John Hancock Funds - Global Marketplace Fund
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
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward Spellman*
* Members of the Audit Committee
Officers
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Legal Counsel
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Independent Auditors
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
John Hancock Funds - Global Marketplace Fund
Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks and warrants (cost - $ 37,945,154) $ 47,238,234
Short-term investments (cost - $4,693,205) 4,693,205
------------------
51,931,439
Cash 13,106
Receivable for investments sold 79,997
Receivable for shares sold 6,533
Interest receivable 535
Dividends receivable 20,725
Foreign tax receivable 9,749
Deferred organization expense - Note A 2,772
Other assets 119
------------------
Total Assets 52,064,975
------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 82,134
Payable for shares repurchased 31,671
Payable for securities on loan - Note A 1,300,205
Payable to John Hancock Advisers, Inc. and affiliates - Note B 53,603
Accounts payable and accrued expenses 52,063
------------------
Total Liabilities 1,519,676
------------------------------------------------------------------------------
Net Assets:
Capital paid-in 44,112,915
Accumulated net realized loss on investments and foreign currency transactions (2,861,059)
Net unrealized appreciation of investments and foreign currency transactions 9,293,457
Accumulated net investment loss (14)
------------------
Net Assets $50,545,299
==============================================================================
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 - $21,256,648 / 1,258,073
$16.90
======================================================================================================================
Class B - $29,288,651 / 1,755,037
$16.69
======================================================================================================================
Maximum Offering Price Per Share*
Class A - ($16.90 x 105.26%) $17.79
======================================================================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is
reduced.
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
Statement of Operations
Year ended October 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $15,376) $ 276,044
Interest (including income on securities loaned $11,729) 158,294
----------
434,338
----------
Expenses:
Investment management fee - Note B 437,172
Distribution and service fee - Note B
Class A 70,425
Class B 311,716
Transfer agent fee - Note B 228,043
Custodian fee 72,729
Registration and filing fees 35,413
Auditing fee 32,513
Printing 25,134
Financial services fee - Note B 10,046
Trustees' fees 4,391
Miscellaneous 2,730
Organization expense - Note A 1,453
Legal fees 974
-----------
Total Expenses 1,232,739
---------------------------------------------------------------------------------------
Less Expense Reductions - Note B (130,737)
---------------------------------------------------------------------------------------
Net Expenses 1,102,002
---------------------------------------------------------------------------------------
Net Investment Loss (667,664)
---------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold (799,623)
Net realized gain on foreign currency transactions 7,494
Change in net unrealized appreciation/depreciation of investments 6,779,313
Change in net unrealized appreciation/depreciation of foreign currency transactions (7,429)
----------
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 5,979,755
--------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $5,312,091
======================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED SEPTEMBER 1, 1996 TO YEAR ENDED
AUGUST 31, 1996 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
----------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($91,821) ($88,237) ($667,664)
Net realized loss on investments sold and foreign currency
transactions (802,118) (1,264,001) (792,129)
Change in net unrealized appreciation/depreciation of investments
and foreign currency transactions 1,009,211 1,314,259 6,771,884
----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 115,272 (37,979) 5,312,091
----------- ----------- -----------
From Fund Share Transactions - Net: * 38,385,073 12,741,407 (6,682,165)
----------- ----------- -----------
Net Assets:
Beginning of period 711,600 39,211,945 51,915,373
----------- ----------- -----------
End of period (including net investment loss of none,
none and $14, respectively) $39,211,945 $51,915,373 $50,545,299
========== ========== ==========
PERIOD FROM
YEAR ENDED SEPTEMBER 1, 1996 TO YEAR ENDED
* Analysis of Fund Share Transactions: AUGUST 31, 1996 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
------------------------ ----------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- -------- ----------- ---------- -----------
Shares sold 1,349,557 $20,373,589 684,738 $10,778,771 777,426 $11,801,950
Less shares repurchased (292,024) (4,386,051) (381,164) (6,000,820) (942,406) (14,657,688)
========== =========== ======== =========== ========== ===========
Net increase (decrease) 1,057,533 $15,987,538 303,574 $4,777,951 (164,980) ($2,855,738)
========== =========== ======== =========== ========== ===========
CLASS B **
Shares sold 1,569,827 $23,824,449 555,243 $8,755,160 815,572 $12,357,458
Less shares repurchased (95,769) (1,426,914) (50,082) (791,704) (1,039,754) (16,183,885)
========== =========== ======== =========== ========== ===========
Net increase (decrease) 1,474,058 $22,397,535 505,161 $7,963,456 (224,182) ($3,826,427)
========== =========== ======== =========== ========== ===========
** Class B commenced operations on January 22, 1996.
(1) Effective October 31, 1996, the fiscal period changed from August 31 to
October 31.
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - John Hancock Global Marketplace 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>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 29, 1994
(COMMENCEMENT PERIOD FROM
OF OPERATIONS) YEAR ENDED SEPTEMBER 1, YEAR ENDED
TO AUGUST 31,1995 AUGUST 31, 1996 TO OCTOBER 31, 1996 (8) OCTOBER 31, 1997
----------------- --------------- ----------------------- ----------------
<S> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 $11.49 $15.16 $15.31
--------- --------- --------- ---------
Net Investment Income (Loss) (1) 0.01 (0.08) (0.02) (0.13)
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 3.01 3.75 0.17 1.72
--------- --------- --------- ---------
Total from Investment Operations 3.02 3.67 0.15 1.59
--------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income (0.01) - - -
Distributions from Net Realized Gain on
Investments Sold (0.02) - - -
--------- --------- --------- ---------
Total Distributions (0.03) - - -
--------- --------- --------- ---------
Net Asset Value, End of Period $11.49 $15.16 $15.31 $16.90
========= ========= ========= =========
Total Investment Return at Net Asset Value (3) 35.61% (6) 31.94% 0.99% (6) 10.39%
Total Adjusted Investment Return at Net
Asset Value (3,4) 28.69% (6) 29.69% 0.89% (6) 10.15%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $712 $16,966 $21,782 $21,257
Ratio of Expenses to Average Net Assets 1.50% (5) 1.45% 1.54% (5) 1.62%
Ratio of Adjusted Expenses to Average Net
Assets (2) 9.00% (5) 3.70% 2.12% (5) 1.86%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.06% (5) (0.57%) (0.70%) (5) (0.82%)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (2) (7.44%) (5) (2.82%) (1.28%) (5) (1.06%)
Portfolio Turnover Rate 63% 52% 12% 115%
Average Broker Commission Rate (7) N/A $0.0140 $0.0079 $0.0129
Fee Reduction Per Share (1) $0.65 $0.31 $0.02 $0.04
FOR THE PERIOD
JANUARY 22, 1996
(COMMENCEMENT PERIOD FROM
OF OPERATIONS) SEPTEMBER 1, 1996 YEAR ENDED
TO AUGUST 31, 1996 TO OCTOBER 31, 1996 (8) OCTOBER 31, 1997
------------------ ----------------------- ----------------
<S> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.95 $15.09 $15.22
--------- --------- ---------
Net Investment Loss (1) (0.11) (0.04) (0.24)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions 3.25 0.17 1.71
--------- --------- ---------
Total from Investment Operations 3.14 0.13 1.47
--------- --------- ---------
Net Asset Value, End of Period $15.09 $15.22 $16.69
========= ========= =========
Total Investment Return at Net Asset Value (3) 26.28% (6) 0.86% (6) 9.66%
Total Adjusted Investment Return at Net Asset Value (3,4) 25.50% (6) 0.76% (6) 9.42%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $22,246 $30,133 $29,289
Ratio of Expenses to Average Net Assets 2.15% (5) 2.24% (5) 2.32%
Ratio of Adjusted Expenses to Average Net Assets (2) 3.49% (5) 2.82% (5) 2.56%
Ratio of Net Investment Loss to Average Net Assets (1.28%) (5) (1.42%)(5) (1.52%)
Ratio of Adjusted Net Investment Loss to Average Net Assets(2) (2.62%) (5) (2.00%)(5) (1.76%)
Portfolio Turnover Rate 52% 12% 115%
Average Broker Commission Rate (7) $0.0140 $0.0079 $0.0129
Fee Reduction Per Share (1) $0.11 $0.02 $0.04
(1) Based on the of the average of the shares outstanding at the end of each
month.
(2) Unreimbursed, without fee reduction.
(3) Total invesment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(4) An estimated total return calculation that does not take into consideration
reductions by the Adviser during the periods shown.
(5) Annualized.
(6) Not annualized.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(8) Effective October 31, 1996 the fiscal period end changed from August 31 to
October 31.
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
Schedule of Investments
October 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANT
Advertising ( 1.85%)
Outdoor Systems, Inc.* 30,375 $ 934,031
----------
Beverages - Alcoholic ( 1.86%)
Beringer Wine Estates Holdings, Inc. (Class B)* 2,500 77,500
Mondavi (Robert) Corp. (Class A)* 17,000 863,813
----------
941,313
----------
Beverages - Soft Drinks ( 1.23%)
Panamerican Beverages, Inc. (Class A) (Mexico) 20,000 620,000
----------
Business Services - Misc ( 1.22%)
Coinstar, Inc.* 43,400 436,713
Market Facts, Inc. 9,000 182,250
----------
618,963
----------
Diversified Operations ( 0.78%)
Moulin International Holdings Ltd. (Hong Kong) 3,571,210 392,618
----------
Finance ( 1.25%)
Medallion Financial Corp. 30,000 630,000
----------
Food ( 1.42%)
American Italian Pasta Co. (Class A)* 800 16,800
Fine Host Corp.* 25,000 700,000
----------
716,800
----------
Funeral Services & Related ( 0.26%)
Rock of Ages Corp. (Class A)* 7,000 133,000
----------
Leisure - Services ( 3.07%)
Carnival Corp. (Class A) 15,000 727,500
Disney (Walt) Co., (The) 10,000 822,500
----------
1,550,000
----------
Real Estate - Operations ( 1.60%)
Central Parking Corp. 14,800 808,450
----------
Retail - Apparel / Shoe Group ( 5.69%)
Big Dog Holdings, Inc.* 16,000 226,000
Burton Group PLC (United Kingdom) 268,000 566,543
Gap, Inc. (The) 22,000 1,170,125
Next, PLC (United Kingdom) 60,000 714,722
Track 'n Trail, Inc.* 20,000 200,000
----------
2,877,390
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
Retail - Consumer Electronics ( 3.48%)
Circuit City Stores-Circuit City Group 20,000 $ 797,500
Grupo Elektras, S.A. de C.V.,
Global Depositary Receipts (Mexico) * 35,000 960,312
----------
1,757,812
----------
Retail - Department Stores ( 8.12%)
Kohl's Corp.* 23,000 1,543,875
Meyer (Fred), Inc. * 34,000 971,125
Proffitt's, Inc.* 30,000 860,625
Stage Stores, Inc.* 20,000 730,000
----------
4,105,625
----------
Retail - Discount & Variety ( 6.35%)
Consolidated Stores Corp.* 25,750 1,026,781
Dollar General Corp. 31,875 1,053,867
99 Cents Only Stores* 30,000 1,126,875
----------
3,207,523
----------
Retail - Drug Stores ( 3.75%)
Arbor Drugs, Inc. 25,000 668,750
CVS Corp. 20,000 1,226,250
----------
1,895,000
----------
Retail - Home Furnishings ( 4.78%)
Cost Plus, Inc.* 35,000 949,375
Linens 'N Things, Inc.* 23,000 826,563
Pier 1 Imports, Inc. 35,000 638,750
----------
2,414,688
----------
Retail - Mail Order / Direct ( 1.23%)
dELiA*s Inc.* 30,000 622,500
----------
Retail - Major Chains ( 4.06%)
Costco Cos., Inc.* 35,000 1,347,500
Wal-Mart Stores, Inc. 20,000 702,500
----------
2,050,000
----------
Retail - Misc./Diversified ( 6.25%)
Borders Group, Inc. * 30,000 778,125
Grand Optical Photoservice SA (France) 7,000 1,127,378
Hibbett Sporting Goods, Inc.* 31,300 868,575
Hot Topic, Inc.* 23,000 388,125
----------
3,162,203
----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
Retail - Restaurants ( 12.09%)
Famous Dave's of America, Inc.* 20,000 $ 347,500
Il Fornaio (America) Corp.* 17,400 231,638
Papa John's International, Inc. * 16,000 473,000
PizzaExpress PLC (United Kingdom) 100,000 1,254,958
Rainforest Cafe, Inc.* 27,000 921,375
Starbucks Corp.* 25,000 825,000
Tele Pizza, S.A. (Spain) 13,000 892,761
Wetherspoon (J.D.) PLC (United Kingdom) 42,871 1,165,215
-----------
6,111,447
-----------
Retail - Supermarkets ( 11.32%)
Carrefour SA (France) 2,000 1,043,644
Disco S.A., American Depositary Receipts, ADR 25,000 1,012,500
(Argentina) *
Dominick's Supermarkets, Inc.* 25,000 912,500
Peapod, Inc.* 21,400 203,300
Quality Food Centers, Inc.* 15,000 714,375
Seaway Food Town, Inc. 20,000 385,000
Supersol Ltd., ADR (Israel) * 55,000 811,250
Tesco PLC (United Kingdom) 80,000 640,565
-----------
5,723,134
-----------
Retail / Wholesale - Building Products ( 4.13%)
Castorama Dubois Investissements SA (France) 2,456 255,893
Home Centers (DIY) Ltd. (Israel) * 60,000 431,250
Home Depot, Inc. 25,000 1,390,625
White Cap Industries, Inc.* 500 9,500
-----------
2,087,268
-----------
Retail / Wholesale - Computers ( 1.83%)
CompUSA, Inc.* 28,200 923,550
-----------
Retail / Wholesale - Food ( 0.69%)
Distribucion y Servicio D&S S.A., ADR (Chile) * 20,000 351,250
-----------
Shoes & Related Apparel ( 1.31%)
Wolverine World Wide, Inc. 30,000 660,000
-----------
Textiles - Apparel Manufacturing ( 3.83%)
Cutter & Buck, Inc.* 37,500 670,313
Jones Apparel Group, Inc.* 20,000 1,017,500
Tefron Ltd. (Israel) * 13,000 249,438
-----------
1,937,251
-----------
TOTAL COMMON STOCKS
(Cost $37,939,775) (93.45%) 47,231,816
------ -----------
WARRANT
Diversified Operations ( 0.01%)
Moulin International Holdings Ltd. (Hong Kong) 293,629 6,418
-----------
TOTAL WARRANT
(Cost $5,379) (0.01%) 6,418
------ -----------
TOTAL COMMON STOCKS AND WARRANT
(Cost $37,945,154) (93.46%) 47,238,234
------ -----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------ ---- -------------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement ( 9.68%)
Investment in a joint repurchase agreement
transaction with Aubrey G. Lanston & Co. -
Dated 10-31-97, Due 11-03-97
(Secured by US Treasury Notes, 5.750% thru 7.125%,
Due 12-31-98 thru 4-30-00) - Note A 5.68% $ 3,393 $ 3,393,000
Cash Equivalents
Navigator Securities Lending Prime Portolio ** 1,300 1,300,205
-----------
TOTAL SHORT-TERM INVESTMENTS (9.29%) 4,693,205
------- -----------
TOTAL INVESTMENTS (102.75%) $51,931,439
------- ===========
* Non-income producing security.
** Represents investments 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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
Country Diversification (Unaudited)
- --------------------------------------------------------------------------------
The concentration of investments by industry group for individual securities
held by the Fund is shown in the schedule of investments. In addition, the
concentration of investments can be aggregated by the countries in which the
Fund invests. The table below shows the percentage of the Fund's investments at
October 31, 1997 assigned to the various countries.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION NET ASSETS
Argentina 2.00%
Chile 0.70
France 4.80
Hong Kong 0.78
Israel 2.95
Mexico 3.13
Spain 1.77
United Kingdom 8.59
United States 78.03
---------
102.75%
=========
See Notes to Financial Statements.
<PAGE>
John Hancock Funds - Global Marketplace Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series: John Hancock Global Marketplace Fund (the "Fund"), John Hancock
Pacific Basin Equities Fund and John Hancock Global Rx Fund. The other two
series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to achieve long-term capital appreciation
through investment primarily in foreign and U.S. stocks of companies that
merchandise goods and services to consumers or to consumer companies.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing sources,
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days or
less are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For Federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities may be treated as ordinary income
even though such items are gains and losses for accounting purposes. For federal
income tax purposes, the Fund has $2,861,058 of capital loss carryforwards
available, to the extent provided by regulations, to offset future net realized
capital gains. To the extent that such carryforwards are used by the Fund, no
capital distribution will be made. The carryforwards expire as follows: October
31, 2003 - $849, October 31, 2004 - $2,060,588 and October 31, 2005 - $799,621.
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.
<PAGE>
John Hancock Funds - Global Marketplace Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not identifiable to a specific fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five year period that commenced with the investment operations of
the Fund.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amount of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. These agreements enable
the Fund to participate with other Funds managed by the Advisor in an unsecured
line of credit with banks which permit borrowings up to $600 million,
collectively. Interest is charged to each Fund, based on its borrowing, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at a
rate of 0.075% per annum based on the average daily unused portion of the line
of credit, is allocated among the participating Funds. The Fund had no borrowing
activity for the year ended October 31, 1997.
SECURITIES LENDING The Fund may lend its securities to certain qualifies brokers
who pay the Fund negotiated lenders fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market of the securities on loan. As with
other extensions of credit, the Fund may bear the risk of delay in recovery of
the loaned securities or even loss of rights in the collateral should the
borrower of the securities fail financially. At October 31, 1997, the Fund
loaned securities having a market value of $1,221,674 collateralized by cash in
the amount of $1,300,205, 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.
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John Hancock Funds - Global Marketplace Fund
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk other than the offset by the currency amount of the underlying
transaction.
There were no open forward foreign currency contracts at October 31,1997.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instruments. Selling futures tends to decrease the Fund's exposure to
the underlying instrument or hedge other Fund instruments. At the time the Fund
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities, known as
"initial margin", equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange.
Subsequent payments, known as "variation margin", to and from the broker are
made on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark to
market", are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1997, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the exchange
on which they are primarily traded. Over-the-counter options are valued at the
mean between the last bid and asked prices. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund is included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the written option.
The Fund may use options contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure to
the underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
risk and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the year ended October 31,
1997.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.80% of the first $250,000,000 of the Fund's
average daily net asset value and (b) 0.70% of the Fund's average daily net
asset value in excess of $250,000,000.
The Adviser has agreed to limit Fund expenses, including the management
fee (but not including the transfer agent fee and the 12b-1 fee), to 0.90% of
the Fund's daily net assets. Accordingly, the reduction in the Adviser's fee
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John Hancock Funds - Global Marketplace Fund
amounted to $130,737 for the year ended October 31, 1997. The Adviser reserves
the right to terminate this limit in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1997, net sales charges received with regard to Class A shares amounted to
$232,186. Out of this amount, $57,668 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $101,631 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$72,887 was paid as sales commissions to personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and Sutro
& Co., Inc. ("Sutro"), all of which are related broker-dealers. The Adviser's
indirect parent, John Hancock Mutual Life Insurance Company ("JHMLICo"), is the
indirect sole shareholder of Distributors and was the sole shareholder until
November 29, 1996 of John Hancock Freedom Securities Corporation and its
subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses for providing distribution related services to the Fund in
connection with the sale of Class B shares. For the year ended October 31, 1997,
the contingent deferred sales charges paid to JH Funds amounted to $125,330.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds, for
distribution and service expenses at an annual rate not to exceed 0.30% of Class
A average daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution and service costs. Up to a maximum of
0.25% of these payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays a transfer agent fee based on the number of shareholder accounts and
certain-out-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are trustees and/or officers of the Adviser, and/or its affiliates, as
well as Trustees of the Fund. The compensation of unaffiliated Trustees is borne
by the Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability are recorded on
the Fund's books as an other asset. The deferred compensation liability and the
related other asset are marked to market on a periodic basis to reflect any
income earned by the investment as well as any unrealized gain or losses. At
October 31, 1997, the Fund's investments to cover the deferred compensation
liability had unrealized appreciation of $4.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended October 31, 1997, aggregated $58,982,698 and
$67,226,772, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the year ended October 31, 1997.
The cost of investments owned at October 31, 1997 (including the short-term
investments) for federal income tax purposes was $42,638,359. Gross unrealized
appreciation and depreciation of investments aggregated $10,660,713 and
$1,367,633, respectively, resulting in net unrealized appreciation of
$9,293,080.
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John Hancock Funds - Global Marketplace Fund
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1997, the Fund has reclassified amounts to
reflect a decrease in accumulated net investment loss of $667,650, an increase
in accumulated net realized loss on investments of $7,479 , and a decrease in
capital paid-in of $660,171. This represents the amount necessary to report
these balances on a tax basis, excluding certain temporary differences, as of
October 31, 1997. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to certain differences in the computation
of distributable income and capital gains under federal tax rules versus
generally accepted accounting principles. The calculation of net investment
income per share in the financial highlights excludes these adjustments.
NOTE E --
SUBSEQUENT EVENT
On September 9, 1997 shareholders approved a vote on a proposed merger between
the Fund and the John Hancock Growth Fund ("Growth Fund"). The reorganization
provided for a transfer of substantially all the assets and liabilities of the
Fund to the Growth Fund. After the transaction and as of the close of business
on December 5, 1997, the Fund will be terminated.
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John Hancock Funds - Global Marketplace Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Global Marketplace Fund and the Trustees of
John Hancock World Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Global Marketplace
Fund (the "Fund") (a series of John Hancock World Fund) at October 31, 1997, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1997 by correspondence with
the custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse, LLP
Boston, Massachusetts
December 15, 1997
