ANNUAL REPORT
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[GRAPHIC OMITTED]
Global Rx
Fund
OCTOBER 31, 1997
[LOGO] John Hancock Funds
A Global Investment Management Firm
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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
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
INDEPENDENT AUDITORS
PRICE WATERHOUSE LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
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===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The stock market in 1997 has been anything but dull. Investors have been treated
to record-breaking performance by the Dow Jones Industrial Average, but with
record-breaking volatility. After two years of strong advances amid relatively
little volatility, the market's recent sharp drops and enormous rebounds have
caused a fair share of investor concern.
The latest round came in October and was largely due to uncertainty in
foreign markets. Southeast Asia sneezed and the rest of the world caught a cold.
On October 27, the Dow experienced its largest one-day point decline, dropping
554 points. In percentage terms, however, that roughly 7% decline didn't even
register on the list of 10 largest drops. The next day, the market bounced right
back, as the Dow had a record one-day vault of 337 points. In short order, the
U.S. market had stabilized, yet many markets remained edgy as investors sorted
out the Asian turmoil and its implications on economic growth, interest rates
and corporate earnings.
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A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
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In the face of such uncertainty, a trusted investment professional can be
your best ally. Now, more than ever, your investment professional can help you
take the emotion out of investment decisions. At a time when your instincts
might have you react to the heat of the market's moment, your investment
professional can serve as an objective voice to put current events in a
longer-term perspective. He or she can also help you evaluate your investments
in any market environment to ensure that they fit your risk tolerance and time
horizons. On an ongoing basis, your investment professional is there for you to
check out new investment ideas or to get an informed opinion about current
economic and market conditions.
We encourage you to take advantage of this important resource. Working
together, you can draw up a detailed road map to help reach your financial
destination regardless of the conditions along the way.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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BY LINDA MILLER, CFA, PORTFOLIO MANAGER
John Hancock
Global Rx Fund
Drug, supply and device companies lead health-care sector
Health-care stocks posted decent gains over the past year, thanks to a number of
favorable trends. The global economy generally continued on a steady growth
course, which helped keep the demand for health-care products and services firm.
In addition, the year saw a number of new and exciting product introductions,
including improved drugs to treat high cholesterol and schizophrenia. The FDA
aided in that process by adhering to its promise to speed up its new
product-review procedures. Furthermore, beyond the 1996 national elections,
there was a moderation in rhetoric about government-mandated health care in the
U.S., despite the passage of the Medicare Reform Act. All in all, the backdrop
remained relatively positive until the middle of October when economic woes in
Southeast Asia infected the U.S. stock market. Although health-care stocks
swooned along with other stocks during the market's October decline, they tended
to weather the storm better than many other industry groups.
For the 12 months ended October 31, 1997, John Hancock Global Rx Fund's Class
A and Class B shares posted total returns of 26.63% and 25.76%, respectively, at
net asset value. By comparison, the average health-care/biotechnology fund
returned 27.70% for the same period, according to Lipper Analytical Services,
Inc.(1) Please see pages six and seven for longer-term performance information.
Leaders and laggards
Some of our biggest winners during the period were drug stocks, which we had
boosted to roughly 56% of the Fund's net assets by the end
"Health-care stocks posted decent gains over the past year..."
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A 2 1/4 " x 3 1/2" photo of Fund management team at bottom right. Caption reads:
"Linda Miller (seated) and Fund management team members Anurag Pandit (l) and
Ben Hock (r)".
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3
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John Hancock Funds - Global Rx Fund
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Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) Pfizer 4.7% 2) Eli Lilly 4.4% 3)
Warner-Lambert 4.0% 4) Merck 3.4% 5) SmithKline Beecham 3.3%. A footnote below
reads "As a percentage of net assets on October 31, 1997."
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of October. Because they were some of the best performers -- and some of our
largest holdings -- in the second half, our increased focus was rewarded. Among
our biggest drug company winners were: Pfizer, a diversified manufacturer of
health-care products; Warner-Lambert, which produces drugs under its Parke Davis
division that introduced the successful cholesterol-lowering drug Lipitor;
U.K.-based SmithKline Beecham, which manufacturers antibiotics, antidepressants
and other drugs; and Eli Lilly, with a new schizophrenia drug.
We also enjoyed strong performance from select biotech stocks such as
PathoGenesis, which develops pharmaceuticals to treat respiratory infections
resulting from diseases like cystic fibrosis, bronchitis and tuberculosis; and
Affymetrix, developer of the GeneChip system. Plans call for GeneChip to be used
for acquiring, analyzing and managing complex genetic information to improve the
diagnosis and treatment of diseases.
Drug stocks' strong showing had a halo effect on medical supply and device
companies, and they also performed well during the year. Johnson & Johnson not
only benefited from rising drug sales, but also from the increasing use of
stents, which are the state-of-the-art method to treat arterial blockages.
Likewise, Medtronic posted good gains. The company develops and manufactures
therapeutic devices for cardiovascular and neurological applications - including
pacemakers, mechanical heart valves and other implantable products for treatment
of cardiac and urinary conditions.
Despite the fact that there was no major move in the direction of
federally-mandated health care, medical delivery companies struggled under the
weight of legislative initiatives. The Medicare Reform Act passed earlier this
year was a drag on our HMO holdings -- including United Healthcare. Fortunately,
our stake in HMOs was limited to less than 10% of investments at the end of the
period. Despite their recent troubles, we think that health-care delivery
companies with a leadership position in their respective markets hold plenty of
opportunity. For example, physician practice management company PhyCor continues
to post strong earnings growth, has the best record among its peers of managing
practices, and is the undisputed leader in a very important aspect of the
medical delivery area.
Recent additions
During the past six months, we've added a number of more consumer-oriented
health-care companies to the Fund's holdings. In places where health care is
government mandated --
"Some of our biggest winners were drug stocks..."
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Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers". The first listing is
Warner-Lambert followed by an up arrow and the phrase "New products for high
cholesterol and diabetes." The second listing is Medtronic followed by an up
arrow and the phrase "New products for Parkinson's and incontinence." The third
listing is United Healthcare followed by a down arrow and the phrase "Price
competition and rising costs." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
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4
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John Hancock Funds - Global Rx Fund
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Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1997." The chart is
scaled in increments of 10% from bottom to top, with 30% at the top and 0% at
the bottom. Within the chart there are three solid bars. The first represents
the 26.63% total return for the John Hancock Global Rx Fund: Class A. The second
represents the 25.76% total return for the John Hancock Global Rx Fund: Class B.
The third represents the 27.70% total return for the average
healthcare/biotechnology fund. A footnote below reads: "Total returns for John
Hancock Global Rx Fund are at net asset value with all distributions reinvested.
The average healthcare/biotechnology fund is tracked by Lipper Analytical
Services. (1) See the following two pages for historical performance
information."
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such as Japan and western Europe -- authorities may look to cut health-care
costs as a way to trim national budgets. So we believe it is prudent to add
stocks that will be somewhat immune to potential government cutbacks.
Additionally, many of these stocks had been overlooked during the health-care
sector's runup. As a result, we were able to buy them at fairly attractive
prices. One such company was Israeli-based ESC Medical Systems, which develops
and manufactures medical devices. The company's devices use lasers and
proprietary intense-pulsed light technology for non-invasive treatment of
varicose veins and hair removal. Another addition was CVS, which operates
specialty retail stores that sell prescription drugs and health and beauty aids.
Outlook
One of the major issues that will affect the health-care sector's performance in
1998 will be the strength of the world economy. It's not certain how currency
and economic problems in Southeast Asia will affect the rest of the world.
Japan, the region's largest trading partner and one of the world's largest
health-care consumers, may experience further economic slowing over the next
year. If that is the case, we would expect that Japanese government officials
will be pressured to cut health-care costs. On the other hand, the U.S. economy
continues to look quite healthy and interest rates should remain relatively
stable for now. As a result, we're likely to look for stocks that have
relatively little exposure to overseas markets.
"...it is prudent to add stocks that will be somewhat immune to potential
government cutbacks."
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This commentary reflects the views of the portfolio manager through the end of
the Fund's period discussed in this report. Of course, the manager's views are
subject to change as market and other conditions warrant.
International investing involves special risks such as political and currency
risks and differences in accounting standards and financial reporting. Sector
investing is subject to greater risks than the market as a whole.
(1) Figures from Lipper Analytical Services, Inc. include reinvested dividends
and do not take into account sales charges. Actual load-adjusted performance is
lower.
5
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John Hancock Funds - Global Rx Fund
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A LOOK AT PERFORMANCE
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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 the 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.
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CLASS A
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For the period ended September 30, 1997
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/1/91)
---- ----- ---------
Cumulative Total Returns 10.84% 135.38% 208.12%
Average Annual Total Returns 10.84% 18.67% 20.63%
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CLASS B
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For the period ended September 30, 1997
SINCE
ONE INCEPTION
YEAR (3/7/94)
---- --------
Cumulative Total Returns 10.88% 79.60%
Average Annual Total Returns 10.88% 17.84%
6
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John Hancock Funds - Global Rx Fund
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WHAT HAPPENED TO A $10,000 INVESTMENT...
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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. The Standard & Poor's 500 Stock Index is
an unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. Past performance is not
indicative of future results.
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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 $31,989 as of October 31, 1997. The second
line represents the the Global Rx Fund , after sales charge, and is equal to
$30,390 as of October 31, 1997. 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 $27,552 as of October 31, 1997.
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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 $21,340 as of October 31, 1997. The second line represents the value
of the Global Rx Fund, before sales charge, and is equal to $18,003 as of
October 31, 1997. The third line represents the value of the Global Rx Fund,
after sales charge, and is equal to $17,703 as of October 31, 1997.
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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 October 31, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 1997
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Assets:
Investments at value - Note C:
Common stocks (cost - $74,244,849) ......................... 104,169,889
Short-term investments (cost - $32,510,290) - Note A ....... 32,510,290
-------------
136,680,179
Cash ....................................................... 5,811
Foreign currency, at value (cost - $1,352) ................. 1,428
Receivable for investments sold ............................ 1,815,676
Receivable for shares sold ................................. 196,710
Interest receivable ........................................ 458
Dividends receivable ....................................... 63,204
Other assets ............................................... 1,560
-------------
Total Assets ............................. 138,765,026
-----------------------------------------------------------
Liabilities:
Payable for investments purchased .......................... 2,325,463
Payable for shares repurchased ............................. 28,396
Payable for securities on loan - Note A .................... 29,607,290
Foreign taxes payable ...................................... 4,097
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................... 179,025
Accounts payable and accrued expenses ...................... 62,834
-------------
Total Liabilities ........................ 32,207,105
-----------------------------------------------------------
Net Assets:
Capital paid-in ............................................ 74,794,762
Accumulated net realized gain on investments and
foreign currency transactions ............................. 1,839,369
Net unrealized appreciation of investments and
foreign currency transactions ............................. 29,925,375
Accumulated net investment loss ............................ (1,585)
-------------
Net Assets ............................... $106,557,921
===========================================================
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 - $53,121,837/1,756,097 ............................ $30.25
=============================================================================
Class B - $53,436,084/1,817,725 ............................ $29.40
=============================================================================
Maximum Offering Price Per Share*
Class A - ($30.25 x 105.26%) ............................... $31.84
=============================================================================
* 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
Year ended October 31, 1997
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Investment Income:
Dividends (net of foreign withholding taxes of $22,220) ..... $587,187
Interest (including income on securities loaned
of $12,277) ................................................ 294,628
------------
881,815
------------
Expenses:
Investment management fee - Note B ......................... 725,408
Distribution and service fee - Note B
Class A .................................................. 140,457
Class B .................................................. 438,571
Transfer agent fee - Note B ................................ 327,345
Custodian fee .............................................. 57,554
Advisory Board fee - Note B ................................ 34,286
Registration and filing fees ............................... 33,449
Auditing fee ............................................... 30,500
Financial services fee - Note B ............................ 16,625
Printing ................................................... 16,047
Trustees' fees ............................................. 5,687
Miscellaneous .............................................. 3,883
Legal fees ................................................. 1,349
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Total Expenses ............................ 1,831,161
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Net Investment Loss ....................... (949,346)
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Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold ....................... 3,211,811
Net realized loss on foreign currency transactions .......... (2,012)
Change in net unrealized appreciation/depreciation
of investments ............................................. 18,596,892
Change in net unrealized appreciation/depreciation of
foreign currency transactions .............................. 59
------------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions ............. 21,806,750
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Net Increase in Net Assets
Resulting from Operations ................. $20,857,404
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SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
Statement of Changes in Net Assets
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<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 ............................................. ($557,388) ($190,818) ($949,346)
Net realized gain on investments sold and
foreign currency transactions ................................. 3,586,805 293,243 3,209,799
Change in net unrealized appreciation/depreciation
of investments and foreign currency transactions .............. 2,092,083 (1,237,619) 18,596,951
------------ ------------ -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ...................................... 5,121,500 (1,135,194) 20,857,404
------------ ------------ -------------
Distributions to Shareholders:
Distributions from net realized gain on investments
sold and foreign currency transactions
Class A - ($0.1437, none, and $1.2325 per share,
respectively) ............................................... (175,093) -- (2,050,456)
Class B - ($0.1437, none, and $1.2325 per share,
respectively) ............................................... (80,096) -- (1,831,686)
------------ ------------ -------------
Total Distributions to Shareholders .......................... (255,189) -- (3,882,142)
------------ ------------ -------------
From Fund Share Transactions - Net:* .............................. 43,402,980 2,277,728 9,443,353
------------ ------------ -------------
Net Assets:
Beginning of period ............................................. 30,727,481 78,996,772 80,139,306
------------ ------------ -------------
End of period
(including accumulated net investment loss of $1,045,
$1,093 and $1,585, respectively) ............................... $78,996,772 $80,139,306 $106,557,921
============ ============ =============
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM
YEAR ENDED SEPTEMBER 1, 1996 TO YEAR ENDED
AUGUST 31, 1996 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
-------------------------- -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold ...................... 2,278,174 $57,180,069 608,177 $16,260,917 1,241,664 $32,842,370
Shares issued to shareholders in
reinvestment of distributions .. 7,174 170,226 -- -- 80,399 1,938,113
----------- ------------ ----------- ------------ ----------- ------------
2,285,348 57,350,295 608,177 16,260,917 1,322,063 34,780,483
Less shares repurchased .......... (1,746,628) (43,511,318) (578,604) (15,504,567) (1,263,154) (33,196,300)
----------- ------------ ----------- ------------ ----------- ------------
Net increase ..................... 538,720 $13,838,977 29,573 $756,350 58,909 $1,584,183
=========== ============ =========== ============ =========== ============
CLASS B
Shares sold ...................... 1,739,644 $43,690,955 163,866 $4,526,283 924,881 $24,469,830
Shares issued to shareholders in
reinvestment of distributions .. 3,211 75,464 -- -- 64,658 1,524,031
----------- ------------ ----------- ------------ ----------- ------------
1,742,855 43,766,419 163,866 4,526,283 989,539 25,993,861
Less shares repurchased .......... (572,508) (14,202,416) (105,746) (3,004,905) (696,883) (18,134,691)
----------- ------------ ----------- ------------ ----------- ------------
Net increase ..................... 1,170,347 $29,564,003 58,120 $1,521,378 292,656 $7,859,170
=========== ============ =========== ============ =========== ============
</TABLE>
(1) Effective October 31, 1996, the fiscal period changed from August 31 to
October 31.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and 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:
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<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 1,
YEAR ENDED AUGUST 31, 1996 TO YEAR ENDED
------------------------------------------ OCTOBER 31, OCTOBER 31,
1993 1994 1995 1996 1996(9) 1997
------- ------- ------- ------- ------- -------
<S> <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
------- ------- ------- ------- ------- -------
Net Investment Loss ................................. (0.23) (0.32) (0.36)(2) (0.19)(2) (0.05)(2) (0.19)(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
------- ------- ------- ------- ------- -------
Total from Investment Operations ................... 0.04 3.13 5.10 3.96 (0.32) 6.37
------- ------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ...................................... -- -- -- (0.14) -- (1.23)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ...................... $13.38 $16.51 $21.61 $25.43 $25.11 $30.25
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (3) ...... 0.30% 23.39% 30.89% 18.39% (1.26%)(4 26.63%
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
Ratio of Expenses to Average Net Assets ............. 2.50% 2.55% 2.56% 1.80% 1.92%(6) 1.68%
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%)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (7) ............................ (1.93%) -- -- -- -- --
Portfolio Turnover Rate ............................. 93% 52% 38% 68% 24% 57%
Average Broker Commission Rate (8) .................. N/A N/A N/A $0.0181 $0.0726 $0.0749
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)
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<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 1,
YEAR ENDED AUGUST 31, 1996 TO YEAR ENDED
-------------------------------- OCTOBER 31, OCTOBER 31,
1994(1) 1995 1996 1996(9) 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ................ $17.29 $16.46 $21.35 $24.94 $24.60
------- ------- ------- ------- -------
Net Investment Loss (2) ............................. (0.17) (0.55) (0.34) (0.08) (0.37)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions ...... (0.66) 5.44 4.07 (0.26) 6.40
------- ------- ------- ------- -------
Total from Investment Operations ................... (0.83) 4.89 3.73 (0.34) 6.03
------- ------- ------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments
Sold and Foreign Currency Transactions ............. -- -- (0.14) -- (1.23)
------- ------- ------- ------- -------
Net Asset Value, End of Period ........................ $16.46 $21.35 $24.94 $24.60 $29.40
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (3) ........ (4.80%)(4) 29.71% 17.53% (1.36%)(4) 25.76%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............ $1,071 $6,333 $36,591 $37,521 $53,436
Ratio of Expenses to Average Net Assets ............. 3.34%(6) 3.45% 2.42% 2.62%(6) 2.38%
Ratio of Net Investment Loss to Average Net Assets .. (2.65%)(6) (2.91%) (1.33%) (1.74%)(6) (1.41%)
Portfolio Turnover Rate ............................. 52% 38% 68% 24% 57%
Average Broker Commission Rate (8) .................. N/A N/A $0.0181 $0.0726 $0.0749
</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) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(9) Effective October 31, 1996, the fiscal period end changed from August 31 to
October 31.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
Schedule of Investments
October 31, 1997
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Rx Fund on October 31, 1997. It's divided into two main categories:
common stocks and short-term investments. Common stocks are further broken down
by industry group. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Chemicals - Specialty (1.47%)
QIAGEN N.V. (Netherlands)* ....................... 15,000 $683,438
Sigma-Aldrich Corp. .............................. 25,000 878,125
-------------
1,561,563
-------------
Drugs - Biotechnology (6.68%)
Affymetrix, Inc.* ................................ 14,500 531,062
Agouron Pharmaceuticals, Inc.* ................... 10,000 456,250
Alkermes, Inc. * ................................. 15,000 341,250
Aviron * ......................................... 23,000 503,125
Human Genome Sciences, Inc.* ..................... 5,000 205,000
IDEC Pharmaceuticals Corp.* ...................... 15,000 571,875
Inhale Therapeutic Systems* ...................... 19,000 517,750
MedImmune, Inc. * ................................ 15,000 598,125
Millennium Pharmaceuticals, Inc.* ................ 15,000 299,063
PathoGenesis Corp.* .............................. 32,000 1,152,000
Protein Design Labs, Inc.* ....................... 16,000 798,000
Serologicals Corp.* .............................. 20,000 460,000
Sonus Pharmaceuticals, Inc.* ..................... 18,000 685,125
-------------
7,118,625
-------------
Drugs - Diversified (14.19%)
Abbott Laboratories .............................. 40,000 2,452,500
American Home Products Corp. ..................... 25,000 1,853,125
Bristol-Myers Squibb Co. ......................... 35,000 3,071,250
Johnson & Johnson ................................ 60,000 3,442,500
Warner-Lambert Co. ............................... 30,000 4,295,625
-------------
15,115,000
-------------
Drugs - Generic (3.83%)
Dura Pharmaceuticals, Inc.* ...................... 40,000 1,935,000
Medicis Pharmaceutical Corp. (Class A) * ......... 9,000 433,125
Warner Chilcott Laboratories, ADR
(Ireland)* ...................................... 31,000 437,875
Watson Pharmaceuticals, Inc.* .................... 40,000 1,270,000
-------------
4,076,000
-------------
Drugs - Major - Domestic (15.28%)
Lilly (Eli) & Co. ................................ 70,000 4,681,250
Merck & Co., Inc. ................................ 40,000 3,570,000
Pfizer, Inc. ..................................... 70,000 4,952,500
Schering-Plough Corp. ............................ 55,000 3,083,437
-------------
16,287,187
-------------
Drugs - Major - International (10.36%)
Astra AB American Depositary Receipts
(ADR), (Sweden) ................................. 36,000 573,750
Novartis AG, ADR (Switzerland) ................... 42,000 3,307,500
Roche Holding AG (Switzerland) ................... 110 966,649
SmithKline Beecham PLC, ADR
(United Kingdom) ................................ 74,000 3,524,250
Zeneca Group PLC, ADR
(United Kingdom) ................................ 28,000 2,670,500
-------------
11,042,649
-------------
Drugs & Sundries - Wholesale (6.14%)
AmeriSource Health Corp. (Class A)* .............. 30,000 1,781,250
Bergen Brunswig Corp. (Class A) .................. 20,000 801,250
Cardinal Health, Inc. ............................ 40,000 2,970,000
Schein (Henry), Inc.* ............................ 30,000 986,250
-------------
6,538,750
-------------
Healthcare - Alternate Site (4.84%)
Assisted Living Concepts, Inc. * ................. 60,000 1,230,000
HEALTHSOUTH Corp.* ............................... 100,000 2,556,250
National Surgery Centers, Inc.* .................. 55,000 1,375,000
-------------
5,161,250
-------------
Healthcare - Management (9.80%)
AmeriPath, Inc.* ................................. 20,000 330,000
Concentra Managed Care, Inc.* .................... 67,720 2,209,365
Healthcare Recoveries, Inc.* ..................... 40,000 740,000
IMPATH, Inc. * ................................... 21,000 595,875
Monarch Dental Corp.* ............................ 13,000 235,625
Omnicare, Inc. ................................... 90,000 2,503,125
OrthAlliance, Inc.* .............................. 20,000 270,000
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Rx Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Healthcare - Management (continued)
Pediatrix Medical Group, Inc.* .................. 7,500 $316,875
PhyCor, Inc.* .................................... 55,000 1,268,437
RehabCare Group, Inc.* ........................... 15,000 413,437
United Healthcare Corp. .......................... 14,000 648,375
Wellpoint Health Networks, Inc.* ................. 20,000 915,000
-------------
10,446,114
-------------
Healthcare - Software/Services (5.86%)
HBO & Co. ........................................ 44,000 1,914,000
HPR Inc. * ....................................... 50,000 1,200,000
Kendle International, Inc.* ...................... 35,000 525,000
Parexel International Corp.* ..................... 32,000 1,156,000
Quintiles Transnational Corp.* .................. 20,000 1,450,000
-------------
6,245,000
-------------
Healthcare - Supplies (2.35%)
Molecular Devices Corp.* ......................... 36,000 720,000
Perkin-Elmer Corp. ............................... 11,000 687,500
Waters Corp. * ................................... 25,000 1,100,000
-------------
2,507,500
-------------
Hospitals Management (0.80%)
Health Management Associates, Inc.
(Class A)* ...................................... 35,000 853,125
-------------
Medical Devices and Products (12.70%)
Baxter International, Inc. ....................... 22,000 1,017,500
Boston Scientific Corp.* ......................... 12,000 546,000
Cooper Cos., Inc.* .............................. 20,000 716,250
DENTSPLY International, Inc. .................... 17,000 482,375
DePuy, Inc. ...................................... 18,000 461,250
ESC Medical Systems Ltd. (Israel)* ............... 45,000 1,766,250
Medtronic, Inc. .................................. 60,000 2,610,000
Mentor Corp. ..................................... 15,000 546,563
Ocular Sciences, Inc.* ........................... 40,000 880,000
Physio - Control International Corp.* ............ 25,000 398,438
Respironics, Inc. ................................ 20,000 562,500
Stryker Corp. .................................... 70,000 2,603,125
Ventana Medical Systems, Inc.* .................. 25,000 387,500
Wesley Jessen VisionCare, Inc.* .................. 19,000 555,750
-------------
13,533,501
-------------
Nursing Homes (1.92%)
Arbor Health Care Co. * .......................... 12,000 532,500
Health Care & Retirement Corp.* .................. 40,000 1,512,500
-------------
2,045,000
-------------
Retail - Drug Stores (1.54%)
Arbor Drugs, Inc. ................................ 20,000 535,000
CVS Corp. ........................................ 18,000 1,103,625
-------------
1,638,625
-------------
TOTAL COMMON STOCK
(Cost $74,244,849) (97.76%) 104,169,889
------- -------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.72%)
Investment in a joint repurchase
agreement transaction with
Aubrey Lanston & Co. - Dated
10-31-97, Due 11-03-97 (Secured
by US Treasury Notes, 5.750%
thru 7.125%, Due 12-31-98
thru 4-30-00)
- Note A ............................. 5.680% $2,903 2,903,000
-------------
Cash Equivalents (27.79%)
Navigator Securities Lending
Prime Portfolio** ............................. 29,607 29,607,290
-------------
TOTAL SHORT-TERM INVESTMENTS .................. (30.51%) 32,510,290
------- -------------
TOTAL INVESTMENTS ................... (128.27%) $136,680,179
======= ============
* 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 investment at
October 31, 1997 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ----------
Ireland ..................................................... 0.41%
Israel ...................................................... 1.66
Netherlands ................................................. 0.64
Sweden ...................................................... 0.54
Switzerland ................................................. 4.01
United Kingdom .............................................. 5.81
United States ............................................... 115.20
------
TOTAL INVESTMENTS 128.27%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Rx 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 Rx Fund (the "Fund"), John Hancock Pacific
Basin Equities Fund and John Hancock Global Marketplace Fund. The other two
series of the Trust are reported in separate financial statements. The
investment objective of the Fund is to achieve long-term growth of capital by
investing primarily in stocks of foreign and U.S.
health care companies.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemptions, dividends and liquidation, except that
certain expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class which bears distribution and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. 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
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Rx Fund
expense rate(s) applicable to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not identifiable to a specific fund are
allocated in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. These agreements enable
the Fund to participate with other Funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $600 million,
collectively. Interest is charged to each Fund, based on its borrowings, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at a
rate of 0.075% per annum based on the average daily unused portion of the line
of credit, is allocated among the participating Funds. The Fund had no borrowing
activity for the year ended October 31, 1997.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lenders fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear the risk of delay in recovery
or even loss of rights in the collateral should the borrower of the securities
fail financially. At October 31, 1997, the Fund loaned securities having a
market value of $28,524,865 collateralized by cash in the amount of $29,607,290,
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 pm, London time, on the date of any
determination of the net asset value of the fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains 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
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Rx Fund
currency. Such contracts normally involve no market risk other than that not
offset by the currency amount of the underlying transaction.
There were no open forward foreign currency contracts at 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 instrument. Selling futures tends to decrease the Fund's exposure to
the underlying instrument or hedge other Fund instruments. At the time the Fund
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange on
which it trades. Subsequent payments, known as "variation margin," to and from
the broker are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1997, 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, 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, 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
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Rx Fund
program equivalent, on an annual basis, to the sum of (a) 0.80% of the first
$200,000,000 of the Fund's average daily net asset value and (b) 0.70% of the
Fund's average daily net asset value in excess of $200,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1997, net sales charges received with regard to Class A shares amounted to
$288,889. Out of this amount, $44,643 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $178,497 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$65,749 was paid as sales commissions to personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and Sutro
& Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect
sole shareholder of Distributors and was the indirect sole shareholder until
November 29, 1996 of John Hancock Freedom Securities Corporation and its
subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses for providing distribution related services to the Fund in
connection with the sale of Class B shares. For the year ended October 31, 1997,
contingent deferred sales charges paid to JH Funds amounted to $160,908.
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 year 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 October 31, 1997, 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 year ended October 31, 1997, aggregated $67,188,527 and
$49,060,321 respectively. There were no purchases or
18
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Rx Fund
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 short-term
investments) for federal income tax purposes was $106,756,265. Gross unrealized
appreciation and depreciation of investments aggregated $30,775,217 and $851,303
respectively, resulting in net unrealized appreciation of $29,923,914.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1997, the Fund has reclassified amounts to
reflect a decrease in accumulated net realized gain on investments of
$1,370,281, a decrease in accumulated net investment loss of $948,854 and an
increase in capital paid-in of $421,427. This represents the amount necessary to
report these balances on a tax basis, excluding certain temporary differences,
as of October 31, 1997. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to the treatment of net
operating losses in the computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles, and the
Fund's use of the tax accounting practice known as equalization. The calculation
of net investment income per share in the financial highlights excludes these
adjustments.
19
<PAGE>
================================================================================
John Hancock Funds - Global Rx Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock Global Rx Fund and the trustees of John
Hancock World Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Global Rx 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 owned at October 31, 1997 by correspondence
with the custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 15, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund paid during its taxable year ended
October 31, 1997.
The Fund designated distributions of $4,867,066 as a capital gain dividend.
All of this amount is a 28% rate gain distribution.
None of the distributions qualify for the dividend received deduction
available to corporations.
Shareholders will receive a 1997 U.S. Treasury Department Form 1099-DIV in
January 1998. This will reflect the tax character of all distributions received
during calendar year 1997.
20
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Rx Fund
21
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Rx Fund
22
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Rx Fund
23
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS -------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713 (TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
-------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Global Rx Fund. It may be used as sales literature when preceded or accompanied
by the current prospectus, which details charges, investment objectives and
operating policies.
[LOGO] Printed on Recycled Paper 2800A 10/97
12/97
<PAGE>
ANNUAL REPORT
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Pacific Basin
Equities Fund
OCTOBER 31, 1997
[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
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
INDEPENDENT AUDITORS
PRICE WATERHOUSE LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
---------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The Stock market in 1997 has been anything but dull. Investors have been treated
to record-breaking performance by the Dow Jones Industrial Average, but with
record-breaking volatility. After two years of strong advances amid relatively
little volatility, the market's recent sharp drops and enormous rebounds have
caused a fair share of investor concern.
The latest round came in October and was largely due to uncertainty in
foreign markets. Southeast Asia sneezed and the rest of the world caught a cold.
On October 27, the Dow experienced its largest one-day point decline, dropping
554 points. In percentage terms, however, that roughly 7% decline didn't even
register on the list of 10 largest drops. The next day, the market bounced right
back, as the Dow had a record one-day vault of 337 points. In short order, the
U.S. market had stabilized, yet many markets remained edgy as investors sorted
out the Asian turmoil and its implications on economic growth, interest rates
and corporate earnings.
- --------------------------------------------------------------------------------
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to first paragraph.
- --------------------------------------------------------------------------------
In the face of such uncertainty, a trusted investment professional can be
your best ally. Now, more than ever, your investment professional can help you
take the emotion out of investment decisions. At a time when your instincts
might have you react to the heat of the market's moment, your investment
professional can serve as an objective voice to put current events in a
longer-term perspective. He or she can also help you evaluate your investments
in any market environment to ensure that they fit your risk tolerance and time
horizons. On an ongoing basis, your investment professional is there for you to
check out new investment ideas or to get an informed opinion about current
economic and market conditions.
We encourage you to take advantage of this important resource. Working
together, you can draw up a detailed road map to help reach your financial
destination regardless of the conditions along the way.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY AYAZ EBRAHIM FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Pacific Basin
Equities Fund
Market turmoil sweeps Pacific Basin markets
Economic mismanagement and currency turmoil have wreaked havoc across the
booming economies of the Pacific Basin, particularly in the last several months.
The downturn in the region was sparked by the dramatic plunge in the Thai stock
market, which has fallen 69% over the last 12 months. Thailand's collapse
resulted from overzealous bank loans, particularly in the overbuilt property
sector, as well as a sharp devaluation of its currency, the Thai baht.
Thailand's problems spread quickly throughout the region as investors began
to worry about the health of neighboring economies. Malaysia, the Philippines,
Singapore and Indonesia soon followed suit with their currencies and stock
markets plummeting. The turmoil eventually reached the strongest markets in the
region -- Hong Kong and Taiwan.
Needless to say, the market volatility that has permeated the region has
impacted performance. For the year ended October 31, 1997, the Pacific Basin
Equities Fund Class A and B shares returned -19.03% and -19.67%, respectively,
at net asset value. By comparison, the average Pacific region fund returned
- -18.52%, according to Lipper Analytical Services, Inc.(1) Please see pages six
and seven for longer-term performance information.
Although no country has escaped the region's recent downturn, the
circumstances surrounding each market's decline are different. In the sections
that follow, we will take a closer look at the
"...no country has escaped the region's recent downturn..."
- --------------------------------------------------------------------------------
A 2 1/4" x 2 1/2" photo of Ayaz Ebrahim at bottom center. Caption reads: "Ayaz
Ebrahim."
- --------------------------------------------------------------------------------
Ayaz Ebrahim
3
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
A pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into twelve sections. Going from top left to right:
Taiwan 3%; Hong Kong 30%; China 3%;Australia 14%; India 3%; Indonesia 2%; Japan
18%; Malaysia 4%; Philippines 3%; Singapore 6%; South Korea 3%; Short-Term
Investments & Other 11%. A footnote states: "As a percentage of net assets on
October 31, 1997."
- --------------------------------------------------------------------------------
Fund's largest country weightings and our investment strategy within each of
those countries.
Hong Kong
Thanks to its strong corporate earnings and abundant trade surplus, Hong Kong is
the healthiest economy in the Pacific region. For that reason, it remains our
largest country weighting at 30% of the Fund's net assets. The recent economic
woes of its neighbors have put pressure on Hong Kong's dollar and, in turn, its
stock market. As the government defends its currency with higher interest rates,
we are likely to see the market volatility continue in the short term.
However, we are confident that the government has ample ammunition to
maintain the Hong Kong dollar's all-important link to the U.S. dollar. What's
more, as the financial and trade service center for China, Hong Kong stands to
benefit significantly from the China's strong growth prospects. Given that, we
remain optimistic about Hong Kong's future, despite the recent setback. Our
investments here focus on China "red chips" -- those Chinese companies that are
listed on the Hong Kong stock exchange. Examples include Shanghai Petrochemical
and CITIC Pacific. All of these companies are well positioned to take advantage
of China's booming economy.
Japan
We have gradually pared our Japanese investments to 18% of net assets, from 27%
a year ago. The main reason is that Japan's long economic slump has persisted,
and the country still faces enormous challenges in overcoming its economic
troubles. In addition, the problems in the rest of Southeast Asia have recently
contributed to the country's woes. The one bright spot in the otherwise weak
Japanese economy is exports. As a result, our emphasis is on electronics giants
- -- such as Sony and Matsushita Electric Industrial -- that are benefiting from
strong overseas sales.
Australia
Thanks to falling interest rates and an improving economy, Australia held up
best during the region's recent market turmoil. After Hong Kong, Australia is
the market where we see the most favorable prospects. We expect the economy to
continue growing at a rate of 3% to 4%. What's more, we believe there is room
for more interest-rate cuts. National Australia Bank is one of our favorite
holdings. Not only does this bank have an excellent balance sheet, but it also
stands to benefit from further interest-rate declines. We also like local
retailers -- such as Woolworth's -- that are poised to reap the rewards of a
rebounding economy.
"...Hong Kong is the healthiest economy in the Pacific region."
- --------------------------------------------------------------------------------
Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is HSBC
Holdings followed by an up arrow and the phrase "Global expansion increases
balanced earnings in the future." The second listing is City Developments
followed by a down arrow and the phrase "Concerns of oversupply in local
property market." The third listing is Sony followed by a down arrow and the
phrase " Profit taking and Asian turmoil hurt stock despite solid growth."
Footnote below reads: "See "Schedule of Investments." Investment holdings are
subject to change."
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1997." The chart is
scaled in increments of 5% from bottom to top, with 0% at the top and -20% at
the bottom. Within the chart there are three solid bars. The first represents
the -19.03% total return for the John Hancock Pacific Basin Fund: Class A. The
second represents the -19.67% total return for John Hancock Pacific Basin Fund:
Class B. The third represents the -18.52% total return for the average pacific
region fund. A footnote below 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. (1)"
See the following two pages for historical performance information."
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Southeast Asia
The Southeast Asian markets of Thailand, Singapore, the Philippines and
Indonesia have been hit hardest. In order to prop up their weakening currencies,
the governments of these countries have raised interest rates substantially. As
those higher interest rates begin to filter through to the local economies, we
are likely to see growth rates slow in the short term. As a result, we've cut
back our total Southeast Asian holdings to 15% of net assets, from nearly 33%
six months ago. For the time being, we have eliminated our Thai holdings. In
Singapore, we've held on to high-quality banks such as Oversea-Chinese Banking
Corp. In Malaysia, our focus remains on defensive manufacturing and shipping
companies such as Malaysia International Shipping Berhad.
Outlook
In the short term, volatility is likely to continue plaguing the Pacific Basin
markets as investors try to make sense of the current economic situation. The
key will be how quickly governments can implement the tough reforms necessary to
correct the economic ills. In the meantime, higher interest rates, weaker
currencies and economic restructuring will take their toll on the region's
economies.
Having said that, we are still optimistic about the long-term growth
prospects for the region. Initial indications suggest that many governments are
moving in the right direction. We believe that once the painful economic
restructurings are complete, we will see these markets bounce back. For now,
however, we will maintain our relatively defensive investment strategy. Our
focus will remain on Hong Kong, which should continue to reap the rewards of
China's strong growth. We will also maintain our position in Australia, where
the economy is still growing at an attractive rate. Until the volatility
subsides, however, we will remain cautious on Southeast Asian markets such as
Thailand, Singapore and Malaysia. We will also maintain our cautious stance on
Japan until we see more substantial signs of an economic recovery.
"For now we will 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
<PAGE>
================================================================================
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 September 30, 1997
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
Cumulative Total Returns (8.02%) 64.51% 81.99%
Average Annual Total Returns (8.02%) 10.47% 6.17%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended September 30, 1997
SINCE
ONE INCEPTION
YEAR (3/7/94)
---- --------
Cumulative Total Returns (8.68%) (4.51%)
Average Annual Total Returns (8.68%) (1.29%)
6
<PAGE>
================================================================================
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 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 $17,051 as of
October 31, 1997. The second line represents the value of the hypothetical
$10,000 investment made in the Pacific Basin Equities Fund , after sales charge,
on September 8, 1987 , and is equal to $16,199 as of October 31, 1997. The third
line represents the Morgan Stanley Capital International Pacific Index and is
equal to $9,111as of October 31, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 two lines. The first line represents the value of the
Pacific Basin Equities Fund, before sales charge, and is equal to $7,848 as of
October 31, 1997. The second line represents the value of the hypothetical
$10,000 investment made in the Morgan Stanley Capital International Pacific
Index on March 7, 1994, and is equal to $7,695 as of October 31, 1997.
- --------------------------------------------------------------------------------
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 October 31, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks and warrants (cost - $38,497,041) ............. $33,515,730
Short-term investments (cost - $11,322,463) - Note A ........ 11,322,463
------------
44,838,193
Cash ........................................................ 294
Foreign currency, at value (cost - $1,543,437) .............. 1,538,836
Foreign taxes receivable .................................... 937
Receivable for investments sold ............................. 796,762
Receivable for shares sold .................................. 163,272
Dividends receivable ........................................ 64,382
Interest receivable ......................................... 495
Other assets ................................................ 2,458
------------
Total Assets .............................. 47,405,629
-----------------------------------------------------------
Liabilities:
Payable for investments purchased ........................... 526,906
Payable for shares repurchased .............................. 71,317
Payable for securities on loan - Note A ..................... 8,185,463
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................... 94,966
Accounts payable and accrued expenses ....................... 97,741
------------
Total Liabilities ......................... 8,976,393
-----------------------------------------------------------
Net Assets:
Capital paid-in ............................................. 43,892,508
Accumulated net realized loss on investments
and foreign currency transactions .......................... (471,148)
Net unrealized depreciation of investments
and foreign currency transactions .......................... (4,989,384)
Accumulated net investment loss ............................. (2,740)
------------
Net Assets ................................ $38,429,236
===========================================================
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 - $21,108,781/1,815,005 ............................. $11.63
=============================================================================
Class B - $17,320,455/1,529,548 ............................. $11.32
=============================================================================
Maximum Offering Price Per Share*
Class A - ($11.63 x 105.26%) ................................ $12.24
=============================================================================
* 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
Year ended October 31, 1997
- --------------------------------------------------------------------------------
Investment Income:
Dividends
(net of foreign withholding taxes of $76,114) .............. $887,162
Interest
(including income on securities loaned of $11,509) ......... 79,605
-----------
966,767
-----------
Expenses:
Investment management fee - Note B ......................... 494,141
Distribution and service fee - Note B
Class A .................................................. 103,871
Class B .................................................. 271,439
Transfer agent fee - Note B ................................ 295,527
Custodian fee .............................................. 173,556
Registration and filing fees ............................... 49,424
Auditing fee ............................................... 32,513
Printing ................................................... 18,767
Financial services fee - Note B ............................ 11,378
Trustees' fees ............................................. 5,204
Miscellaneous .............................................. 3,019
Legal fees ................................................. 1,040
-----------
Total Expenses ............................ 1,459,879
-----------------------------------------------------------
Net Investment Loss ....................... (493,112)
-----------------------------------------------------------
Realized and Unrealized Loss on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ....................... (238,241)
Net realized loss on foreign currency transactions .......... (85,148)
Change in net unrealized appreciation/depreciation
of investments ............................................. (6,881,140)
Change in net unrealized appreciation/depreciation
of foreign currency transactions ........................... (10,045)
-----------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ............. (7,214,574)
-----------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ................. ($7,707,686)
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities 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 ............................................ ($286,709) ($139,847) ($493,112)
Net realized gain (loss) on investments sold and foreign
currency transactions ......................................... 484,871 485,068 (323,389)
Change in net unrealized appreciation/depreciation of
investments and foreign currency transactions ................. 1,979,326 (1,583,701) (6,891,185)
----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 2,177,488 (1,238,480) (7,707,686)
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and
foreign currency transactions
Class A - (none, none, and $0.1114 per share, respectively) ... -- -- (298,861)
Class B - (none, none, and $0.1114 per share, respectively) ... -- -- (226,927)
----------- ----------- -----------
Total Distributions to Shareholders ......................... -- -- (525,788)
----------- ----------- -----------
From Fund Share Transactions - Net:* ............................. 20,330,528 (4,213,348) (22,178,367)
----------- ----------- -----------
Net Assets:
Beginning of period ............................................ 51,784,889 74,292,905 68,841,077
----------- ----------- -----------
End of period (including accumulated net investment loss of
$188,377, $10,419 and $2,740 respectively) .................... $74,292,905 $68,841,077 $38,429,236
=========== =========== ===========
* Analysis of Fund Share Transactions:
<CAPTION>
PERIOD FROM
YEAR ENDED SEPTEMBER 1, 1996 TO YEAR ENDED
AUGUST 31, 1996 OCTOBER 31, 1996 (1) OCTOBER 31, 1997
--------------------------- --------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold .................... 5,439,721 $80,924,479 1,081,326 $16,035,337 7,033,995 $104,411,972
Shares issued to shareholders in
reinvestment of distributions -- -- -- -- 18,734 279,606
------------ ------------ ------------ ------------ ------------- -------------
5,439,721 80,924,479 1,081,326 16,035,337 7,052,729 104,691,578
Less shares repurchased ........ (5,246,580) (78,427,912) (1,251,853) (18,610,457) (7,912,293) (118,130,220)
------------ ------------ ------------ ------------ ------------- -------------
Net increase (decrease) ........ 193,141 $2,496,567 (170,527) ($2,575,120) (859,564) ($13,438,642)
============ ============ ============ ============ ============= =============
CLASS B
Shares sold .................... 3,821,397 $56,351,704 454,392 $6,590,658 1,927,628 $28,233,034
Shares issued to shareholders in
reinvestment of distributions -- -- -- -- 12,216 178,751
------------ ------------ ------------ ------------ ------------- -------------
3,821,397 $56,351,704 454,392 $6,590,658 1,939,844 $28,411,785
Less shares repurchased ........ (2,618,144) (38,517,743) (563,407) (8,228,886) (2,533,663) (37,151,510)
------------ ------------ ------------ ------------ ------------- -------------
Net increase (decrease) ........ 1,203,253 $17,833,961 (109,015) ($1,638,228) (593,819) ($8,739,725)
============ ============ ============ ============ ============= =============
</TABLE>
(1) Effective October 31, 1996, the fiscal period changed from August 31 to
October 31.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and redeemed during the last three periods, along with
the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
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>
YEAR ENDED AUGUST 31, PERIOD FROM YEAR ENDED
------------------------------------------ SEPTEMBER 1, 1996 TO OCTOBER 31,
1993 1994 1995 1996 OCTOBER 31, 1996(10) 1997
------- ------- ------- ------- -------------------- -----------
<S> <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
------- ------- ------- ------- ------- -------
Net Investment Income (Loss)(2) ................. (0.11) (0.10) 0.02(3) (0.02) (0.02) (0.07)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions . 4.51 3.12 (1.24) 0.65 (0.25) (2.66)
------- ------- ------- ------- ------- -------
Total from Investment Operations ............. 4.40 3.02 (1.22) 0.63 (0.27) (2.73)
------- ------- ------- ------- ------- -------
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
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value(4) ... 49.61% 22.82% (7.65%) 4.47% (1.83%)(5) (19.03%)
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
Ratio of Expenses to Average Net Assets ......... 2.94% 2.43% 2.05% 1.97% 2.21%(7) 2.06%
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)
Ratio of Adjusted Net Investment Loss
to Average Net Assets(8) ...................... (2.28%) -- -- -- -- --
Portfolio Turnover Rate ......................... 171% 68% 48% 73% 15% 118%
Expense Reimbursement Per Share(2) .............. $0.14 -- -- -- -- --
Average Brokerage Commission Rate(9) ............ N/A N/A N/A $0.0183 $0.0221 $0.0076
</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 YEAR ENDED
AUGUST 31, ------------------ SEPTEMBER 1, 1996 TO OCTOBER 31,
1994(1) 1995 1996 OCTOBER 31, 1996(10) 1997
-------- ------- ------- -------------------- -----------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $15.11 $15.84 $13.96 $14.49 $14.20
------- ------- ------- ------- -------
Net Investment Loss(2) ..................................... (0.09) (0.09) (0.13) (0.04) (0.18)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions ............................ 0.82 (1.24) 0.66 (0.25) (2.59)
------- ------- ------- ------- -------
Total from Investment Operations ........................ 0.73 (1.33) 0.53 (0.29) (2.77)
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Realized Gain on Investments Sold and
Foreign Currency Transactions ........................... -- (0.55) -- -- (0.11)
------- ------- ------- ------- -------
Total Distributions ..................................... -- (0.55) -- -- (0.11)
------- ------- ------- ------- -------
Net Asset Value, End of Period ........................... $15.84 $13.96 $14.49 $14.20 $11.32
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value(4) .............. 4.83%(5) (8.38%) 3.80% (2.00%)(5) (19.67%)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................... $9,480 $14,368 $32,342 $30,147 $17,320
Ratio of Expenses to Average Net Assets .................... 3.00%(7) 2.77% 2.64% 2.90%(7) 2.76%
Ratio of Net Investment Loss to Average Net Assets ......... (1.40%)(7) (0.66%) (0.86%) (1.52%)(7) (1.19%)
Portfolio Turnover Rate .................................... 68% 48% 73% 15% 118%
Average Brokerage Commission Rate(9) ....................... N/A N/A $0.0183 $0.0221 $0.0076
</TABLE>
(1) Class B shares commenced operations on March 7, 1994.
(2) Based on average of shares outstanding at the end of each month.
(3) May not accord to amounts shown elsewhere in the financial statements due
to the timing of sales and repurchases of fund shares in relation to
fluctuating market values of the investments of the fund.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration
fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(10) Effective October 31, 1996, the fiscal period changed
from August 31 to October 31.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Schedule of Investments
October 31, 1997
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Pacific Basin Equities Fund on October 31, 1997. It's divided into three main
categories: common stocks, warrants and short-term investments. Common stocks
and warrants 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 (13.55%)
Australia & New Zealand Banking
Group Ltd. (Banks - Foreign) .................. 12,000 $83,715
Australian Gas Light Co., Ltd.
(Oil & Gas) ................................... 36,800 245,856
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) ...................... 41,500 411,507
Hoyts Cinemas Group (Leisure) .................. 353,733 497,526
ICI Australia Ltd.
(Diversified Operations) ...................... 65,600 493,625
National Australia Bank Ltd.
(Banks - Foreign) ............................. 130,000 1,778,168
Southern Pacific Petroleum NL
(Oil & Gas)* .................................. 156,300 340,746
Woodside Petroleum Ltd. (Oil & Gas) ............. 100,000 844,603
Woolworth's Ltd. (Retail) ....................... 158,800 512,593
-----------
5,208,339
-----------
China (3.07%)
Angang New Steel Co., Ltd. (Steel)* ............. 2,150,000 475,522
China Eastern Airlines Corp., Ltd.
(Transport)* .................................. 500,000 113,173
Shanghai Petrochemical Co., Ltd.
(Chemicals) ................................... 816,000 219,000
Zhenhai Refining and Chemical Co., Ltd.
(Oil & Gas) ................................... 800,000 372,502
-----------
1,180,197
-----------
Hong Kong (30.18%)
Beijing Enterprises Holdings Ltd.
(Diversified Operations)* ..................... 150,000 501,520
Cathay Pacific Airways Ltd. (Transport) ......... 280,000 295,156
Cheung Kong Holdings Ltd.
(Real Estate Operations) ...................... 149,000 1,035,860
China Everbright Ltd. (Retail)* ................. 216,000 231,883
China Light & Power Co., Ltd. (Utilities) ....... 100,000 526,418
CITIC Pacific Ltd.
(Diversified Operations) ...................... 100,000 478,562
Cosco Pacific Ltd. (Containers) ................. 400,000 465,628
Guangdong Kelon Electric
Holdings Ltd. (Household) ..................... 500,000 633,771
Hang Seng Bank Ltd.
(Banks - Foreign) ............................. 70,000 608,873
Hong Kong Telecommunications Ltd.
(Telecommunications) .......................... 720,000 1,378,258
HSBC Holdings Ltd. (Banks - Foreign) ............ 35,213 797,035
Hutchison Whampoa Ltd.
(Diversified Operations) ...................... 256,000 1,771,454
New World Development Co., Ltd.
(Real Estate Operations) ...................... 97,000 341,253
Shanghai Industrial Holdings Ltd.
(Diversified Operations) ...................... 169,000 751,937
Sun Hung Kai Properties Ltd.
(Real Estate Operations) ...................... 102,000 751,989
Swire Pacific Ltd.
(Diversified Operations) ...................... 103,000 550,204
Union Bank of Hong Kong Ltd.
(Banks - Foreign) ............................. 380,000 476,751
-----------
11,596,552
-----------
India (2.76%)
Reliance Industries Ltd.
(Global Depositary Receipts)
(GDR) (Diversified Operations)* ............... 33,000 693,000
State Bank of India (GDR)
(Banks - Foreign) ............................. 20,000 368,000
-----------
1,061,000
-----------
Indonesia (1.57%)
Gulf Indonesia Resources Ltd.
(Oil & Gas)* .................................. 8,700 182,700
PT Bank Internasional Indonesia
(Banks - Foreign) ............................. 1,165,258 258,587
PT Lippo Securities (Finance) .................. 1,572,000 163,523
-----------
604,810
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Japan (18.45%)
Advantest Corp. (Electronics) .................. 3,000 $248,027
Canon Inc. (Office) ............................. 16,000 388,201
Circle K Japan Co., Ltd. (Retail) ............... 3,100 159,186
Laox Co., Ltd. (Retail) ......................... 17,000 151,142
Marui Co., Ltd. (Retail) ........................ 12,000 202,410
Matsushita Electric Industrial Co.,
Ltd. (Electronics) ............................ 23,000 386,041
Minebea Co., Ltd. (Machinery) .................. 39,000 388,866
Mitsubishi Estate Co., Ltd.
(Real Estate Operations) ...................... 45,000 568,342
NEC Corp. (Electronics) ......................... 64,000 701,953
NTT Data Corp. (Computers) ...................... 2 95,555
Ricoh Co., Ltd. (Office) ........................ 31,000 399,252
Rohm Co., Ltd. (Electronics) .................... 4,000 395,513
Shin-Etsu Chemical Co., Ltd.
(Chemicals) ................................... 18,000 439,717
Sony Corp. (Electronics) ........................ 6,000 498,047
Sumitomo Electric Industries, Ltd.
(Wire & Cable Products) ....................... 30,000 396,344
Takashimaya Co., Ltd. (Retail) .................. 23,000 217,864
Takeda Chemical Industries, Ltd.
(Medical) ..................................... 15,000 408,808
TDK Corp. (Electronics) ......................... 6,000 497,549
Tokyo Electron Ltd. (Electronics) ............... 11,000 548,400
-----------
7,091,217
-----------
Malaysia (3.89%)
Malayan Banking Berhad
(Banks - Foreign) ............................. 100,000 386,981
Malaysia International Shipping Berhad
(Transport) ................................... 91,000 152,872
New Straits Times Press Berhad
(Media) ....................................... 100,000 218,989
Rothmans of Pall Mall Berhad
(Tobacco) ..................................... 47,400 380,366
United Engineers Berhad (Building) .............. 150,000 355,482
-----------
1,494,690
-----------
Philippine Islands (2.54%)
Manila Electric Co. (B Shares)
(Utilities) ................................... 121,342 369,674
Philippine Long Distance Telephone Co.
American Depositary Receipts
(Utilities) ................................... 25,000 606,250
-----------
975,924
-----------
Singapore (5.60%)
City Developments Ltd.
(Real Estate Operations) ...................... 86,000 360,381
Hongkong Land Holdings Ltd.
(Real Estate Operations) ...................... 94,000 214,320
NatSteel Ltd. (Steel) ........................... 190,000 307,619
Overseas-Chinese Banking Corp., Ltd.
(Banks - Foreign) ............................. 84,000 466,667
Singapore Technologies Aerospace Ltd.
(Aerospace) ................................... 44,000 115,657
Singapore Technologies Automotive Ltd.
(Engineering / R&D Services) .................. 118,000 346,133
United Overseas Bank Ltd.
(Banks - Foreign) ............................. 62,000 342,476
-----------
2,153,253
-----------
South Korea (2.83%)
Hansol Paper Co.
(Paper & Paper Products) ...................... 10,770 154,017
LG Chemical Ltd. (Chemicals) .................... 7,000 79,793
LG Semiconductor Co. (Electronics)* ............. 2,700 44,487
Pohang Iron & Steel Co., Ltd. (Steel) ........... 12,220 535,654
Samsung Electronics Co. (Electronics) ........... 7,000 274,922
-----------
1,088,873
-----------
Taiwan (2.54%)
Acer Inc. (GDR) (Computers)* .................... 58,750 386,281
Asustek Computer, Inc.
(GDR) (Computers)* ............................ 20,000 244,500
China Steel Corp. (GDR) (Steel) ................. 23,000 343,850
-----------
974,631
-----------
TOTAL COMMON STOCKS
(Cost $38,246,213) (86.98%) 33,429,486
--------- -----------
WARRANTS
Hong Kong (0.21%)
ABN Amro (Banks - Foreign)* ..................... 3,200,000 11,175
Deutsche Bank (Banks - Foreign)* ................ 6,370,000 69,208
-----------
80,383
-----------
Indonesia (0.02%)
PT Bank Internasional Indonesia
(Banks - Foreign)* ............................ 103,580 5,861
-----------
TOTAL WARRANTS
(Cost $250,828) (0.23%) 86,244
--------- -----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $38,497,041) (87.21%) 33,515,730
--------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------ ---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (8.17%)
Investment in a joint repurchase
agreement transaction with
Aubrey Lanston & Co. -
Dated 10-31-97, Due
11-3-97 (secured by U.S.
Treasury Notes 5.750% thru
7.125%, Due 12-31-98
thru 4-30-00) - Note A .................. 5.68% $3,137 $3,137,000
-----------
Non-Cash Security Lending Collateral (2.30%)
U.S. Treasury Bonds, 6.25% thru
15.75%, Due 11-15-01 thru
6-15-26, U.S. Treasury Note
6.25%, Due 01-01-02** ......................... 883,894
-----------
Cash Equivalents (19.00%)
Navigator Securities Lending
Prime Portfolio** ............................. 7,302 7,301,569
-----------
TOTAL SHORT-TERM INVESTMENTS (29.47%) 11,322,463
--------- -----------
TOTAL INVESTMENTS (116.68%) $44,838,193
========= ===========
* 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.
Industry Diversification
October 31, 1997 (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 October 31, 1997 assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- -------------
Aerospace ....................................................... 0.30%
Banks - Foreign ................................................. 14.71
Buildings ....................................................... 0.93
Chemicals ....................................................... 1.92
Computers ....................................................... 1.89
Containers ...................................................... 1.21
Diversified Operations .......................................... 14.71
Electronics ..................................................... 9.35
Engineering/R & D Services ...................................... 0.90
Finance ......................................................... 0.43
Household ....................................................... 1.65
Leisure ......................................................... 1.29
Machinery ....................................................... 1.01
Media ........................................................... 0.57
Medical ......................................................... 1.06
Office .......................................................... 2.05
Oil & Gas ....................................................... 5.17
Paper Products .................................................. 0.40
Real Estate Operations .......................................... 8.51
Retail .......................................................... 3.84
Steel ........................................................... 4.33
Telecommunications .............................................. 3.59
Tobacco ......................................................... 0.99
Transport ....................................................... 1.46
Utilities ....................................................... 3.91
Wire & Cable .................................................... 1.03
Short-Term Investments .......................................... 29.47
------
TOTAL INVESTMENTS 116.68%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series: John Hancock Pacific Basin Equities Fund (the "Fund"), John
Hancock Global Rx Fund and John Hancock Global Marketplace Fund. 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"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, net currency exchange gains and
losses from sales of foreign debt securities must be treated as ordinary income
even though such items are gains and losses for accounting purposes. 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 distributions 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 for the effect of expenses that may be applied
differently to each class.
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, 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 an unsecured
line of credit with banks which permit borrowings up to $600 million,
collectively. Interest is charged to each Fund, based on its borrowings, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at a
rate of 0.075% per annum based on the average daily unused portion of the line
of credit, is allocated among the participating Funds. The Fund had no borrowing
activity for the year ended October 31, 1997.
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 extension of credit, the Fund may bear risk of delay in recovery or
even loss of rights in the collateral should the borrower of the securities fail
financially. At October 31, 1997 the Fund loaned securities having a market
value of $7,994,464, collateralized by cash and securities, in the amount of
$8,185,463. Cash collateral was invested in a short-term instrument.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 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 counter
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
parties to meet the terms of the contract and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk other than that not offset by the currency amount of the underlying
transaction.
There were no open forward foreign currency exchange contracts at October 31,
1997.
NOTE B--
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada.
The Fund and the Adviser also have a sub-investment management contract with
John Hancock Advisers International Limited (the "Sub-Adviser"), a wholly owned
subsidiary of the Adviser, under which the Sub-Adviser, subject to the review of
the Trustees and overall supervision of the Adviser, provides the Fund with
investment management services and advice with respect to that portion of the
Fund's assets invested in countries other than the United States and Canada. The
Adviser and Indosuez Asia Advisers Limited ("IAAL") have a second subadvisory
contract. Pursuant to such contract, IAAL will serve as co-subadviser to the
Fund with 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 year ended October
31, 1997, net sales charges received with regard to sales of Class A shares
amounted to $91,016. Of this amount, $13,196 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $44,828 was paid
as sales commissions to unrelated broker-dealers and $32,992 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro
&Co., ("Sutro"), all of which are broker dealers. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Distributors and was the indirect sole shareholder until November
29, 1996 of John Hancock Freedom Securities Corporation and its subsidiaries,
which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.00% 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 year ended October 31, 1997,
contingent deferred sales charges paid to JH Funds amounted to $118,807.
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
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
with respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds for
distribution and service expenses, at an annual rate not exceed 0.30% of Class A
average daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The Fund pays
transfer agent fees based on the number of shareholder accounts and certain
out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the 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. 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
October 31, 1997 , 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 year ended October 31, 1997 aggregated $68,665,277 and
$96,879,563 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 short-term
investments) for federal income tax purposes was $49,899,999. Gross unrealized
appreciation and depreciation of investments aggregated $3,429,740 and
$8,491,546, respectively, resulting in unrealized depreciation of $5,061,806.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1997, the Fund has reclassified amounts to
reflect an increase in accumulated net realized loss on investments of $127,766,
a decrease in accumulated net investment loss of $500,791 and a decrease in
capital paid-in of $373,025. This represents the amount necessary to report
these balances on a tax basis, excluding certain temporary differences, as of
October 31, 1997. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to the treatment of net operating losses in
the computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles. The calculation of net
investment income per share in the financial highlights excludes these
adjustments.
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John Hancock Funds - Pacific Basin Equities Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock Pacific Basin Equities Fund
and the Trustees of John Hancock World Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Pacific Basin Equities
Fund (the "Fund") (a series of John Hancock World Fund) at October 31, 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 significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at October 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 15, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund paid during its taxable year ended
October 31, 1997.
The Fund has designated distributions to shareholders of $525,803 as a
capital gain dividend. All of this amount is a 28% rate gain distribution.
None of the distributions qualify for the dividend received deduction
available to corporations.
Shareholders will receive a 1997 U.S. Treasury Department Form 1099-DIV in
January 1998. This will reflect the tax character of all distributions received
during calendar year 1997.
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