32
------- -------
Net Investment Loss(2) ...................... (0.18) (0.04)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ............................. (2.59) (1.47)
------- -------
Total from Investment Operations ......... (2.77) (1.51)
------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ............................. (0.11) --
------- -------
Total Distributions ...................... (0.11) --
------- -------
Net Asset Value, End of Period .............. $11.32 $9.81
======= =======
Total Investment Return at Net Asset
Value(4) ................................. (19.67%) (13.34%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .... $17,320 $14,153
Ratio of Expenses to Average Net Assets ..... 2.76% 3.10%(7)
Ratio of Net Investment Loss to Average
Net Assets ............................... (1.19%) (0.74%)(7)
Portfolio Turnover Rate ..................... 118% 125%
</TABLE>
(1) Class B shares commenced operations on March 7, 1994.
(2) Based on the average of the shares outstanding at the end of each month.
(3) May not accord to amounts shown elsewhere in the financial statements due
to the timing of sales and repurchases of Fund shares in relation to
fluctuating market values of the investments of the Fund.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Effective October 31, 1996, the fiscal period end changed from August 31
to October 31.
(10) Less than $0.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Schedule of Investments
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Pacific Basin Equities Fund on April 30, 1998. It's divided into three main
categories: common stocks, rights and short-term investments. Common stocks and
rights 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
- ------------------- ---------------- -----
COMMON STOCKS
Australia (11.90%)
Australian Gas Light Co., Ltd. (Oil & Gas) ...... 36,800 $273,920
Broken Hill Proprietary Co., Ltd. (Energy) ...... 21,500 210,351
Foster's Brewing Group Ltd. (Beverages) ......... 168,800 367,733
Hoyts Cinemas Group (Leisure) .................. 353,733 576,806
National Australia Bank Ltd. ....................
(Banks - Foreign) ............................. 20,000 284,381
Publishing & Broadcasting Ltd. (Media) .......... 59,000 282,079
Southern Pacific Petroleum NL
(Oil & Gas)* .................................. 116,748 177,427
Telstra Corp., Ltd. (Telecommunications) ........ 183,800 431,581
Westpac Banking Corp. ...........................
(Banks - Foreign) ............................. 41,800 280,820
Woodside Petroleum Ltd. (Oil & Gas) ............. 50,000 327,103
Woolworth's Ltd. (Retail) ....................... 158,800 546,888
------------
3,759,089
------------
Hong Kong (28.16%)
Beijing Datang Power Generation Co., Ltd. .......
(Utilities) ................................... 446,000 181,371
Cheung Kong Holdings Ltd. .......................
(Real Estate Operations) ...................... 134,000 890,911
China Telecom Ltd. ..............................
(Telecommunications)* ......................... 600,000 1,138,652
CITIC Pacific Ltd. (Diversified Operations) ..... 64,000 196,643
CLP Holdings Ltd. (Utilities) .................. 53,000 254,531
Hang Seng Bank Ltd. (Banks - Foreign) ........... 15,900 133,937
Hong Kong & China Gas Co., Ltd. .................
(Oil & Gas) ................................... 306,900 417,996
Hong Kong Telecommunications Ltd. ...............
(Telecommunications) .......................... 576,000 1,078,234
Hong Kong (continued)
Hongkong Land Holdings Ltd. .....................
(Real Estate Operations) ...................... 94,000 $132,540
HSBC Holdings Ltd. (Banks - Foreign) ............ 44,013 1,255,729
Hutchison Whampoa Ltd. ..........................
(Diversified Operations) ...................... 180,000 1,113,091
New World Development Co., Ltd. .................
(Real Estate Operations) ...................... 171,000 486,774
Shanghai Industrial Holdings Ltd. ...............
(Diversified Operations) ...................... 163,000 558,695
Sun Hung Kai Properties Ltd. ....................
(Real Estate Operations) ...................... 70,000 415,698
Television Broadcasts Ltd. (Media) .............. 147,000 375,755
Tianjin Development Holdings Ltd. ...............
(Diversified Operations)* ..................... 234,000 267,351
------------
8,897,908
------------
India (2.16%)
Bajaj Auto Ltd. Global Depositary Receipts
(GDR) (Automobile / Trucks) .................. 15,500 294,500
Larsen & Toubro Ltd. (GDR) (Machinery) .......... 23,000 298,425
Reliance Industries Ltd. (GDR) (Chemicals)* ..... 9,900 90,338
------------
683,263
------------
Indonesia (0.42%)
Gulf Indonesia Resources Ltd. (Oil & Gas)* ...... 8,700 133,763
------------
Japan (29.00%)
Canon, Inc. (Machinery) ......................... 6,000 141,907
Honda Motor Co., Ltd. ...........................
(Automobile / Trucks) ......................... 3,000 108,811
Matsushita Electric Industrial Co., Ltd. ........
(Electronics) ................................. 17,000 272,329
Mazda Motor Corp. (Automobile / Trucks)* ........ 22,000 60,677
Minebea Co., Ltd. (Machinery) .................. 43,000 480,883
NEC Corp. (Electronics) ......................... 20,000 225,178
Nichiei Co., Ltd. (Finance) ..................... 2,000 155,660
NTT Data Corp. (Computers) ...................... 13 561,886
Ricoh Co., Ltd. (Machinery) ..................... 93,000 963,450
Rohm Co., Ltd. (Electronics) .................... 15,000 1,693,366
Shin-Etsu Chemical Co., Ltd. (Chemicals) ........ 20,000 389,905
Sony Corp. (Household) .......................... 13,000 1,081,532
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Japan (continued)
Sumitomo Electric Industries, Ltd. ............
(Industrial Components) ..................... 50,000 $595,814
Sumitomo Sitix Corp. (Metal) .................. 34,000 482,998
Takeda Chemical Industries, Ltd. (Medical) .... 49,000 1,399,577
TERUMO Corp. (Medical) ........................ 25,000 366,102
Toyota Motor Corp. (Automobile / Trucks) ...... 7,000 182,484
-----------
9,162,559
-----------
Malaysia (5.31%)
Genting Berhad (Leisure) ...................... 100,000 332,440
Malayan Banking Berhad (Banks - Foreign) ...... 82,200 242,413
Malaysia International Shipping Berhad
(Transport) ................................. 170,000 296,247
Petronas Gas Berhad (Oil & Gas) ............... 139,000 335,389
Rothmans of Pall Mall Berhad (Tobacco) ........ 25,000 206,099
Telekom Malaysia Berhad
(Telecommunications) ........................ 60,000 180,161
Tenaga Nasional Berhad (Utilities) ............ 42,000 83,887
-----------
1,676,636
-----------
Philippine Islands (1.07%)
Philippine Long Distance Telephone Co. ........
American Depositary Receipts
(Telecommunications) ........................ 12,500 337,500
-----------
Singapore (7.17%)
City Developments Ltd. ........................
(Real Estate Operations) .................... 20,000 86,572
DBS Land Ltd. (Real Estate Operations) ........ 60,000 90,616
Development Bank of Singapore
(Banks - Foreign) ........................... 46,000 305,213
Oversea-Chinese Banking Corp., Ltd. ...........
(Banks - Foreign) ........................... 97,000 511,817
Overseas Union Bank Ltd. ......................
(Banks - Foreign) ........................... 69,000 261,611
Sembawang Corp., Ltd. .........................
(Diversified Operations) .................... 48,000 95,848
Singapore Technologies Engineering Ltd. .......
(Engineering / R&D Services)* ............... 584,452 502,278
Singapore Telecommunications, Ltd. ............
(Telecommunications) ........................ 155,000 266,414
United Overseas Bank Ltd. .....................
(Banks - Foreign) ........................... 31,000 146,919
-----------
2,267,288
-----------
South Korea (3.84%)
Daehan City Gas Co. (Utilities) ............... 4,500 $80,808
Daewoo Heavy Industries (Machinery) ........... 76,000 375,877
Samsung Display Devices Co. ...................
(Electronics) ............................... 8,140 405,021
Samsung Electronics Co. (Electronics) ......... 5,000 276,843
Samsung Electronics Ltd. (GDR)
(Electronics) (R)* .......................... 2,700 76,005
-----------
1,214,554
-----------
Taiwan (2.51%)
BES Engineering Corp. (Building)* ............. 230,000 189,722
D-Link Corp. (Computers) ...................... 80,000 205,007
Taiwan Semiconductor Manufacturing Co. ........
(Electronics)* .............................. 45,000 194,468
Yageo Corp. (Electronics)* .................... 85,000 202,353
-----------
791,550
-----------
Thailand (0.53%)
Bangkok Expressway Public Co., Ltd. ...........
(Transport)* ................................ 212,000 167,296
-----------
TOTAL COMMON STOCKS
(Cost $28,370,413).............. (92.07%) 29,091,406
----------- -----------
RIGHTS
South Korea (0.12%)
Samsung Display Devices Co. ...................
(Electronics)* .............................. 1,169 20,292
Samsung Electronics Co. (Electronics)* ........ 795 15,347
Samsung Electronics Ltd. (GDR)
(Electronics) (R)* .......................... 214 2,318
-----------
37,957
-----------
TOTAL RIGHTS
(Cost $0).............. (0.12%) 37,957
----------- -----------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $28,370,413) ............. (92.19%) 29,129,363
----------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Indonesia (1.08%)
Indonesia Time Deposit,
Due 5/4/98 *** .......................... 25.00% 2,721,000 $340,125
-----------
Joint Repurchase Agreement (0.30%)
Investment in a joint repurchase
agreement transaction with
Toronto Dominion Securities
USA, Inc. - Dated 04-30-98,
due 05-01-98 (Secured by
U.S. Treasury Notes,
5.00% thru 9.125%, due
02-15-99 thru 07-31-00)
- Note A .............................. 5.50 $96 96,000
-----------
Non-Cash Security Lending Collateral (0.75%)
U.S. Treasury Bonds, 6.625% thru
12.000%, Due 05-15-10 thru
02-15-27, U.S. Treasury Notes
3.375% thru 7.250%, Due
10-31-98 thru 01-15-07 ** ............. 236 235,722
-----------
Cash Equivalents (16.43%)
Navigator Securities Lending
Prime Portfolio ** .................... 5,193 5,193,397
-----------
TOTAL SHORT-TERM INVESTMENTS (18.56%) 5,865,244
--------- -----------
TOTAL INVESTMENTS (110.75%) 34,994,607
--------- -----------
OTHER ASSETS AND LIABILITIES, NET (10.75%) (3,395,851)
--------- -----------
TOTAL NET ASSETS (100.00%) $31,598,756
========= ===========
</TABLE>
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
*** Par value of this security is denominated in foreign currency.
(R) Security is exempt from registration under rule 144A of the Securities and
Exchange Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $78,323 as of April 30, 1998.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Industry Diversification
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's investments
at April 30, 1998 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- -------------
Automobile / Trucks......................... 2.05%
Banks- Foreign............................. 10.83
Beverages - Alcoholic....................... 1.16
Buildings................................... 0.60
Chemicals................................... 1.52
Computers................................... 2.43
Diversified Operations...................... 7.06
Electronics................................. 10.71
Energy...................................... 0.67
Engineering/R & D Services.................. 1.59
Finance..................................... 0.49
Household................................... 3.42
Industrial Components....................... 1.89
Leisure..................................... 2.88
Machinery................................... 7.15
Media....................................... 2.08
Medical..................................... 5.59
Metal....................................... 1.53
Oil & Gas................................... 5.27
Real Estate Operations...................... 6.66
Retail...................................... 1.73
Telecommunications.......................... 10.86
Tobacco..................................... 0.65
Transport................................... 1.47
Utilities................................... 1.90
Short-Term Investments...................... 18.56
-----
TOTAL INVESTMENTS 110.75%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Pacific Basin Equities 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 Pacific Basin Equities Fund (the "Fund"), John
Hancock European Equity Fund and John Hancock Global Rx 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
in a diversified portfolio of stocks of companies located primarily in countries
of the Pacific Basin.
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."
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,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities must be treated as ordinary income
even though such items are gains and losses for accounting purposes. For federal
income tax purposes, the Fund has $369,905 of capital loss carryforwards
available, to the extent provided by regulations, to offset future net realized
capital gains. To the extent such carryforwards are used by the Fund, no capital
gains distribution will be made. The whole amount of the carryforward expires on
October 31, 2005.
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
15
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Pacific Basin Equities Fund
for the effect of expenses that may be applied differently to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported 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. These agreements enable
the Fund to participate with other funds managed by the Adviser in unsecured
lines of credit with banks which permit borrowings up to $800 million,
collectively. Interest is charged to each fund, based on its borrowings, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at
rates ranging from 0.070% to 0.075% per annum based on the average daily unused
portion of the lines of credit, is allocated among the participating funds. The
Fund had no borrowing activity for the period ended April 30, 1998.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral should
the borrower of the securities fail financially. At April 30, 1998 the Fund
loaned securities having a market value of $5,143,649 collateralized by cash and
securities in the amount of $5,429,119, which was invested in a short-term
instrument.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 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 cur-
16
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Pacific Basin Equities Fund
rency 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 if they are offset by the currency amount of the underlying
transaction.
Open forward foreign currency contracts for the Fund at April 30, 1998
were as follows:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT DATE (DEPRECIATION)
- -------- ------------------- ---- --------------
BUYS
Japanese Yen 2,770,398 MAY 98 ($169)
Malaysian Ringgit 685,000 MAY 98 2,045
Singapore Dollar 481,000 MAY 98 1,529
--------
$3,405
========
SELLS
Australian Dollar 376,000 MAY 98 ($3,177)
Australian Dollar 2,007,000 MAY 98 (5,520)
Indonesian Rupiah 2,734,227,083 MAY 98 (6,290)
--------
($14,987)
========
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 Adviser has a sub-investment management contract with John Hancock
Advisers International Limited ("JHAI") (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 INDOCAM Asia Advisers Limited ("IAAL") have a second subadvisory
contract. Pursuant to such contract, IAAL will serve as co-subadviser to the
Fund with the Sub-Adviser. 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, 1998, net sales charges received with regard to sales of Class A shares
amounted to $35,948. Of this amount, $5,327 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $21,000 was paid
as sales commissions to unrelated broker-dealers and $9,621 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), a related broker-dealer. The Adviser's indirect parent, John
Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Distributors.
17
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Pacific Basin Equities Fund
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 5.00% 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, 1998,
contingent deferred sales charges paid to JH Funds amounted to $40,012.
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 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 less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are Trustees and/or officers of the Adviser and/or its affiliates, as
well as Trustees of the Fund. 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, 1998 , the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $428.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1998, aggregated $39,557,057 and
$39,927,271, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended April 30, 1998.
The cost of investments owned at April 30, 1998 (including short-term
investments) for federal income tax purposes was $34,256,404. Gross unrealized
appreciation and depreciation of investments aggregated $2,791,461 and
$2,053,258, respectively, resulting in unrealized appreciation of $738,203.
18
<PAGE>
===================================== NOTES ====================================
John Hancock Funds - Pacific Basin Equities Fund
19
<PAGE>
================================================================================
----------------
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 Randolph, MA
1-800-225-5291 1-800-554-6713 (TDD) Permit No. 75
INTERNET: www.jhancock.com/funds ----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Pacific Basin Equities Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[Recycle Logo] Printed on Recycled Paper 580SA 4/98
6/98
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Global Rx
Fund
APRIL 30, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
------------------------------------------
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 and Chief Operating Officer
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 02109-1803
------------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year
wondering what the market would do for an encore in 1998. The answer so far has
been more of the same. This achievement continues to bolster many investors'
convictions that the market will produce these results forever, or, in the worst
case, that market declines will always be short-lived. While the economy remains
solid and the environment favorable, history and reason tell us it's a highly
unlikely scenario.
This doesn't mean we know what the market will do next, or that it's
riding for a fall. But after such a run, even in this "new era" of strong
economic growth with low inflation, we believe it would be wise for investors to
set more realistic expectations. As we've said before, markets do indeed move in
two directions, even though we've seen "up" much more than "down" recently. Over
the long term, the market's historical results have been more in the 10% per
year range, which is still a solid result, considering it has been produced
despite wars, depressions and other social upheavals along the way.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to third paragraph.]
In addition to adjusting, or at least re-examining, expectations, now
could also be a good time to review with your investment professional how your
assets are diversified, perhaps with an eye toward a more conservative approach.
Stocks, especially with their outsized gains of the last three years, might have
grown to represent a larger piece of your portfolio than you had originally
intended, given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial
objectives and maintain wealth. One way we can do that is by helping you keep
your feet on the ground as you pursue your dreams.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY LINDA MILLER, CFA, PORTFOLIO MANAGER
John Hancock
Global Rx Fund
Health-care stocks chalk up strong gains
There wasn't much that ailed health-care stocks during the six-month period
ended April 30, 1998. While other sectors of the market suffered from a serious
bout of "Asian flu," health-care companies shrugged off the region's financial
crisis. Even though many of these companies generate a fair amount of their
earnings from developed countries in Asia, they generally have little exposure
to the less-developed, most troubled nations in the region. Furthermore, the
strong demand for new and existing health-care products from other parts of the
world -- particularly the U.S. and Europe -- helped offset declining Asian
sales. In fact, health-care stocks not only survived the Asian turmoil, but some
even benefited from it. In a classic "flight to quality," investors increasingly
favored health-care companies with predictable earnings growth over cyclical
industries dependent on the economy's growth.
Several other developments and trends aided health-care stocks. First was
the excitement generated from a rash of new product introductions, including the
wildly successful Viagra, the first pill used to treat male impotence. In
addition, hospitals and HMOs emerged from the sick bay where they were laid low
in 1997. Their improved condition was a direct result of HMOs' finally being
able to enact rate increases to offset rising medical care costs. Finally, talk
of mergers and acquisitions between large drug companies fueled speculation that
a period of consolidation was about to overtake the industry.
Against that backdrop, the Fund's performance was gratifying, both on an
absolute and
"...health-care companies shrugged off the [Asian] region's financial crisis."
[A 2 1/4" x 3 3/4" photo at bottom of page of portfolio manager Linda (seated)
and Fund management team members Anurag Pandit (l) and Ben Hock (r)]
3
<PAGE>
================================================================================
John Hancock Funds - Global Rx Fund
[Chart at the top of left hand column with the heading "Top Five Common Stock
Holdings". The chart lists five holdings: 1.) Pfizer 4.4%; 2.) Warner-Lambert
4.2%; 3.) Schering-Plough 3.7%; 4.) Merck 3.2% and 5.) Bristol-Myers Squibb
3.2%. A note below the chart reads "As a percentage of net assets on April 30,
1998".]
relative basis. For the six months ended April 30, 1998, John Hancock Global Rx
Fund's Class A and Class B shares posted total returns of 17.00% and 16.57%,
respectively, at net asset value. Keep in mind that your net asset value return
will be different from this performance if you were not invested in the Fund for
the entire period and did not reinvest all distributions. The Fund outpaced the
average health-care/biotechnology fund's return of 12.70% for the same period,
according to Lipper Analytical Services, Inc.1 Please see pages six and seven
for longer-term performance information.
Winners and Losers
Among our biggest winners during the period were our large drug companies, which
were also some of our top holdings. Our biggest position, Pfizer, saw its stock
price jump nearly 36% during the period, thanks in large part to its promotion
of the cholesterol-lowering drug Lipitor, the successful introduction of the
antibiotic Trovan, and the overwhelming demand for Viagra. Merck's stock jumped
roughly 30% from depressed levels with the continued growth in sales of its
cholesterol drug Zocor and HIV treatment Crixivan. Warner-Lambert, Pfizer's
partner in Lipitor, was up roughly 29%. Schering-Plough, Johnson & Johnson and
Eli Lilly also posted decent gains.
Not all of our drug holdings performed well. Dura Pharmaceuticals' stock
dropped more than 45% from the beginning of the period. The company develops and
manufactures prescription pharmaceuticals and drug delivery systems for the
treatment of asthma and the common cold. But with El Nino, the cold and flu
season was relatively mild, curtailing sales of the company's treatments.
Furthermore, the stock had experienced a huge run up earlier in the period, and
it wasn't altogether surprising that it retrenched.
We also saw impressive performance from some of our HMO holdings,
including Wellpoint and United Healthcare. After years of battling rising costs,
HMOs have finally been able to enact premium rate hikes to cover their higher
expenditures. After toiling in the shadow of the federal probe of possible
Medicare fraud at Columbia HCA, the condition of many hospital companies also
got upgraded. The stock price of Health Management Associates, for example, was
up more than 29%. By steadily acquiring rural hospitals, adding services that
would previously only have been available in larger metropolitan areas,
recruiting new doctors and improving operating performance, Health Management
Associates continued its highly profitable growth record.
"We also saw impressive performance from some of our HMO holdings..."
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Pfizer
followed by an up arrow with the phrase "Impotence drug Viagra boosts company's
sales". The second listing is Wellpoint followed by an up arrow with the phrase
"Aided by rate increases". The third listing is Dura Pharmaceuticals followed by
a down arrow with the phrase "Mild winter curtails demand for cold/flu
medicine". A note below the table reads "See "Schedule of Investments."
Investment holdings are subject to change."]
4
<PAGE>
================================================================================
John Hancock Funds - Global Rx Fund
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the six months ended April 30, 1998". The
chart is scaled in increments of 5% with 0% at the bottom and 20% at the top.
The first bar represents the 17.00% total return for John Hancock Global Rx Fund
Class A. The second bar represents the 16.57% total return for John Hancock
Global Rx Fund Class B. The third bar represents the 12.70% total return for the
average healthcare/biotechnology fund. A note below the chart reads "Total
returns for John Hancock Global Rx Fund are at net asset value with all
distributions reinvested. The average healthcare/biotechnology fund is tracked
by Lipper Analytical Services, Inc. (1). See the following two pages for
historical performance information."]
A word about biotech
Over the past six months there has been a lot of excitement surrounding the
biotech sector, with some experts touting 1998 as the year of the "biotech
breakout." While drug companies have primarily depended on naturally-occurring
and man-made solutions for their product development, biotech companies use
genetic engineering and the manipulation of organisms at the molecular level to
develop new products. Although we expect exciting developments and rewards to
occur on the biotech front over the next several years, there are definite
risks. Only a handful of biotech companies actually have a product on the market
and are profitable. Many more are in the "development stage," still testing a
drug, and are years away from (hopefully) making it to the market with a
product.
Our approach to biotech companies is two-fold: We look for companies that
are already successfully marketing their treatments, or for companies that
supply products and services to the biotech industry. IDEC Pharmaceuticals, for
example, has enjoyed good success with its immunotherapeutic products designed
to harness a patient's own immune mechanism to fight disease. In the category of
companies that provide tools to the biotech industry, we've benefited from our
holdings in Affymetrix, which develops the Gene Chip System used for acquiring,
analyzing and managing complex genetic information.
Outlook
We're optimistic about the outlook for health-care stocks. The long-term
dynamics of an aging world population and lengthening life span will continue to
drive demand for more cost-efficient care and new and better drugs. That should
serve as a catalyst for more strong performance for the health-care sector. That
said, we wouldn't be surprised to see the sector retreat somewhat, given its
recent strong performance. But even if a retreat does occur, we believe that
health-care stocks as a group are poised to do well over the longer term.
"...an aging world population and lengthening life span will continue to drive
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, economic 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.
5
<PAGE>
================================================================================
John Hancock Funds - Global Rx Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Global Rx Fund. Total return measures the
change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended March 31, 1998
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/1/91)
---- ----- ---------
Cumulative Total Returns 43.56% 175.80% 254.95%
Average Annual Total Returns 43.56% 22.49% 21.52%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended March 31, 1998
SINCE
ONE INCEPTION
YEAR (3/7/94)
---- --------
Cumulative Total Returns 45.00% 107.61%
Average Annual Total Returns 45.00% 19.68%
6
<PAGE>
================================================================================
John Hancock Funds - Global Rx Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Global Rx Fund would be worth, assuming all distributions were reinvested for
the period indicated. For comparison, we've shown the same $10,000 investment in
the Standard & Poor's 500 Stock Index -- an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance. Past performance is not indicative of future results.
[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 $37,427 as of April 30, 1998. The second
line represents the Global Rx Fund , after sales charge, and is equal to $35,556
as of April 30, 1998. The third line represents the value of the $10,000
hypothetical investment made in the Standard & Poor's 500 Stock Index on October
1, 1991, and is equal to $33,750 as of April 30, 1998.]
[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 $10,000 hypothetical
investment made in the Standard & Poor's 500 Stock Index on March 7, 1994, and
is equal to $26,141 as of April 30, 1998. The second line represents the value
of the Global Rx Fund, before sales charge, and is equal to $20,986 as of April
30, 1998. The third line represents the value of the Global Rx Fund, after sales
charge, and is equal to $20,786 as of April 30, 1998.]
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1998. 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $103,796,435) ...................... $150,800,153
Short-term investments (cost - $29,898,969) .............. 29,898,969
-------------
180,699,122
Cash ...................................................... 102,503
Receivable for investments sold ........................... 827,135
Receivable for shares sold ................................ 978,188
Interest receivable ....................................... 1,213
Dividends receivable ...................................... 110,847
Other assets .............................................. 1,560
-------------
Total Assets ............................ 182,720,568
-----------------------------------------------------------
Liabilities:
Payable for investments purchased ......................... 3,364,082
Payable upon return of securities on loan - Note A ........ 21,959,969
Foreign taxes payable ..................................... 2,699
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................. 228,330
Accounts payable and accrued expenses ..................... 32,267
-------------
Total Liabilities ....................... 25,587,347
-----------------------------------------------------------
Net Assets:
Capital paid-in ........................................... 108,257,782
Accumulated net realized gain on investments and
foreign currency transactions ............................ 2,527,006
Net unrealized appreciation of investments and
foreign currency transactions ............................ 47,003,883
Accumulated net investment loss ........................... (655,450)
-------------
Net Assets .............................. $157,133,221
===========================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with no par value)
Class A - $71,329,552/2,049,090 ........................... $34.81
=============================================================================
Class B - $85,803,669/2,546,544 ........................... $33.69
=============================================================================
Maximum Offering Price Per Share*
Class A - ($34.81 x 105.26%) .............................. $36.64
=============================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
The Statement of 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (net of foreign withholding taxes of $13,265) ... $385,372
Interest (including income on securities loaned
of $33,762) .............................................. 197,777
-------------
583,149
-------------
Expenses:
Investment management fee - Note B ....................... 497,529
Distribution and service fee - Note B
Class A ................................................ 89,278
Class B ................................................ 324,319
Transfer agent fee - Note B .............................. 208,039
Custodian fee ............................................ 34,709
Advisory board fee - Note B .............................. 19,862
Registration and filing fees ............................. 19,110
Auditing fee ............................................. 15,145
Financial services fee - Note B .......................... 10,989
Printing ................................................. 8,031
Miscellaneous ............................................ 6,203
Trustees' fees ........................................... 3,120
Legal fees ............................................... 680
-------------
Total Expenses .......................... 1,237,014
-----------------------------------------------------------
Net Investment Loss ..................... (653,865)
-----------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold ..................... 2,530,845
Net realized loss on foreign currency transactions ........ (165)
Change in net unrealized appreciation/depreciation
of investments ........................................... 17,078,602
Change in net unrealized appreciation/depreciation
of foreign currency transactions ......................... (94)
-------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions ........... 19,609,188
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............... $18,955,323
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
---------------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ................................................................... ($949,346) ($653,865)
Net realized gain on investments sold and foreign currency transactions ............... 3,209,799 2,530,680
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions ....................................................... 18,596,951 17,078,508
------------- -------------
Net Increase in Net Assets Resulting from Operations ................................ 20,857,404 18,955,323
------------- -------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and foreign currency
transactions
Class A - ($1.2325 and $0.5126 per share, respectively) ............................. (2,050,456) (891,908)
Class B - ($1.2325 and $0.5126 per share, respectively) ............................. (1,831,686) (951,137)
------------- -------------
Total Distributions to Shareholders ............................................... (3,882,142) (1,843,045)
------------- -------------
From Fund Share Transactions - Net:* ..................................................... 9,443,353 33,463,022
------------- -------------
Net Assets:
Beginning of period ................................................................... 80,139,306 106,557,921
------------- -------------
End of period (including accumulated net investment loss of $1,585
and $655,450, respectively) ......................................................... $106,557,921 $157,133,221
============= =============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ......................................................... 1,241,664 $32,842,370 847,204 $27,402,274
Shares issued to shareholders in reinvestment of distributions ...... 80,399 1,938,113 27,215 833,151
------------ ------------ ------------ ------------
1,322,063 34,780,483 874,419 28,235,425
Less shares repurchased ............................................. (1,263,154) (33,196,300) (581,426) (18,338,038)
------------ ------------ ------------ ------------
Net increase ........................................................ 58,909 $1,584,183 292,993 $9,897,387
============ ============ ============ ============
CLASS B
Shares sold ......................................................... 924,881 $24,469,830 920,785 $29,623,142
Shares issued to shareholders in reinvestment of distributions ...... 64,658 1,524,031 26,767 795,638
------------ ------------ ------------ ------------
989,539 25,993,861 947,552 30,418,780
Less shares repurchased ............................................. (696,883) (18,134,691) (218,733) (6,853,145)
------------ ------------ ------------ ------------
Net increase ........................................................ 292,656 $7,859,170 728,819 $23,565,635
============ ============ ============ ============
</TABLE>
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 each period, along with the
corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
SEPTEMBER 1, YEAR ENDED
YEAR ENDED AUGUST 31, 1996 TO ENDED APRIL 30,
------------------------------------------ OCTOBER 31, OCTOBER 31, 1998
1993 1994 995 1996 1996(8) 1997 (UNAUDITED)
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period .... $13.34 $13.38 $16.51 $21.61 $25.43 $25.11 $30.25
------- ------- ------- ------- ------- ------- -------
Net Investment Loss ..................... (0.23) (0.32) (0.36)(2) (0.19)(2) (0.05)(2) (0.19)(2) (0.11)(2)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ......................... 0.27 3.45 5.46 4.15 (0.27) 6.56 5.18
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ..... 0.04 3.13 5.10 3.96 (0.32) 6.37 5.07
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign
Currency Transactions ................ -- -- -- (0.14) -- (1.23) (0.51)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .......... $13.38 $16.51 $21.61 $25.43 $25.11 $30.25 $34.81
======= ======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset
Value (3) ............................ 0.30% 23.39% 30.89% 18.39% (1.26%)(4) 26.63% 17.00%(4)
Total Adjusted Investment Return at Net
Asset Value (3,5) .................... 0.04% -- -- -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s
omitted) ............................. $15,647 $18,643 $24,394 $42,405 $42,618 $53,122 $71,330
Ratio of Expenses to Average Net
Assets ............................... 2.50% 2.55% 2.56% 1.80% 1.92%(6) 1.68% 1.63%(6)
Ratio of Adjusted Expenses to Average
Net Assets (7) ....................... 2.76% -- -- -- -- -- --
Ratio of Net Investment Loss to Average
Net Assets ........................... (1.67%) (2.01%) (1.99%) (0.75%) (1.04%)(6) (0.71%) (0.69%)(6)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (7) ............ (1.93%) -- -- -- -- -- --
Portfolio Turnover Rate ................. 93% 52% 38% 68% 24% 57% 17%
Fee Reduction Per Share ................. $0.035 -- -- -- -- -- --
</TABLE>
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.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
SEPTEMBER 1, YEAR ENDED
YEAR ENDED AUGUST 31, 1996 TO ENDED APRIL 30,
------------------------------ OCTOBER 31, OCTOBER 31, 1998
1994(1) 1995 1996 1996(8) 1997 (UNAUDITED)
------ ------ ------- ------- ------- -----------
<S> <C> <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 $29.40
------ ------ ------- ------- ------- -------
Net Investment Loss(2) ................................. (0.17) (0.55) (0.34) (0.08) (0.37) (0.21)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ..................... (0.66) 5.44 4.07 (0.26) 6.40 5.01
------ ------ ------- ------- ------- -------
Total from Investment Operations .................... (0.83) 4.89 3.73 (0.34) 6.03 4.80
------ ------ ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold and Foreign Currency Transactions ................ -- -- (0.14) -- (1.23) (0.51)
------ ------ ------- ------- ------- -------
Net Asset Value, End of Period ......................... $16.46 $21.35 $24.94 $24.60 $29.40 $33.69
====== ====== ======= ======= ======= =======
Total Investment Return at Net Asset Value(3) .......... (4.80%)(4) 29.71% 17.53% (1.36%)(4) 25.76% 16.57%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $1,071 $6,333 $36,591 $37,521 $53,436 $85,804
Ratio of Expenses to Average Net Assets ................ 3.34%(6) 3.45% 2.42% 2.62%(6) 2.38% 2.32%(6)
Ratio of Net Investment Loss to Average Net Assets ..... (2.65%)(6) (2.91%) (1.33%) (1.74%)(6) (1.41%) (1.38%)(6)
Portfolio Turnover Rate ................................ 52% 38% 68% 24% 57% 17%
</TABLE>
(1) Class B shares commenced operations on March 7, 1994.
(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 period shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Effective October 31, 1996, the fiscal period end changed from August 31
to October 31.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
Schedule of Investments
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Rx Fund on April 30, 1998. 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
- ------------------- ---------------- -----
COMMON STOCKS
Chemicals - Specialty (2.48%)
Sigma-Aldrich Corp. ........................... 30,000 $1,196,250
VWR Scientific Products Corp.* ................ 28,500 936,938
Waters Corp.* ................................. 33,000 1,765,500
-------------
3,898,688
-------------
Drugs - Biotechnology (5.28%)
Affymetrix, Inc.* ............................. 17,000 535,500
Alkermes, Inc.* ............................... 30,000 716,250
ArQule, Inc.* ................................. 32,000 554,000
Aviron* ....................................... 27,000 669,938
Centocor, Inc.* ............................... 10,000 421,875
ICOS Corp.* ................................... 25,000 368,750
IDEC Pharmaceuticals Corp.* ................... 22,000 792,000
Incyte Pharmaceuticals, Inc.* ................. 22,000 990,000
Inhale Therapeutic Systems* ................... 26,000 728,000
MedImmune, Inc.* .............................. 20,000 1,055,000
PathoGenesis Corp.* ........................... 37,000 1,466,125
-------------
8,297,438
-------------
Drugs - Diversified (13.91%)
Abbott Laboratories ........................... 49,000 3,583,125
American Home Products Corp. .................. 25,000 2,328,125
Bristol-Myers Squibb Co. ...................... 47,000 4,976,125
Johnson & Johnson ............................. 61,000 4,353,875
Warner-Lambert Co. ............................ 35,000 6,621,562
-------------
21,862,812
-------------
Drugs - Generic (4.25%)
Dura Pharmaceuticals, Inc.* ................... 50,000 1,325,000
Forest Laboratories, Inc.* .................... 33,000 1,194,187
Medicis Pharmaceutical Corp. (Class A)* ....... 24,000 1,026,000
Mylan Laboratories, Inc. ...................... 46,000 1,247,750
Drugs - Generic (continued)
Watson Pharmaceutical, Inc.* .................. 44,000 $1,892,000
-------------
6,684,937
-------------
Drugs - Major - Domestic (13.35%)
Lilly (Eli) & Co. ............................. 45,000 3,130,312
Merck & Co., Inc. ............................. 42,000 5,061,000
Pfizer, Inc. .................................. 61,000 6,942,562
Schering-Plough Corp. ......................... 73,000 5,849,125
-------------
20,982,999
-------------
Drugs - Major - International (7.76%)
Glaxo Wellcome PLC, American Depositary
Receipts (ADR) (United Kingdom) ............. 20,000 1,131,250
Novartis AG, ADR (Switzerland) ................ 50,000 4,125,000
Novo Nordisk A/S, ADR (Denmark) ............... 10,000 808,750
Roche Holding AG (Switzerland) ................ 118 1,195,728
SmithKline Beecham PLC, ADR
(United Kingdom) ............................ 65,000 3,871,562
Zeneca Group PLC, ADR
(United Kingdom) ............................ 24,000 1,053,000
-------------
12,185,290
-------------
Drugs & Sundries - Wholesale (4.27%)
AmeriSource Health Corp. (Class A)* ........... 13,000 708,500
Bergen Brunswig Corp. (Class A) ............... 13,000 589,875
Cardinal Health, Inc. ......................... 40,000 3,850,000
Schein (Henry), Inc.* ......................... 40,000 1,560,000
-------------
6,708,375
-------------
Healthcare - Management (11.13%)
AmeriPath, Inc.* .............................. 35,000 573,125
Concentra Managed Care, Inc.* ................. 92,000 2,863,500
Hanger Orthopedic Group, Inc.* ................ 10,700 199,956
Healthcare Recoveries, Inc.* .................. 70,000 1,671,250
HEALTHSOUTH Corp.* ............................ 140,000 4,226,250
IMPATH, Inc.* ................................. 45,000 1,676,250
Pediatrix Medical Group, Inc.* ................ 20,000 843,750
PhyCor, Inc.* ................................. 60,000 1,365,000
Renal Care Group, Inc.* ....................... 21,000 803,250
Total Renal Care Holdings, Inc.* .............. 25,500 844,688
United Healthcare Corp. ....................... 14,000 983,500
Wellpoint Health Networks, Inc.* .............. 20,000 1,442,500
-------------
17,493,019
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Healthcare - Software/Services (10.06%)
Cognizant Corp. ............................... 15,000 $771,563
DAOU Systems, Inc.* ........................... 24,000 432,000
First Consulting Group, Inc.* ................ 20,000 480,000
HBO & Co. ..................................... 77,500 4,635,469
Kendle International, Inc.* ................... 35,000 949,375
Omnicare, Inc. ................................ 120,000 4,110,000
PAREXEL International Corp.* .................. 49,000 1,641,500
Quintiles Transnational Corp.* ................ 44,000 2,178,000
Transition Systems, Inc.* ..................... 27,000 607,500
-------------
15,805,407
-------------
Healthcare - Supplies (3.91%)
Cooper Cos., Inc.* ............................ 30,000 1,153,125
DENTSPLY International, Inc. .................. 34,000 1,117,750
Mentor Corp. .................................. 32,000 870,000
Ocular Sciences, Inc.* ........................ 43,000 1,204,000
Rexall Sundown, Inc.* ......................... 12,000 383,250
Wesley Jessen VisionCare, Inc.* ............... 46,000 1,420,250
-------------
6,148,375
-------------
Hospitals Management (4.33%)
Health Management Associates, Inc. ............
(Class A)* .................................. 61,000 1,921,500
National Surgery Centers, Inc.* ............... 66,000 1,872,750
Quorum Health Group, Inc.* .................... 15,000 481,875
Province Healthcare Co.* ...................... 15,000 414,375
Tenet Healthcare Corp.* ....................... 41,000 1,534,937
Universal Health Services, Inc. (Class B)* .... 10,000 575,625
-------------
6,801,062
-------------
Medical Devices and Products (9.71%)
Allergan, Inc. ................................ 9,000 374,063
Cyberonics, Inc.* ............................. 33,000 792,000
DePuy, Inc. ................................... 24,000 744,000
ESC Medical Systems Ltd. (Israel)* ............ 62,000 2,015,000
Guidant Corp. ................................. 7,000 468,125
Medtronic, Inc. ............................... 76,000 3,999,500
Molecular Devices Corp.* ...................... 44,000 742,500
Physio-Control International Corp.* ........... 36,000 828,000
Respironics, Inc.* ............................ 35,000 584,063
Sofamor Danek Group, Inc.* .................... 5,000 438,750
Stryker Corp. ................................. 85,000 3,825,000
Symphonix Devices, Inc.* ...................... 30,000 442,500
-------------
15,253,501
-------------
Nursing Homes (2.75%)
Alternative Living Services, Inc.* ............ 29,000 1,015,000
Assisted Living Concepts, Inc. * .............. 60,000 1,102,500
Nursing Homes (continued)
Health Care & Retirement Corp.* ............... 54,000 $2,200,500
-------------
4,318,000
-------------
Retail - Drug Stores (2.78%)
CVS Corp. ..................................... 39,000 2,876,250
Duane Reade, Inc.* ............................ 25,000 593,750
Genovese Drug Stores, Inc. (Class A) .......... 20,000 476,250
Walgreen Co. .................................. 12,000 414,000
-------------
4,360,250
-------------
TOTAL COMMON STOCK
(Cost $103,796,435) (95.97%) 150,800,153
------------- -------------
INTEREST PAR VALUE
RATE 000s OMITTED)
---- -------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.05%)
Investment in a joint repurchase
agreement transaction with
Toronto Dominion Securities
USA, Inc. - Dated 04-30-98,
due 05-01-98 (Secured by
U.S. Treasury Notes,
5.00% thru 9.125%, due
02-15-99 thru 07-31-00)
- Note A........................ 5.50% $7,939 7,939,000
-----------
Cash Equivalents (13.98%)
Navigator Securities Lending
Prime Portfolio**.......................... 21,960 21,959,969
-----------
TOTAL SHORT-TERM INVESTMENTS (19.03%) 29,898,969
-------- -----------
TOTAL INVESTMENTS (115.00%) 180,699,122
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (15.00%) (23,565,901)
-------- -----------
TOTAL NET ASSETS (100.00%) $157,133,221
======== ===========
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
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 investments at
April 30, 1998 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ----------
Denmark.............................................. 0.52%
Israel............................................... 1.28
Switzerland.......................................... 3.39
United Kingdom....................................... 3.85
United States........................................ 105.96
------
TOTAL INVESTMENTS 115.00%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
========================= 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 European
Equity Fund and John Hancock Pacific Basin Equities 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."
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,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities must be treated as ordinary income
even though such items are gains and losses for accounting purposes.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund 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.
15
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Global Rx Fund
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. These agreements enable
the Fund to participate with other funds managed by the Adviser in unsecured
lines of credit with banks which permit borrowings up to $800 million,
collectively. Interest is charged to each fund, based on its borrowings, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at
rates ranging from 0.070% to 0.075% per annum based on the average daily unused
portion of the lines of credit, is allocated among the participating funds. The
Fund had no borrowing activity for the period ended April 30, 1998.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral should
the borrower of the securities fail financially. At April 30, 1998, the Fund
loaned securities having a market value of $21,487,164 collateralized by cash in
the amount of $21,959,969, which was invested in a short-term instrument.
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 if they are offset by the currency amount of the underlying
transaction.
16
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Global Rx Fund
There were no open forward foreign currency contracts at April 30, 1998.
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, 1998, there were no open positions in financial futures
contracts.
OPTIONS The Fund may purchase options 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 ("credit risk"), 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,
1998.
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE SERVICES AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.80% of the first $200,000,000 of the Fund's
average daily net asset value and (b) 0.70% of the Fund's average daily net
asset value in excess of $200,000,000.
17
<PAGE>
========================= NOTES TO FINANCIAL STATEMENTS ========================
John Hancock Funds - Global Rx Fund
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, 1998, net sales charges received with regard to Class A shares amounted to
$377,260. Out of this amount, $57,707 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $264,395 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$55,158 was paid as sales commissions to personnel of John Hancock Distributors,
Inc. ("Distributors"), a related broker-dealer. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Distributors.
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, 1998,
contingent deferred sales charges paid to JH Funds amounted to $43,532.
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 less than 0.02% 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, 1998, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $220.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1998, aggregated $47,362,346 and
$20,341,591 respectively. There were no purchases or sales of obligations of the
U.S. government and its agencies during the period ended April 30, 1998.
The cost of investments owned at April 30, 1998 (including short-term
investments) for federal income tax purposes was $133,695,404. Gross unrealized
appreciation and depreciation of investments aggregated $48,023,627 and
$1,019,909 respectively, resulting in net unrealized appreciation of
$47,003,718.
18
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John Hancock Funds - Global Rx Fund
19
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