<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
HIGH YIELD
TAX-FREE
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
Edgar Larsen
Senior Vice President
James K. Ho
Senior Vice President
Andrew St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
David Beckwith
Vice President
Barry Evans
Vice President
Frank Lucibella
Vice President
Anne McDonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became part
of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array of
retirement and private account services, John Hancock Funds offers you a broader
selection of investment choices to meet your long-term financial needs. What's
more, the union of the Hancock and Transamerica investment teams gives you
access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way we
work with you. Not only do we strive to ensure that your investments are
well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if you
have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY FRANK LUCIBELLA FOR THE
PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
HIGH YIELD TAX-FREE FUND
WANING INFLATION FEARS BOOST MUNICIPAL BOND MARKET;
OUTLOOK MORE CAUTIOUS FOR REMAINDER OF THE YEAR
Effective March 1995, Frank Lucibella took over as head of the management
team on John Hancock High Yield Tax-Free Fund. Mr. Lucibella, who is a second
vice president, also manages John Hancock Managed Tax-Exempt Fund and
John Hancock Tax-Exempt Series Fund: New York Portfolio.
[A 2 1/2" x 3 1/2" photo of Frank Lucibella at bottom right. Caption reads:
"Frank K. Lucibella, Portfolio Manager."]
After completing one of the worst 12-month periods for bonds since the 1920s,
the municipal bond market began a strong upward move last November. The rally
continued to gain steam throughout the first quarter of 1995 when municipals
ended up as the best performing fixed-income category. What fueled the
turnaround were hopes that the economy was slowing and interest rates wouldn't
rise much further.
High-yield municipal bonds were particularly strong performers during the
period. That's because as yields on all municipal bonds fell, yield-hungry
investors added to their already strong demand for higher- yielding municipal
bonds. As a result, the yield spreads -- or difference in yields -- between
higher-yielding bonds and lower-yielding bonds narrowed considerably.
A LOOK AT PERFORMANCE
For the six months ended April 30, 1995, John Hancock High Yield Tax-Free Fund's
Class A
[CAPTION]
"...THE MUNICIPAL BOND MARKET BEGAN A STRONG UPWARD MOVE..."
3
<PAGE> 4
John Hancock Funds - High Yield Tax-Free Fund
[Chart with heading "Top Five Sectors" at top of left hand column. The chart
lists five sectors: 1) Pollution Control 22% 2) Health Care 11% 3) Industrial
Revenue 10% 4) Transportation 8% 5) Electric Utilities 8%. A footnote below
reads: "As a percentage of net assets on April 30, 1995."]
and Class B shares posted total returns of 8.81% and 8.38%, respectively, at net
asset value. Those returns outpaced the average high-yield municipal bond
fund's return of 6.60%, according to Lipper Analytical Services.(1)
The primary reason for the Fund's strong performance was its duration.
Duration measures how sensitive a fund's share price is to changes in interest
rates. Throughout much of the period, the Fund had a long duration, meaning it
was more sensitive to rising and falling rates. That hurt performance when
interest rates were rising at the start of the period, but it really paid off as
the market rallied strongly during the last several months.
PORTFOLIO CHANGES
Since taking over management of the Fund in March, we've made several tactical
changes to the portfolio. First, we've begun to add more higher-yielding,
lower-quality securities. Here's why: If interest rates rise, a higher level of
income will help cushion against price declines. And even if interest rates
remain stable, a higher level of income could help the Fund's total return. One
of the primary ways we've added income is by investing in high-yielding,
non-rated securities -- which now make up about 55% of the Fund's investments.
For a variety of reasons, these securities don't carry a credit rating from one
of the major rating agencies. With the help of our credit analysts, however, we
assign an internal rating to these bonds, and most carry a Baa or Ba internal
rating. These securities can add as much as one percentage point more in yield
than higher-rated bonds with comparable maturities.
Second, we've been adding securities with a high degree of liquidity, meaning
they can be more easily traded. Three municipal dealers left the market in 1994,
taking some of the market's liquidity with them. So now, more than ever, it's
important to find bonds that are widely held by investors and easily traded. So
we've added industrial revenue bonds, including those issued by Bethlehem Steel
and Philadelphia Gas.
The third change we've made is shortening our duration. True, the Fund
benefited from having a long duration in the first quarter of 1995. But we don't
believe that interest rates are likely to come down much further. And there's a
good chance they could rise later this year. So we're taking a cautious
approach, positioning the Fund with a more neutral duration.
[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 U.S. Air
followed by an up arrow and the phrase "Traffic and revenue increases." The
second listing is Denver Airport followed by an up arrow and the phrase
"Airport finally opens." The third listing is Sam Rayburn Municipal Power
Agency followed by a down arrow and the phrase "Credit downgrade." Footnote
below reads: "See "Schedule of Investments." Investment holdings are subject
to change."]
[CAPTION]
"...WE'VE MADE SEVERAL TACTICAL CHANGES TO THE PORTFOLIO."
4
<PAGE> 5
John Hancock Funds - High Yield Tax-Free Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the six months ended April 30, 1995." The
chart is scaled in increments of 5% from top to bottom, with 10% at the top and
0% at the bottom. Within the chart, there are three solid bars. The first
represents the 8.81% total return for John Hancock High Yield Tax-Free Fund:
Class A. The second represents the 8.38% total return for John Hancock High
Yield Tax-Free Fund: Class B. The third represents the 6.60% total return for
the average high-yield municipal bond fund. Footnote below reads: "Total
returns for John Hancock High Yield Tax-Free Fund are at net asset value with
all distributions reinvested. The average high-yield municipal bond fund is
tracked by Lipper Analytical Services.(1) See following page for historical
performance information."]
OUTLOOK AND STRATEGY
Concerns about tax reform could continue to cause some uneasiness in the
municipal market. At the end of April, politicians floated several tax reform
proposals, sparking worries that municipal bonds might lose either their
tax-exempt status or some of their appeal. Specifically, talk of a flat tax -- a
uniform tax rate for all taxpayers -- caused the municipal bond market to
underperform the Treasury market. Under the flat tax proposal now being
discussed, only wages and salaries would be taxed. Interest, dividends and
capital gains would be exempt. If all interest income becomes exempt, the
tax-exempt status of municipal bond income would be eliminated. In our view,
however, it's unlikely that any major tax reform will be enacted in the near
future. So we think that the municipal bond market is jumping the gun.
As far as the interest rate environment goes, we remain cautious. Despite
some recent indications to the contrary, we believe that there's still a decent
amount of strength left in the economy. The decline in interest rates we've seen
so far in 1995 may actually give a boost to the economy later in the year by
spurring housing, auto and retail sales. While the notion of a "soft landing" --
that is, a moderately growing economy with low inflation -- is tempting, history
reminds us that it's difficult to achieve.
With that in mind, we'll keep the Fund positioned with a neutral duration. If
interest rates stabilize or rise from here, total return will be more dependent
on yield than on price appreciation. For that reason, we'll continue to try to
improve the Fund's yield when we find opportunities to do so.
- -------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"...THERE'S STILL A DECENT AMOUNT OF STRENGTH LEFT IN THE ECONOMY."
5
<PAGE> 6
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - High Yield Tax-Free Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ending March 31,
1995 with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception were 1.71%
and (1.91%), respectively, and reflect payment of the maximum sales charge of
4.75%. On May 15, 1995, the maximum sales charge was lowered to 4.50%. The
average annualized total returns for Class B shares for the 1-year, 5-year and
10-year periods were 0.91%, 6.98% and 6.44%, respectively, and reflect the
applicable contingent deferred sales charge (maximum contingent sales charge of
5% declines to 0% over 6 years). SEC yields for the 30-day period ending April
30, 1995 were 5.76%% and 5.25% for Class A and Class B shares, respectively. All
performance data shown represents past performance and should not be considered
indicative of future performance. Returns and principal values of Fund
investments will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Performance is affected by a 12b-1
plan.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
(OR MOST RECENT TEN YEARS)
High Yield Tax-Free Fund: Class A
Line chart with the heading High Yield Tax-Free 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 hypothetical $10,000 investment made
in the High Yield Tax-Free Fund on December 31, 1993, before sales charge, and
is equal to $10,356 as of April 30,1995. The second line represents the value of
the Lehman Bros. Municipal Bond Index and is equal to $10,165* as of April
30,1995. The third line represents the High Yield Tax-Free Fund after sales
charge and is equal to $9,866 as of April 30,1995.
High Yield Tax-Free Fund: Class B
Line chart with the heading High Yield Tax-Free 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 Lehman Bros. Municipal Bond Index and
is equal to $20,061* as of April 30,1995. The second line represents the value
of the hypothetical $10,000 investment made in the High Yield Tax-Free Fund on
August 29, 1986 and is equal to $17,268 as of April 30,1995.
* The Lehman Bros. Municipal Bond Index is an unmanaged index that includes
approximately 15,000 bonds and is commonly used as a measure of municipal
bond performance.
** No applicable contingent deferred sales charge.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $165,068,152) .............................................. $165,224,578
Short-term investments (cost - $200,000) ................................. 200,000
-------------
165,424,578
Cash ....................................................................... 2,240,944
Segregated assets for financial futures contracts .......................... 131,250
Receivable for shares sold ................................................. 271,014
Receivable for investments sold ............................................ 8,782,548
Interest receivable ........................................................ 3,497,216
Miscellaneous assets ....................................................... 43,444
-------------
Total Assets ............................................ 180,390,994
---------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased .......................................... 5,856,496
Payable for shares repurchased ............................................. 84,260
Dividend payable ........................................................... 466,471
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ...................................................... 50,032
Accounts payable and accrued expenses ...................................... 74,183
-------------
Total Liabilities ....................................... 6,531,442
---------------------------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................................ 176,676,257
Accumulated net realized loss on investments ............................... (2,328,407)
Net unrealized appreciation of investments and
financial futures contracts .............................................. 149,395
Distributions in excess of net investment income ........................... (637,693)
-------------
Net Assets .............................................. $173,859,552
===========================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest outstanding -
125,000,000 shares authorized with $0.01 per share par value, respectively)
Class A - $14,498,617/1,566,266 ............................................ $ 9.26
==============================================================================================
Class B - $159,360,935/17,211,821 .......................................... $ 9.26
==============================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($9.26 x 104.99%) ................................................ $ 9.72
==============================================================================================
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
</TABLE>
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
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.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Interest ................................................................... $ 6,256,231
-----------
Expenses:
Investment management fee - Note B ....................................... 484,928
Distribution/service fee - Note B
Class A ................................................................. 19,084
Class B ................................................................. 755,590
Transfer agent fee ....................................................... 67,645
Registration and filing fees ............................................. 39,478
Custodian fee ............................................................ 34,353
Auditing fee ............................................................. 30,159
Trustees' fees ........................................................... 11,402
Printing ................................................................. 8,152
Miscellaneous ............................................................ 7,849
Advisory board fee ....................................................... 5,929
Legal fees ............................................................... 4,586
-----------
Total Expenses .......................................... 1,469,155
--------------------------------------------------------------------------
Net Investment Income ................................... 4,787,076
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FINANCIAL FUTURES CONTRACTS
Net realized loss on investments sold ...................................... (408,713)
Change in net unrealized appreciation/depreciation
of investments ........................................................... 9,487,112
Change in net unrealized appreciation/depreciation
on financial futures contracts ........................................... (7,031)
-----------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts ............................. 9,071,368
--------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............................... $13,858,444
==========================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................. $ 4,787,076 $ 8,040,548
Net realized loss on investments sold and financial futures contracts................. (408,713) (1,459,716)
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts.......................................................... 9,480,081 (14,473,003)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations..................... 13,858,444 (7,892,171)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A** - ($0.3207 and $0.4800 per share, respectively)........................... (556,199) (369,015)
Class B - ($0.2848 and $0.4800 per share, respectively)............................. (4,868,570) (7,671,533)
Distributions fom net realized gain on investments sold
Class B - (none and $0.1900 per share, respectively)................................ -- (1,980,359)
Distributions in excess of net investment income
Class A** - (none and $0.0900 per share, respectively).............................. -- (67,471)
Class B - (none and $0.0700 per share, respectively)................................ -- (1,136,918)
------------ ------------
Total Distributions to Shareholders................................................ (5,424,769) (11,225,296)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... (1,043,825) 72,145,259
------------ ------------
NET ASSETS:
Beginning of period................................................................... 166,469,702 113,441,910
------------ ------------
End of period (including distributions in excess of net investment
income of ($637,693) and none, respectively)......................................... $173,859,552 $166,469,702
============ ============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A**
Shares sold ................................. 273,387 $ 2,438,701 1,811,428 $ 16,937,949
Shares issued to shareholders in reinvestment
of distributions ........................... 23,853 212,931 14,913 136,310
---------- ------------ ---------- ------------
297,240 2,651,632 1,826,341 17,074,259
Less shares repurchased ...................... (476,422) (4,328,562) (80,893) (741,733)
---------- ------------ ---------- ------------
Net increase (decrease) ...................... (179,182) ($ 1,676,930) 1,745,448 $ 16,332,526
========== ============ ========== ============
CLASS B
Shares sold .................................. 2,076,584 $ 18,411,151 7,988,008 $ 76,547,531
Shares issued to shareholders in reinvestment
of distributions ............................ 181,819 1,626,281 446,841 4,233,508
---------- ------------ ---------- ------------
2,258,403 20,037,432 8,434,849 80,781,039
Less shares repurchased ...................... (2,173,725) (19,404,327) (2,671,603) (24,968,306)
---------- ------------ ---------- ------------
Net increase ................................. 84,678 $ 633,105 5,763,246 $ 55,812,733
========== ============ ========== ============
</TABLE>
** Class A shares commenced operations on December 31, 1993
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
periods indicated, investment returns, key ratios and supplemental data are
listed as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
PERIOD FROM
SIX MONTHS DECEMBER 31, 1993
ENDED (COMMENCEMENT OF
APRIL 30, OPERATIONS) TO
1995(b) OCTOBER 31,
(UNAUDITED) 1994
CLASS A ----------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................................ $ 8.82 $ 9.85
------- -------
Net Investment Income....................................................................... 0.28 0.48(a)
Net Realized and Unrealized Gain (Loss) on Investments Sold and Financial Futures Contracts. 0.48 (0.94)
------- -------
Total from Investment Operations........................................................... 0.76 (0.46)
------- -------
Less Distributions:
Dividends from Net Investment Income........................................................ (0.32) (0.48)
Distributions in Excess of Net Investment Income............................................ -- (0.09)
------- -------
Total Distributions........................................................................ (0.32) (0.57)
------- -------
Net Asset Value, End of Period.............................................................. $ 9.26 $ 8.82
======= =======
Total Investment Return at Net Asset Value.................................................. 8.81% 4.96%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................................... $14,499 $15,401
Ratio of Expenses to Average Net Assets..................................................... 1.09%* 1.15%*
Ratio of Net Investment Income to Average Net Assets........................................ 6.49%* 6.08%*
Portfolio Turnover Rate..................................................................... 18% 62%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE 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.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1995(b) YEAR ENDED OCTOBER 31, 1994
-----------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------------
Class B
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ............. $ 8.82 $ 9.98 $ 9.39 $ 9.31 $ 9.07 $ 9.29
-------- -------- -------- ------- ------- -------
Net Investment Income ............................ 0.25 0.48 0.53 0.55 0.54 0.55
Net Realized and Unrealized Gain (Loss) on
Investments Sold and
Financial Futures Contracts .................... 0.47 (0.90) 0.72 0.17 0.34 (0.14)
-------- -------- -------- ------- ------- -------
Total from Investment Operations ................ 0.72 (0.42) 1.25 0.72 0.88 0.41
-------- -------- -------- ------- ------- -------
Less Distributions
Dividends from Net Investment Income ............. (0.28) (0.48) (0.56) (0.55) (0.54) (0.55)
Distributions in Excess of Net Investment Income.. -- (0.07) -- -- -- --
Distributions from Net Realized Gain on
Investments Sold ................................ -- (0.19) (0.10) (0.09) -- --
Distributions from Capital Paid-in ............... -- -- -- -- (0.10) (0.08)
Total Distributions ............................. (0.28) (0.74) (0.66) (0.64) (0.64) (0.63)
-------- -------- -------- ------- ------- -------
Net Asset Value, End of Period ................... $ 9.26 $ 8.82 $ 9.98 $ 9.39 $ 9.31 $ 9.07
======== ======== ======== ======= ======= =======
Total Investment Return at Net Asset Value ...... 8.38% (4.44%) 13.69% 7.89% 10.07% 4.60%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ........ $159,361 $151,069 $113,442 $65,933 $51,467 $35,820
Ratio of Expenses to Average Net Assets .......... 1.84%* 1.85% 2.06% 2.17% 2.36% 2.20%
Ratio of Net Investment Income to Average Net
Assets........................................... 5.74%* 5.36% 5.23% 5.78% 5.61% 5.96%
Portfolio Turnover Rate .......................... 18% 62% 100% 40% 83% 41%
</TABLE>
* On an annualized basis.
(a) On average month end shares outstanding.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY HIGH
YIELD TAX-FREE FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN CATEGORIES:
TAX-EXEMPT LONG-TERM BONDS AND TAX-EXEMPT SHORT-TERM NOTES. THE BONDS ARE
FURTHER BROKEN DOWN BY STATES. UNDER EACH STATE IS A LIST OF THE SECURITIES
OWNED BY THE FUND.
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
CALIFORNIA (17.12%)
Fontana, County Of,
Special Tax Rev Community Facility District No 90-3
Empire Center............................................. 8.500% 04-01-21 BB-** $8,000 $ 8,000,000 8.50%
Fresno Joint Powers Financing Auth,
Rev Ser B Subordinated Debt................................ 7.350 09-02-12 BB-** 5,540 5,585,760 7.29
Pleasanton Joint Powers Financing Auth,
Rev Reassessment Ser B Subordinated Debt................... 6.750 09-02-17 BBB-** 3,420 3,312,407 6.97
San Bernardino, County Of,
Cert Of Part Medical Center Fin Proj....................... 5.500 08-01-17 A- *4,500 3,648,510 6.78
Santa Ana Financing Auth,
Lease Rev Police Admin & Holding Facil Ser A............... 6.250 07-01-19 AAA *2,000 2,045,100 6.11
South Orange County Public Financing Auth,
Spec Tax Rev Levrrs........................................ 6.095 08-15-17 AAA** *7,500 7,171,875 6.37
-----------
29,763,652
-----------
COLORADO (2.95%)
Denver, City & County of,
Airport Rev Ser A.......................................... 7.250 11-15-25 BB 5,000 5,134,600 7.06
-----------
DISTRICT OF COLUMBIA (0.56%)
District of Columbia,
Cert of Part............................................... 7.300 01-01-13 B- 1,000 976,600 7.47
-----------
FLORIDA (6.92%)
Florida Housing Finance Agency,
Southlake Apartments Proj Ser D Remarketed 6-1-1993........ 8.400 10-01-12 BBB-** 3,300 3,366,165 8.23
Hillsborough County Aviation Auth,
Rev Special Purpose Facil Improv US Air Proj............... 8.600 01-15-22 B- 3,900 3,886,974 8.63
Homestead, City of,
Ind'l Development Rev Community Rehab Proj Ser A........... 7.950 11-01-18 BB** 2,000 1,864,920 8.53
Jacksonville Electric Auth,
Elec Sys Rev Ser 3A........................................ 5.250 10-01-28 AA 1,000 871,660 6.02
South Indian River Water Control District,
Rev Egret Landing Proj Section 15 Phase 1.................. 7.500 11-01-18 BB+** 2,000 2,039,240 7.36
-----------
12,028,959
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
GEORGIA (3.43%)
Rockdale County Development Auth,
Solid Waste Disposal Rev Visy Paper Inc Proj............... 7.400% 01-01-16 BB** $5,000 $ 4,957,450 7.46%
Solid Waste Disposal Rev Visy Paper Inc Proj............... 7.500 01-01-26 BB** 1,000 1,000,550 7.50
-----------
5,958,000
-----------
ILLINOIS (7.98%)
Bedford Park, City Of,
Tax Increment Rev Sr Lien Mark IV Proj..................... 9.750 03-01-12 BB** 1,000 1,108,470 8.80
Chicago, City Of,
Chicago-O'Hare Int'L Airport Spec Facil Rev Ref
American Airlines Inc 8.200 12-01-24 BB+* 1,500 1,656,240 7.43
Illinois Development Finance Auth,
Solid Waste Disposal Rev Facility Ford Heights
Waste Tire Proj 7.875 04-01-11 BB-** 5,035 4,923,072 8.05
Illinois Health Facilities Auth,
Rev Fairview Obligated Group Proj Ser A.................... 9.500 10-01-22 BB** 2,500 2,659,550 8.93
Rev Fairview Obligated Group Proj Ser B.................... 9.000 10-01-22 BB** 1,500 1,547,790 8.72
Round Lake Beach, City Of,
Tax Increment Rev Ref...................................... 7.500 12-01-13 BB+** 2,000 1,978,080 7.58
-----------
13,873,202
-----------
INDIANA (0.45%)
Bluffton Economic Development Auth,
Rev Ref Kroger Co Proj Adjustable Rate Convertible 5-1-1992 7.850 08-01-15 BA2** 750 784,905 7.50
-----------
IOWA (0.12%)
Iowa Finance Auth,
Health Care Facil Rev Mercy Health - Health Initiatives Proj 9.950 07-01-19 BB** 200 211,238 9.42
-----------
KANSAS (1.17%)
Prarie Village, City of,
Rev Ser A Claridge Court Proj.............................. 8.750 08-15-23 BBB-** 2,000 2,044,400 8.56
-----------
KENTUCKY (3.72%)
Kenton County Airport Board,
Rev Spec Facil Delta Airlines Inc Ser 1985................. 7.800 12-01-15 BB 2,500 2,620,650 7.44
Rev Spec Facil Delta Airlines Proj Ser B................... 7.250 02-01-22 BB 3,800 3,850,882 7.15
-----------
6,471,532
-----------
MARYLAND (1.16%)
Baltimore, County of,
Poll Control Rev Ref Bethelehem Steel Corp Proj............ 7.500 06-01-15 BB-** 2,000 2,016,220 7.44
-----------
MASSACHUSETTS (3.11%)
Massachusetts Industrial Finance Agency,
Rev Ser A Southeastern Mass Proj........................... 9.000 07-01-15 BB** 2,800 3,019,744 8.35
Massachusetts Port Auth,
Spec Proj Rev Harborside Hyatt Hotel Remarketed 6-20-1991.. 10.000 03-01-26 BB** 2,200 2,381,346 9.24
-----------
5,401,090
-----------
MICHIGAN (3.04%)
Michigan Hospital Finance Auth,
Rev Ref Ser A Detroit Osteopathic.......................... 7.500 11-01-10 B+ 1,455 1,417,374 7.70
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN (CONTINUED)
Monroe, County Of,
Poll Control Rev Ser A Detroit Edison Co................... 10.500% 12-01-16 BBB $ 250 $ 264,825 9.91%
Waterford Township Economic Development Corp,
Rev Ltd Oblig Canterbury Hlth Care......................... 8.375 07-01-23 BB+** 3,500 3,604,265 8.13
-----------
5,286,464
-----------
MISSOURI (0.59%)
Lees Summit Industrial Development Auth,
Hlth Facil Ref Rev & Imp John Knox Vlg Proj................ 7.125 08-15-12 A-** 1,000 1,018,300 7.00
-----------
NEW YORK (2.91%)
New York, City Of,
Go Ser B................................................... 7.300 08-15-11 A-* 950 995,315 6.97
Triborough Bridge And Tunnel Auth,
Gen Purpose Rev Ser Y...................................... 6.125 01-01-21 A+ 4,000 4,064,600 6.03
-----------
5,059,915
-----------
OHIO (4.78%)
Bedford, County Of,
Rev Ref Community Hosp Bedford Inc......................... 8.500 05-15-09 AAA** 1,465 1,705,465 7.30
Cleveland, City Of,
Parking Facil Imp Rev...................................... 8.000 09-15-12 BBB** 1,000 1,043,380 7.67
Parking Facil Imp Rev...................................... 8.100 09-15-22 BBB** *2,000 2,091,860 7.74
Lorain, County Of,
Rev First Mtg Kendal At Oberlin Proj Ser A................. 8.625 02-01-22 A1 3,300 3,474,042 8.19
-----------
8,314,747
-----------
OKLAHOMA (1.18%)
Tulsa Municipal Airport Trust, Trustees Of,
Rev American Airlines Inc.................................. 7.350 12-01-11 BB+ 2,000 2,057,940 7.14
-----------
OREGON (2.49%)
Western Generation Agency,
Rev 1994 Ser A Wauna Cogeneration Proj..................... 7.125 01-01-21 BB+** 4,300 4,330,616 7.07
-----------
PENNSYLVANIA (15.69%)
Chester County Industrial Development Auth,
Rev First Mtg Rha/Pa Nursing Home.......................... 10.125 05-01-19 BB** 200 212,730 9.52
Montgomery County Higher Education & Health Auth,
Hosp Rev Ser A Utd Hosp Original Iss....................... 7.500 11-01-14 BA1** 1,055 1,021,472 7.75
Hosp Rev Ser B Utd Hosp Original Iss....................... 7.500 11-01-13 BA1** 3,030 2,970,673 7.65
Montgomery County Redevelopment Auth,
Multifamily Hsg Rev Ser A KBF Assoc L.P. Proj.............. 6.500 07-01-25 BBB+** *3,500 3,191,510 7.13
Northampton County Industrial Development Auth,
Poll Control Rev Ref Bethlehem Steel Proj.................. 7.550 06-01-17 BB-** *2,000 2,011,700 7.51
Pennsylvania Convention Center Auth,
Rev Ser A.................................................. 6.000 09-01-19 AAA 2,700 2,743,146 5.91
Pennsylvania Economic Development Finance Auth,
Rev Ser C Subordinated Debt Northampton Generating......... 6.875 01-01-11 BB** 5,800 5,357,924 7.44
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
Philadelphia Auth For Industrial Development,
Rev First Mtg Rha Care Pavilion Proj....................... 10.250% 02-01-18 BB** $ 285 $ 298,127 9.80%
Philadelphia Hospitals And Higher Education Facilities Auth
Hosp Rev Methodist Hosp Ser 1987A.......................... 9.000 07-01-10 BB 2,295 2,400,157 8.61
Rev Ser A Philadelphia Protestant Home Proj................ 8.625 07-01-21 BB-** 2,300 2,336,455 8.49
Philadelphia Municipal Auth,
Rev Ref Lease Ser D........................................ 6.300 07-15-17 BBB- 2,000 1,864,360 6.76
Philadelphia, City Of,
Gas Works Rev Fourteenth Ser............................... 6.375 07-01-14 BBB *1,900 1,847,598 6.56
Scranton-Lackawanna Health & Welfare Auth,
Rev Ser B Moses Taylor Hosp Proj........................... 8.500 07-01-20 BB+ 1,000 1,019,190 8.34
-----------
27,275,042
-----------
RHODE ISLAND ( 1.33%)
Providence Redevelopment Agency,
Cert of Part Ser A......................................... 8.000 09-01-24 BB-** 2,250 2,308,635 7.80
-----------
SOUTH CAROLINA (1.17%)
McCormick, County Of,
Hosp Facil Rev McCormick County Nursing Center Proj........ 10.500 03-01-18 BB** 100 102,727 10.22
Piedmont Municipal Power Agency,
Elec Sys Rev Ref........................................... 5.375 01-01-25 AAA 2,155 1,922,842 6.02
-----------
2,025,569
-----------
TEXAS (1.51%)
Houston Housing Finance Corp,
Single Family Mtg Rev...................................... 9.750 09-15-03 B 410 411,406 9.72
Sam Rayburn Municipal Power Agency,
Rev Ref Ser A.............................................. 6.750 10-01-14 BB 2,525 2,216,217 7.69
-----------
2,627,623
-----------
UTAH (3.23%)
Carbon, County of,
Solid Waste Disposal Rev Ref East Carbon Development Corp
Ser A..................................................... 9.000 07-01-12 BBB-** 2,000 2,075,360 8.67
Solid Waste Disposal Rev Ref Sunnyside Cogeneration Proj... 9.250 07-01-18 BBB-** 1,900 2,044,799 8.59
Solid Waste Disposal Rev Ref Sunnyside Cogeneration Proj... 7.500 07-01-07 BBB-** 1,500 1,496,190 7.52
-----------
5,616,349
-----------
VIRGINIA (3.28%)
Hopewell Industrial Development Auth,
Poll Control Rev Stone Container Corp Proj................. 8.250 05-01-10 BB** 1,000 1,037,870 7.95
Resource Recovery Rev Ref Stone Container Corp Proj........ 8.250 06-01-16 BB** 4,500 4,658,130 7.97
-----------
5,696,000
-----------
WEST VIRGINIA (2.10%)
Marion, County Of,
Community Solid Waste Disposal Rev American Power Paper
Recycling Proj............................................ 7.750 12-01-11 BB** 4,000 3,655,960 8.48
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
WISCONSIN (3.04%)
Wisconsin Public Power Inc.,
Pwr Supply Sys Rev Serv A.................................. 5.250% 07-01-21 AAA $6,000 $ 5,287,020 5.96%
------------
TOTAL TAX-EXEMPT LONG TERM BONDS
(Cost $165,068,152) (95.03%) 165,224,578
------ ------------
TAX-EXEMPT SHORT-TERM NOTES
MISSISSIPPI (0.12%)
Jackson, County Of,
Poll Control Rev Ref Chevron USA Inc Proj Adj Rate......... 4.700%# 06-01-23 200 200,000
------------
TOTAL TAX-EXEMPT SHORT TERM NOTES (0.12%) 200,000
------ ------------
TOTAL INVESTMENTS (95.15%) $165,424,578
====== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short term investments, newly added to the portfolio,
during the period ended April 30, 1995.
** Credit ratings are rated by Moody's Investors Services or John Hancock
Advisers, Inc. where Standard & Poor's ratings are not available and are
unaudited.
+ The yield is not calculated with guidelines established by the U.S.
Securities Exchange Commission and is unaudited.
# Securities redeemable at any time subject to prior notification to issuer.
Represents the rate in effect on April 30, 1995.
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.
15
<PAGE> 16
FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE HIGH YIELD TAX-FREE FUND INVESTS PRIMARILY IN SECURITIES ISSUED BY THE
VARIOUS STATES AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE PERFORMANCE OF THE
FUND IS CLOSELY TIED TO ECONOMIC CONDITIONS WITHIN THE APPLICABLE STATES AND THE
FINANCIAL CONDITION OF THE STATES AND THEIR AGENCIES AND MUNICIPALITIES. THE
CONCENTRATION OF INVESTMENTS BY STATES AND CREDIT RATINGS FOR INDIVIDUAL
SECURITIES HELD BY THE FUND ARE SHOWN IN THE SCHEDULE OF INVESTMENTS. IN
ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS SECTOR
CATEGORIES.
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT APRIL 30,
1995 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A PERCENTAGE OF
SECTOR DISTRIBUTION THE FUND'S NET ASSETS:
- ------------------- -------------------------------
<S> <C>
General Obligation..................................................................... 0.57%
Revenue Bonds - Certificate of Participation........................................... 3.99
Revenue Bonds - Education.............................................................. 0.00
Revenue Bonds - Electric Power......................................................... 8.43
Revenue Bonds - Health................................................................. 10.61
Revenue Bonds - Housing................................................................ 4.01
Revenue Bonds - Industrial Development Bond............................................ 10.18
Revenue Bonds - Other.................................................................. 25.53
Revenue Bonds - Pollution Control Facilities........................................... 22.19
Revenue Bonds - Transportation......................................................... 8.49
Revenue Bonds - Water & Sewer.......................................................... 1.18
-----
TOTAL TAX-EXEMPT LONG-TERM BONDS 95.18%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of six series portfolios: John Hancock High Yield Tax-Free Fund
(the "Fund"), John Hancock Emerging Growth Fund, John Hancock Global Resources
Fund, John Hancock Government Income Fund, John Hancock High Yield Bond Fund and
John Hancock Money Market Fund. The Trustees may authorize the creation of
additional Funds from time to time to satisfy various investment objectives.
Effective December 22, 1994 (see Note B), the Trust and Funds changed names by
replacing the word Transamerica with John Hancock.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under the terms of a distribution plan
have exclusive voting rights regarding such distribution plan. Class A Shares
are subject to an initial sales charge of up to 4.50% and a 12b-1 distribution
plan. Prior to May 15, 1995, the maximum sales charge was 4.75%. Class B Shares
are subject to a contingent deferred sales charge and a separate 12b-1
distribution plan.
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.
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 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.
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. At the time the Fund enters into a financial futures contract, it
will be 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 will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", to and from the broker will be 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", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize 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. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, open positions in financial futures contracts are as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITIONS DEPRECIATION
- ---------- -------------- --------- ------------
<S> <C> <C> <C>
JUNE 1995 75 U.S. TREASURY BOND SHORT ($7,031)
=======
</TABLE>
At April 30, 1995, the Fund has deposited in a segregated account $131,250 to
cover margin requirements on open financial futures contracts.
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 for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
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 of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $2,785,979 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distribution will be made. The carryforward expires 12/31/2002.
The Fund's tax year end is December 31.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
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, if any, 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 effect of expenses that may be applied
differently to each class as explained previously.
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 Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/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.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, the Adviser became the investment adviser for the Fund
with approval of the Trustees and shareholders of the Fund. The Fund's former
investment manager was Transamerica Fund Management Company ("TFMC").
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, to
0.6250% of the first $75,000,000 of the Fund's average daily net asset value,
0.5625% of the next $75,000,000, and 0.5000% of the Fund's average daily net
asset value in excess of $150,000,000. This fee structure is consistent with the
former agreement with TFMC. For the period ended April 30, 1995, the advisory
fee earned by the Adviser and TFMC amounted to $323,285 and $161,643,
respectively, resulting in a total fee of $484,928.
The Adviser and TFMC, for their respective periods, provided administrative
services to the Fund pursuant to an administrative
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
service agreement through January 16, 1995 on which day the agreement was
terminated.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a wholly-owned
subsidiary of the Adviser, became the principal underwriter of the Fund. Prior
to this date, Transamerica Fund Distributors, Inc. ("TFD") served as the
principal underwriter and distributor of the Fund. For the period ended April
30, 1995, JH Funds and TFD received net sales charges of $80,407 with regard to
sales of Class A shares. Out of this amount, $8,677 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, and
$71,730 was paid as sales commissions to unrelated broker-dealers.
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, formerly TFD, and are used in whole or in
part to defray its expenses related to providing distribution related services
to the Fund in connection with the sale of Class B shares. For the period ended
April 30, 1995, contingent deferred sales charges amounted to $328,342.
In addition, to compensate 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 shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments for
distribution and service expenses which in total will not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse for its distribution/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 which became
effective July 7, 1993. Under the amended Rules of Fair Practice, curtailment of
a portion of the Fund's 12b-1 payments could occur under certain circumstances.
This fee structure and plan is similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund will pay Investor Services a fee based on transaction volume and
number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until December 22,
1994. During the period ended April 30, 1995, legal fees paid to Baker & Botts
amounted to $1,382.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - High Yield Tax-Free Fund
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 will
be marked to market on a periodic basis and income earned by the investment will
be recorded on the Fund's books.
The Fund has an independent advisory board composed of certain members of the
former Transamerica Board of Trustees who provide advice to the current Trustees
in order to facilitate a smooth management transition for which the Fund pays
the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $29,329,941 and
$33,745,030, respectively.
The cost of investments owned at April 30, 1995 (including the short-term
investments) for Federal income tax purposes was $165,268,152. Gross unrealized
appreciation and depreciation of investments aggregated $4,508,453, and
$4,352,027, respectively, resulting in net unrealized depreciation of $156,426.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified $1,483,253
from distributions in excess of net investment income to capital paid-in. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 1994. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
20
<PAGE> 21
ADDITIONAL INFORMATION
John Hancock Funds - High Yield Tax-Free Fund
On December 16, 1994 , a special meeting of John Hancock (formerly Transamerica)
Series, Inc. (the "Trust") in respect of John Hancock (formerly Transamerica)
High Yield Tax-Free Fund (the "Fund") was held involving the election of
trustees and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation of
Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 11,167,198 FOR, 157,698 AGAINST and 465,936
ABSTAINING.
The shareholders next approved new Plans of Distribution for each Class A and
Class B shares of the Fund, also effective on December 22, 1994, and also on
substantially the same terms as the prior Plans of Distribution. The Class A
shareholder votes tallied were 1,111,511 FOR, 10,700 AGAINST and 48,658
ABSTAINING. The Class B shareholder votes tallied were 9.957,536 FOR, 172,315
AGAINST and 490,111 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young, LLP as
independent auditors for the Fund for the fiscal year ending Ocotber 31, 1995,
and the votes tallied were 11,416,372 FOR, 48,394 AGAINST and 326,065
ABSTAINING.
Lastly, the following trustees were elected to serve until their respective
successors shall become duly elected and qualified, with the votes tabulated as
indicated:
<TABLE>
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
- --------------- --- ---------
<S> <C> <C>
Edward J. Boudreau, Jr.......... 10,584,119 1,206,713
James F. Carlin................. 10,578,783 1,212,049
William H. Cunningham........... 10,587,700 1,203,132
Charles L. Ladner............... 10,587,700 1,203,132
Leo E. Linbeck, Jr.............. 10,585,562 1,205,270
Patricia P. McCarter............ 10,581,055 1,209,777
Steven R. Pruchansky............ 10,580,226 1,210,606
Norman H. Smith................. 10,580,226 1,210,606
John P. Toolan.................. 10,584,426 1,206,406
</TABLE>
21
<PAGE> 22
NOTES
John Hancock Funds - High Yield Tax-Free Fund
22
<PAGE> 23
NOTES
John Hancock Funds - High Yield Tax-Free Fund
23
<PAGE> 24
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a circle in
upper right, a cube in lower left and a diamond in lower right. A tag line
below reads: "A Global Investment Management Firm."]
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock High
Yield Tax-Free Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]
JHF 590SA 04/95
<PAGE> 25
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - -
HIGH YIELD
BOND
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 26
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Edgar Larsen
Senior Vice President
Andrew St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
David Beckwith
Vice President
Barry Evans
Vice President
Frank Lucibella
Vice President
Anne McDonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became part
of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array of
retirement and private account services, John Hancock Funds offers you a broader
selection of investment choices to meet your long-term financial needs. What's
more, the union of the Hancock and Transamerica investment teams gives you
access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way we
work with you. Not only do we strive to ensure that your investments are
well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if you
have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 27
BY FREDERICK CAVANAUGH AND ARTHUR CALAVRITINOS,
CO-PORTFOLIO MANAGERS
JOHN HANCOCK
HIGH YIELD BOND FUND
U.S. bond market rallies with
high-yield sector leading the pack
In late December 1994, Frederick Cavanaugh and Arthur Calavritinos began
managing John Hancock High Yield Bond Fund. A senior vice president, Mr.
Cavanaugh is an expert on both the high-yield and international bond markets. He
has also managed John Hancock Strategic Income Fund since 1986. Mr.
Calavritinos, a second vice president, joined John Hancock Funds in 1988. His
areas of expertise include airlines, energy and steel for the fixed-income
group. What follows is the managers' perspective on the high-yield market as
well as a discussion of how they've restructured the Fund.
After one of the toughest years ever, the U.S. bond market began to rally in
November as investors decided that the worst might be over. Although the Federal
Reserve raised rates two more times, the upturn persisted through March before
taking a breather in April. All bond sectors benefited, but high-yield issues
were among the market's top performers, beating Treasuries and edging out
high-quality corporate bonds during the past six months.
A couple of factors favored the high-yield market. First, credit quality --
or an issuer's ability to meet its interest payments -- continued to improve,
which boosted prices. Second, investors began pouring money into high-yield
bond funds as supply started to decline. This further fueled prices.
Despite this positive environment, John Hancock High Yield Bond Fund posted
disappointing total returns compared to its peers. For the six months ended
April 30, 1995,
[A 2 1/2" X 3 1/2" photo of Arthur Calavritinos and Frederick Cavanaugh at
bottom right. Caption reads: "ARTHUR CALAVRITINOS AND FREDERICK CAVANAUGH."]
[CAPTION]
"...HIGH-YIELD ISSUES WERE AMONG THE MARKET'S TOP PERFORMERS..."
3
<PAGE> 28
John Hancock Funds -- High Yield Bond Fund
[Chart with heading "Top Five Holdings" at top of left hand column. The chart
lists five holdings: 1) Algoma Finance 5.4% 2) Northwest Airlines 4.3% 3) Great
Dane 3.0% 4) OPI International 2.8% 5) Cablevision Industries 2.8%. A footnote
below reads: "As a percentage of net assets on April 30, 1995."]
the Fund's Class A and B shares returned 1.82% and 1.38%, respectively, at net
asset value. These returns lagged the average high current yield fund's return
of 5.73%, according to Lipper Analytical Services.1
RESTRUCTURING TO IMPROVE TOTAL RETURN
When we started managing John Hancock High Yield Bond Fund in January, our goal
was to put more emphasis on total return, while still maintaining a high yield.
To accomplish that, we made some tactical changes to the Fund. These hurt our
short-term results, but we believe they'll help over the long term.
Specifically, we focused our efforts on about 25% of the Fund -- with the goal
of improving credit quality, liquidity and diversification.
Unfortunately, none of the bonds involved were easy to sell, leaving the
Fund with sizable losses. Five investments, which made up half of the 25%, were
especially hard to work with. The first two were Latin American issues, which
lost much of their value when the peso crisis hit. Grupo Industrial Durango, for
example, a Mexican company that makes linerboard and boxes, had bonds
denominated in U.S. dollars but revenues in pesos. The third and fourth
securities, including a zero coupon bond, were non-cash paying, small issues
from companies with mediocre performance. Unfortunately, they were among the
Fund's largest investments. The fifth issue -- All American Bottling Corporation
- -- had similar problems, although it was not as sizable a holding. We estimate
that these five issues alone cost the Fund about 15 cents of its net asset
value, or over 2% in total return. The Fund sustained additional losses, though
not as great, when we sold the other half of this 25% portion, which consisted
of about a dozen holdings.
BRIGHT SPOTS
Fortunately, the rest of our investments performed much better. Among the top
gainers were securities from our largest sector concentrations. For example,
Weirton Steel, a steel and tin manufacturer, benefited from strong demand. Most
of the bonds' performance came from coupons (or stated interest rates), which
were around 11%. Some of our cable television investments, especially
Cablevision Systems, also did well. The bonds were up 10% in the first four
months of 1995, amid growing expectations that the company would be bought out.
An improved regulatory environment as well as the possibility of new legislation
that would open up the telecommunications market to cable companies also helped
cable issues. Finally, among
[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 Weirton
Steel followed by an up arrow and the phrase "Strong demand for steel." The
second listing is Cablevision Systems followed by an up arrow and the phrase
"More favorable regulatory climate." The third listing is Groupo Industrial
Durango followed by a down arrow and the phrase "Peso crisis hits Mexican
market." Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."]
[CAPTION]
"...WE MADE SOME TACTICAL CHANGES TO THE FUND."
4
<PAGE> 29
John Hancock Funds -- High Yield Bond Fund
[Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the six months ended April 30, 1995."
The chart is scaled in increments of 2% from top to bottom, with 6% on the left
and 0% at the bottom. Within the chart, there are three solid bars. The first
represents the 1.82% total return for John Hancock High Yield Bond Fund: Class
A. The second represents the 1.38% total return for John Hancock High Yield
Bond Fund: Class B. The third represents the 5.73% total return for the average
high current yield fund. Footnote below reads: "Total returns for John Hancock
High Yield Bond Fund are at net asset value with all distributions reinvested.
The average high current yield fund is tracked by Lipper Analytical Services.
(1) See following page for historical performance information."]
our energy holdings, Mesa Capital -- a natural gas exploration and production
company -- was a top gainer. The bonds appreciated nicely as the company began
actively looking to sell some of its properties.
As we added new securities to the Fund, our strategy was simple: to look for
situations in any industry that offered good value for the risk we were taking.
One place we found opportunity was in selected airlines. Northwest Airlines
- -- which prospered from refocusing its domestic routes -- is a favorite. Our
Northwest bonds delivered 13 7/8% coupons, while increasing in value at the same
time. We also bought USAir bonds, which appreciated more than 30% between
January and April. The airline benefited as a major competitor on its East Coast
route dropped out, thereby cutting capacity and allowing the remaining players
to raise fares. In addition, the company made significant headway toward
reaching an agreement with its labor union.
POSITIVE SHORT-TERM OUTLOOK
We're optimistic about the near term. First, the supply/demand situation in the
high-yield market is likely to remain positive throughout the second quarter.
Second, despite reports that the economy is slowing, we've seen firsthand that
business is still strong. Any slowdown has been minimal -- nothing near the
recessionary conditions that would hurt high-yield issuers. Given this, we
expect that the Fed could raise interest rates once again. Only when interest
rates start coming down do we expect the high-yield sector to weaken.
We believe the Fund is well-positioned for the future. Its increased
diversification should offer added risk protection when rates do fall. Plus, the
new structure should enable us to strike a better balance between income and
total return. Going forward, we expect coupons to average around 11% and play a
more predominant role in performance than price appreciation.
[CAPTION]
"WE'RE OPTIMISTIC ABOUT THE NEAR FUTURE."
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE> 30
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds -- High Yield Bond Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on June 30,
1993 were (7.71%) and (0.66%), respectively, and reflect payment of the maximum
sales charge of 4.75%. On May 15, 1995, the maximum sales charge was lowered to
4.50%. The average annualized total returns for Class B shares for the 1-year,
5-year and since inception were (8.83%), 11.25%, and 7.54%, respectively, and
reflect the applicable contingent deferred sales charge (maximum contingent
sales charge of 5% declines to 0% over 6 years). SEC yields for the 30-day
period ending April 30, 1995 were 9.92% and 9.66% for Class A and Class B shares
respectively. All performance data shown represent past performance and should
not be considered indicative of future performance. Returns and principal values
of Fund investments will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
[High Yield Bond Fund
Class A shares
Line chart with the heading High Yield Bond 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 Lehman Brothers High Yield Bond
Index and is equal to $11,332* as of April 30, 1995. The second line represents
the value of the hypothetical $10,000 investment made in the High Yield Bond
Fund on June 30, 1993, before sales charge, and is equal to $10,625 as of April
30, 1995. The third line represents the High Yield Bond Fund after sales
charge and is equal to $10,125 as of April 30, 1995.
High Yield Bond Fund
Class B shares
Line chart with the heading High Yield Bond 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 Lehman Brothers High Yield Bond
Index and is equal to $19,850* as of April 30, 1995. The second line
represents the value of the hypothetical $10,000 investment made in the High
Yield Bond Fund on October 26, 1987 and is equal to $17,562** as of April 30,
1995.]
*The Lehman Brothers High Yield Bond Index is an unmanaged index of
fixed-income securities that are similar, but not identical, to the bonds
in the Fund's portfolio.
**No applicable contingent deferred sales charge.
6
<PAGE> 31
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
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.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $151,190,883) ............................... $ 151,443,895
Common and preferred stocks and warrants
(cost - $20,664,481) .................................... 23,798,074
Joint repurchase agreement (cost - $7,286,000) ............ 7,286,000
Corporate savings account ................................. 804
-------------
182,528,773
Dividends receivable ........................................ 233,290
Receivable for investments sold ............................. 2,881,242
Interest receivable ......................................... 4,647,629
Miscellaneous receivable .................................... 50,900
Receivable for shares sold .................................. 699,559
Miscellaneous assets ........................................ 47,056
-------------
Total Assets ............................. 191,088,449
------------------------------------------------------------
LIABILITIES:
Payable for investments purchased ........................... 6,000,360
Payable for shares repurchased .............................. 122,089
Dividend payable ............................................ 452,984
Payable for forward foreign currency exchange
contracts bought .......................................... 419,328
Payable to John Hancock Advisers, Inc. and affiliates -
Note B .................................................... 107,399
Accounts payable and accrued expenses ....................... 36,792
-------------
Total Liabilities ........................ 7,138,952
------------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................. 203,651,002
Accumulated net realized loss on investments and
foreign currency transactions ............................. (23,108,247)
Net unrealized appreciation of investments and
foreign currency transactions ............................. 3,389,948
Undistributed net investment income ......................... 16,794
-------------
Net Assets ............................... $ 183,949,497
============================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares
of beneficial interest outstanding -
125,000,000 shares authorized with
$0.01 per share par value, respectively)
Class A - $18,429,522/2,603,407 ............................ $ 7.08
================================================================================
Class B - $165,519,975/23,371,966 .......................... $ 7.08
================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($7.08 x 104.99%) ................................. $ 7.43
================================================================================
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $50,900)... $ 9,008,860
Dividends ............................................... 714,253
---------
9,723,113
---------
Expenses:
Investment management fee - Note B .................... 487,123
Distribution/service fee - Note B
Class A .............................................. 17,164
Class B .............................................. 767,660
Transfer agent fee .................................... 122,024
Registration and filing fees .......................... 33,535
Auditing fee .......................................... 23,878
Custodian fee ......................................... 21,821
Trustees' fees ........................................ 15,330
Advisory board fee .................................... 15,196
Printing .............................................. 10,580
Legal fees ............................................ 8,814
Miscellaneous ......................................... 6,826
---------
Total Expenses ....................... 1,529,951
-----------------------------------------------------
Net Investment Income ................ 8,193,162
-----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold ................... (13,463,286)
Net realized loss on foreign currency transactions ...... (400,157)
Change in net unrealized appreciation/depreciation
of investments ........................................ 8,191,878
Change in net unrealized appreciation/depreciation of
foreign currency transactions ......................... 3,343
---------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions ........ (5,668,222)
-----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............ $ 2,524,940
=====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 32
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
-------------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................... $ 8,193,162 $ 15,754,523
Net realized loss on investments sold and foreign currency transactions ............. (13,863,443) (8,882,766)
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions .............................................................. 8,195,221 (9,524,936)
------------ -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................... 2,524,940 (2,653,179)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A - ($0.3715 and $0.8200 per share, respectively) ........................... (762,342) (821,430)
Class B - ($0.3411 and $0.7600 per share, respectively) ........................... (7,500,272) (15,331,034)
Distributions from net realized gain on investments
Class A - (none and $0.0465 per share, respectively) .............................. -- (18,900)
Class B - (none and $0.0465 per share, respectively) .............................. -- (870,444)
------------ -------------
Total Distributions to Shareholders ............................................... (8,262,614) (17,041,808)
------------ -------------
FROM FUND SHARE TRANSACTIONS -- NET* ................................................. 17,252,555 35,571,332
------------ -------------
NET ASSETS:
Beginning of period ................................................................. 172,434,616 156,558,271
------------ -------------
End of period (including undistributed net investment income
of $16,794 and $86,246, respectively) ............................................. $183,949,497 $ 172,434,616
============ ==============
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
-------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold..................................... 1,915,995 $13,385,451 3,865,973 $ 30,826,064
Shares issued to shareholders in reinvestment
of distributions............................... 60,462 424,157 56,266 435,342
--------- ----------- ----------- ------------
1,976,457 13,809,608 3,922,239 31,261,406
Less shares repurchased......................... (967,868) (6,728,113) (2,612,061) (20,718,136)
--------- ----------- ----------- ------------
Net increase.................................... 1,008,589 $ 7,081,495 1,310,178 $ 10,543,270
========= =========== =========== ============
CLASS B
Shares sold..................................... 4,605,962 $32,265,277 10,695,100 $ 84,645,545
Shares issued to shareholders in reinvestment
of distributions............................... 497,479 3,487,834 949,832 7,453,158
--------- ----------- ----------- ------------
5,103,441 35,753,111 11,644,932 92,098,703
Less shares repurchased......................... (3,645,438) (25,582,051) (8,472,714) (67,070,641)
--------- ----------- ----------- ------------
Net increase.................................... 1,458,003 $10,171,060 3,172,218 $ 25,028,062
========= =========== =========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT 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 TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR
VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 33
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FROM JUNE 30,
1993
SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED OF OPERATIONS)
APRIL 30, 1995(b) OCTOBER 31, TO OCTOBER 31,
(UNAUDITED) 1994 1993
----------------- ------------ --------------
<S> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................ $ 7.33 $ 8.23 $ 8.10
------ ------ ------
Net Investment Income .......................................... 0.36 0.80(a) 0.33
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions................................. (0.24) (0.83) 0.09
------ ------ ------
Total from Investment Operations ............................. 0.12 (0.03) 0.42
------ ------ ------
Less Distributions:
Dividends from Net Investment Income............................ (0.37) (0.82) (0.29)
Distributions from Net Realized Gain on Investments Sold........ -- (0.05) --
------ ------ ------
Total Distributions .......................................... (0.37) (0.87) (0.29)
Net Asset Value, End of Period.................................. $ 7.08 $ 7.33 $ 8.23
====== ====== ======
Total Investment Return at Net Asset Value...................... 1.82% ( 0.59%) 4.96%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)....................... $18,430 $11,696 $ 2,344
Ratio of Expenses to Average Net Assets......................... 1.14%* 1.16% 0.91%*
Ratio of Net Investment Income to Average Net Assets............ 10.49%* 10.14% 12.89%*
Portfolio Turnover Rate ........................................ 52% 153% 204%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE 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.
9
<PAGE> 34
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 1995(b) YEAR ENDED OCTOBER 31, 1994
---------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................... $ 7.33 $ 8.23 $ 7.43 $ 7.44 $ 6.45 $ 8.14
------ ------ ------ ------ ------ ------
Net Investment Income ................................. 0.35 0.74(a) 0.80 0.87 0.98 1.09
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency Transactions...... (0.26) (0.83) 0.75 (0.04) 1.06 (1.68)
------ ------ ------ ------ ------ ------
Total from Investment Operations .................... 0.09 (0.09) 1.55 0.83 2.04 (0.59)
------ ------ ------ ------ ------ ------
Less Distributions
Dividends from Net Investment Income................... (0.34) (0.76) (0.75) (0.84) (0.98) (1.09)
Distributions from Net Realized Gain on
Investments Sold...................................... -- (0.05) -- -- -- --
Distributions from Capital Paid-in..................... -- -- -- -- (0.07) (0.01)
------ ------ ------ ------ ------ ------
Total Distributions ................................. (0.34) (0.81) (0.75) (0.84) (1.05) (1.10)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period......................... $ 7.08 $ 7.33 $ 8.23 $ 7.43 $ 7.44 $ 6.45
====== ====== ====== ====== ====== ======
Total Investment Return at Net Asset Value............. 1.38% (1.33%) 21.76% 11.56% 34.21% (8.04%)
Total Adjusted Investment Return at Net
Asset Value........................................... -- -- -- -- -- (8.07%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).............. $165,520 $160,739 $154,214 $98,560 $72,023 $37,097
Ratio of Expenses to Average Net Assets................ 1.89%* 1.91% 2.08% 2.25% 2.24% 2.22%
Ratio of Adjusted Expenses to Average
Net Assets............................................ -- -- -- -- -- 2.25%
Ratio of Net Investment Income to Average
Net Assets............................................ 9.74%* 9.39% 10.07% 11.09% 13.73% 14.59%
Ratio of Adjusted Net Investment Income to
Average Net Assets.................................... -- -- -- -- -- 14.56%
Portfolio Turnover Rate ............................... 52% 153% 204% 206% 93% 96%
<FN>
* On an annualized basis.
(a) On average month end shares outstanding.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 35
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
HIGH YIELD BOND FUND ON APRIL 30, 1995. IT'S DIVIDED INTO THREE MAIN CATEGORIES:
PUBLICLY TRADED BONDS, COMMON AND PREFERRED STOCKS AND WARRANTS, AND SHORT-TERM
INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- ---- -------- -------- ------
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS
AEROSPACE (1.68%)
Rohr, Inc.,
*Sr Note 05-15-03.................................... 11.625% BB- $3,000 $ 3,090,000
------------
AUTOMOBILE/TRUCK (3.02%)
Great Dane Holdings,
*Sr Sub Deb 08-01-01................................. 12.750 B- 2,435 2,459,350
*Sub Deb 01-01-06.................................... 14.500 CCC 3,132 3,100,680
------------
5,560,030
------------
BROADCASTING (8.47%)
Adelphia Communications Corp.,
*Sr Note 05-15-02.................................... 12.500 B 2,500 2,437,500
Cablevision Industries Corp.,
Deb 04-01-08........................................ 9.250 BB- 3,000 2,977,500
Sr Note 01-30-02.................................... 10.750 BB- 2,000 2,130,000
Cablevision Systems Corp.,
Sr Sub Deb 02-15-13................................. 9.875 B 2,000 1,980,000
CF Cable TV Inc.,
Sr Sec 2nd Priority Note 02-15-05 (Canada) (F)...... 11.625 BB+ 1,000 1,050,000
Continental Cablevision Inc.,
Deb 08-01-13........................................ 9.500 BB 4,000 3,970,000
Le Groupe Videotron Ltee,
*Sr Note 02-15-05 (Canada) (F)....................... 10.625 BB+ 1,000 1,040,000
15,585,000
COMPUTERS (4.24%)
Anacomp Inc.,
*Sr Sub Note 11-01-00 (A)............................ 15.000 D 3,000 2,100,000
Computervision Corp.,
*Sr Sub Note 08-15-99................................ 11.375 CCC+ 2,000 1,910,000
Data Documents, Inc.,
*Sr Sec Note 07-15-02................................ 13.500 B+ 2,000 2,005,000
Unisys Corp.,
*Sr Note 10-01-99.................................... 10.625 BB- 1,700 1,785,000
------------
7,800,000
------------
CONSTRUCTION (1.40%)
Primeco Inc.,
*Sr Sub Note 03-01-05................................ 12.750 B 2,500 2,578,125
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 36
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
COSMETICS & TOILETRIES (1.05%)
Renaissance Cosmetics,
*Sr Note 08-15-01 ......................... 13.750% B $ 2,000 $1,930,000
----------
DRUGS (1.94%)
Amerisource Distribution Corp.,
Deb 07-15-05 ............................. 11.250 B- 1,116 1,216,073
Chattem Inc.,
Sr Sub Note 06-15-04 ..................... 12.750 B- 1,500 1,372,500
J.B. Williams Holdings, Inc.,
Sr Note 03-01-04 ......................... 12.000 B 1,000 972,500
----------
3,561,073
----------
ELECTRONICS (0.78%)
Alliant Techsystems, Inc.,
*Sr Sub Note 03-01-03 (R) ................. 11.750 B2 1,375 1,426,562
----------
FINANCE (1.35%)
Indah Kiat International Finance Co.,
Sr Sec Note 06-15-06 (Indonesia) (F)...... 12.500 BB 2,500 2,475,000
----------
FOODS (2.38%)
Di Giorgio Corp.,
*Sr Note 02-15-03 ......................... 12.000 B 3,000 2,565,000
Pilgrim's Pride Corp.,
*Sr Sub Note 08-01-03 ..................... 10.875 B- 2,000 1,820,000
----------
4,385,000
----------
GLASS PRODUCTS (0.94%)
Owens-Illinois, Inc.,
*Sr Sub Note 04-01-99 ..................... 10.250 B+ 1,700 1,729,750
----------
GOVERNMENTAL - FOREIGN (3.42%)
Argentina, Republic of,
*Deb 03-31-23 (Argentina) (F) ............. 5.000 B2 2,000 870,000
Brazil, Republic of,
Note IDU Ser A-L 01-01-01 (Brazil) (F) ... 7.813 B 1,960 1,484,700
Mexican Tesobono,
*Bond 06-01-95 (Mexico) (F) ............... Zero B 4,000 3,940,800
----------
6,295,500
----------
HEALTHCARE (2.35%)
Abbey Healthcare Group Inc.,
Sr Sub Note 11-01-02 ..................... 9.500 B- 2,200 2,233,000
National Medical Enterprises, Inc.,
*Sr Sub Note 03-01-05 ..................... 10.125 B+ 2,000 2,085,000
----------
4,318,000
----------
LEISURE & RECREATION (1.87%)
Bally's Grand, Inc.,
*1st Mtg 12-15-03 ......................... 10.375 B+ 2,000 1,940,000
Station Casinos, Inc.,
*Sr Sub Note 06-01-03 ..................... 9.625 B 1,000 885,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 37
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
LEISURE & RECREATION (CONTINUED)
Stratosphere Corp.,
*1st Mtg Note 05-15-02 ................ 14.250% B $ 600 $ 612,000
------------
3,437,000
------------
METALS (3.90%)
Interlake Corp. (The),
*Sr Sub Deb 03-01-02 .................. 12.125 CCC+ 2,000 2,000,000
Kaiser Aluminum & Chemical Corp.,
*Sr Sub Note 02-01-03 ................. 12.750 B- 3,000 3,187,500
Renco Metals Inc.,
Sr Note 07-15-00 ..................... 12.000 B+ 2,000 1,990,000
------------
7,177,500
------------
MOTION PICTURES (0.58%)
Act III Theaters, Inc.,
*Sr Sub Note 02-01-03 ................. 11.875 B- 1,000 1,070,000
------------
OIL & GAS (17.64%)
Columbia Gas System, Inc., (The),
*Deb 08-01-93 (B) ..................... 9.000 D 2,595 3,581,100
Dual Drilling Co.,
Sr Sub Note 01-15-04 ................. 9.875 B- 3,750 3,196,875
Falcon Drilling Co., Inc.,
Sr Note 01-15-01 ..................... 9.750 B- 2,500 2,371,875
Global Marine, Inc.,
Sr Sec Note 12-15-99 ................. 12.750 B+ 2,100 2,296,875
Maxus Energy Corp.,
Deb 11-15-15 ......................... 11.500 BB- 2,000 1,870,000
Note 05-15-01 ........................ 11.080 BB- 2,000 1,774,400
Mesa Capital Corp.,
Discount Note 06-30-96 ............... Zero CCC 516 490,200
Discount Note 06-30-98 ............... Zero CCC+ 4,000 3,840,000
Nuevo Energy Co.,
Sr Sub Note 06-15-02 ................. 12.500 B- 4,000 4,200,000
OPI International, Inc.,
Sr Note 07-15-02 ..................... 12.875 B+ 4,700 5,170,000
TransAmerican Refining Corp.,
*Unit (1st Mtg Note 02-15-02 & Warr.).. 16.500 B- 1,500 1,647,030
Wilrig AS,
Sr Sec Note 03-15-04 (Norway) ........ 11.250 B 2,000 2,000,000
------------
32,438,355
------------
PAPER (2.53%)
Container Corp. Of America,
Sr Note Ser A 05-01-04 ............... 11.250 B+ 2,000 2,140,000
Crown Packaging Holdings Ltd.,
Sr Note 11-01-00 (Canada) (F) ........ 10.750 B3 1,500 1,503,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 38
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
PAPER (CONTINUED)
Stone Container Corp.,
1st Mtg Note 04-01-02 ...... 10.750% B- $1,000 $ 1,015,000
-----------
4,658,750
-----------
PUBLISHING (1.74%)
American Media Operation, Inc.,
*Sr Sub Note 11-15-04 ....... 11.625 B 3,000 3,195,000
-----------
REAL ESTATE (1.00%)
NVR Inc.,
*Sr Note 04-15-03 ........... 11.000 B 2,000 1,840,000
-----------
RETAIL (6.20%)
American Restaurant Group Inc.,
Sr Sec Note 09-15-98 ....... 12.000 B+ 2,500 2,250,000
Flagstar Corp.,
*Sr Sub Deb 11-01-04 ........ 11.250 CCC+ 2,500 2,037,500
Food 4 Less Supermarkets, Inc.,
Sr Note 04-15-00 ........... 10.450 B+ 2,000 1,990,000
Sr Sub Note 06-15-01 ....... 13.750 B- 2,400 2,568,000
Petro PSC / Properties, L.P.,
*Sr Note 06-01-02 ........... 12.500 B 700 686,000
Specialty Retailers, Inc.,
*Sr Sub Note 08-15-03 ....... 11.000 B- 2,000 1,880,000
-----------
11,411,500
-----------
STEEL (3.73%)
Geneva Steel Co.,
Sr Note 01-15-04 ........... 9.500 B+ 1,000 850,000
Sheffield Steel Corp,
Sr Note 11-01-01 ........... 12.000 B 2,000 1,940,000
Weirton Steel Corp.,
Sr Note 03-01-98 ........... 11.500 B 1,500 1,545,000
Sr Note 10-15-99 ........... 10.875 B 2,500 2,525,000
-----------
6,860,000
-----------
TELECOMMUNICATIONS (0.93%)
Century Communications Corp.,
Sr Sub Deb 10-15-03 ........ 11.875 B+ 700 742,875
NEXTEL Communications, Inc.,
Sr Discount Note 08-15-04 .. Zero CCC- 2,000 975,000
-----------
1,717,875
-----------
TEXTILES (1.26%)
Apparel Ventures Inc,
Sr Note 12-31-00 ........... 12.250 B- 1,500 1,368,750
Westpoint Stevens,
*Sr Sub Deb 12-15-05 ........ 9.375 B+ 1,000 950,000
-----------
2,318,750
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 39
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
TRANSPORTATION (6.96%)
AM General Corp.,
*Sr Note 05-01-02 (R) .............................. 12.875% B3 $2,000 $ 1,992,500
Burlington Motor Holdings Inc.,
*Sr Sub Note 11-01-03 .............................. 11.500 CCC+ 2,000 1,770,000
CHC Helicopter Corp.,
Sr Sub Note 07-15-02 (Canada) (F) ................. 11.500 B 1,250 1,028,125
NWA Trust,
*Sub Note 06-21-08 ................................. 13.875 B 4,075 4,319,500
USAir Inc.,
*Sr Note 02-01-01 .................................. 9.625 CCC+ 4,000 3,200,000
*Sr Deb 04-01-00 ................................... 12.875 CCC+ 500 490,000
-----------
12,800,125
-----------
UTILITIES (0.97%)
Petroleum Heat & Power Co., Inc.,
*Sub Deb 02-01-05 .................................. 12.250 B+ 1,700 1,785,000
-----------
TOTAL PUBLICLY TRADED BONDS
(Cost $151,190,883) (82.33%) 151,443,895
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNITS OR WARRANTS
-----------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND WARRANTS
Algoma Finance Corp., 5.50% Ser A Preferred Stock (Canada) .............................. 590,643 $9,983,521
*AVI Holdings, Inc. Warrants (R) *** ..................................................... 1,500 67,500
Boomtown Inc. Warrants (R) *** .......................................................... 1,500 15
Browne Bottling Co. Warrants*** ......................................................... 237 237
Casino Magic Finance Corp. Warrants*** .................................................. 9,000 90
Chattem Inc. Warrants (R) *** ........................................................... 1,500 6,750
CHC Helicopter Corp. Warrants (Canada) (F) *** .......................................... 16,000 16,000
*Chevy Chase Savings Bank FSB, 13.00% Ser A Pref Stock ................................... 75,000 2,118,750
Crown Packaging Holdings Ltd. Common Stock (Canada) (F) *** ............................. 2,750 79,750
Farm Fresh Holdings Corp. Common Stock (Class B)*** ..................................... 1,000 20,000
*Northwest Airlines Corp. Common Stock (Class A)*** ...................................... 120,000 3,570,000
*PanAmSat Corp., 12.75% Mandatory Exchangeable Sr Red Pref. Stock ........................ 1,750 1,774,500
*Renaissance Cosmetics Warrants*** ....................................................... 4,000 70,000
Sheffield Steel Corp. Warrants*** ....................................................... 22,500 135,000
*Swissair Schweizerische Luftverkehr AG Reg. Shares (Switzerland)*** ..................... 3,400 2,084,086
*UAL Corp., 12.25% Ser B Depositary Shares Pref. Stock ................................... 75,000 2,212,500
Valero Energy Corp., 6.50% Pref. Stock .................................................. 35,400 1,659,375
------------
23,798,074
------------
TOTAL COMMON AND PREFERRED STOCKS, WARRANTS
(Cost $20,664,481) (12.94%) 23,798,074
----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 40
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (3.96%)
Investment in a joint repurchase agreement transaction
with Bankers Trust Co., Dated 04-28-95, Due 05-01-95
(secured by U.S. Treasury Bond, 10.750%, due 08-15-05,
and U.S. Treasury Note, 6.875% due 10-31-96) - Note A..... 5.93% $ 7,286 $ 7,286,000
-----------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% ....................................... 804
-----------
TOTAL SHORT-TERM INVESTMENTS (3.96%) 7,286,804
------- ------------
TOTAL INVESTMENTS (99.23%) $182,528,773
======= ============
</TABLE>
(A) Non-income producing -- issuer is in default of interest payment.
(B) Non-income producing -- issuer filed for protection under the Federal
Bankruptcy Code and has filed a comprehensive reorganization plan.
(F) Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer, however, security is U.S. dollar
denominated.
(R) These securites are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securites amounted to $3,493,327 as of April 30, 1995. See Note A
of the Notes to Financial Statements for valuation policy.
* Securities, other than short-term investments, newly added to the portfolio
during the six months ended April 30, 1995.
** Credit ratings are rated by Moody's Investor Services or John Hancock
Advisers, Inc. where Standard and Poors ratings are not available.
*** Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 41
FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- --------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE UNITED
STATES OF AMERICA. THE PERFORMANCE OF THIS FUND IS CLOSELY TIED TO THE ECONOMIC
AND FINANCIAL CONDITIONS WITHIN THE COUNTRIES IT INVESTS. THE CONCENTRATION OF
INVESTMENTS BY INDUSTRY CATEGORY FOR INDIVIDUAL SECURITIES HELD BY THE FUND IS
SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
COUNTRIES. THE TABLE BELOW SHOWS THE PERCENTAGE OF THE FUND'S INVESTMENTS AT
APRIL 30, 1995 ASSIGNED TO COUNTRY CATEGORIES.
<TABLE>
<CAPTION>
MARKET VALUE AS A
COUNTRY DIVERSIFICATION % OF NET ASSETS
----------------------- -----------------
<S> <C>
Argentina........................................................................................ 0.47%
Brazil........................................................................................... 0.81
Canada........................................................................................... 7.99
Indonesia........................................................................................ 1.35
Mexico........................................................................................... 2.14
Norway........................................................................................... 1.09
Switzerland...................................................................................... 1.13
United States.................................................................................... 84.25
-----
TOTAL INVESTMENTS 99.23%
=====
</TABLE>
ADDITIONALLY, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY THE QUALITY
RATING FOR EACH DEBT SECURITY.
<TABLE>
<CAPTION>
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
QUALITY DISTRIBUTION: NET ASSETS
--------------------- ----------
<S> <C>
BAA.............................................................................................. 0.27%
BA............................................................................................... 15.03
B................................................................................................ 60.74
CAA.............................................................................................. 6.29
-----
TOTAL BONDS 82.33%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of six series portfolios: John Hancock High Yield Bond Fund (the
"Fund"), John Hancock Emerging Growth Fund, John Hancock Global Resources Fund,
John Hancock Government Income Fund, John Hancock High Yield Tax-Free Fund, and
John Hancock Money Market Fund B. The Trustees may authorize the creation of
additional Funds from time to time to satisfy various investment objectives.
Effective December 22, 1994 (see Note B), the Trust and Funds changed names by
replacing the word Transamerica with John Hancock.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under the terms of a distribution plan
have exclusive voting rights regarding such distribution plan. Class A Shares
are subject to an initial sales charge of up to 4.50% and a 12b-1 distribution
plan. Prior to May 15, 1995, the maximum sales charge was 4.75%. Class B Shares
are subject to a contingent deferred sales charge and a separate 12b-1
distribution plan. On June 30, 1993, Class A shares were sold to commence class
activity. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing 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.
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 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.
OPTIONS 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 will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to financial
markets. Writing puts and buying calls will tend to increase the Fund's exposure
to the underlying instrument and buying puts and writing calls will 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 will reflect 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
18
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
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 and liquidity risks in over-the-counter option
contracts, the Fund will continuously monitor the creditworthiness of all its
counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April
30, 1995.
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. At the time the Fund enters into a financial futures contract, it
will be 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 will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", to and from the broker will be 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", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize 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. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, there were no open positions in financial futures
contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. These
contracts involve market or credit risk in excess of the unrealized gain or loss
reflected in the Fund's Statement of Assets and Liabilities. The Fund may also
purchase and sell forward contracts to facilitate the settlement of foreign
currency denominated portfolio transactions, under which it intends to take
delivery of the foreign currency. Such contracts normally involve no market risk
other than that offset by the currency amount of the underlying transaction.
At April 30, 1995, there were no open forward foreign currency exchange
contracts.
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
19
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
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.
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 for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
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 of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. The Fund's tax year end is December 31.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis. Foreign income may be subject to foreign
withholding tax and is 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, if any,
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 effect of expenses that
may be applied differently to each class as explained previously.
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 Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, the Adviser became the investment adviser for the Fund
with approval of the Trustees and shareholders of the Fund. The Fund's former
investment manager was Transamerica Fund Management Company ("TFMC").
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment program
equivalent, to 0.6250% of the first $75,000,000 of the Fund's average daily net
asset value, 0.5625% of the next $75,000,000, and 0.5000% of the Fund's average
daily net asset value in excess of $150,000,000. This fee structure is
consistent with the former agreement with TFMC. For the period ended April 30,
1995, the advisory fee earned by the Adviser and TFMC amounted to $324,749 and
$162,374, respectively, resulting in a total fee of $487,123.
The Adviser and TFMC, for their respective periods, provided
administrative services to the Fund pursuant to an administrative service
agreement through January 16, 1995 on which day the agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent of such excess and
the Adviser will make additional arrangements necessary to eliminate any
remaining excess expenses. The current limits are 2.5% of the first $30,000,000
of the Fund's average daily net asset value,
20
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
2.0% of the next $70,000,000 and 1.5% of the remaining average daily net asset
value.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a
wholly-owned subsidiary of the Adviser, became the principal underwriter of the
Fund. Prior to this date, Transamerica Fund Distributors, Inc. ("TFD") served as
the principal underwriter and distributor of the Fund. For the period ended
April 30, 1995, JH Funds and TFD received net sales charges of $93,570 with
regard to sales of Class A shares. Out of this amount, $10,535 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, and $83,035 was paid as sales commissions to unrelated broker-dealers.
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 4.75% 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, formerly TFD, and are used in whole or in
part to defray its expenses related to providing distribution related services
to the Fund in connection with the sale of Class B shares. For the period ended
April 30, 1995, contingent deferred sales charges amounted to $330,387.
In addition, to compensate 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 shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments for
distribution and service expenses which in total will not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse for its distribution/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. This fee structure and plan is
similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement
between the Fund and John Hancock Investor Services Corporation ("Investor
Services"), a wholly owned subsidiary of The Berkeley Financial Group, for the
period between December 22, 1994 and May 12, 1995, inclusive under which
Investor Services processed telephone transactions on behalf of the Fund. As of
May 15, 1995, the Fund entered into a full service transfer agent agreement with
Investor Services. Prior to this date The Shareholder Services Group was the
transfer agent. The Fund will pay Investor Services a fee based on transaction
volume and number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until December
22, 1994. During the period ended April 30, 1995, legal fees paid to Baker &
Botts amounted to $1,421.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser
and its affiliates as well as Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock Funds,
as applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be recorded
on the Fund's books as other assets. The deferred compensation liability will be
marked to market on a periodic basis and income earned by the investment will be
recorded on the Fund's books.
The Fund has an independent advisory board composed of certain members
of the former Transamerica Board of Trustees who provide advice to the current
Trustees in order to facilitate a smooth management transition for which the
Fund pays the advisory board and its counsel a fee.
21
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- High Yield Bond Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $98,763,095 and
$84,611,766, respectively.
The cost of investments owned at April 30, 1995 (including the
short-term investments) for Federal income tax purposes was $179,141,364. Gross
unrealized appreciation and depreciation of investments aggregated $7,024,162,
and $3,637,557, respectively, resulting in net unrealized appreciation of
$3,386,605.
22
<PAGE> 47
ADDITIONAL INFORMATION
John Hancock Funds -- High Yield Bond Fund
On December 16, 1994 , a special meeting of John Hancock (formerly Transamerica)
Series, Inc. (the "Trust") in respect of John Hancock (formerly Transamerica)
High Yield Bond Fund (the "Fund") was held involving the election of trustees
and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation of
Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 14,073,889 FOR, 246,067 AGAINST and 723,503
ABSTAINING.
The shareholders next approved new Plans of Distribution for each Class
A and Class B shares of the Fund, also effective on December 22, 1994, and also
on substantially the same terms as the prior Plans of Distribution. The Class A
shareholder votes tallied were 916,033 FOR, 1,984 AGAINST and 89,101 ABSTAINING.
The Class B shareholder votes tallied were 12,851,936 FOR, 326,770 AGAINST and
857,636 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young,
LLP as independent auditors for the Fund for the fiscal year ending Ocotber 31,
1995, and the votes tallied were 4,311,282 FOR, 46,604 AGAINST and 117,164
ABSTAINING.
Lastly, the following trustees were elected to serve until their
respective successors shall become duly elected and qualified, with the votes
tabulated as indicated:
<TABLE>
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
- --------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr.......... 3,082,680 1,392,370
James F. Carlin................. 3,082,600 1,392,450
William H. Cunningham........... 3,084,089 1,390,961
Charles L. Ladner............... 3,082,224 1,392,826
Leo E. Linbeck, Jr.............. 3,084,060 1,390,990
Patricia P. McCarter............ 3,082,319 1,392,731
Steven R. Pruchansky............ 3,080,793 1,394,259
Norman H. Smith................. 3,081,938 1,393,112
John P. Toolan.................. 3,081,252 1,393,799
</TABLE>
23
<PAGE> 48
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page.
A box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm.'']
Bulk Rate
U.S. Postage
PAID
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 Brockton, MA
Permit No. 582
This report is for the information of shareholders of the John Hancock
High Yield Bond Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with the caption "Printed
on Recycled Paper."]
<PAGE> 49
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
GOVERNMENT
INCOME
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 50
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
Edgar Larsen
Senior Vice President
James K. Ho
Senior Vice President
Anne McDonley
Vice President
Barry Evans
Vice President
David Beckwith
Vice President
Frank Lucibella
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became part
of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array of
retirement and private account services, John Hancock Funds offers you a broader
selection of investment choices to meet your long-term financial needs. What's
more, the union of the Hancock and Transamerica investment teams gives you
access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as
a valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way we
work with you. Not only do we strive to ensure that your investments are
well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if you
have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment
needs in the years to come.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 51
BY BARRY H. EVANS FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
GOVERNMENT INCOME FUND
BOND MARKET RALLIES IN FIRST QUARTER 1995,
THEN PAUSES IN APRIL; OUTLOOK REMAINS POSITIVE
In February 1995, Barry H. Evans began managing John Hancock Government Income
Fund. Mr. Evans, who joined John Hancock Funds in 1986, is vice president and
head of the company's government fixed-income department. He also manages John
Hancock Limited-Term Government Fund, John Hancock Sovereign U.S. Government
Fund, and the fixed-income portion of John Hancock Sovereign Balanced Fund.
The bond market, which took a nose dive in 1994, has recovered in 1995. Late
last year, there were signs that the Federal Reserve's efforts to slow economic
growth were working. With inflation under control, investors began returning to
the bond market. After the benchmark 30-year Treasury peaked at 8.16% last
November, rates fell -- slowly at first and then picked up speed in January.
[A 2 1/2" x 3" photo of Barry H. Evans at bottom right. Caption reads: "Barry H.
Evans, Portfolio Manager."]
As the yield curve -- the difference between short- and long-term rates
- -- steepened in the first quarter of 1995, intermediate (10-year) and long-term
(30-year) government bonds did especially well. For the six-month period through
the end of April, mortgage-backed securities outperformed the government sector.
But most of their gains came in December and January when rates were falling
gradually. That's typically when mortgages do best. Then as rates dropped
dramatically in February and March, Treasuries outpaced mortgages. That's
because interest-rate sensitive Treasuries tend to lead the way in up markets.
In April, the entire bond rally paused as investors waited for evidence that the
economic slowdown would continue.
[CAPTION]
"...INVESTORS BEGAN RETURNING TO THE BOND MARKET."
3
<PAGE> 52
John Hancock Funds - Government Income Fund
[Pie chart with heading "Portfolio Diversification" at top of left hand column.
The pie is divided into four sections. From left to right: Mortgage-Backed
Securities 45%; Short-Term Investments & Other 1%; U.S. Treasury Bonds 43%; and
Foreign Government Bonds 11%. A footnote below reads: "As a percentage of net
assets on April 30, 1995."]
Our goal in managing John Hancock Government Income Fund is to give
equal emphasis to total return and yield. For the six months ended April 30,
1995, the Fund's Class A and B shares returned 6.54% and 6.15%, respectively, at
net asset value. By comparison, the average general U.S. government fund
returned 6.34% for the same period, according to Lipper Analytical Services.1
The Fund's 30-day SEC yield was 6.52% for A shares and 6.09% for B shares versus
the average government income fund's 6.10% yield.
HIGHER-COUPON MORTGAGES;
LOWER-COUPON TREASURIES
Late in 1994, the Fund started to decrease its mortgage stake; it began the
period at 54% and ended at 45%. In their place, Treasuries were added,
increasing to 43% from 35% six months ago. Both moves helped performance, as
rates fell in the first quarter of the year.
More importantly, since taking over the Fund's management in February,
we've made some radical changes to the government and Treasury holdings to
better balance total return and yield. The Fund had largely owned low coupon (6%
and 6.5%) mortgage-backed securities. In February, we began selling those
securities to buy current coupon (8%) issues, which generate more income for the
Fund. Doing this modestly weakened the quality of our duration -- a measure of
how sensitive the Fund's share price is to interest rates. That's because, when
rates fall, homeowners with higher-rate mortgages typically refinance. So a
higher-rate mortgage ends up having a shorter-than-expected maturity. When this
happens, a mortgage bond with an 8% coupon offers less duration than a 6% one.
What offset our concern about lowering the quality of the Fund's duration was
the fact that we had already extended its length to 5.5 years. That was above
the average government income fund's 5-year duration. A longer duration means
the Fund's share price will rise more as interest rates fall (or fall more as
rates rise).
With more income coming from our restructured mortgage investments, we
reduced the Fund's exposure to higher-coupon (12% or more) Treasuries. Bought at
premium prices, these issues depreciate toward par (or face value) as they
approach maturity and that hurts the Fund's share price. In their place, we
bought lower coupon (9% and 10%) Treasuries. Despite this change, the Fund's
dividend and average coupon stayed reasonably constant.
NORTHERN STARS: CANADIAN PROVINCIAL BONDS
Among the Fund's best performers were our Canadian government bonds -- which
represented about 10% of the Fund's assets throughout the period. Denominated in
U.S.
[CAPTION]
"...WE REDUCED THE FUND'S EXPOSURE TO HIGHER-COUPON TREASURIES."
4
<PAGE> 53
John Hancock Funds - Government Income Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart
is scaled in increments of 2% from top to bottom, with 8% on the top and 0% at
the bottom. Within the chart, there are three solid bars. The first represents
the 6.54% total return for John Hancock Government Income Fund: Class A. The
second represents the 6.15% total return for John Hancock Government Income
Fund: Class B. The third represents the 6.34% total return for the average
general U.S. government fund. Footnote below reads: "Total returns for John
Hancock Government Income Fund are at net asset value with all distributions
reinvested. The average general U.S. government fund is tracked by Lipper
Analytical Services.(1) See following page for historical performance
information."]
dollars, they trade more to the tune of what's going on in the U.S. corporate
bond market than foreign bond markets.
Most of what we owned were bonds issued by Canadian provinces. They did
well as their credit quality improved and spreads (or the differences in yield
between bonds with similar maturities but different credit qualities) tightened.
The Fund's biggest Canadian issuer was Hydro-Quebec. It's a large utility with a
decent credit rating, and it's guaranteed by the province of Quebec. Our
Hydro-Quebec bonds benefited as spreads tightened, especially once secession
fears abated.
POSITIVE MARKET AHEAD
We're optimistic about the bond market's prospects. With continued signs that
the economy's slowing, it seems unlikely that the Federal Reserve will raise
rates again this year. If the budget deficit and commodity prices stay under
control, rates on 30-year Treasuries could fall below 7%.
With its above-average duration, the Fund is in a good position to
benefit from falling rates. If the yield curve doesn't steepen or even if it
flattens, as we expect it to, the Fund should also benefit from its barbell
structure -- that is, owning mostly short- and long-term securities with not
much in between. As the yield curve steepened during the period, having a
barbell held us back. But going forward, it should help, especially if inflation
fears lessen and long-term bonds rally. For now, the only change we're
considering is gradually adding to our stake in mortgage-backed securities. That
would increase the Fund's income potential and offer more stability if rates
rise again. Along with the Fund's current structure, this should help us in our
effort to deliver both a competitive total return and yield.
- -------------------------------------------------------------------------------
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is lower.
[CAPTION]
"WE'RE OPTIMISTIC ABOUT THE BOND MARKET'S PROSPECTS."
5
<PAGE> 54
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Government Income Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ended March 31,
1995, with all distributions reinvested in shares. Total return (not annualized)
since inception on September 30, 1994 for Class A shares was (0.49%) and
reflects payment of the maximum sales charge of 4.75%. On May 15, 1995, the
maximum sales charge was lowered to 4.50%. The average annualized total returns
for Class B shares for the 1-year, 5-year and 10- year periods were (2.59%),
6.83% and 6.54%, respectively, and reflect the applicable contingent deferred
sales charge (maximum contingent deferred sales charge is 5% and declines to 0%
over 6 years). The standard SEC yield for the 30-day period ended April 30, 1995
for Class A and Class B shares was 6.40% and 6.05%, respectively. All
performance data shown represent past performance and should not be considered
indicative of future performance. Returns and principal values of Fund
investments will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
[Government Income Fund
Class A shares
Line chart with the heading Government Income 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 hypothetical
$10,000 investment made in the Government Income Fund on
September 30, 1994, before sales charge, and is equal to
$10,606 as of April 30, 1995. The second line represents
the value of the Lehman Brothers Treasury Composite Index
and is equal to $10,492* as of April 30, 1995. The third
line represents the Government Income Fund after sales
charge and is equal to $10,104 as of April 30, 1995.
Government Income Fund
Class B shares
Line chart with the heading Government Income 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 Lehman Brothers
Treasury Composite Index and is equal to $18,018* as of
April 30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Government
Income Fund on February 23, 1988 and is equal to $15,896**
as of April 30, 1995.
*The Lehman Brothers Treasury Composite Index is an unmanaged index of
fixed-income securities that are similar, but not identical, to the bonds in the
Fund's portfolio.
**No applicable contingent deferred sales charge.]
6
<PAGE> 55
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- ------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
U.S. government and agencies securities
(cost - $193,972,895)............................... $193,669,454
Foreign government bonds (cost - $28,574,874) 24,964,493
Multi-family mortgage backed bonds
(cost - $9,896,545)................................. 9,320,670
Joint repurchase agreement ($230,000)................. 230,000
Corporate savings account............................. 452
------------
228,185,069
Receivable for shares sold.............................. 248,044
Receivable for investments sold......................... 1,041
Interest receivable..................................... 5,684,300
Other assets............................................ 105,050
------------
Total Assets......................... 234,223,504
----------------------------------------------------
LIABILITIES:
Dividend payable........................................ 582,590
Payable for shares repurchased.......................... 410,172
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................... 118,032
Accounts payable and accrued expenses................... 119,217
------------
Total Liabilities.................... 1,230,011
----------------------------------------------------
NET ASSETS:
Capital paid-in......................................... 257,949,685
Accumulated net realized loss on investments and
financial futures contracts........................... (19,956,438)
Net unrealized depreciation of investments and
financial futures contracts........................... (4,429,384)
Distributions in excess of net investment income ....... (570,370)
------------
Net Assets........................... $232,993,493
====================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - 350,000,000 shares authorized
with $0.01 per share par value, respectively)
Class A - $528,362/59,048............................... $ 8.95
=======================================================================
Class B - $232,465,131/25,974,481....................... $ 8.95
=======================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($8.95 x 105.03%)............................. $ 9.40
=======================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 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.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest.................................................. $11,109,546
-----------
Expenses:
Distribution/service fee - Note B
Class A................................................ 331
Class B................................................ 1,151,100
Investment management fee - Note B...................... 744,785
Transfer agent fee...................................... 178,409
Interest expense........................................ 54,175
Custodian fee........................................... 39,618
Auditing fee............................................ 36,974
Registration and filing fees............................ 30,188
Miscellaneous........................................... 13,687
Trustees' fees.......................................... 13,643
Printing................................................ 9,246
Advisory board fee...................................... 8,694
Legal fees.............................................. 8,265
-----------
Total Expenses......................... 2,289,115
------------------------------------------------------
Net Investment Income.................. 8,820,431
------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold..................... (7,392,486)
Net realized loss on financial futures contracts (257,031)
Change in net unrealized appreciation/depreciation
of investments.......................................... 12,996,287
Change in net unrealized appreciation/depreciation
of financial futures contracts.......................... (352,813)
-----------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts............ 4,993,957
------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations.............. $13,814,388
======================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 56
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income .................................................... $ 8,820,431 $ 18,739,100
Net realized loss on investments sold and financial futures contracts .... (7,649,517) (12,072,264)
Change in net unrealized appreciation/depreciation of investments ........ 12,643,474 (24,904,672)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........ 13,814,388 (18,237,836)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3600 and $0.0600 per share, respectively) ................ (10,739) (1,228)
Class B - ($0.3270 and $0.6500 per share, respectively) ................ (8,652,273) (18,621,004)
Distributions from net realized gain on investments sold
and financial futures contracts
Class B - (none and $0.0200 per share, respectively) ................... -- (730,403)
------------ ------------
Total Distributions to Shareholders .................................... (8,663,012) (19,352,635)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET* ...................................... (13,442,313) (14,538,382)
------------ ------------
NET ASSETS:
Beginning of period ...................................................... 241,284,430 293,413,283
------------ ------------
End of period (including distibutions in excess of net investment income
of $570,370 and $727,789, respectively) ................................ $232,993,493 $241,284,430
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
----------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
CLASS A** --------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold ..................................... 43,782 $ 388,329 25,409 $ 223,359
Shares issued to shareholders in reinvestment
of distributions ............................. 311 2,736 69 606
---------- ------------ ---------- ------------
44,093 391,065 25,478 223,965
Less shares repurchased ........................ (10,523) (91,772) -- --
---------- ------------ ---------- ------------
Net increase ................................... 33,570 $ 299,293 25,478 $ 223,965
========== ============ ========== ============
CLASS B
Shares sold .................................... 1,476,867 $ 12,978,783 4,611,686 $ 43,702,215
Shares issued to shareholders in reinvestment
of distributions ............................. 514,520 4,527,495 1,061,434 9,872,309
---------- ------------ ---------- ------------
1,991,387 17,506,278 5,673,120 53,574,524
Less shares repurchased ........................ (3,564,583) (31,247,884) (7,326,339) (68,336,871)
---------- ------------ ---------- ------------
Net decrease ................................... (1,573,196) ($13,741,606) (1,653,219) ($14,762,347)
========== ============ ========== ============
</TABLE>
** Class A shares commenced operations on September 30, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 57
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
SEPTEMBER 30, 1994
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1995 OPERATIONS) TO
(UNAUDITED)(a) OCTOBER 31, 1994
---------------- ------------------
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................... $8.75 $8.85
------ ------
Net Investment Income .......................................... 0.33(b) 0.06
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts .................. 0.23 (0.10)
------ ------
Total from Investment Operations ............................. 0.56 (0.04)
Less Distributions:
Dividends from Net Investment Income ........................... (0.36) (0.06)
------ ------
Net Asset Value, End of Period ................................. $8.95 $8.75
====== ======
Total Investment Return at Net Asset Value ..................... 6.54% (0.45%)
Total Adjusted Investment Return at Net Asset Value ............ 6.52% (0.46%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ...................... $528 $223
Ratio of Adjusted Expenses to Average Net Assets (c) ........... 1.19%* 0.12%
Ratio of Adjusted Net Investment Income to Average Net Assets... 8.45%* 0.71%
Portfolio Turnover Rate ........................................ 49% 92%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, 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.
9
<PAGE> 58
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -----------------------------------------------------
(UNAUDITED)(a) 1994 1993 1992 1991 1990
-------------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $ 8.75 $ 10.05 $ 9.83 $ 9.79 $ 9.37 $ 9.98
-------- -------- ------- -------- -------- -------
Net Investment Income ................................. 0.33(b) 0.65 0.70 0.80 0.89 0.88
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts ......... 0.20 (1.28) 0.24 0.03 0.40 (0.54)
-------- -------- ------- -------- -------- -------
Total from Investment Operations .................... 0.53 (0.63) 0.94 0.83 1.29 0.34
-------- -------- ------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income .................. (0.33) (0.65) (0.72) (0.79) (0.87) (0.95)
Distributions from Net Realized Gains on Investments
Sold and Financial Futures Contracts ................ -- (0.02) -- -- -- --
-------- -------- -------- -------- -------- -------
Total Distributions ................................. (0.33) (0.67) (0.72) (0.79) (0.87) (0.95)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of Period ........................ $ 8.95 $ 8.75 $ 10.05 $ 9.83 $ 9.79 $ 9.37
======== ======== ======== ======== ======== =======
Total Investment Return at Net Asset Value ............ 6.15% (6.42%) 9.86% 8.81% 14.38% 3.71%
Total Adjusted Investment Return at Net Asset Value ... 6.13% (6.43%) 9.85% 8.66% -- --
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............. $232,465 $241,061 $293,413 $225,540 $129,014 $64,707
Ratio of Expenses to Average Net Assets (c) ........... 1.94%* 1.93% 2.00% 2.00% 2.00% 2.00%(d)
Ratio of Net Investment Income to Average Net Assets .. 7.70%* 6.98% 7.06% 8.03% 9.09% 9.22%(d)
Portfolio Turnover Rate ............................... 49% 92% 138% 112% 162% 83%
</TABLE>
* On an annualized basis.
(a) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(b) On average month end shares outstanding.
(c) Excluding interest expense, which equalled 0.02% for the six months ended
April 30, 1995, and 0.01%, 0.01% and 0.15% for the years ended October 31,
1994, 1993 and 1992, respectively.
(d) Reflects expense limitation in effect during the year ended October 31, 1990
(see Note B). As a result of such limitation, expenses of Class B shares for
the year ended October 31, 1990 reflect a reduction of $0.02 per share.
Absent of such reduction, the ratio of expenses to average net assets would
have been 2.04% and the ratio of net investment income to average net assets
would have been 9.18%.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 59
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
GOVERNMENT INCOME FUND ON APRIL 30, 1995. IT'S DIVIDED INTO FOUR MAIN
CATEGORIES:U.S. GOVERNMENT AND AGENCIES SECURITIES, FOREIGN GOVERNMENT BONDS,
MULTI-FAMILY MORTGAGE BACKED BONDS AND SHORT-TERM INVESTMENTS. SHORT-TERM
INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S. (42.21%)
Financing Corp.,
Bond................................................................ 9.400% 02-08-18 $ 4,000 $ 4,671,880
Bond................................................................ 9.650 11-02-18 1,600 1,920,000
Tennessee Valley Authority,
Pwr Bond 1993 Ser D................................................. 7.250 07-15-43 8,000 7,170,080
Pwr Bond 1994 Ser A................................................. 7.850 06-15-44 5,000 4,785,200
United States Treasury,
Bond................................................................ 12.625 05-15-95 8,150 8,167,849
Bond................................................................ 11.500 11-15-95* 17,770 18,236,487
Bond................................................................ 15.750 11-15-01 16,865 24,601,819
Bond **............................................................. 11.625 11-15-04* 22,000 28,792,500
-----------
98,345,815
-----------
GOVERNMENTAL - U.S. AGENCIES (40.91%)
Federal Home Loan Mortgage Corp.,
30 Yr SF Pass Thru Ctf.............................................. 7.750 11-01-08 33 33,021
30 Yr SF Pass Thru Ctf.............................................. 8.000 04-01-07 67 67,097
CMO REMIC 1094-K.................................................... 7.000 06-15-21 2,300 2,149,051
CMO REMIC 1218-G.................................................... 4.500 05-15-14 2,000 1,732,500
CMO REMIC 1408-H.................................................... 6.500 10-15-19 4,754 4,382,939
CMO REMIC 1611-F.................................................... 5.750 05-15-21 17,006 15,342,424
Federal Judiciary Office Building,
Zero Coupon Bond.................................................... 0.000 02-15-01 250 164,500
Federal National Mortgage Association,
30 Yr SF Pass Thru Ctf.............................................. 8.500 08-01-24 to 22,642 23,005,387
10-01-24
GTD REMIC Pass Thru Ctf 1990-51- H.................................. 7.500 05-25-20 200 193,312
GTD REMIC Pass Thru Ctf 1990-58- J.................................. 7.000 05-25-20 3,700 3,435,191
GTD REMIC Pass Thru Ctf 1990-94- D.................................. 6.500 08-25-20 1,660 1,514,750
GTD REMIC Pass Thru Ctf 1991-56- M.................................. 6.750 06-25-21 4,000 3,645,000
GTD REMIC Pass Thru Ctf 1992-210-H.................................. 6.500 03-25-19* 10,000 9,196,800
GTD REMIC Pass Thru Ctf 1994-72-K................................... 6.000 04-25-24 6,389 5,082,928
STRIP MBS Ser 249 Class 2........................................... 6.500 10-25-23 1,892 672,907
Indexed Sinking Fund................................................ 9.950 05-10-99* 131 131,363
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 60
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
GOVERNMENTAL - U.S. AGENCIES (CONTINUED)
Government National Mortgage Association,
30 Yr SF Pass Thru Ctf.............................................. 8.000% 05-15-24 to *$24,570 $ 24,574,469
08-15-24 ------------
95,323,639
------------
TOTAL U.S. GOVERNMENT AND AGENCIES SECURITIES
(Cost $193,972,895) (83.12%) 193,669,454
------- ------------
FOREIGN GOVERNMENT BONDS
U.S. DOLLAR DENOMINATED FOREIGN GOVERNMENT BONDS (10.71%)
Brazil, Republic of,
Notes IDU Ser A-L................................................... 7.813# 01-01-01 2,940 2,227,050
British Columbia Hydro and Power Auth.
Bond Ser FG......................................................... 15.000 04-15-11 3,900 4,382,040
Bond Ser FJ......................................................... 15.500 11-15-11 1,700 2,005,014
Hydro-Quebec Corp.,
Deb Ser GH.......................................................... 8.250 04-15-26 1,000 975,210
Deb Ser GQ.......................................................... 8.250 01-15-27 1,000 977,040
Deb Ser GF.......................................................... 8.875 03-01-26 2,000 2,090,620
Deb Ser HK.......................................................... 9.375 04-15-30 2,000 2,197,480
Deb Ser FU.......................................................... 11.750 02-01-12 270 355,355
International Bank for Reconstruction and Development,
Forty Year Bond Ser 1986............................................ 8.875 03-01-26* 2,000 2,231,980
Ontario, Province of,
30 Year Deb......................................................... 15.125 05-01-11 1,345 1,521,854
30 Year Deb......................................................... 17.000 11-05-11 5,000 6,000,850
------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $28,574,874 ) (10.71%) 24,964,493
------- ------------
MULTI-FAMILY MORTGAGE BACKED BONDS (4.00%)
DLJ Mortgage Acceptance Corp.,
CMO REMIC 1993-M10-A2............................................... 7.200 07-15-03 4,795 4,609,654
CMO REMIC 1993-MF7-A1............................................... 7.400 06-18-03 4,872 4,711,016
------------
TOTAL MULTI-FAMILY MORTGAGE BACKED BONDS
(Cost $9,896,545) (4.00%) 9,320,670
------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 61
FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.10%)
Investment in a joint repurchase agreement transaction
with BT Securities Corp., Dated 04-28-95, Due 05-01-95
(secured by U. S. Treasury Bond 10.75% Due 08-15-05 and
by U.S. Treasury Note 6.875% Due 10-31-96) Note A................... 5.93% 05-01-95 $ 230 $ 230,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings
Account Current Rate 3.00%.......................................... 452
------------
TOTAL SHORT-TERM INVESTMENTS (0.10%) 230,452
------ ------------
TOTAL INVESTMENTS (97.93%) $228,185,069
====== ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** U.S. Treasury Bonds with a value of $11,947,579 owned by the Fund were
designated as margin deposits for futures contracts at April 30, 1995.
# Represents rate in effect on April 30, 1995.
The percentage shown for each investment category is the total value of that
catgegory as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940, as
amended. The Trust consists of six series portfolios: John Hancock Government
Income Fund (the "Fund"), John Hancock Emerging Growth Fund, John Hancock High
Yield Tax Free Fund, John Hancock High Yield Bond Fund, John Hancock Money
Market Fund B and John Hancock Global Resources Fund. The Trustees may authorize
the creation of additional Funds from time to time to satisfy various investment
objectives. Effective December 22, 1994 (see Note B), the Trust and Funds
changed names by replacing the word Transamerica with John Hancock.
The Trustees have authorized the issuance of two classes of shares of
the Fund, designated as Class A and Class B. The shares of each class represent
an interest in the same portfolio of investments of the Fund and have equal
rights to voting, redemption, 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/service expenses under the
terms of a distribution plan have exclusive voting rights regarding such
distribution plan. Class A Shares are subject to an initial sales charge of up
to 4.50% and a 12b-1 distribution plan. Prior to May 15, 1995, the maximum
sales charge was 4.75%. Class B Shares are subject to a contingent deferred
sales charge and a separate 12b-1 distribution plan. On September 30, 1994,
Class A shares were sold to commence class activity. Significant accounting
policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing 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.
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 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.
REVERSE REPURCHASE AGREEMENT Prior to December 22, 1994, the Fund entered into
reverse repurchase agreements which involve the sale of securities held by the
Fund to a bank or securities firm with an agreement that the Fund will buy back
the securities at a fixed future date at a fixed price plus an agreed amount of
"interest" which may be reflected in the repurchase price. Reverse repurchase
agreements are considered to be borrowings by the Fund and the Fund used the
proceeds obtained from the sale of securities to purchase other investments. On
December 22, 1994, the Fund discontinued investing in reverse repurchase
agreements.
OPTIONS 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 will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the
financial markets. Writing puts and buying calls will tend to increase the
Fund's exposure to the underlying instrument and buying puts
14
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
and writing calls will 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 will reflect 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 and liquidity risks in over-the-counter option contracts, the
Fund will continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or
credit risk may involve amounts in excess of those reflected in the Fund's
period-end Statement of Assets and Liabilities.
There were no written option transactions for the period ended April
30, 1995.
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. At the time the Fund enters into a financial futures contract, it
will be 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 will be valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", to and from the broker will be 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", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize 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. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, open positions in financial futures contracts were
as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION APPRECIATION
- ---------- -------------- -------- -------------
<S> <C> <C> <C>
JUNE 95 90 Treasury Bond(1) LONG $60,313
=======
</TABLE>
(1) Each contract represents $100,000 in par value.
At April 30, 1995, the Fund has deposited in a segregated account
$9,129,000 par value of U.S. Treasury Bond, 11.625% due 11-15-04 to cover margin
requirements on open financial futures contracts.
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
15
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
in the Fund's Statement of Assets and Liabilities. The Fund may also purchase
and sell forward contracts to facilitate the settlement of foreign currency
denominated portfolio transactions, under which it intends to take delivery of
the foreign currency. Such contracts normally involve no market risk other than
that offset by the currency amount of the underlying transaction.
At April 30, 1995, there were no open forward foreign currency exchange
contracts.
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.
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 for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
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 of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. The Fund's tax year end is December 31.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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, if any,
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 effect of expenses that
may be applied differently to each class as explained previously.
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 Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/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.
RECLASSIFICATION Certain reclassifications have been made to 1994 amounts to
permit comparisons to 1995 presentations.
16
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, John Hancock Advisers, Inc. ("the Adviser"), a wholly
owned subsidiary of The Berkeley Financial Group, became the investment adviser
for the Fund with approval of the Trustees and shareholders of the Fund. The
Fund's former investment manager was Transamerica Fund Management Company
("TFMC").
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment program
equivalent, to 0.650% of the first $200,000,000 of the Fund's average daily net
asset value, 0.625% of the next $300,000,000 and 0.600% of the Fund's average
daily net asset value in excess of $500,000,000. This fee structure is
consistent with the former agreement with TFMC. For the period ended April 30,
1995, the advisory fee earned by the Adviser and TFMC amounted to $488,064 and
$256,721, respectively, resulting in a total fee of $744,785.
The Adviser and TFMC, for their respective periods, provided
administrative services to the Fund pursuant to an administrative service
agreement through January 16, 1995 on which day the agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent of such excess and
the Adviser will make additional arrangements necessary to eliminate any
remaining excess expenses. The current limits are 2.5% of the first $30,000,000
of the Fund's average daily net asset value, 2.0% of the next $70,000,000 and
1.5% of the remaining average daily net asset value.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a
wholly-owned subsidiary of the Adviser, became the principal underwriter of the
Fund. Prior to this date, Transamerica Fund Distributors, Inc. ("TFD") served
as the principal underwriter and distributor of the Fund. For the period ended
April 30, 1995, JH Funds and TFD received net sales charges of $10,458 with
regard to sales of Class A shares. Out of this amount, $1,121 was retained and
used for printing prospectuses, advertising, sales literature and other
purposes, and $9,337 was paid as sales commissions to unrelated broker-dealers.
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, formerly TFD, and are used in whole or in
part to defray its expenses related to providing distribution related services
to the Fund in connection with the sale of Class B shares. For the period ended
April 30, 1995, contingent deferred sales charges amounted to $654,605.
In addition, to compensate 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 shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments for
distribution and service expenses which in total will not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse for its distribution/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. This fee structure and plan is
similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement
between the Fund and John Hancock Investor Services Corporation ("Investor
Services"), a wholly owned subsidiary of The Berkeley Financial Group, for the
period between December 22, 1994 and May 12, 1995, inclusive under which
Investor Services processed telephone transactions on behalf of the Fund. As of
May 15, 1995, the Fund entered into a full service transfer agent agreement
with Investor Services. Prior to this date The Shareholder Services Group
17
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Government Income Fund
was the transfer agent. The Fund will pay Investor Services a fee based on
transaction volume and number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until
December 22, 1994. During the period ended April 30, 1995, legal fees paid to
Baker & Botts amounted to $2,864.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser
and its affiliates as well as Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as other assets. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
The Fund has an independent advisory board composed of certain
members of the former Transamerica Board of Trustees who provide advice to the
current Trustees in order to facilitate a smooth management transition for
which the Fund pays the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $142,813,070 and
$158,520,564, respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $232,674,314. Gross
unrealized appreciation and depreciation of investments aggregated $3,856,408,
and $8,346,105, respectively, resulting in net unrealized depreciation of
$4,489,697.
18
<PAGE> 67
ADDITIONAL INFORMATION
John Hancock Funds - Government Income Fund
On December 16, 1994 , a special meeting of John Hancock (formerly Transamerica)
Series, Inc. (the "Trust") in respect of John Hancock (formerly Transamerica)
Government Income Fund (the "Fund") was held involving the election of trustees
and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation of
Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 15,124,354 FOR, 150,196 AGAINST and 881,257
ABSTAINING.
The shareholders next approved new Plans of Distribution for each
Class A and Class B shares of the Fund, also effective on December 22, 1994,
and also on substantially the same terms as the prior Plans of Distribution.
The Class A shareholder votes tallied were 22,521 FOR, 0 AGAINST and 0
ABSTAINING. The Class B shareholder votes tallied were 14,923,421 FOR, 198,460
AGAINST and 1,015,793 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young,
LLP as independent auditors for the Fund for the fiscal year ending October 31,
1995, and the votes tallied were 15,603,163 FOR, 45,420 AGAINST and 640,244
ABSTAINING.
Lastly, the following trustees were elected to serve until their
respective successors shall become duly elected and qualified, with the votes
tabulated as indicated:
<TABLE>
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
- --------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr. ........ 13,583,397 2,688,529
James F. Carlin ................ 13,604,279 2,667,648
William H. Cunningham .......... 13,603,910 2,668,017
Charles L. Ladner .............. 13,600,854 2,671,073
Leo E. Linbeck, Jr. ............ 13,596,624 2,675,303
Patricia P. McCarter ........... 13,593,811 2,678,116
Steven R. Pruchansky ........... 13,590,167 2,681,760
Norman H. Smith ................ 13,605,443 2,666,483
John P. Toolan ................. 13,604,891 2,667,036
</TABLE>
19
<PAGE> 68
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Government Income Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]
JHF S60SA 4/95
<PAGE> 69
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - -
GLOBAL
RESOURCES
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 70
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
Edgar Larsen
Senior Vice President
James K. Ho
Senior Vice President
Anne McDonley
Vice President
Barry Evans
Vice President
David Beckwith
Vice President
Frank Lucibella
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became
part of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array
of retirement and private account services, John Hancock Funds offers you a
broader selection of investment choices to meet your long-term financial needs.
What's more, the union of the Hancock and Transamerica investment teams gives
you access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as
a valued shareholder isn't. Here at John Hancock Funds, our motto is: "We
invest in quality first." It has to do with the way we invest your money and
the way we work with you. Not only do we strive to ensure that your investments
are well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if
you have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment
needs in the years to come.
Sincerely,
/s/ Edward J. Boudreau, JR.,
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 71
BY B.J. WILLINGHAM, SENIOR VICE PRESIDENT
AND PORTFOLIO MANAGER
JOHN HANCOCK
GLOBAL RESOURCES FUND
NATURAL RESOURCE STOCKS DON'T KEEP PACE WITH OVERALL
STOCK MARKET; RISING DEMAND AND LIMITED SUPPLY PAINT
POSITIVE LONG-TERM PICTURE
The last six months were difficult for John Hancock Global Resources Fund. The
warmest winter in decades in the United States kept a lid on energy prices,
pushing natural gas and oil stocks down during the last quarter of 1994. The
collapse of the Mexican peso in December sent shock waves through Latin American
and Asian emerging markets, driving many natural resource stocks even
lower through most of the first quarter of 1995. And finally, fears that the
U.S. economy was slowing caused basic material stocks like steel, cement and
metals to perform poorly, despite their strong 1994 earnings. These factors
prevented global resource stocks from enjoying the stock market's recent rally.
A 3" x 2 1/2" photo of B. J. Willingham at bottom center. Caption reads: "B.J.
Willingham, Portfolio Manager."
That said, John Hancock Global Resources Fund underperformed relative
to its peers. For the six months ended April 30, 1995, the Fund's Class A and
Class B shares had total returns of -7.24% and -7.88%, respectively, at net
asset value. Those returns compared to the 0.10% return for the average
natural resources fund, according to Lipper Analytical Services. (1)
WHY THE FUND LAGGED ITS PEERS
The primary reason for the Fund's underperformance was its above-average
exposure to energy stocks -- including drillers,
[CAPTION]
"THE LAST SIX MONTHS WERE DIFFICULT..."
B.J. Willingham, Portfolio Manager
3
<PAGE> 72
John Hancock Funds - Global Resources Fund
----------------------------------------------------------
TOP FIVE COMMON
STOCK HOLDINGS
1. CAIRN ENERGY USA 3.7%
2. YORK RESEARCH 3.6%
3. BELLWETHER EXPLORATION 3.3%
4. RANGER OIL 3.1%
5. PETROLEUM GEO-SERVICES 3.1%
As a percentage of net assets on April 30, 1995
----------------------------------------------------------
refiners, marketers, exploration and production, service, and natural gas
pipeline companies. All told, energy stocks accounted for about 43% of
the Fund's assets at the end of April. These stocks suffered in the fourth
quarter of 1994 due to large supplies of both oil and gas and weak demand as a
result of warm weather. By the New Year, however, oil and natural gas prices
rose, and many of the Fund's energy stocks rebounded, although not enough to
erase their previous losses.
Though energy stocks had a tough go of it in 1994, we believe their
future looks quite good. The energy industry has spent the past decade undoing
its overbuilding from the early 1980s. It has reduced itself to a fraction of
its former size. During the 1980s, there was less exploration for, and
production of, energy. Demand, meanwhile, has grown to the point where it's in
fairly tight balance with supply.
Looking ahead, it's likely that supply and demand will tighten even
more over the next three years. Despite the development of some impressive new
drilling technologies, the world is still not finding as much energy as it
uses. The key ingredient is the development of the third world. Take China and
India, which make up roughly 40% of the world's population and have been
growing at about 10% or more annually over the past two years. These countries
use an average of less than one barrel of oil per person a year. To put that
into perspective, the United States uses 30 barrels per person a year. Mexico,
on the other hand, uses 5 or 6 barrels. If China alone gets halfway to Mexico's
usage rate which we believe they will by the end of the decade the increase
in energy demand will be equal to 1.5 times the amount of oil that Saudi
Arabia, the world's largest oil producer, currently produces. An early
indication of that growth is that global demand is running 1.5 million barrels
a day more in 1995 than it did in 1994.
Because of our favorable long-term outlook for the energy sector, we've held
onto many of our favorites, focusing on companies that we believe have the
potential to grow earnings 40% or 50% over the next 12 months. That's the
reasoning behind two of our largest investments in this sector. Our number one
holding is U.S.-based Cairn Energy, which has a spectacular record of finding
oil. Its earnings have doubled so far in 1995; we expect the company to do the
same in 1996. Another large holding is International Petroleum, a
Canadian-based exploration and production company with access to regions like
Libya and the Sudan that are off-limits to most American oil companies.
Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is " Recent
performance .... and what's behind the numbers." The first listing is Cairn
Energy followed by an up arrow and the phrase "New energy finds." The second
listing is "Petroleum Geo-Services followed by an up arrow and the phrase
"Stronger earnings." The third listing is AK Steel Holding Corp. followed by a
down arrow and the phrase "Falling stock price masks strong earnings." Footnote
below reads: "See "Schedule of Investments." Investment holdings are subject to
change."
[CAPTION]
"...THE WORLD IS STILL NOT FINDING AS MUCH ENERGY AS IT USES."
4
<PAGE> 73
John Hancock Funds - Global Resources Fund
Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart
is scaled in increments of 8% from top to bottom, with 8% at the top and -8% at
the bottom. Within the chart, there are three solid bars. The first represents
the -7.24% total return for John Hancock Global Resources Fund: Class A. The
second represents the -7.88% total return for John Hancock Global Resources
Fund: Class B. The third represents the 0.10% return for the average natural
resources fund. Footnote below reads: "Total returns for John Hancock Global
Resources Fund are at net asset value with all distributions reinvested. The
average natural resources fund is tracked by Lipper Analytical Services.(1) See
following page for historical performance information."
EMERGING MARKETS
About one-third of the Fund's assets were invested in emerging markets at the
end of April, mostly in the Pacific Rim (20%) and Latin America (8%). When
the peso crisis spilled over to other emerging markets, we cut our holdings
in Latin America and more heavily weighted our Pacific Rim holdings. Despite
the fact that these markets have suffered recently, we think they continue to
offer some of the world's most exciting growth opportunities. IndoCement in
Indonesia and gravel company Sungei Way Holdings in Malaysia were two
additions to the Fund during the period. One Latin America holding we kept is
TGS in Argentina, a natural gas pipeline company. Since TGS's contracts are
priced in dollars, a potential devaluation of Argentina's currency shouldn't
affect the company's bottom line. What's more, a declining local currency
would translate into lower costs for the company.
BASIC MATERIALS
Fears of a slowing U.S. economy caused prices of basic material stocks like
steel, metals and cement to fall, as investors worried that company earnings
couldn't keep up the strong pace set in late 1994. But many of these companies
have been able to lock in higher product prices for the next several years. For
example, steel companies including U.S. Steel and AK Steel Holding
Corporation have negotiated two- and three-year contracts with the automobile
companies, which use about 50% of their steel. On the other hand, paper
companies like Kimberly Clark, PT Indah Kiat Pulp and Concordia Paper did
well during the period. After several flat years, paper prices rose in 1995,
which helped paper companies' earnings.
FAVORABLE CLIMATE
Some investors believe that the cycle for natural resource stocks is over. We
disagree. In our view, we're at the beginning of an upward cycle that could
last through the decade. The past dozen years have been a unique period in
economic history. The natural resource industry was overbuilt in the 1970s.
So entering the 1980s, the world had plenty of commodities. Now the industry
has downsized and lowered costs. At the same time, demand has exploded and
supply has contracted. As demand continues to increase due to economic
growth, especially in less developed nations, we expect many of these
companies will do quite well.
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"...WE'RE AT THE BEGINNING OF AN UPWARD CYCLE THAT COULD LAST
THROUGH THE DECADE."
5
<PAGE> 74
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Global Resources Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995
with all distributions reinvested in shares. Total return (not annualized) since
inception on June 15, 1994 for Class A shares was (12.22%) and reflects payment
of the maximum sales charge of 5.75%. On May 15, 1995, the maximum sales charge
was lowered to 5.00%. The average annualized total returns for Class B shares
for the 1 year, 5 year and 10 year periods were (11.55%), 2.21% and 7.91%,
respectively, and reflect the maximum contingent deferred sales charge of
5.00%, declining to 0% after six years. All performance data shown represent
past performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Consult your prospectus for more information regarding the risks
associated with international and industry segment investing.
Global Resources Fund
Class A shares
Line chart with the heading Global Resources 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 Standard &
Poor's 500 Stock Index and is equal to $11,555* as of
April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Global
Resources Fund on May 15, 1994, before sales charge, and is
equal to $9,731 as of April 30, 1995. The third line
represents the Global Resources Fund after sales charge and
is equal to $9,177 as of April 30, 1995.
Global Resources Fund
Class B shares
Line chart with the heading Global Resources Fund: Class
B, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines.
The first line represents the value of the Standard &
Poor's 500 Stock Index and is equal to $20,355* as of
April 30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Global
Resources Fund on October 26, 1987 and is equal to $18,379
as of April 30, 1995.
* 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.
** No applicable contingent deferred sales charge.
6
<PAGE> 75
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $33,243,835)............... $35,201,093
Joint repurchase agreement (cost - $159,000)..... 159,000
Corporate savings account........................ 479
-----------
35,360,572
Receivable for shares sold......................... 16,274
Receivable for investments sold.................... 117,771
Interest receivable................................ 52
Dividend receivable................................ 92,891
Foreign tax receivable............................. 12,251
Prepaid expenses................................... 7,745
-----------
Total Assets................ 35,607,556
------------------------------------------
LIABILITIES:
Payable for shares repurchased..................... 65,183
Payable for investments purchased.................. 256,105
Payable to John Hancock Advisers, Inc. and
affiliates - Note B.............................. 28,378
Accounts payable and accrued expenses.............. 7,948
-----------
Total Liabilities........... 357,614
------------------------------------------
NET ASSETS:
Capital paid-in.................................... 34,650,721
Accumulated net realized loss on investments and
foreign currency transactions.................... (1,190,907)
Net unrealized appreciation of investments and
foreign currency transactions...................... 1,957,174
Net investment loss................................ (167,046)
-----------
Net Assets.................. $35,249,942
==========================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - 75,000,000 shares authorized
with $0.01 per share par value, respectively)
Class A - $2,920,606 / 201,528..................... $ 14.49
=================================================================
Class B - $32,329,336 / 2,246,183.................. $ 14.39
=================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - $(14.49 x 106.10%)....................... $ 15.37
=================================================================
<FN>
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
</TABLE>
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.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $22,627)........................................... $ 247,965
Interest................................................ 5,769
-----------
253,734
-----------
Expenses:
Distribution/service fee - Note B
Class A........................................... 4,838
Class B........................................... 157,504
Investment management fee - Note B.................... 132,642
Transfer agent fee.................................... 50,768
Custodian fee......................................... 26,894
Registration and filing fees.......................... 21,332
Auditing fee.......................................... 15,459
Trustees' fees........................................ 6,692
Printing.............................................. 3,725
Legal fees............................................ 926
-----------
Total Expenses................... 420,780
-------------------------------------------------
Net Investment Loss.............. (167,046)
-------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold................... (1,083,008)
Net realized loss on foreign currency transactions...... (1,038)
Change in net unrealized appreciation/depreciation
of investments........................................ (2,193,434)
Change in net unrealized appreciation/depreciation
of foreign currency transactions...................... (84)
-----------
Net Realized and Unrealized
Loss on Investments and
Foreign Currency Transactions.... (3,277,564)
-------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations........ $(3,444,610)
=================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 76
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss............................................................. $ (167,046) $ (441,384)
Net realized loss on investments sold and foreign currency transactions......... (1,084,046) (90,344)
Change in net unrealized appreciation/depreciation of investments and
foreign currency transactions............................................. (2,193,518) 553,900
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations............... (3,444,610) 22,172
----------- -----------
FROM FUND SHARE TRANSACTIONS -- NET*.............................................. (3,614,322) 22,788,288
----------- -----------
NET ASSETS:
Beginning of period............................................................. 42,308,874 19,498,414
----------- -----------
End of period (including net investment loss of $167,046 and $441,384,
respectively)............................................................. $35,249,942 $42,308,874
=========== ===========
<FN>
*ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994
----------------------- ---------------------------
Shares Amount Shares Amount
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CLASS A**
Shares sold............................................... 61,427 $ 895,719 419,756 $ 6,352,382
Less shares repurchased................................... (203,776) (2,838,257) (75,879) (1,159,547)
-------- ----------- --------- -----------
Net increase (decrease)................................... (142,349) $(1,942,538) 343,877 $ 5,192,835
======== =========== ========= ===========
CLASS B
Shares sold............................................... 362,827 $ 5,105,903 1,781,599 $27,695,930
Less shares repurchased................................... (488,110) (6,777,687) (652,737) (10,100,477)
-------- ----------- --------- -----------
Net increase (decrease)................................... (125,283) $(1,671,784) 1,128,862 $17,595,453
======== =========== ========= ===========
<FN>
** Class A share commenced operations on June 15, 1994.
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES AND ANY
INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE
ILLUSTRATES THE NUMBER OF FUND SHARES SOLD AND REDEEMED DURING THE LAST TWO
PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 77
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
FOR THE PERIOD
JUNE 15, 1994
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1995(a) OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................................ $15.62 $14.89
------ ------
Net Investment Loss (b)..................................................................... (0.01) (0.08)
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions.... (1.12) 0.81
------ ------
Total from Investment Operations.......................................................... (1.13) 0.73
------ ------
Net Asset Value, End of Period.............................................................. $14.49 $15.62
====== ======
Total Investment Return at Net Asset Value.................................................. (7.24%) 4.90%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................................... $2,921 $5,372
Ratio of Expenses to Average Net Assets..................................................... 1.71%* 0.73%
Ratio of Net Investment Loss to Average Net Assets.......................................... (0.28%)* (0.42%)
Portfolio Turnover Rate..................................................................... 53% 96%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE 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.
9
<PAGE> 78
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 (a) ---------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------------- -------- ------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period......................... $ 15.58 $ 15.69 $ 12.41 $12.20 $ 11.57 $11.99
------- ------- ------- ------ ------- ------
Net Investment Loss (b)...................................... (0.07) (0.23) (0.24) (0.24) (0.17) (0.10)(c)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions.............................. (1.12) 0.12 3.52 0.58 1.24 0.16
------- ------- ------- ------ ------- ------
Total from Investment Operations........................... (1.19) (0.11) 3.28 0.34 1.07 0.06
------- ------- ------- ------ ------- ------
Less Distributions
Dividends from Net Investment Income......................... -- -- -- -- -- (0.01)
Distributions from Realized Gains on Investments Sold........ -- -- -- (0.13) (0.44) (0.47)
------- ------- ------- ------ ------- ------
Total Distributions to Shareholders........................ -- -- -- (0.13) (0.44) (0.48)
------- ------- ------- ------ ------- ------
Net Asset Value, End of Period............................... $ 14.39 $ 15.58 $ 15.69 $12.41 $ 12.20 $11.57
======= ======= ======= ====== ======= ======
Total Investment Return at Net Asset Value................... (7.88%) (0.70%) 26.43% 2.93% 9.81% 0.09%
Total Adjusted Investment Return at Net Asset Value.......... -- -- -- -- -- 0.04%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................... $32,329 $36,937 $19,498 $7,428 $10,766 $7,746
Ratio of Expenses to Average Net Assets...................... 2.46%* 2.54% 2.92% 3.75% 3.64% 3.50%(c)
Ratio of Net Investment Loss to Average Net Assets........... (1.03%)* (1.52%) (1.65%) (2.01%) (1.47%) (0.82%)(c)
Portfolio Turnover Rate...................................... 53% 96% 83% 59% 93% 59%
<FN>
* On an annualized basis.
(a) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the Fund.
(b) Per share information has been calculated using the average number of shares outstanding.
(c) Reflects expense limitation in effect during the year ended October 31, 1990 (see Note B).
As a result of such limitation, expenses of Class B shares for the year ended October 31, 1990
reflect a reduction of $0.01 per share. Absent of such reduction, the ratio of expenses to
average net assets would have been 3.55% and the ratio of net investment income to average
net assets would have been (0.87%).
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 79
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
GLOBAL RESOURCES FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES:COMMON STOCKS AND SHORT-TERM INVESTMENTS. THE COMMON STOCKS ARE FUR
THER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
COMMON STOCKS
CONSUMER CYCLICALS (1.14%)
Tolmex S.A. de C.V. American Depository
Receipt (ADR)(Mexico)...................... 12,000 $ 401,024
----------
CONSUMER GOODS & SERVICES (1.80%)
Reliance Industries Ltd.(ADR) (India)**.... 40,000 633,120
----------
DIVERSIFIED OPERATIONS (15.07%)
Barret Resources Corp. **.................. 40,000 940,000
Belden and Blake Corp. **.................. 35,000* 511,875
Broken Hill Proprietary Co. Ltd.
(ADR) (Austrailia)....................... 14,000 808,500
Grupo Mexico S.A. B(Mexico)................ 120,000* 370,932
NKK Corp.(Japan) **........................ 225,000 629,325
Phelps Dodge Corp.......................... 12,500* 707,813
Sungei Way Holdings Berhad(Malaysia)....... 140,000* 555,646
Tesoro Petroleum Corp. **.................. 80,000* 790,000
----------
5,314,091
----------
ENERGY - EXPLORATION AND PRODUCTION (24.21%)
Abraxas Petroleum Corp. * *................ 45,000 405,000
Bellwether Exploration Co. ............... 190,000 1,163,750
Cairn Energy USA, Inc.** .................. 135,000 1,316,250
Dusty Mac Oil and Gas Ltd.(Canada) **...... 50,000* 137,500
International Petroleum Corp.(Canada) **... 500,000* 1,062,500
Newscope Resources Ltd.(Canada) ** ........ 255,200* 731,429
Nuevo Energy Co. **........................ 55,000 1,051,875
PTT Exploration & Production Public Co.,
Ltd.(Thailand) **........................ 70,000 683,081
PetroCorp, Inc. **......................... 100,000 875,000
Ranger Oil Ltd.(Canada).................... 150,000* 1,106,250
----------
8,532,635
----------
ENERGY - PROCESSING AND MARKETING (8.02%)
Methanex Corp.(Canada) **.................. 60,000 637,500
Repsol S.A.(ADR) (Spain)................... 25,000 800,000
Shanghai Petrochemical Ltd.(ADR) (China)... 21,000 606,375
Total Compagnie Francaise des Petroles
(ADR) (France)........................... 25,000 784,375
----------
2,828,250
----------
ENERGY - SERVICES AND EQUIPMENT (7.69%)
Amercian Ecology Corp...................... 104,200 677,300
Newpark Resources Inc. ** ................. 20,000* 445,000
Petroleum Geo-Services A/S (ADR)
(Norway) **.............................. 40,000 $1,092,500
Reading and Bates Corp. **................. 60,000* 495,000
----------
2,709,800
----------
FINANCIAL SERVICES (1.99%)
Brassie Golf Corp.(Canada) **.............. 287,900 701,756
----------
INDUSTRIAL - INTERMEDIATE MATERIALS (20.18%)
AK Steel Holding Corp. **.................. 30,000* 806,250
Concordia Paper Holdings, (ADR)
(Hong Kong)**............................ 50,000* 681,250
Hindalco Industries Ltd.(India) **......... 20,000 572,600
Industrias Campos Hermanos S.A.
(Mexico) **.............................. 155,000 198,819
Kimberly Clark de Mexico S.A.(ADR)
(Mexico)................................ 29,000* 599,102
Kymmene Oy(Finland)........................ 20,000 601,378
O'Okiep Copper Ltd. (ADR) (Portugal) **.... 43,000 419,250
PT Indah Kiat Pulp & Paper Corp.
(Indonesia).............................. 600,000 665,040
PT Indocement Tunggal Prakar(Indonesia).... 170,000* 563,363
Pohang Iron and Steel Co., Ltd. (ADR)
(South Korea) **......................... 35,000 966,875
USX-U.S. Steel Group....................... 18,000 549,000
Venezolana de Prerreducidos Caroni
(Venezuela) **........................... 101,000 492,375
----------
7,115,302
----------
Industrial - Miscellaneous (12.10%)
Eastern Aluminium Ltd.(Austrailia) **...... 620,000* 518,878
Giant Cement Holding, Inc. **.............. 60,000 780,000
Holderbank Financiere Glarus AG
(Switzerland) **......................... 712 573,596
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 80
FINANCIAL STATEMENTS
<TABLE>
John Hancock Funds - Global Resources Fund
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- ------
<S> <C> <C>
INDUSTRIAL - MISCELLANEOUS (CONTINUED)
Mercer International, Inc. .............. 34,000* $ 510,000
RTZ Corp. PLC (ADR) (United Kingdom)..... 12,000 618,000
York Research Corp. **................... 230,000 1,265,000
-----------
4,265,474
-----------
MINING (3.71%)
Amax Gold Inc. **........................ 115,000* 646,875
Battle Mountain Gold Co. ................ 60,000* 660,000
-----------
1,306,875
-----------
UTILITIES (3.95%)
OEMV AG(Austria) **...................... 5,625 583,016
Transportadora de Gas del Sur S.A.(ADR)..
(Argentina)............................ 82,000 809,750
-----------
1,392,766
-----------
TOTAL COMMON STOCKS
(Cost $33,243,835) (99.86%) 35,201,093
------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.45%)
Investment in a joint repurchase
agreement transaction with
B.T. Securities Corp. -
Dated 04-28-95, Due 05-01-95
(secured by U.S. Treasury Bond,
10.75% Due 08-15-05, and by
U.S. Treasury Note, 6.875%
Due 10-31-96) Note A.................... 5.93% $ 159 $ 159,000
-----------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%..................... 479
-----------
TOTAL SHORT-TERM INVESTMENTS (0.45%) 159,479
------- -----------
TOTAL INVESTMENTS (100.31%) $35,360,572
======= ===========
<FN>
** Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Non-income producing security.
</TABLE>
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.
12
<PAGE> 81
FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
<TABLE>
PORTFOLIO CONCENTRATION
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Global Resources Fund invests primarily in equity securities of
issuers in the natural resource industry in the United States and abroad. The
concentration of investments by industry category for individual securities
held by the Fund is shown in the schedule of investments. In addition,
concentration of investments can be aggregated by various countries. The table
below shows the percentage of the Fund's investments at April 30, 1995 assigned
to the various country categories.
<CAPTION>
MARKET VALUE AS A
COUNTRY DIVERSIFICATION % OF NET ASSETS
- ----------------------- -----------------
<S> <C>
Argentina........................................................... 2.30%
Australia........................................................... 3.76
Austria............................................................. 1.65
Canada.............................................................. 12.42
China............................................................... 1.72
Finland............................................................. 1.71
France.............................................................. 2.23
Hong Kong........................................................... 1.92
India............................................................... 3.42
Indonesia........................................................... 3.48
Japan............................................................... 1.79
Malaysia............................................................ 1.58
Mexico.............................................................. 4.45
Norway.............................................................. 3.10
Portugal............................................................ 1.19
South Korea......................................................... 2.74
Spain............................................................... 2.27
Switzerland......................................................... 1.63
Thailand............................................................ 1.94
United Kingdom...................................................... 1.75
United States....................................................... 41.41
Venezuela........................................................... 1.40
-----
TOTAL INVESTMENTS 99.86%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940, as
amended. The Trust consists of six series portfolios: John Hancock Global
Resources Fund (the "Fund"), John Hancock Emerging Growth Fund, John Hancock
High Yield Tax Free Fund, John Hancock High Yield Bond Fund, John Hancock
Money Market Fund B and John Hancock Government Income Fund. The Trustees may
authorize the creation of additional Funds from time to time to satisfy various
investment objectives. Effective December 22, 1994 (see Note B), the Trust and
Funds changed names by replacing the word Transamerica with John Hancock.
The Trustees have authorized the issuance of two classes of shares of
the Fund, designated as Class A and Class B. The shares of each class
represent an interest in the same portfolio of investments of the Fund and
have equal rights to voting, redemption, 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/service expenses
under the terms of a distribution plan have exclusive voting rights regarding
such distribution plan. Class A Shares are subject to an initial sales charge
of up to 5.00% and a 12b-1 distribution plan. Prior to May 15, 1995, the
maximum sales charge was 5.75%. Class B Shares are subject to a contingent
deferred sales charge and a separate 12b-1 distribution plan. On June 15,
1994, Class A shares were sold to commence class activity. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing
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.
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 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.
REVERSE REPURCHASE AGREEMENT Prior to December 22, 1994, the Fund entered
into reverse repurchase agreements which involve the sale of securities held
by the Fund to a bank or securities firm with an agreement that the Fund will
buy back the securities at a fixed future date at a fixed price plus an
agreed amount of "interest" which may be reflected in the repurchase price.
Reverse repurchase agreements are considered to be borrowings by the Fund and
the Fund used the proceeds obtained from the sale of securities to purchase
other investments. On December 22, 1994, the Fund discontinued investing in
reverse repurchase agreements.
OPTIONS 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 will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock
market. Writing puts and buying calls will tend to increase the Fund's
exposure to the underlying instrument and buying puts and
14
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
writing calls will 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 will reflect 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 and liquidity risks in over-the-counter option contracts, the
Fund will continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April
30, 1995.
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. At the time the Fund enters into a financial futures contract, it
will be 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 will be valued at the official settlement price of
the board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin", to and from the broker will be 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", will be recorded by the
Fund as unrealized gains or losses.
When the contracts are closed, the Fund will recognize 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. In addition, the Fund could be prevented from opening or
realizing the benefits of closing out futures positions because of position
limits or limits on daily price fluctuations imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures
contracts.
At April 30, 1995, there were no open positions in financial futures
contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts
are marked-to-market daily at the applicable foreign currency exchange rates.
Any resulting unrealized gains and losses are included in the determination
of the Fund's daily net assets. The Fund records realized gains and losses at
the time the forward foreign currency contract is closed out or offset by a
matching contract. Risks may arise upon entering these contracts from
potential inability of counterparties to meet the terms of the contract and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. These contracts involve market or credit risk in excess of
the unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. The Fund may also purchase and sell forward contracts to
facilitate the settlement of foreign currency denominated portfolio
transactions, under which it intends to take delivery of the foreign currency.
Such contracts normally involve no market risk other than that offset by the
currency amount of the underlying transaction.
At April 30, 1995, there were no open forward foreign currency
exchange contracts.
15
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
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 investmen
ts in securities at fiscal year end, resulting from changes in the exchange
rate.
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 for both financial
reporting and federal income tax purposes.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or the date of purchase over the
life of the security, as required by the Internal Revenue Code.
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 of its taxable income, including any net
realized gain on investments, to its shareholders. Therefore, no federal
income tax provision is required. For federal income tax purposes, at October
31, 1994, the Fund has approximately $107,000 of capital loss carryforwards
available, to the extent provided by regulations, to offset future net
realized capital gains. If such carryforwards are used by the Fund, no
capital gain distributions will be made. The carryforwards expire as follows:
October 31, 2000 -- $17,000 and October 31, 2002 -- $90,000. For Federal income
tax purposes, net currency exchange gains and losses from sale 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 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, if any, 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
effect of expenses that may be applied differently to each class as explained
previously.
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 Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class
of shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level
based on the appropriated net assets of each class and the specific expense
rate(s) applicable to each class.
RECLASSIFICATION Certain reclassifications have been made to 1994 amounts to
permit comparisons to 1995 presentations.
16
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, John Hancock Advisers, Inc. (the "Adviser"), a wholly
owned subsidiary of The Berkeley Financial Group, became the investment
adviser for the Fund with approval of the Trustees and shareholders of the
Fund. The Fund's former investment manager was Transamerica Fund Management
Company ("TFMC").
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment program
equivalent, to 0.75% of the Fund's average daily net assets. This fee
structure is consistent with the former agreement with TFMC. For the period
ended April 30, 1995, the advisory fee earned by the Adviser and TFMC
amounted to $82,126 and $50,516, respectively, resulting in a total fee of
$132,642.
The Adviser and TFMC, for their respective periods, provided
administrative services to the Fund pursuant to an administrative service
agreement through January 16, 1995 on which day the agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent of such excess and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current
limits are 2.5% of the first $30,000,000 of the Fund's average daily net
asset value, 2.0% of the next $70,000,000 and 1.5% of the remaining average
daily net asset value.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a
wholly-owned subsidiary of the Adviser, became the principal underwriter of
the Fund. Prior to this date, Transamerica Fund Distributors, Inc. ("TFD")
served as the principal underwriter and distributor of the Fund. For the
period ended April 30, 1995, JH Funds and TFD received net sales charges of
$20,173 with regard to sales of Class A shares. Out of this amount, $1,933
was retained and used for printing prospectuses, advertising, sales literature
and other purposes, and $18,240 was paid as sales commissions to unrelated
broker-dealers.
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, formerly TFD, and are used in
whole or in part to defray its expenses related to providing distribution
related services to the Fund in connection with the sale of Class B shares.
For the period ended April 30, 1995, contingent deferred sales charges
amounted to $51,597.
In addition, to compensate 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 for distribution and service expenses which in total
will not exceed on an annual basis 0.25% of the Fund's average daily net assets
attributable to Class A shares and 1.00% of the Fund's average daily net assets
attributable to Class B shares, to reimburse for its distribution/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. This fee
structure and plan is similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement
between the Fund and John Hancock Investor Services Corporation ("Investor
Services"), a wholly owned subsidiary of The Berkeley Financial Group, for the
period between December 22, 1994 and May 12, 1995, inclusive under which
Investor Services processed telephone transactions on behalf of the Fund. As of
May 15, 1995, the Fund entered into a full service transfer agent agreement
with Investor Services. Prior to this date The Shareholder Services Group was
the transfer agent. The Fund will pay Investor Services a fee based on
transaction volume and number of shareholder accounts.
17
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Global Resources Fund
A partner with Baker & Botts was an officer of the Trust until
December 22, 1994. During the period ended April 30, 1995, legal fees paid to
Baker & Botts amounted to $460.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser
and its affiliates as well as Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as other assets. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
The Fund has an independent advisory board composed of certain members
of the former Transamerica Board of Trustees who provide advice to the current
Trustees in order to facilitate a smooth management transition for which the
Fund pays the advisory board and its counsel a fee.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $19,417,011
and $23,748,038, respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $33,402,835. Gross
unrealized appreciation and depreciation of investments aggregated
$4,053,590, and $2,096,332, respectively, resulting in net unrealized
appreciation of $1,957,258.
NOTE D
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified the
accumulated net investment loss in the amount of $441,384 to capital paid-in.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 1994.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund,
are primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus
generally accepted accounting principles.
18
<PAGE> 87
ADDITIONAL INFORMATION
John Hancock Funds - Global Resources Fund
On December 16, 1994, a special meeting of John Hancock (formerly Transamerica)
Series, Inc. (the "Trust") in respect of John Hancock (formerly Transamerica)
Global Resources Fund (the "Fund") was held involving the election of trustees
and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment
management agreement between the Trust on behalf of the Fund and John
Hancock Advisers, Inc. on substantially similar terms of the prior investment
management agreement, to take effect on December 22, 1994, the date of the
consummation of Transamerica Fund Management Company by The Berkeley
Financial Group. The shareholder votes tallied were 1,354,007 FOR, 53,647
AGAINST and 81,404 ABSTAINING.
The shareholders next approved new Plans of Distribution for each
Class A and Class B shares of the Fund, also effective on December 22, 1994,
and also on substantially the same terms as the prior Plans of Distribution.
The Class A shareholder votes tallied were 221,760 FOR, 277 AGAINST and 836
ABSTAINING. The Class B shareholder votes tallied were 1,312,461 FOR, 52,764
AGAINST and 69,842 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young
LLP as independent auditors for the Fund for the fiscal year ending April 30,
1995, and the votes tallied were 1,383,338 FOR, 46,467 AGAINST and 59,253
ABSTAINING.
<TABLE>
Lastly, the following trustees were elected to serve until their
respective successors shall become duly elected and qualified, with the votes
tabulated as indicated:
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
--------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr.... 1,337,139 151,918
James F. Carlin........... 1,338,875 150,183
William H. Cunningham..... 1,337,278 151,780
Charles L. Ladner......... 1,339,888 149,170
Leo E. Linbeck, Jr........ 1,339,791 149,268
Patricia P. McCarter...... 1,339,993 149,065
Steven R. Pruchansky...... 1,337,134 151,923
Norman H. Smith........... 1,339,897 149,162
John P. Toolan............ 1,339,993 149,065
</TABLE>
19
<PAGE> 88
Bulk Rate
U.S. Postage
PAID
HUNTINGTON AVENUE BOSTON, MA 02199-7603 Brockton, MA
Permit No. 582101
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."
This report is for the information of shareholders of the John
Hancock Global Resources Fund. It may be used as sales literature when
preceded or accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."
JHF T63SA 4/95
<PAGE> 89
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MONEY
MARKET
FUND B
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 90
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
Edgar Larsen
Senior Vice President
James K. Ho
Senior Vice President
Anne McDonley
Vice President
Barry Evans
Vice President
David Beckwith
Vice President
Frank Lucibella
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Chairman's Message
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
DEAR FELLOW SHAREHOLDERS:
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became
part of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array
of retirement and private account services, John Hancock Funds offers you a
broader selection of investment choices to meet your long-term financial
needs. What's more, the union of the Hancock and Transamerica investment
teams gives you access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you
as a valued shareholder isn't. Here at John Hancock Funds, our motto is: "We
invest in quality first." It has to do with the way we invest your money and
the way we work with you. Not only do we strive to ensure that your
investments are well-managed, we also take pride in providing the highest
quality customer service. We can't guarantee investment performance; nobody
can. The quality of our service, however, depends totally on us. That is
something that we can guarantee.
All of the former Transamerica funds are now fully integrated into
John Hancock's internal shareholder service organization, John Hancock
Investor Services Corporation. Not only do you have full exchange privileges
into all John Hancock funds, but your account will be handled by one of the
top-rated service organizations in the industry. To show you how seriously we
take our commitment to quality, we offer a service guarantee. If we make an
error in processing a transaction in your account, we will deposit $25 into
it. Or if you have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment
needs in the years to come.
Sincerely,
/s/ Edward J. Boudreau Jr.
EDWARD J. BOUDREAU JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 91
BY DAWN BAILLIE FOR THE
PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
MONEY MARKET FUND B
Money market yields approach
----------------------------
highest level in four years
---------------------------
After the Federal Reserve's seven interest-rate increases, money market
yields have approached their highest levels in almost four years. In fact,
they have nearly doubled since February 1994 when the Fed first began
raising interest rates to rein in the economy. With yields now close to
6%, money market investors are earning a real rate of return - that is, the
return after inflation - of nearly 3.5%. At that level, money market funds
have become more attractive investments than they've been in recent memory,
especially relative to more risky stock and bond funds.
By April 30, 1995, John Hancock Money Market Fund B had a 7-day
average yield of 4.05%. By comparison, the average taxable money fund had a
7-day average yield of 5.47%, according to IBC/Donoghue's Money Fund Report.
SHIFTING GEARS
During the semi-annual period, our strategy has shifted gears. In the last
quarter of 1994 and early this year, we kept the Fund's average maturity
relatively short, in the 25- to 30-day range. Staying short allowed us to buy
higher-yielding securities as interest rates were rising, especially at
year-end when short-term financing pressures caused yields to spike
temporarily.
With the last rate hike in early February of this year, however, the
market began to anticipate that the Fed may soon be done raising rates. That
phenome non, coupled with signs of a slowing economy and positive technical
factors in the market, caused short-term rates to drop off slightly. In
response, money fund managers began to lengthen their average maturities.
At John Hancock Money Market Fund, we gradually lengthened our
A 2 1/2" x 2 1/2" photo of Dawn Baillie at bottom center. Caption reads: "Dawn
Baillie, Portfolio Manager."
- --------------------------------------------------------------------------------
"...money market funds have become more attractive investments..."
- --------------------------------------------------------------------------------
3
<PAGE> 92
Bar chart with heading "7-Day Yield" at top of left hand column. Under the
heading is the footnote: "As of April 30, 1995." The chart is scaled in
increments of 2% from top to bottom, with 6% on the top and 0% at the bottom.
Within the chart, there are two solid bars. The first represents the 4.05%
7-day yield for John Hancock Money Market Fund. The second represents the 5.47%
7-day yield for the average taxable money market fund. Footnote below reads:
"The average taxable money market fund is tracked by IBC/Donoghue's Money Fund
report."
John Hancock Funds - Money Market Fund B
average maturity, extending out to almost 40 days by the end of April. That
was around the average for taxable money market funds.
INFLATION PICTURE
Ambiguous inflation readings - such as weaker-than-expected March retail
sales and a pickup in the Johnson Red Book indicator - will probably keep the
Fed from raising rates in the next couple of months. By the end of the second
quarter, however, there could be enough broad evidence that inflation is
picking up. Having said that, though, we don't think inflation is likely to
spiral out of control.
One thing that isn't clear yet is how the decline in the U.S. dollar
relative to the Japanese yen will impact inflation later this year. Investors
fear a falling dollar because it's considered inflationary. (A lower dollar
tends to make imports more expensive, which, in turn, can force domestic
prices up.) Given that, the Fed's likely to keep a close eye on the dollar's
impact in the months ahead.
LOOKING AHEAD
Our near-term view is neutral. In other words, we don't expect short-term
interest rates to move significantly from current levels. Given that, we will
keep the Fund's average maturity in a neutral range of 40 days. We will also
continue to employ a barbell strategy - that is, concentrating on money
market securities with short maturities (30 days) and long maturities (nine
to 13 months). We will, however, stay more heavily weighted in shorter
maturities. That will give us the flexibility to take advantage of higher
yields if the Fed should hike rates again.
- --------------------------------------------------------------------------------
The Fund is neither insured nor guaranteed by the U.S. government. There can
be no assurance that the Fund will be able to maintain a net asset value of
$1.00 per share.
4
<PAGE> 93
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments, in money market instruments,
at value - Note C:
Commercial paper (cost - $36,423,414) $36,423,414
Negotiable bank certificates of deposit
(cost - $4,000,089).............................. 4,000,089
Bankers' acceptances (cost - $1,982,274) 1,982,274
Corporate interest-bearing obligations
(cost - $992,740)................................ 992,740
U.S. government obligations (cost - $5,736,722).. 5,736,722
Joint repurchase agreement (cost - $10,750,000) 10,750,000
-----------
59,885,239
Cash............................................... 68
Interest receivable................................ 209,416
Miscellaneous assets............................... 13,767
-----------
Total Assets.................. 60,108,490
----------------------------------------------------
Liabilities:
Payable for investments purchased.................. 3,500,000
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................ 27,875
Accounts payable and accrued expenses.............. 58,488
-----------
Total Liabilities............. 3,586,363
----------------------------------------------------
Net Assets:
Capital paid-in.................................... 56,522,127
-----------
Net Assets.................... $56,522,127
====================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(based on 56,522,127 shares of beneficial
interest outstanding - 150,000,000 shares
authorized with $0.01 per share par value)........... $ 1.00
===========================================================================
</TABLE>
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE
AS OF THAT DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED
AND EXPENSES INCURRED IN OPERATING THE FUND.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Interest........................................... $ 1,603,318
-----------
Expenses:
Distribution/service fee - Note B................ 275,387
Investment management fee - Note B............... 137,693
Transfer agent fee - Note B...................... 52,718
Registration and filing fees..................... 34,813
Custodian fee.................................... 30,526
Auditing fee..................................... 14,530
Printing......................................... 6,789
Trustees' fees................................... 6,308
Shareholder service fee.......................... 4,374
Advisory board fee............................... 2,207
Legal fees....................................... 1,976
Miscellaneous.................................... 1,754
-----------
Total Expenses............... 569,075
---------------------------------------------------
Net Investment Income........ 1,034,243
===================================================
Net Increase in Net Assets
Resulting from Operations.... $ 1,034,243
===================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 94
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment Income......................................................... $ 1,034,243 $ 842,207
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.0187 and $0.0180 per share, respectively) ( 1,034,243) ( 842,207)
--------------- ---------------
FROM FUND SHARE TRANSACTIONS - Net*................................................. ( 1,843,462) 26,819,423
--------------- ---------------
NET ASSETS:
Beginning of period........................................................... 58,365,589 31,546,166
--------------- ---------------
End of period................................................................. $ 56,522,127 $ 58,365,589
=============== ===============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
Shares sold................................................................... $ 117,586,279 $ 237,416,247
Shares issued to shareholders in reinvestment of distributions................ 828,944 683,416
--------------- ---------------
118,415,223 238,099,663
Less shares repurchased....................................................... ( 120,258,685) ( 211,280,240)
--------------- ---------------
Net increase (decrease)....................................................... $( 1,843,462) $ 26,819,423
=============== ===============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, 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 TWO PERIODS.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 95
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key ratios and
supplemental data are as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995(b) ------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
---------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Net Investment Income.............................. 0.02 0.02 0.01 0.02 0.05 0.06
Less Distributions:
Dividends from Net Investment Income............... (0.02) (0.02) (0.01) (0.02) (0.05) (0.06)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value......... 1.88% 1.87% 0.85% 1.73% 4.61% 6.30%
Total Adjusted Investment Return at
Net Asset Value (a).............................. ..... ..... ..... ..... 4.49%(c) 6.15%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).......... $56,522 $58,366 $31,546 $31,480 $20,763 $21,099
Ratio of Expenses to Average Net Assets ........... 2.07%* 2.06% 2.44% 2.47% 2.11% 2.16%
Ratio of Adjusted Expenses to Average Net Assets... ..... ..... ..... ..... 2.23% 2.31%
Ratio of Net Investment Income to Average
Net Assets (a)................................... 3.76%* 1.97% 0.85% 1.69% 4.57% 6.26%
Ratio of Adjusted Net Investment Income to
Average Net Assets (a)........................... ..... ..... ..... ..... 4.45% 6.11%
<FN>
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) On December 22, 1994 John Hancock Advisers, Inc. became the Investment Adviser of the Fund.
(c) Unaudited.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF NET INVESTMENT INCOME AND
DIVIDENDS ON A SINGLE SHARE FOR THE PERIOD INDICATED. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 96
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY MONEY MARKET
FUND B ON APRIL 30, 1995. IT'S DIVIDED INTO SIX TYPES OF SHORT-TERM INVESTMENTS. MOST
CATEGORIES OF SHORT-TERM INVESTMENTS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUP.
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- -------- -------- --------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
AUTOMOTIVE (5.08%)
Ford Motor Credit Co., 05-22-95.................................................. 6.020% Tier 1 $ 2,900 $ 2,870,903
-----------
BANKING (5.08%)
Norwest Corp.,
06-16-95................................................................... 6.000 Tier 1 2,900 2,871,000
-----------
BANKING - FOREIGN (0.37%)
Deutsche Bank Financial, Inc.,
05-01-95................................................................... 6.050 Tier 1 211 209,121
-----------
BROKER SERVICES (15.04%)
Bear Stearns Cos., Inc.,
06-20-95................................................................... 6.000 Tier 1 3,000 2,970,000
Goldman Sachs Group, L.P.,
06-01-95................................................................... 6.100 Tier 1 2,400 2,365,027
Merrill Lynch & Co., Inc.,
05-22-95................................................................... 6.030 Tier 1 300 296,985
Merrill Lynch & Co., Inc.,
06-12-95................................................................... 6.020 Tier 1 1,000 990,970
Merrill Lynch & Co., Inc.,
06-19-95................................................................... 6.010 Tier 1 1,900 1,880,968
-----------
8,503,950
-----------
FINANCE (3.51%)
American Honda Finance Corp.,
06-01-95................................................................... 6.050 Tier 1 2,000 1,981,178
-----------
INSURANCE (5.08%)
American General Finance Corp.,
06-12-95................................................................... 6.000 Tier 1 2,900 2,871,000
-----------
MORTGAGE BANKING (5.10%)
Countrywide Funding Corp.,
05-12-95................................................................... 6.040 Tier 1 2,900 2,885,403
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 97
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- -------- -------- --------- -----
<S> <C> <C> <C> <C>
RETAIL STORES (10.18%)
Dayton Hudson Corp.,
06-16-95..................................................................... 6.020% Tier 1 $ 2,900 $ 2,870,903
Sears Roebuck Acceptance Corp.,
05-12-95..................................................................... 6.000 Tier 1 2,900 2,885,500
-----------
5,756,403
-----------
TOBACCO (5.29%)
Philip Morris Cos., Inc.,
05-05-95..................................................................... 6.000 Tier 13,000 2,987,500
-----------
UTILITIES (9.71%)
Pennsylvania Power & Light Co.,
05-09-95..................................................................... 5.970 Tier 1 2,000 1,995,356
Public Service Electric & Gas Co.,
05-09-95..................................................................... 6.000 Tier 1 2,900 2,894,200
U.S. West Communications, Inc.,
05-02-95..................................................................... 6.000 Tier 1 600 597,400
-----------
5,486,956
-----------
TOTAL COMMERCIAL PAPER
(Cost $36,423,414) ( 64.44%) 36,423,414
------- -----------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S. BRANCHES OF FOREIGN BANKS (7.08%)
Industrial Bank of Japan Ltd.,
06-21-95..................................................................... 6.250 Tier 1 2,000 2,000,076
Sanwa Bank Ltd.,
05-25-95..................................................................... 6.040 Tier 1 2,000 2,000,013
-----------
4,000,089
TOTAL NEGOTIABLE BANK
CERTIFICATES OF DEPOSIT
(Cost $4,000,089) ( 7.08%) 4,000,089
------- -----------
BANKERS' ACCEPTANCES
U.S. BRANCHES OF FOREIGN BANKS (3.51%)
Bank of Tokyo Ltd.,
06-05-95..................................................................... 6.020 Tier 1 2,000 1,982,274
-----------
TOTAL BANKERS' ACCEPTANCES
(Cost $1,982,274) ( 3.51%) 1,982,274
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 98
Financial Statements
John Hancock Funds - Money Market Fund B
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- -------- -------- --------- -----
<S> <C> <C> <C> <C>
CORPORATE INTEREST-BEARING OBLIGATIONS
Finance (1.75%)
General Electric Capital Corp.,
11-15-95................................................................... 5.250% Tier 1 $ 1,000 $ 992,740
-----------
TOTAL CORPORATE INTEREST
BEARING OBLIGATIONS
(Cost $992,740) ( 1.75%) 992,740
------- -----------
U. S. GOVERNMENT OBLIGATIONS
Governmental - U. S. Agencies (10.15%)
Federal Farm Credit Bank,
08-01-95................................................................... 6.650 Tier 1 1,000 1,000,083
Federal Farm Credit Bank,
11-01-95................................................................... 6.100 Tier 1 3,500 3,500,000
Federal Home Loan Mortgage Corp.,
05-22-95................................................................... 7.438 Tier 1 250 241,684
Federal National Mortgage Association,
05-22-95................................................................... 6.340 Tier 1 485 473,128
Federal National Mortgage Association,
06-15-95................................................................... 6.549 Tier 1 540 521,827
-----------
5,736,722
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $5,736,722) ( 10.15%) 5,736,722
------- -----------
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase agreement
transaction with BT Securities Corp. -
Dated 04-28-95, Due 05-01-95
(secured by U.S. Treasury Bond,
10.75% Due 08-15-05 and U.S.
Treasury Note, 6.875% Due 10-31-96)............................. 5.960 10,750 10,750,000
------- -----------
TOTAL JOINT REPURCHASE AGREEMENT ( 19.02%) 10,750,000
------- -----------
TOTAL INVESTMENTS (105.95%) $59,885,239
======= ===========
<FN>
*Quality ratings indicate the categories of eligible securities, as defined by Rule 2a-7 of the U.S. Securities and Exchange
Commission, owned by the Fund. The percentage shown for each investment category is the total value of that category expressed
as a percentage of total net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 99
Notes to Financial Statements
John Hancock Funds - Money Market Fund B
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940, as
amended. The Trust consists of six series portfolios: John Hancock Money
Market Fund B (the "Fund"), John Hancock Emerging Growth Fund, John Hancock
Global Resources Fund, John Hancock High Yield Tax Free Fund, John Hancock
High Yield Bond Fund and John Hancock Government Income Fund. The Trustees
may authorize the creation of additional Funds from time to time to satisfy
various investment objectives. Effective December 22, 1994 (see Note B), the
Trust and Funds changed names by replacing the word Transamerica with John
Hancock.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Trustees have determined appropriate methods for
valuing portfolio securities. Accordingly, portfolio securities are valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company Act of
1940, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and the cost of the security to the Fund.
Interest income on certain portfolio securities such as negotiable bank
certificates of deposit and interest bearing notes is accrued daily and
included in interest receivable.
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 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 for both financial
reporting and federal income tax purposes.
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. It will not be subject to Federal income tax on taxable earnings
which are distributed to shareholders.
DIVIDENDS The Fund's net investment income is declared daily as dividends to
shareholders of record as of the close of business on the preceding day and
distributed monthly.
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, the Adviser became the investment adviser for the Fund
with approval of the Trustees and shareholders of the Fund. The Fund's former
investment manager was Transamerica Fund Management Company ("TFMC").
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment program
equivalent, on an annual basis, to the sum of (a) 0.50% of the first
$500,000,000 of the Fund's average daily net asset value, (b) 0.425% of the
next $250,000,000, (c) 0.375% of the next $250,000,000, (d) 0.350% of the next
$500,000,000, (e) 0.325% of the next $500,000,000, (f) 0.300% of the next
$500,000,000 and (g) 0.275% of the Fund's average daily net asset value in
excess of $2,500,000,000. This fee structure is consistent with the former
agreement with TFMC. For the period ended April 30, 1995, the advisory fee
earned by the Adviser and TFMC amounted to $87,082 and $50,611, respectively,
resulting in a total fee of $137,693.
11
<PAGE> 100
Notes to Financial Statements
John Hancock Funds - Money Market Fund B
The Adviser and TFMC, for their respective periods, provided
administrative services to the Fund pursuant to an administrative service
agreement through January 16, 1995 on which day the agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares of
beneficial interest, the fee payable to the Adviser will be reduced to the
extent of such excess and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current limits are
2.5% of the first $30,000,000 of the Fund's average daily net asset value,
2.0% of the next $70,000,000 and 1.5% of the remaining average daily net
asset value.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a
wholly-owned subsidiary of the Adviser, became the principal underwriter of
the Fund. Prior to this date, Transamerica Fund Distributors, Inc. ("TFD")
served as the principal underwriter and distributor of the Fund.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% 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, formerly TFD, and are used in
whole or in part to defray its expenses related to providing distribution
related services to the Fund in connection with the sale of Class B shares.
For the period ended April 30, 1995, contingent deferred sales charges
amounted to $302,060.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments for distribution and service expenses which in
total will not exceed on an annual basis 1.00% of the Fund's average daily
net assets to reimburse for its distribution/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. This fee structure and plan
is similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement
between the Fund and John Hancock Investor Services Corporation ("Investor
Services"), a wholly owned subsidiary of The Berkeley Financial Group, for
the period between December 22, 1994 and May 12, 1995, inclusive under which
Investor Services processed telephone transactions on behalf of the Fund. As of
May 15, 1995, the Fund entered into a full service transfer agent agreement
with Investor Services. Prior to this date The Shareholder Services Group was
the transfer agent. The Fund will pay Investor Services a fee based on
transaction volume and number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until
December 22, 1994. During the period ended April 30, 1995, legal fees paid to
Baker & Botts amounted to $688.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser
and its affiliates as well as Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation
Plan. The Fund will make investments into other John Hancock Funds, as
applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be
recorded on the Fund's books as other assets. The deferred compensation
liability will be marked to market on a periodic basis and income earned by
the investment will be recorded on the Fund's books.
The Fund has an independent advisory board composed of certain
members of the former Transamerica Board of Trustees who provide advice to
the current Trustees in order to facilitate a smooth management transition
for which the Fund pays the advisory board and its counsel a fee.
12
<PAGE> 101
Notes to Financial Statements
John Hancock Funds - Money Market Fund B
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities, including discount earned
on investment securities, during the period ended April 30, 1995 aggregated
$1,348,016,627 and $1,332,603,541, respectively. The cost of investments
owned at April 30, 1995 for Federal income tax purposes was $59,885,239.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 102
Additional Information
John Hancock Funds - Money Market Fund B
On December 16, 1994, a special meeting of John Hancock (formerly
Transamerica) Series, Inc. (the "Trust") in respect of John Hancock (formerly
Transamerica) Money Market B Fund (the "Fund") was held involving the election
of trustees and certain other matters concerning the Fund.
Specifically, shareholder's first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation
of Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 28,010,195 FOR, 429,634 AGAINST and 1,543,584
ABSTAINING.
The shareholders next approved new Plans of Distribution for the
Fund, also effective on December 22, 1994, and also on substantially the same
terms as the prior Plans of Distribution. The shareholder votes tallied were
27,864,397 FOR, 324,983 AGAINST and 1,794,033 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young,
LLP as independent auditors for the Fund for the fiscal year ending October
31, 1995, and the votes tallied were 28,514,095 FOR, 40,605 AGAINST and
1,428,713 ABSTAINING.
<TABLE>
Lastly, the following trustees were elected to serve until their
respective successors shall become duly elected and qualified, with the votes
tabulated as indicated:
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
- --------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr.... 26,514,487 3,468,927
James F. Carlin........... 26,515,928 3,467,485
William H. Cunningham..... 26,510,272 3,473,142
Charles L. Ladner......... 26,510,272 3,473,142
Leo E. Linbeck, Jr........ 26,497,012 3,486,401
Patricia P. McCarter...... 26,510,272 3,473,142
Steven R. Pruchansky...... 26,510,272 3,473,142
Norman H. Smith........... 26,507,782 3,475,632
John P. Toolan............ 26,510,272 3,473,142
</TABLE>
14
<PAGE> 103
Notes
John Hancock Funds - Money Market Fund B
15
<PAGE> 104
[LOGO] Bulk Rate
U.S. Postage
JOHN HANCOCK FUNDS PAID
A GLOBAL INVESTMENT MANAGEMENT FIRM Brockton, MA
101 Huntington Avenue Boston, MA 02199-7603 Permit No. 582
This report is for the information of shareholders of the John Hancock Money
Market Fund B. It may be used as sales literature when preceded or accompanied
by the current prospectus, which details charges, investment objectives and
operating policies.
[RECYCLE LOGO] Printed on Recycled Paper JHF 144SA 04/95
<PAGE> 105
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
EMERGING
GROWTH
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 106
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
Edgar Larsen
Senior Vice President
James K. Ho
Senior Vice President
Anne McDonley
Vice President
Barry Evans
Vice President
David Beckwith
Vice President
Frank Lucibella
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became part
of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array of
retirement and private account services, John Hancock Funds offers you a broader
selection of investment choices to meet your long-term financial needs. What's
more, the union of the Hancock and Transamerica investment teams gives you
access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way we
work with you. Not only do we strive to ensure that your investments are
well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if you
have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 107
BY EDGAR M. LARSEN,
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER
JOHN HANCOCK
EMERGING GROWTH FUND
STOCKS COME BACK TO LIFE;
POSITIVE OUTLOOK WELL FOR SMALL STOCKS
Stocks enjoyed a dramatic turnaround over the past six months, after spending
most of 1994 suffering from the effects of higher interest rates and the threat
of more of the same in 1995. By December, however, there was growing evidence
that the economy wasn't overheating. Investors reasoned that if the economic
expansion was less than exuberant, there wouldn't be a need for the Federal
Reserve Board to raise interest rates again. That belief, coupled with strong
earnings in the fourth quarter of 1994 and the first quarter of 1995, fueled an
impressive rally that continued through the end of April.
[A 3 1/2" x 2 1/2" photo of Edgar M. Larsen at center bottom. Caption reads:
"Edgar M. Larsen, Portfolio Manager."]
While small stocks rallied amid the good news, they slightly lagged their
larger counterparts. In the first half of the period, investors favored large,
U.S.-based multinational companies that could benefit from a weak dollar. These
companies tend to generate significant revenues from sales abroad. Small
companies, on the other hand, tend to derive little or no revenues from
overseas. In the final half of the period, nervousness about the market's
strength caused some investors to migrate toward larger, more liquid names as a
defense against a possible correction.
TECHNOLOGY AND HEALTH CARE LEAD THE PACK
Against that backdrop, John Hancock Emerging Growth Fund posted strong
performance. For the six months ended
[CAPTION]
"STOCKS ENJOYED A DRAMATIC TURNAROUND..."
3
<PAGE> 108
John Hancock Funds - Emerging Growth Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) U.S. Robotics Corp 1.8% 2) Tencor Instruments
1.7% 3) Madge NV 1.5% 4) Tellabs 1.5% 5) 3COM 1.5%. A footnote below reads: "As
a percentage of net assets on April 30, 1995]
April 30, 1995, the Fund's Class A and Class B shares returned 7.53% and 7.14%,
respectively, at net asset value. Those returns beat the average small-company
growth fund's return of 5.32%, according to Lipper Analytical Services.(1)
Technology stocks -- which made up roughly 30% of the Fund's holdings --
were the market's big winners, thanks primarily to strong earnings gains. Cirrus
Logic, which makes computer components like circuit boards, and Mattson
Technology, a semiconductor equipment manufacturer, were among the Fund's
biggest gainers. Software and networking companies continued to be the
beneficiaries of increased business and personal spending. However, those
companies that failed to meet earnings expectations suffered badly. For example,
when networking company Sybase posted first-quarter earnings below analysts'
expectations, its stock plummeted.
Not all of our technology-related holdings fall directly into the technology
category, but they are closely tied to the industry. One example is
Mecklermedia, the Fund's strongest performer in 1995. The company publishes the
leading magazine on the Internet and virtual reality. It also sponsors trade
shows on the subject of how to use and access the so-called "Information
Superhighway." The company's earnings are expected to double over the next few
years as subscriptions, advertising and trade show revenues grow. Another
example is Indigo, which markets a revolutionary digital color printing system.
The company should grow earnings 50% annually over the next three to five years.
The exciting earnings outlook for the technology sector has resulted in
substantial gains for many stocks. However, we believe that the best way to
control risk is to broadly diversify our investments, making sure that no one
holding gets too large. So we've used the market's recent strength to sell some
of our technology holdings.
Health-care stocks, at roughly 13% of the Fund, were also leading
performers. One of the best was Technol Medical Products, a leading manufacturer
of protective equipment for health-care specialists. The stock rose more than
70% during the first quarter of 1995. Our hospital holdings also performed well,
thanks to a wave of mergers in this sector.
As always, there were a few disappointments along the way. In general,
financial services stocks and some energy stocks didn't keep pace with the
overall market during the past six months. However, we had below-average
exposure to both sectors.
[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 Mecklermedia
followed by an up arrow and the phrase "Booming interest in the Internet." The
second listing is Technol Medical followed by an up arrow and the phrase "Strong
demand for protective health-care products." The third listing is Sybase
followed by a down arrow and the phrase "Lower-than-expected earnings." Footnote
below reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
[CAPTION]
"TECHNOLOGY STOCKS... WERE THE MARKET'S BIG WINNERS..."
4
<PAGE> 109
John Hancock Funds - Emerging Growth Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart is
scaled in increments of 4% from top to bottom, with 8% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
7.53% total return for John Hancock Emerging Growth Fund: Class A. The second
represents the 7.14% total return for John Hancock Emerging Growth Fund: Class
B. The third represents the 5.32% total return for the average small company
growth fund. Footnote below reads: "Total returns for John Hancock Emerging
Growth Fund are at net asset value with all distributions reinvested. The
average small-company growth fund is tracked by Lipper Analytical Services.(1)
See following page for historical performance information."]
STRATEGY OVERVIEW
With the stock market reaching new highs, we believe that now--more than
ever--it's important to stick with a time-tested, disciplined investment
approach. So we want to review our major investment themes. For one, we remain
growth investors with a value bent. We focus on companies that can grow earnings
at roughly 25% or more annually. But we want to buy these companies at a
reasonable price. We will shy away from them if they appear to be too expensive.
We look for promising business sectors and invest in companies that serve a
niche that's growing faster than their overall business segment. We also look
for strong fundamentals, such as large stock ownership by management, little or
no debt and improving profits.
Second, we believe that by broadly diversifying the Fund's holdings, we've
made it less susceptible to the ups and downs of one company or industry. At the
end of the period, the Fund had more than 500 holdings across 14 industries.
Finally, we like to hold onto our core investments for the long-term.
Low-turnover minimizes trading costs and limits our shareholders' tax liability.
OUTLOOK FOR 1995
We see significant opportunities in small-company stocks for the balance of 1995
and for several years to come. A number of factors make us optimistic. First,
earnings growth for small companies could become increasingly more attractive.
Many large companies could experience slower earnings growth if the economy
moderates. Small-companies are less economically-sensitive, so their earnings
shouldn't be as vulnerable. Also, a strengthening dollar could also cut into
overseas earnings for larger companies. Second, small-company stocks are priced
more attractively than their larger counterparts.
Third, the wave of mergers and acquisitions, which was so prominent in 1994,
has extended into 1995. So far, seven of our holdings have merged with or have
been acquired by other companies. We believe that trend will continue through
the balance of the year. Finally, a capital gains cut would favor small-company
stocks. Since these companies reward investors through capital appreciation, not
dividends, they would benefit most from a change in tax treatment of capital
gains. All of these factors could translate into more money finding its way into
small stocks.
[CAPTION]
"WE SEE SIGNIFICANT OPPORTUNITIES IN SMALL-COMPANY STOCKS..."
5
<PAGE> 110
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Emerging Growth Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on August
22, 1991 were 5.72% and 11.38%, respectively, and reflect payment of the maximum
sales charge of 5.75%. On May 15, 1995 the maximum sales charge was lowered to
5.00%. The average annualized total returns for Class B shares for the 1-year
and 5-year periods and since inception on October 26, 1987 were 6.31%, 15.52%
and 19.37%, respectively, and reflect applicable contingent deferred sales
charge (maximum contingent deferred sales charge of 5% and declines to 0% over 6
years). All performance data shown represent past performance and should not be
considered indicative of future performance. Returns and principal values of
Fund investments will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND
[Emerging Growth Fund
Class A shares
Line chart with the heading Emerging Growth 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 hypothetical $10,000 investment made
in the Emerging Growth Fund on August 22, 1991, before sales charge, and is
equal to $15,971 as of April 30, 1995. The second line represents the Emerging
Growth Fund after sales charge and is equal to $15,049 as of April 30, 1995. The
third line represents the value of the Standard & Poor's 500 Stock Index* and is
equal to $14,783 as of April 30, 1995.
Emerging Growth Fund
Class B shares
Line chart with the heading Emerging Growth Fund: Class B, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are three lines.
The first line represents the value of the hypothetical $10,000 investment made
in the Emerging Growth Fund on October 26, 1987 and is equal to $37,986 as of
April 30, 1995. The second line represents the value of the Standard & Poor's
500 Stock Index* and is equal to $20,355 as of April 30, 1995.
*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.
**No applicable contingent deferred sales charge.]
6
<PAGE> 111
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and warrants
(cost - $281,399,064)................................. $426,371,410
Joint repurchase agreement (cost - $7,177,000) 7,177,000
Corporate savings account............................... 39
------------
433,548,449
Receivable for shares sold ............................... 677,341
Receivable for investments sold .......................... 1,720,234
Dividends receivable ..................................... 139,274
Interest receivable ...................................... 1,182
Other assets ............................................. 190,015
------------
Total Assets .......................... 436,276,495
-----------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ........................... 732,054
Payable for investments purchased ........................ 1,543,063
Payable to John Hancock Advisers, Inc. and
affiliates - Note B .................................... 292,101
Accounts payable and accrued expenses .................... 138,448
------------
Total Liabilities ..................... 2,705,666
-----------------------------------------------------------
NET ASSETS:
Capital paid-in .......................................... 308,582,095
Accumulated net realized loss on investments ............. (17,387,462)
Net unrealized appreciation of investments ............... 144,972,346
Net investment loss ...................................... (2,596,150)
------------
Net Assets ............................ $433,570,829
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - 125,000,000 shares
authorized with $.01 per share par value,
respectively)
Class A - $130,666,252/4,531,343 ......................... $ 28.84
===============================================================================
Class B - $302,904,577/10,856,014 ........................ $ 27.90
===============================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($28.84 x 106.10%) ............................. $ 30.60
===============================================================================
<FN>
*On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
</TABLE>
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.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $1,532) ..................................... $ 1,151,393
Interest ......................................... 154,052
------------
1,305,445
------------
Expenses:
Investment management fee - Note B ............. 1,506,430
Distribution/service fee - Note B
Class A ....................................... 155,192
Class B ....................................... 1,387,807
Transfer agent fee ............................. 571,669
Registration and filing fees ................... 83,199
Custodian fee .................................. 61,755
Auditing fee ................................... 35,341
Trustees' fees ................................. 30,453
Advisory board fee ............................. 26,292
Printing ....................................... 20,600
Legal fees ..................................... 11,651
Miscellaneous .................................. 11,206
------------
Total Expenses ................ 3,901,595
------------------------------------------------------------
Net Investment Loss ........... (2,596,150)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold ............ (224,340)
Change in net unrealized appreciation/depreciation
of investments ................................. 33,623,431
------------
Net Realized and Unrealized
Gain on Investments ........... 33,399,091
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ..... $ 30,802,941
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 112
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss................................................................... $ (2,596,150) $ (4,439,725)
Net realized loss on investments sold................................................. (224,340) (8,817,307)
Change in net unrealized appreciation/depreciation of investments..................... 33,623,431 27,047,214
------------ ------------
Net Increase in Net Assets Resulting from Operations................................ 30,802,941 13,790,182
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*................................................... (11,719,759) 99,950,356
------------ ------------
NET ASSETS:
Beginning of period................................................................... 414,487,647 300,747,109
------------ ------------
End of period (including accumulated net investment loss of $2,596,150 and
$4,439,725, respectively) .......................................................... $433,570,829 $414,487,647
============ ============
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
--------------------------- ---------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold.................................................. 1,289,696 $ 34,302,818 4,169,752 $ 107,936,683
Less shares repurchased...................................... (1,645,324) (43,979,606) (2,421,719) (62,106,008)
---------- ------------- ---------- -------------
Net increase (decrease)...................................... (355,628) $ (9,676,788) 1,748,033 $ 45,830,675
========== ============= ========== =============
CLASS B
Shares sold.................................................. 4,157,695 $ 105,472,196 10,731,824 $ 265,135,236
Less shares repurchased...................................... (4,185,281) (107,515,167) (8,513,937) (211,015,555)
---------- ------------- ---------- -------------
Net increase (decrease)...................................... (27,586) $ (2,042,971) 2,217,887 $ 54,119,681
========== ============= ========== =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, 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 TWO
PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 113
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 22, 1991
(COMMENCEMENT
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, OF OPERATIONS)
APRIL 30, 1995 ---------------------------- TO OCTOBER 31,
(UNAUDITED) 1994 1993 1992 1991
---------------- -------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................... $ 26.82 $ 25.89 $ 20.60 $ 19.26 $ 18.12
-------- -------- ------- ------- -------
Net Investment Loss (a) .................................. (0.10) (0.18) (0.16) (0.20) (0.03)
Net Realized and Unrealized Gain on Investments .......... 2.12 1.11 5.45 1.60 1.17
-------- -------- ------- ------- -------
Total from Investment Operations ....................... 2.02 0.93 5.29 1.40 1.14
-------- -------- ------- ------- -------
Less Distributions
Distributions from Net Realized Gain on Investments Sold.. -- -- -- (0.06) --
-------- -------- ------- ------- -------
Net Asset Value, End of Period ........................... $ 28.84 $ 26.82 $ 25.89 $ 20.60 $ 19.26
======== ======== ======= ======= =======
Total Investment Return at Net Asset Value ............... 7.53% 3.59% 25.68% 7.32% 6.29%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's Omitted) ................ $130,666 $131,053 $81,263 $46,137 $38,859
Ratio of Expenses to Average Net Assets .................. 1.43%* 1.44% 1.40% 1.67% 0.33%
Ratio of Net Investment Loss to Average Net Assets ....... (0.78%)* (0.71%) (0.70%) (1.03%) (0.15%)
Portfolio Turnover Rate .................................. 11% 25% 29% 48% 66%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: INCOME, EXPENSES, DISTRIBUTIONS AND GAINS
(LOSSES) 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.
9
<PAGE> 114
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................. $ 26.04 $ 25.33 $ 20.34 $ 19.22 $ 11.06 $ 12.76
------- -------- -------- ------- ------- -------
Net Investment Loss (a)............................... (0.19) (0.36) (0.36) (0.38) (0.30) (0.22)
Net Realized and Unrealized Gain (Loss)
on Investments...................................... 2.05 1.07 5.35 1.56 8.46 (1.26)
------- -------- -------- ------- ------- -------
Total from Investment Operations.................... 1.86 0.71 4.99 1.18 8.16 (1.48)
------- -------- -------- ------- ------- -------
Less Distributions
Distributions from Net Realized Gain on
Investments Sold.................................... -- -- -- (0.06) -- (0.22)
------- -------- -------- ------- ------- -------
Net Asset Value, End of Period........................ $ 27.90 $ 26.04 $ 25.33 $ 20.34 $ 19.22 $ 11.06
======== ======== ======== ======= ======= =======
Total Investment Return at Net Asset Value............ 7.14% 2.80% 24.53% 6.19% 73.78% (11.82%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's Omitted)............. $302,905 $283,435 $219,484 $86,923 $52,743 $11,668
Ratio of Expenses to Average Net Assets............... 2.17%* 2.19% 2.28% 2.64% 2.85% 3.11%
Ratio of Net Investment Loss to Average Net Assets.... (1.52%)* (1.46%) (1.58%) (1.99%) (1.83%) (1.64%)
Portfolio Turnover Rate............................... 11% 25% 29% 48% 66% 82%
<FN>
* On an annualized basis.
(a) On average month end shares outstanding.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 115
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
EMERGING GROWTH FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN CATEGORIES:
COMMON STOCKS AND WARRANTS 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.
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
ADVERTISING (0.53%)
Catalina Marketing Corp.**............. 27,000 $ 1,269,000
Cyrk International, Inc.**............. 45,000 635,625
Katz Media Group**..................... 25,000* 403,125
------------
2,307,750
------------
AUTOMOBILE/TRUCK (1.13%)
APS Holding Corp. (Class A)**.......... 10,000 223,750
Copart, Inc.**......................... 50,000 1,018,750
Deflecta-Shield Corp.**................ 5,000 53,750
Detroit Diesel Corp.**................. 20,000 465,000
Discount Auto Parts, Inc.**............ 30,000 723,750
Edelbrock Corp.**...................... 10,000 131,250
Johnstown America Industries, Inc.**... 10,000 127,500
Pep Boys - Manny, Moe & Jack........... 20,000 515,000
Rollins Truck Leasing Corp............. 22,500 247,500
Stant Corp............................. 30,000 390,000
Stewart & Stevenson Services, Inc...... 15,000 562,500
Thompson PBE, Inc.**................... 30,000* 435,000
------------
4,893,750
------------
BANKS (0.13%)
Hibernia Corp. (Class A)**............. 15,000 120,000
MBNA Corp.............................. 15,000 453,750
------------
573,750
------------
BROADCASTING (1.16%)
Clear Channel Communications, Inc.**... 30,075 1,691,719
E-Z Communications, Inc. (Class A)**... 10,000 162,500
Gaylord Entertainment Co. (Class A).... 26,000 614,250
Heftel Broadcasting Corp. (Class A)**.. 125,000 1,406,250
Lodgenet Entertainment Corp.**......... 5,000 37,500
SFX Broadcasting, Inc. (Class A)**..... 40,000 920,000
United International Holdings, Inc.
(Class A)**.......................... 6,400 91,200
Young Broadcasting Corp. (Class A)**... 5,100* 112,200
------------
5,035,619
------------
BUILDING PRODUCTS (0.06%)
NCI Building Systems, Inc.**........... 15,000 262,500
------------
CHEMICAL (0.05%)
Mallinckrodt Group, Inc................ 6,000 216,000
------------
COMPUTERS (23.01%)
Adaptec, Inc.**........................ 110,000 3,520,000
Adobe Systems, Inc..................... 70,000 4,077,500
Alantec Corp.**........................ 7,500 287,812
America Online, Inc.**................. 10,800 500,850
American Business Information, Inc.**.. 5,000 120,000
Amtech Corp............................ 4,375 30,078
Applied Voice Technology, Inc.**....... 35,000* 546,875
Applix, Inc.**......................... 8,000* 208,000
Aspen Technology, Inc.**............... 5,000 103,750
Auspex Systems, Inc.**................. 5,000 51,875
Autodesk, Inc.......................... 29,000 987,812
Avid Technology, Inc.**................ 790* 31,847
BancTec, Inc.**........................ 5,000 85,000
Banyan Systems, Inc.**................. 60,000 873,750
Bay Networks, Inc.**................... 50,000 1,818,750
BISYS Group, Inc. (The)**.............. 11,835* 245,576
BMC Software, Inc.**................... 7,000 435,750
Brock Control Systems, Inc.**.......... 2,500 17,500
Broderbund Software, Inc.**............ 14,000 693,000
Cabletron Systems, Inc.**.............. 22,500 1,068,750
Cadence Design Systems, Inc.**......... 75,029 2,419,685
C*ATS Software, Inc.**................. 4,000* 52,000
Cerner Corp.**......................... 20,000 1,062,500
CFI ProServices, Inc.**................ 25,000 265,625
Cheyenne Software, Inc.**.............. 2,000 29,000
Chipcom Corp.**........................ 4,500 147,375
Cirrus Logic, Inc.**................... 40,000 1,992,500
Cognex Corp.**......................... 42,000 1,260,000
Compuware Corp.**...................... 26,600 698,250
Concentra Corp.**...................... 10,000* 128,750
Continuum, Inc.**...................... 75,000 2,475,000
Cornerstone Imaging, Inc.**............ 7,000 109,375
Datastream Systems, Inc.**............. 10,000* 240,000
Dataware Technologies, Inc.**.......... 3,000 47,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 116
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMPUTERS (CONTINUED)
Dell Computer Corp.**.................... 70,000 $ 3,832,500
Digital Biometrics, Inc.**............... 11,000 104,500
Electronic Arts, Inc.**.................. 5,000 115,000
EPIC Design Technology, Inc.**........... 500 13,250
Expert Software, Inc.**.................. 8,000* 118,000
FileNet Corp.**.......................... 7,000 234,500
Frame Technology Corp.**................. 2,500 52,500
Gateway 2000, Inc.**..................... 50,000 946,875
General Magic, Inc.**.................... 5,000* 69,375
Geoworks**............................... 60,000 555,000
Global Village Communication**........... 2,000 27,000
HCIA, Inc.**............................. 200* 5,300
Hogan Systems, Inc.**.................... 100,000 850,000
Hyperion Software Corp.**................ 48,500* 2,085,500
Information Resources, Inc.**............ 35,000* 492,187
Informix Corp.**......................... 125,000 4,921,875
InfoSoft International, Inc.**........... 5,000 313,750
KLA Instruments Corp.**.................. 15,000 930,000
Kronos, Inc.**........................... 21,500 655,750
Lannet Data Communications, Ltd.**....... 55,000* 1,086,250
Learning Co. (The)**..................... 15,000 393,750
LEGENT Corp.**........................... 65,000 1,771,250
Loronix Information Systems, Inc.**+..... 265,000 761,875
Madge, N.V.**............................ 250,000 6,875,000
MapInfo Corp.**.......................... 6,000 179,250
Measurex Corp............................ 20,500 512,500
Mercury Interactive Corp.**.............. 95,000 2,042,500
Micropolis Corp.**....................... 96,500 699,625
Minnesota Educational Computing Corp.**.. 5,000 128,750
Mustang Software, Inc.**................. 8,000* 62,000
National Instruments Corp.**............. 6,000* 112,500
NetManage, Inc.**........................ 12,000 219,000
Network General Corp.**.................. 95,000 2,481,875
Norand Corp.**........................... 2,500 76,250
Oak Technology, Inc.**................... 13,500* 372,938
Open Environment Corp.**................. 20,000* 350,000
OPTi, Inc.**............................. 120,000 1,815,000
Parametric Technology Corp.**............ 70,000 3,325,000
PeopleSoft, Inc.**....................... 55,400 2,839,250
Phamis, Inc.**........................... 5,500* 106,562
Physician Computer Network, Inc.**....... 25,000* 112,500
Pinnacle Systems, Inc.**................. 35,000* 638,750
Platinum Technology, Inc.**.............. 125,000 2,500,000
Policy Management Systems Corp.**........ 2,300 115,863
PRI Automation, Inc.**................... 10,000 262,500
Printronix, Inc.**....................... 25,000 578,125
Progress Software Corp.**................ 28,500 1,154,250
Project Software & Development, Inc.**... 25,000 606,250
Pyxis Corp.**............................ 95,000 1,888,125
Quantum Corp.**.......................... 25,000 462,500
QuickResponse Services, Inc.**........... 6,000 111,750
Radius, Inc.**........................... 2,500 25,313
Read-Rite Corp.**........................ 51,000 1,083,750
Renaissance Solutions, Inc.**............ 9,000* 117,000
S3, Inc.**............................... 15,000 346,875
Seagate Technology, Inc.**............... 50,000 1,593,750
Security Dynamics Technologies, Inc.**... 5,000* 176,250
7th Level, Inc.**........................ 40,000 345,000
Sierra On-Line, Inc.**................... 40,000 755,000
Softdesk, Inc.**......................... 35,000 796,250
Software Artistry, Inc.**................ 2,500* 62,188
Software Spectrum, Inc.**................ 5,000 80,000
SPSS, Inc.**............................. 70,000 975,625
Sterling Software, Inc.**................ 105,000 3,570,000
Sybase, Inc.**........................... 61,000 1,479,250
Sylvan Learning Systems, Inc.**.......... 5,600 97,300
Symantec Corp.**......................... 14,000 325,500
TGV Software, Inc.**..................... 3,000* 56,250
3COM Corp.**............................. 115,000 6,440,000
Transaction Systems Architects, Inc.
(Class A)**............................ 10,000* 206,250
Viewlogic Systems, Inc.**................ 5,000 56,250
Wall Data, Inc.**........................ 8,000 154,000
Western Digital Corp.**.................. 35,000 560,000
Wonderware Corp.**....................... 20,000 662,500
Zebra Technologies Corp. (Class A)**..... 2,200 100,925
Zilog, Inc.**............................ 60,000 2,107,500
------------
99,769,486
------------
COSMETICS & TOILETRIES (0.62%)
INBRAND Corp.**.......................... 10,500 139,125
Maybelline Inc........................... 65,006 1,430,132
Playtex Products, Inc.**................. 140,000 1,120,000
-----------
2,689,257
-----------
DRUGS (2.11%)
ALZA Corp.**............................. 24,600 479,700
Big B, Inc............................... 10,000 145,000
Centocor, Inc.**......................... 35,500 501,437
Chronimed, Inc.**........................ 40,000 610,000
Circa Pharmaceuticals, Inc.**............ 10,000* 243,750
Cor Therapeutics, Inc.**................. 20,000 330,000
Eckerd (Jack) Corp.**.................... 85,000 2,475,625
Elan Corp., PLC, American
Depository Receipt, (ADR)**............. 5,250 185,719
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 117
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
DRUGS (CONTINUED)
Mylan Laboratories, Inc................... 85,000 $ 2,613,750
North American Vaccine, Inc.**............ 20,000 145,000
Syncor International Corp.**.............. 16,500 150,563
Watson Pharmaceuticals, Inc.**............ 40,000 1,245,000
------------
9,125,544
------------
ELECTRONICS (9.57%)
American Sensors, Inc.**.................. 45,000* 450,000
ANADIGICS, Inc.**......................... 6,350* 84,931
Applied Materials, Inc.**................. 70,000 4,313,750
Atmel Corp.**............................. 60,000 2,640,000
C-Cube Microsystems, Inc.**............... 15,000 333,750
CIDCO, Inc.**............................. 15,200 547,200
Exar Corp.**.............................. 96,000 2,532,000
GaSonics International Corp.**............ 18,000 414,000
General Instrument Corp.**................ 16,000 546,000
Home Theater Products
International, Inc.**..................... 100,000 359,370
Integrated Circuit Systems, Inc.**........ 42,500* 440,937
Integrated Silicon Solution, Inc.**....... 5,000* 192,500
Itron, Inc.**............................. 15,000* 378,750
LAM Research Corp.**...................... 100,000 5,050,000
Level One Communications, Inc.**.......... 4,500 69,188
Mattson Technology, Inc.**................ 2,000 53,500
Maxim Integrated Products, Inc.**......... 54,000 1,957,500
Megatest Corp.**.......................... 140,000 1,470,000
Micrel, Inc.**............................ 17,500* 315,000
PSC, Inc.**............................... 70,000* 910,000
Quickturn Design System, Inc.**........... 1,500 12,750
SDL, Inc.**............................... 10,000* 255,000
Sonic Solutions, Inc.**................... 10,000 116,250
Tektronix, Inc............................ 2,000 91,000
Tencor Instruments**...................... 110,000 7,452,500
Teradyne, Inc.**.......................... 115,000 5,821,875
Ultratech Stepper, Inc.**................. 15,000 840,000
Varian Associates, Inc.................... 28,000 1,288,000
VeriFone, Inc.**.......................... 25,000 590,625
Xilinx, Inc.**............................ 25,900 1,987,825
------------
41,514,201
------------
ENGINEERING (0.40%)
J. Ray Mcdermott, S. A.**................. 62,500* 1,718,750
------------
FINANCE (3.50%)
ADVANTA Corp. (Class A)**................. 7,500 260,625
ADVANTA Corp. (Class B)................... 6,750 217,687
Alex Brown, Inc.**........................ 5,000 205,000
Alliance Capital Management, L.P.......... 110,000 2,048,750
Bear Stearns Cos., Inc.................... 4,663 96,174
Capital RE Corp........................... 30,000 $ 697,500
Cash America International, Inc........... 5,000 38,125
Concord EFS, Inc.**....................... 4,500 135,000
CUC International, Inc.**................. 20,000 790,000
Eaton Vance Corp.......................... 25,000 790,625
First Financial Management Corp........... 11,000 804,375
Franklin Resources, Inc................... 32,000 1,288,000
KBK Capital Corp.**....................... 128,000 752,000
Lehman Brothers Holdings, Inc............. 25,000* 487,500
Mercer International, Inc. SBI**.......... 50,000 750,000
Oppenheimer Capital, L.P.................. 60,000 1,245,000
Price (T. Rowe) & Associates, Inc......... 66,000 2,425,500
Raymond James Financial, Inc.............. 84,750 1,483,125
SEI Corp.................................. 18,000 337,500
SunAmerica, Inc........................... 7,000 343,000
------------
15,195,486
------------
FUNERAL SERVICES (0.53%)
Service Corp. International............... 50,000 1,412,500
Stewart Enterprises, Inc. (Class A)....... 32,250 886,875
------------
2,299,375
------------
HEALTHCARE (5.84%)
Abbey Healthcare Group, Inc.**............ 63,000 2,504,250
Apogee, Inc.**............................ 5,000 91,250
Applied Bioscience International, Inc.**.. 40,000 220,000
Arbor Health Care Co.**................... 3,000 61,500
Beverly Enterprises, Inc.**............... 25,000 359,375
Cardinal Health, Inc...................... 3,750 172,969
Caremark International, Inc............... 120,000 2,100,000
CorVel Corp.**............................ 20,000 495,000
Diagnostek, Inc.**........................ 100,000 1,850,000
Express Scripts, Inc. (Class A)**......... 25,000 721,875
Genzyme Corp.**........................... 1,000 42,750
GranCare, Inc.**.......................... 20,000 327,500
Health Care & Retirement Corp.**.......... 57,100 1,613,075
Health Management Associates, Inc.
(Class A)**............................. 16,875 489,375
Health Management Systems, Inc.**......... 30,000 690,000
Horizon Healthcare Corp.**................ 85,000 1,774,375
Horizon Mental Health Management, Inc.**.. 5,000* 55,625
Integrated Health Services, Inc........... 2,000 69,250
Interim Services, Inc.**.................. 15,000 433,125
Living Centers Of America, Inc.**......... 41,500 1,177,562
Manor Care, Inc........................... 37,500 1,101,562
Mariner Health Group, Inc.**.............. 43,500 636,187
MedPartners, Inc.**....................... 15,000* 354,375
Mid Atlantic Medical Services**........... 20,000* 345,000
</TABLE>
SEE NOTES TO FINANCI AL STATEMENTS.
13
<PAGE> 118
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Multicare Cos., Inc.**.................... 50,000 $ 1,025,000
NovaCare, Inc.**.......................... 65,200 562,350
OrNda Healthcorp**........................ 20,000* 350,000
PhyCor, Inc.**............................ 5,250 166,688
Physician Reliance Network**.............. 10,000* 252,500
Quantum Health Resources, Inc.**.......... 7,000 113,750
REN Corp., U.S.A.**....................... 10,000 160,000
Renal Treatment Centers, Inc.**........... 15,000 375,000
Summit Care Corp.**....................... 40,000 820,000
Surgical Care Affiliates, Inc............. 31,000 720,750
TheraTx, Inc.**........................... 50,000 725,000
Vencor, Inc.**............................ 8,437 261,547
Vivra, Inc.**............................. 65,000 2,088,125
------------
25,306,690
------------
HOTELS & MOTELS (0.55%)
Equity Inns, Inc.......................... 30,000 345,000
Marcus Corp............................... 25,000 665,625
Marriott International, Inc............... 10,000 360,000
Primadonna Resorts, Inc.**................ 41,000 1,014,750
------------
2,385,375
------------
INSURANCE (5.61%)
ACE, Ltd.................................. 50,000 1,325,000
Acordia, Inc.............................. 15,000 466,875
American RE Corp.......................... 57,000 2,166,000
Berkley (W. R.), Corp..................... 10,000 375,000
Blanch (E. W.) Holdings, Inc.............. 10,000 187,500
Capital Guaranty Corp..................... 10,000 177,500
CMAC Investment Corp...................... 15,000 555,000
Enhance Financial Services Group, Inc..... 5,000 85,000
Exel Ltd.................................. 10,500 477,750
First Colony Corp......................... 10,000 222,500
Gallagher (Arthur J.) & Co................ 15,000 513,750
Guaranty National Corp.................... 35,000 577,500
HCC Insurance Holdings, Inc.**............ 22,000 506,000
Hilb, Rogal & Hamilton Co................. 10,000 117,500
Horace Mann Educators Corp................ 75,000 1,546,875
Insurance Auto Auctions, Inc.**........... 29,500 877,625
Life Partners Group, Inc.................. 65,000 1,267,500
Life RE Co................................ 5,000 94,375
Maxicare Health Plans, Inc.**............. 125,000 1,937,500
MBIA, Inc................................. 23,000 1,443,250
Mid Ocean Ltd............................. 4,000 114,500
NAC Re Corp............................... 30,050 991,650
National RE Corp.......................... 78,000 2,359,500
Oxford Health Plans, Inc.**............... 10,000 416,250
PacifiCare Health Systems, Inc.**......... 5,000 307,500
PartnerRe Holdings, Ltd................... 10,000 230,625
Paul Revere Corp. (The)................... 5,000 82,500
Philadelphia Consolidated
Holding Corp.**......................... 75,000 1,021,875
Physicians Health Services, Inc...........
(Class A)**............................. 7,500 192,656
PXRE Corp................................. 5,000 121,250
Sierra Health Services, Inc.**............ 35,000 949,375
Transatlantic Holdings, Inc............... 17,000 1,079,500
Transnational Re Corp. (Class A)**........ 1,000 20,250
UNUM Corp................................. 27,500 1,179,063
Vesta Insurance Group, Inc................ 10,000* 333,750
------------
24,320,244
------------
LEISURE & RECREATION (0.32%)
Coleman Co., Inc.**....................... 5,000 181,250
Rawlings Sporting Goods Co.**............. 25,000* 271,875
Royal Caribbean Cruises Ltd............... 40,000 955,000
------------
1,408,125
------------
MACHINERY (3.49%)
ASM Lithography Holding, NV**............. 10,000* 273,750
Asyst Technologies, Inc.**................ 20,000 780,000
Bridgeport Machines, Inc.**............... 25,000* 365,625
Credence Systems Corp.**.................. 120,000 4,350,000
Duracraft Corp.**......................... 9,000 285,750
Electroglas, Inc.**....................... 111,000 4,828,500
Novellus Systems, Inc.**.................. 70,000 4,252,500
------------
15,136,125
------------
MEDICAL/DENTAL (3.22%)
Benson Eyecare Corp.**.................... 20,000 200,000
Bioject Medical Technologies, Inc.**...... 20,000 40,000
BioWhittaker, Inc.**...................... 120,000 960,000
Cordis Corp.**............................ 28,000 2,009,000
Forest Laboratories, Inc.**............... 10,000 450,000
Gulf South Medical Supply, Inc.**......... 10,000 420,000
Haemonetics Corp.**....................... 30,000 465,000
Heart Technology, Inc.**.................. 1,000 17,750
Isolyser Co., Inc.**...................... 5,000 87,500
IVAX Corp................................. 22,000 569,250
Liposome Co., Inc.**...................... 45,000* 405,000
MAXXIM Medical, Inc.**.................... 30,000 416,250
MedCath, Inc.**........................... 20,000* 260,000
Pall Corp................................. 6,666 155,818
Patterson Dental, Inc.**.................. 28,500 662,625
Perrigo Co.**............................. 20,000 222,500
Rotech Medical Corp.**.................... 36,000 1,170,000
Scherer (R.P.) Corp.**.................... 22,000 1,050,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 119
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
MEDICAL/DENTAL (CONTINUED)
Steris Corp.**............................... 14,000 $ 553,000
Stryker Corp................................. 6,100 275,263
Target Therapeutics, Inc.**.................. 8,500 310,250
Tecnol Medical Products, Inc.**.............. 80,000 1,490,000
Uromed Corp.**............................... 50,000* 350,000
Ventritex, Inc.**............................ 70,000 1,050,000
Vital Signs, Inc............................. 25,000* 365,625
------------
13,955,331
------------
METALS (0.02%)
Webco Industries, Inc.**..................... 10,000 80,000
------------
OFFICE EQUIPMENT & SUPPLIES (0.70%)...........
Indigo N. V.**............................... 45,000* 2,182,500
Staples, Inc.**.............................. 36,000 868,500
------------
3,051,000
------------
OIL & GAS (4.75%)
Alexander Energy Corp.**..................... 60,000* 285,000
Anadarko Petroleum Corp...................... 12,500 514,062
Apache Corp.................................. 50,000 1,350,000
Baker Hughes, Inc............................ 10,000 225,000
Barrett Resources Corp.**.................... 12,500 293,750
Basin Exploration, Inc.**.................... 20,000 175,000
B.J. Services Co.**.......................... 1,000 22,875
Brown (Tom), Inc.**.......................... 115,000 1,624,375
Cabot Oil & Gas Corp. (Class A)**............ 50,000 775,000
Cairn Energy USA, Inc.**..................... 50,000 487,500
Cross Timbers Oil Co.**...................... 40,000 655,000
Energy Service Co., Inc.**................... 10,000 167,500
Enron Oil & Gas Co........................... 65,000 1,486,875
Halliburton Co............................... 5,000* 191,875
Hornbeck Offshore Services, Inc.**........... 25,000 343,750
HS Resources, Inc.**......................... 10,000* 165,000
Hugoton Energy Corp.**....................... 10,000 82,500
Landmark Graphics Corp.**.................... 10,000 247,500
Mitchell Energy & Development Corp
(Class B).................................. 10,000 180,000
Newfield Exploration Co.**................... 73,000 1,679,000
Noble Affiliates, Inc........................ 70,000 1,890,000
Nuevo Energy Co.**........................... 80,000 1,530,000
Oceaneering International, Inc.**............ 18,000 180,000
ParcPlace Systems, Inc.**.................... 6,000 70,500
Parker & Parsley Petroleum, Co............... 30,000 641,250
PetroCorp, Inc.**............................ 20,000 175,000
Pogo Producing Co............................ 75,000 1,687,500
Smith International, Inc.**.................. 50,000 862,500
Snyder Oil Corp.............................. 19,000 273,125
Stone Energy Corp.**......................... 20,000 277,500
Tidewater, Inc............................... 10,000 237,500
Tuboscope Vetco International Corp.**........ 45,000 315,000
Weatherford International, Inc.**............ 135,000 1,485,000
------------
20,576,437
------------
POLLUTION CONTROL (0.60%)
BioMedical Waste System, Inc.**.............. 175,000 103,897
GNI Group, Inc.**............................ 125,000 796,875
IMCO Recycling, Inc.......................... 48,500 763,875
Safety-Kleen Corp............................ 10,000* 170,000
Tetra Tech, Inc.**........................... 12,500 254,688
TRC Companies**.............................. 30,000 228,750
U.S. Filter Corp.**.......................... 17,500* 277,813
------------
2,595,898
------------
PRINTING (0.69%)
Harte-Hanks Communications, Inc.............. 50,000 1,162,500
International Imaging Materials, Inc.**...... 35,000 936,250
Mecklermedia Corp.**......................... 50,000 881,250
------------
2,980,000
------------
PROTECTION (0.40%)
Checkpoint Systems, Inc.**................... 5,000* 105,625
First Alert, Inc.**.......................... 70,000 866,250
Koala Corp.**................................ 35,000 231,875
Protection One, Inc.**....................... 100,000 462,500
Sensormatic Electronics Corp................. 2,250 66,938
------------
1,733,188
------------
PUBLISHING (0.74%)
Franklin Electronic Publishers, Inc.**....... 19,500 604,500
Readers Digest Association, Inc. (Class A)... 20,000 787,500
Scholastic Corp.**........................... 32,500 1,820,000
------------
3,212,000
------------
(3.66%)
Beacon Properties Corp....................... 10,000 196,250
Camden Property Trust........................ 30,000 630,000
Clayton Homes, Inc........................... 112,546 1,899,214
Crescent Real Estate Equities, Inc........... 20,300 583,625
Equity Residential Properties Trust.......... 20,000 535,000
Evans Withycombe Residential, Inc............ 5,000* 93,750
Factory Stores Of America, Inc............... 30,000 588,750
Gables Residential Trust..................... 10,000 183,750
Highwoods Properties, Inc.................... 5,000 110,000
Horizon Outlet Centers, Inc.................. 17,500 385,000
Insignia Financial Group, Inc. (Class A)**... 25,000 581,250
Liberty Property Trust....................... 10,000 186,250
Manufactured Home Communities, Inc........... 40,000 630,000
Mid-America Apartment Communities, Inc....... 25,400 635,000
Oakwood Homes Corp........................... 80,000 2,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 120
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
REAL ESTATE (CONTINUED)
Oasis Residential, Inc....................... 20,000 $ 437,500
Post Properties, Inc......................... 11,100 328,838
Redman Industries, Inc.**.................... 155,000 3,022,500
Regency Realty Corp.......................... 25,000 396,875
RFS Hotel Investors, Inc..................... 10,000 145,000
ROC Communities, Inc......................... 25,000 503,125
Security Capital Industrial Trust............ 15,000 234,375
Security Capital Pacific Trust............... 20,000* 350,000
Storage USA, Inc............................. 10,400 297,700
Tanger Factory Outlet Centers, Inc........... 18,000 420,750
Vornado Realty Trust......................... 15,000 506,250
------------
15,880,752
------------
RETAIL (13.36%)
ADFlex Solutions, Inc.**..................... 50,000 1,212,500
AmeriSource Health Corp.**................... 40,000* 885,000
AnnTaylor Stores, Inc.**..................... 40,000 1,005,000
Apple South, Inc. ........................... 77,062 1,117,399
Applebee's International, Inc.**............. 25,000 550,000
Arbor Drugs, Inc............................. 6,000 153,750
Au Bon Pain Co., Inc. (Class A)**............ 15,000 202,500
Barnes & Noble, Inc.**....................... 11,000 314,875
Bed Bath & Beyond, Inc.**.................... 60,000 1,252,500
Best Buy Co., Inc.**......................... 75,000 2,053,125
Blyth Industries, Inc.**..................... 15,000 416,250
Brinker International, Inc.**................ 42,579 729,165
Brookstone, Inc.**........................... 75,000 384,375
Campo Electronics, Appliances and
Computers, Inc.**.......................... 155,000 1,026,875
Catherine's Stores Corp.**................... 10,000 87,500
Cato Corp. (Class A)......................... 10,000 82,500
Chart House Enterprises, Inc.**.............. 76,000 684,000
Claire's Stores, Inc......................... 4,000 55,500
Consolidated Stores Corp.**.................. 24,000 411,000
Corporate Express, Inc.**.................... 10,000 282,500
Creative Computers, Inc.**................... 25,000* 615,625
Daisytek International Corp.**............... 5,000* 106,250
Department 56, Inc.**........................ 20,000 740,000
DF & R Restaurants, Inc.**................... 10,000 142,500
Dollar Tree Stores, Inc.**................... 1,000* 22,500
Dreyer's Grand Ice Cream, Inc................ 15,000 446,250
El Chico Restaurants, Inc.**................. 100,000 775,000
Ellett Brothers, Inc......................... 81,000 688,500
Ethan Allen Interiors, Inc.**................ 41,000 768,750
Federated Department Stores, Inc.**.......... 90,000 1,901,250
Fingerhut Cos., Inc.......................... 16,000 186,000
Fossil, Inc.**............................... 15,000 251,250
Franklin Quest Co.**......................... 41,000 1,363,250
Friedman's, Inc. (Class A)**................. 10,000 177,500
General Nutrition Cos., Inc.**............... 2,000 49,750
Good Times Restaurants, Inc.**............... 120,000 210,000
Gymboree Corp.**............................. 22,000 517,000
Hollywood Entertainment Corp.**.............. 7,500 270,000
HomeTown Buffet, Inc.**...................... 10,000 118,750
IHOP Corp.**................................. 130,000 2,892,500
Integrity Music, Inc. (Class A)**+........... 110,000 715,000
Just For Feet, Inc.**........................ 3,750 107,344
Landry's Seafood Restaurants, Inc.**......... 40,000 1,385,000
Little Switzerland, Inc.**................... 115,000 517,500
Lone Star Steakhouse & Saloon, Inc.**........ 13,500 413,437
Men's Wearhouse, Inc. (The)**................ 12,750 321,937
Michael's Stores, Inc.**..................... 74,000 2,109,000
Movie Gallery, Inc.**........................ 15,000* 468,750
Nine West Group, Inc.**...................... 75,000 2,437,500
Office Depot, Inc.**......................... 35,009 796,455
OfficeMax, Inc.**............................ 26,200* 671,375
Outback Steakhouse, Inc.**................... 105,000 2,651,250
Papa John's International, Inc.**............ 2,500 86,562
PetSmart, Inc.**............................. 8,000 267,000
Pier 1 Imports, Inc.......................... 120,750 1,086,750
Quality Dining, Inc.**....................... 31,000 414,625
Revco D.S., Inc.**........................... 170,454 3,664,761
Rite-Aid Corp................................ 65,000 1,511,250
Sonic Corp.**................................ 43,000 1,112,625
Sports Authority, Inc. (The)**............... 21,900* 388,725
Sports & Recreation, Inc.**.................. 60,000 705,000
Starbucks Corp.**............................ 20,000 470,000
Stein Mart, Inc.**........................... 10,250 116,594
Sunglass Hut International, Inc.**........... 102,000 2,926,125
Talbots, Inc................................. 50,000 1,518,750
Tiffany & Co................................. 20,000 642,500
U.S. Delivery Systems, Inc.**................ 14,000 311,500
Urban Outfitters, Inc.**..................... 18,000 382,500
Wall Street Deli, Inc.**..................... 7,500 52,500
Wendy's International, Inc................... 145,000 2,465,000
West Marine, Inc.**.......................... 45,000 1,113,750
Whole Foods Market, Inc.**................... 30,000 356,250
Williams-Sonoma, Inc.**...................... 12,000 225,750
Zale Corp.**................................. 30,000 350,625
------------
57,912,629
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 121
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
TELECOMMUNICATIONS (7.04%)
ACC Corp..................................... 12,000 $ 186,000
ANTEC Corp.**................................ 40,000 990,000
Applied Digital Access, Inc.**............... 5,000 71,250
Ascend Communications, Inc.**................ 37,000 2,849,000
BroadBand Technologies, Inc.**............... 15,000 375,000
Communications Center, Inc.**................ 15,000 251,250
DSC Communications Corp.**................... 7,500 277,500
Equifax, Inc................................. 71,500 2,314,812
Gilat Satellite Networks Ltd.**.............. 2,500* 40,313
International Cabletel, Inc.**............... 20,000 590,000
LDDS Communications, Inc.**.................. 127,996 3,071,904
Metrocall, Inc.**............................ 41,000 727,750
MFS Communications Co., Inc.**............... 11,200 400,400
Mobile Telecommunications
Technologies Corp.**....................... 30,000 708,750
NFO Research, Inc.**......................... 25,000 478,125
Octel Communication Corp.**.................. 20,000 452,500
Paging Network, Inc.**....................... 3,750 103,125
Pairgain Technologies, Inc.**................ 10,000* 212,500
PriCellular Corp. (Class A)**................ 25,000* 181,250
ProNet, Inc.**............................... 40,000 795,000
QUALCOMM, Inc.**............................. 5,000 131,250
Scientific-Atlanta, Inc...................... 8,000 182,000
Stanford Telecommunications, Inc.**.......... 11,000 181,500
Tellabs, Inc.**.............................. 94,500 6,520,500
Telular Corp.**.............................. 5,000 45,000
Transaction Network Services, Inc.**......... 15,000 210,000
U. S. Robotics, Inc.**....................... 100,000 7,925,000
Zoom Telephonics, Inc.**..................... 30,000 262,500
------------
30,534,179
------------
TEXTILES (0.45%)
Ashworth, Inc.**............................. 25,000 262,500
Cygne Designs, Inc.**........................ 33,000 206,250
Haggar Corp.................................. 8,000 162,000
Nautica Enterprises, Inc.**.................. 40,000 1,100,000
St. John Knits, Inc.......................... 5,000 173,125
Tandy Brands Accessories, Inc.**............. 6,750 64,969
------------
1,968,844
------------
TOYS/GAMES/HOBBY PRODUCTS (1.92%)
Acclaim Entertainment, Inc.**................ 30,000 450,000
Bollinger Industries, Inc.**................. 80,000 610,000
Callaway Golf Co............................. 52,000 643,500
Cannondale Corp.**........................... 20,200* 308,050
Circus Circus Enterprises, Inc.**............ 5,050 167,281
Cobra Golf, Inc.**........................... 32,000 696,000
GTECH Holdings Corp.**....................... 10,000 220,000
Happiness Express, Inc.**.................... 55,000* 660,000
Intergold Ltd.**............................. 100,000 227,820
Players International, Inc.**................ 106,000 3,140,250
Sodak Gaming, Inc.**......................... 5,000 71,250
Station Casinos, Inc.**...................... 85,000 1,041,250
Toy Biz, Inc.**.............................. 5,000* 93,750
------------
8,329,151
------------
TRANSPORTATION (2.14%)
Alaska Air Group, Inc.**..................... 25,000 428,125
American Classic Voyage Co................... 10,000 102,500
Atlantic Southeast Airlines, Inc............. 65,000 1,495,000
Comair Holdings, Inc......................... 57,300 1,443,244
Continental Airlines, Inc. (Class B)**....... 10,000 165,000
Fritz Cos., Inc.**........................... 2,000* 120,500
Frontier Airlines, Inc.**.................... 50,000 250,000
Greenbrier Cos., Inc......................... 20,000 277,500
Intertrans Corp.............................. 10,000* 216,250
Heartland Express, Inc.**.................... 2,500 65,000
Landair Services, Inc.**..................... 1,300 19,825
Mesa Airlines, Inc.**........................ 100,000 612,500
Northwest Airlines Corp.**................... 75,000 2,231,250
Offshore Logistics, Inc.**................... 11,500 155,969
Rural/Metro Corp.**.......................... 15,000 281,250
Skywest, Inc................................. 20,000 355,000
Southwest Airlines Co........................ 45,000 1,040,625
------------
9,259,538
------------
UTILITIES (0.03%)
York Research Corp.**........................ 22,000* 121,000
------------
TOTAL COMMON STOCKS
(Cost $281,348,916) (98.33%) 426,347,974
------------
NUMBER OF
WARRANTS
---------
WARRANTS
RETAIL (0.01%)
Good Times Restaurants, Inc.**............... 60,000 23,436
------------
TOTAL WARRANTS
(Cost $50,148) (0.01%) 23,436
------------
TOTAL COMMON STOCKS
AND WARRANTS
(Cost $281,399,064) (98.34%) 426,371,410
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 122
FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (OOO'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.65%)
Investment in a joint repurchase agreement transaction with
Bankers Trust - Dated 4-28-95, Due 5-1-95 (secured by U.S.
Treasury Bond, 10.75%, due 8-15-05 and U.S. Treasury Note,
6.875%, due 10-31-96) Note A................................. 5.93% $7,177 $ 7,177,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%............................................... 39
------------
TOTAL SHORT-TERM INVESTMENTS (1.65%) 7,177,039
------ ------------
TOTAL INVESTMENTS (99.99%) $433,548,449
====== ============
<FN>
* Securities, other than short-term investments, newly added to the portfolio during the period ended April 30, 1995
** Non-income producing security.
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at April 30, 1995 were as
follow:
</TABLE>
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
- --------------------------------- ---------- ---------------
<S> <C> <C>
Integrity Music, Inc. (Class A) $1,043,750 ----
Longnix Information Systems, Inc. 1,595,000 ----
</TABLE>
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.
18
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Trust") is a diversified, open-end management
investment company, registered under the Investment Company Act of 1940, as
amended. The Trust consists of six series portfolios: John Hancock Emerging
Growth Fund (the "Fund"), John Hancock Global Resources Fund, John Hancock High
Yield Tax Free Fund, John Hancock High Yield Bond Fund, John Hancock Money
Market Fund B and John Hancock Government Income Fund. The Trustees may
authorize the creation of additional Funds from time to time to satisfy various
investment objectives. Effective December 22, 1994 (see Note B), the Trust and
Funds changed names by replacing the word Transamerica with John Hancock.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under the terms of a distribution plan
have exclusive voting rights regarding such distribution plan. Class A Shares
are subject to an initial sales charge of up to 5.00% and a 12b-1 distribution
plan. Prior to May 15, 1995, the maximum sales charge was 5.75%. Class B Shares
are subject to a contingent deferred sales charge and a separate 12b-1
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.
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 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.
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.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and
19
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
losses on sales of investments are determined on the identified cost basis for
both financial reporting and federal income tax purposes.
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 of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, at October 31, 1994, the Fund has
approximately $17,163,000 of capital loss carryforwards available, to the extent
provided by regulations, to offset future net realized capital gains. The
carryforwards expire as follows: October 31, 1995 -- $1,478,000, October 31,
1997 -- $117,000, October 31, 2000 -- $2,304,000, October 31, 2001 -- $4,447,000
and October 31, 2002 -- $8,817,000. If such carryforwards are used by the Fund,
no capital gain distributions will be made. Expired capital loss carryforwards
are reclassified to capital paid-in, in the year of expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis. 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. 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, if any,
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 effect of expenses that
may be applied differently to each class as explained previously.
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 Fund.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriated net assets of each class and the specific expense rate(s)
applicable to each class.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE SERVICES AND TRANSACTIONS WITH AFFILIATES AND
OTHERS
On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser
for the Fund with approval of the Trustees and shareholders of the Fund. The
Fund's former investment manager was Transamerica Fund Management Company
("TFMC").
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, to
0.75% of the Fund's average daily net assets. This fee structure is consistent
with the former agreement with TFMC. For the period ended April 30, 1995, the
advisory fee earned by the Adviser and TFMC amounted to $1,010,222 and $496,208,
respectively, resulting in a total fee of $1,506,430.
The Adviser and TFMC, for their respective periods, provided administrative
services to the Fund pursuant to an administrative service agreement through
January 16, 1995 on which day the agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
20
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a wholly-owned
subsidiary of the Adviser, became the principal underwriter of the Fund. Prior
to this date, Transamerica Fund Distributors, Inc. ("TFD") served as the
principal underwriter and distributor of the Fund. For the period ended April
30, 1995, JH Funds and TFD received net sales charges of $192,073 with regard to
sales of Class A shares. Out of this amount, $18,453 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, and
$173,620 was paid as sales commissions to unrelated broker-dealers.
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, formerly TFD, and are used in whole or in
part to defray its expenses related to providing distribution related services
to the Fund in connection with the sale of Class B shares. For the period ended
April 30, 1995, contingent deferred sales charges amounted to $692,155.
In addition, to compensate 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 shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments for
distribution and service expenses which in total will not exceed on an annual
basis 0.25% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse for its distribution/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. This fee structure and plan is
similar to the former arrangement with TFD.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund will pay Investor Services a fee based on transaction volume and
number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until December 22,
1994. During the period ended April 30, 1995, legal fees paid to Baker & Botts
amounted to $4,849.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund will
make investments into other John Hancock funds, as applicable, to cover its
liability with regard to the deferred compensation. Investments to cover the
Fund's deferred compensation liability will be recorded on the Fund's books as
other assets. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on the
Fund's books.
The Fund has an independent advisory board composed of certain members of
the former Transamerica Board of Trustees who provide advice to the current
Trustees in order to facilitate a smooth management transition for which the
Fund pays the advisory board and its counsel a fee.
21
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Emerging Growth Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995 aggregated $45,266,140 and
$60,330,177, respectively.
The cost of investments owned at April 30, 1995 for Federal income tax
purposes was $288,576,064. Gross unrealized appreciation and depreciation of
investments aggregated $159,856,697 and $14,884,351, respectively, resulting in
net unrealized appreciation of $144,972,346.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1994, the Fund has reclassified the
accumulated net investment loss in the amount of $4,439,725 to capital paid-in.
This represents the cumulative amount necessary to report these balances on a
tax basis, excluding certain temporary differences, as of October 31, 1994.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
22
<PAGE> 127
NOTES
John Hancock Funds - Emerging Growth Fund
23
<PAGE> 128
[JOHN HANCOCK FUNDS LOGO] Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
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Brockton, MA
Permit No. 582
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right, a cube in lower left and a diamond in lower right. A tag line below
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- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Emerging Growth Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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Paper."]
JHF 6005A 04/95