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FINAL REPORT
GLOBAL BOND
FUND
John Hancock Funds
FEBRUARY 11, 1999
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John Hancock Funds - Global Bond Fund
Statement of Assets and Liabilities
February 11, 1999 (Unaudited)
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Assets:
Cash $ 9,824,990
Receivable from John Hancock Advisers, Inc. and affiliates - Note B 1,026
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Total Assets 9,826,016
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Liabilities:
Distribution payable 12,717
Accounts payable and accrued expenses 2,024
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Total Liabilities 14,741
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Net Assets:
Capital paid-in 9,811,274
Net unrealized appreciation of investments and foreign currency transactions 1
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Net Assets $ 9,811,275
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Net Asset Value Per Share:
(Based on 1,185,029 shares of beneficial interest outstanding-
unlimited number of shares authorized with no par value) $ 8.28
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SEE NOTES TO FINANCIAL STATEMENTS
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John Hancock Funds - Global Bond Fund
Statement of Operations
Period from March 1, 1998 to February 11, 1999 (Unaudited)
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Investment Income:
Interest $ 558,634
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Expenses:
Investment management fee - Note B 70,177
Custodian fee 18,656
Registration and filing fees 8,496
Transfer agent fee - Note B 4,678
Organization Expense - Note A 3,448
Auditing fee 2,444
Printing 2,008
Financial Services Fee - Note B 1,456
Miscellaneous 387
Trustees' fees 275
Legal fees 159
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Total Expenses 112,184
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Less Expense Reductions - Note B (32,555)
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Net Expenses 79,629
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Net Investment Income 479,005
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Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions:
Net realized gain on investments sold 407,650
Net realized loss on foreign currency transactions (176,849)
Change in net unrealized appreciation/depreciation
of investments (89,628)
Change in net unrealized appreciation/depreciation
of foreign currency transactions 1,144
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Net Realized and Unrealized Gain on
Investments and Foreign Currency Transactions 142,317
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Net Increase in Net Assets
Resulting from Operations $ 621,322
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SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
John Hancock Funds - Global Bond Fund
Statement of Changes in Net Assets
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PERIOD FROM
MARCH 1, 1998 TO
YEAR ENDED FEBRUARY 11, 1999
FEBRUARY 28, 1998 (UNAUDITED)
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Increase (Decrease) in Net Assets:
From Operations:
Net investment income $249,040 $479,005
Net realized gain (loss) on investments sold (167,705) 230,801
Change in net unrealized appreciation/depreciation of investments 96,133 (88,484)
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Net Increase in Net Assets Resulting from Operations 177,468 621,322
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Distributions to Shareholders: *
Dividends from net investment income (249,040) (479,005)
Distributions from net realized gain on investments sold (31,000) -
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Total Distributions to Shareholders (280,040) (479,005)
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From Fund Share Transactions Net: **
Shares sold 9,080,251 95,429
Shares issued to shareholders in reinvestment of distributions 17,009 9,645
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9,097,260 105,074
Less shares repurchased (60,430) (396,227)
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Net Increase (Decrease) 9,036,830 (291,153)
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Net Assets:
Beginning of period 1,025,853 9,960,111
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End of period (including distributions in excess of net investment income
of $167,117 and none, respectively) $9,960,111 $9,811,275
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* Distributions to Shareholders:
Per share dividends from net investment income $ 0.4821 $ 0.3958
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Per share distributions from net realized gain on investments sold $ 0.0254 $ -
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**Analysis of Fund Share Transactions:
Shares sold 1,100,749 11,739
Shares issued to shareholders in reinvestment of distributions 2,086 1,188
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1,102,835 12,927
Less shares repurchased (7,419) (48,144)
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Net Increase (Decrease) 1,095,416 (35,217)
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SEE NOTES TO FINANCIAL STATEMENTS
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John Hancock Funds - Global Bond Fund
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:
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FOR THE PERIOD APRIL 19, 1995 PERIOD FROM MARCH 1, 1998
(COMMENCEMENT OF OPERATIONS) YEAR ENDED FEBRUARY 28, TO FEBRUARY 11, 1999
TO FEBRUARY 29, 1996 1997 1998 (UNAUDITED)
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Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 $ 8.46 $ 8.22 $ 8.16
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Net Investment Income (6) 0.41 0.52 0.48 0.40
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.04) (0.24) (0.03) 0.12
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Total from Investment Operations 0.37 0.28 0.45 0.52
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Less Distribution:
Dividends from Net Investment Income (0.41) (0.35) (0.48) (0.40)
Distributions form Net Realized Gain on
Investments Sold - - (0.03) -
Distributions from Capital Paid-In - (0.17) - -
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Total Distributions (0.41) (0.52) (0.51) (0.40)
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Net Asset Value, End of Period $ 8.46 $ 8.22 $ 8.16 $ 8.28
=================== ========= ========= ====================
Total Investment Return at
Net Asset Value (5) 4.37% (3) 3.39% 5.62% 6.53% (3)
Total Adjusted Investment Return at
Net Asset Value (5,7) (54.55%)(3) (2.93%) 4.30% 6.20% (3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $ 217 $ 1,026 $ 9,960 $ 9,811
Ratio of Expenses to Average Net Assets 0.91% (2) 0.85% 0.85% 0.85% (2)
Ratio of Adjusted Expenses to
Average Net Assets (1,4) 69.15% (2) 7.17% 2.17% 1.20% (2)
Ratio of Net Investment Income to
Average Net Assets 5.91% (2) 6.26% 5.44% 5.12% (2)
Ratio of Adjusted Net Investment
Income (Loss) to Average Net Assets (1,4) (62.33%)(2) (0.06%) 4.12% 4.77% (2)
Portfolio Turnover Rate 129% 119% 123% 90%
Fee Reduction Per Share (6) $ 5.35 $ 0.56 $ 0.11 $ 0.03
(1) Unreimbursed, without fee reduction.
(2) Annualized.
(3) Not annualized.
(4) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
(5) Total investment return assumes dividend reinvestment. (6) Based on the
average of the shares outstanding at the end of each month.
(7) An estimated total return calculation, which does not take into
consideration fee reductions by the Adviser during the periods shown.
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SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
(Unaudited)
NOTE A -
ACCOUNTING POLICIES
John Hancock Institutional Series Trust (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940. The
Trust, organized as a Massachusetts business trust in 1994, consists of twelve
series portfolios: John Hancock Global Bond Fund (the "Fund"), John Hancock
Active Bond Fund, John Hancock Dividend Performers Fund, John Hancock
Multi-Sector Growth Fund, John Hancock Small Capitalization Growth Fund, John
Hancock Small Capitalization Value Fund, John Hancock International Equity Fund,
John Hancock Independence Balanced Fund, John Hancock Independence Value Fund,
John Hancock Independence Diversified Core Equity Fund II, John Hancock
Independence Growth Fund and John Hancock Independence Medium Capitalization
Fund. The other eleven series of the Trust are reported in separate financial
statements. The Fund currently had one class of shares with equal rights as to
voting, redemption, dividends and liquidation. The investment objective of the
Fund was to obtain a competitive total investment return, consisting of current
income and capital appreciation. On February 12, 1999, the Fund's sole remaining
shareholder, John Hancock Advisers, Inc., redeemed their shares and the Fund was
abolished by the Trustees on February 26, 1999.
Significant accounting policies of the Fund were as follows:
VALUATION OF INVESTMENTS Securities in the Fund portfolio were 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
were valued at amortized cost, which approximated market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., participated in a joint repurchase agreement transaction. Aggregate cash
balances were invested in one or more repurchase agreements, whose underlying
securities were obligations of the U.S. government and/or its agencies. The
Fund's custodian bank received delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser was responsible for ensuring
that the agreement was fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions were recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments were determined on the identified cost basis. Capital gains realized
on some foreign securities were subject to foreign taxes and were accrued, as
applicable.
FEDERAL INCOME TAXES The Fund's policy was to comply with the requirements of
the Internal Revenue Code that were applicable to regulated investment companies
and to distribute all of their taxable income, including net realized gain on
investments, to their shareholders. Therefore, no federal income tax provisions
are required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
was recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund identified the dividend. Interest income on
investment securities was recorded on the accrual basis. Foreign income may have
been subjected to foreign withholding taxes, which were accrued as applicable.
The Fund recorded all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions were
determined in conformity with income tax regulations, which could have differed
from generally accepted accounting principles.
DISCOUNT ON SECURITIES The Fund accreted 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.
EXPENSES The majority of the expenses of the Trust were directly identifiable to
an individual fund. Expenses which were not readily identifiable to a specific
fund were allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund were capitalized and were being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund. The remaining balance was expensed during the current
period.
<PAGE>
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporated estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could have differed from these
estimates.
BANK BORROWINGS The Fund was permitted to have bank borrowings for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might have required the untimely disposition of securities. These
agreements enabled the Fund to participate with other funds managed by the
Adviser in unsecured lines of credit with banks, which permitted borrowings up
to $800 million, collectively. Interest was charged to each of the funds based
on its borrowings. In addition, a commitment fee was charged based on the
average daily unused portion of the line of credit and was allocated among the
participating funds. The Fund had no borrowing activity for the period ended
February 11, 1999.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies were 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
were translated at the rates prevailing at the dates of the transactions.
The Fund did 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 were
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, resulting
from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund could have entered into
forward foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involved an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts
were marked to market daily at the applicable foreign currency exchange rates.
Any resulting unrealized gains and losses were included in the determination of
the Fund's daily net assets. The Fund recorded realized gains and losses at the
time the forward foreign currency contract was closed out or offset by a
matching contract. Risks could have arisen upon entering these contracts from
the 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 involved market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund could have also purchased and sold forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under which
it intended to take delivery of the foreign currency. Such contracts normally
involved no market risk if they were offset by the currency amount of the
underlying transaction.
At February 11, 1999, there were no open forward foreign currency exchange
contracts
FINANCIAL FUTURES CONTRACTS The Fund could buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures would have tended to decrease the Fund's
exposure to the underlying instrument or hedge other Fund instruments. At the
time the Fund entered into a financial futures contract, it was 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 was valued at the official settlement price of the board of trade or
U.S. commodities exchange on which it traded. Subsequent payments, known as
"variation margin," to and from the broker were made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, which arose from this "mark to market," were recorded by the
Fund as unrealized gains or losses.
When the contracts were closed, the Fund recognized a gain or loss.
Risks of entering into futures contracts included 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.
<PAGE>
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 February 11, 1999, there were no open positions in financial
futures contracts.
OPTIONS The Fund could have entered into option contracts. Listed options
were valued at the last quoted sales price on the exchange on which they were
primarily traded. Over-the-counter options were valued at the mean between the
last bid and asked prices. Upon the writing of a call or put option, an amount
equal to the premium received by the Funds was included in the Statement of
Assets and Liabilities as an asset and corresponding liability. The amount of
the liability was subsequently marked to market to reflect the current market
value of the written option.
The Fund could use option contracts to manage their exposure to the price
volatility of financial instruments. Writing puts and buying calls would have
tended to increase the Fund's exposure to the underlying instrument and buying
puts and writing calls would have tended to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options would have been
limited to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value would have reflected the
maximum exposure of the Fund in these contracts, but the actual exposure would
have been limited to the change in value of the contract over the period the
contract remains open.
Risks may have also arisen if counterparties did not perform under the
contract's terms ("credit risk") or if the Fund was unable to offset a contract
with a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options had 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 would continuously monitor the creditworthiness of all its
counterparties.
At any particular time, except for purchased options, market or credit risk
could have involved amounts in excess of those reflected in the Fund's
period-end Statement of Assets and Liabilities.
At February 11, 1999, there were no written option transactions.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund paid a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.75% of the first $250,000,000 of the
Fund's average daily net asset value and (b) 0.70% of the Fund's average daily
net asset value in excess of $250,000,000.
Effective September 12, 1995, the Adviser had agreed to limit the
Fund's expenses to the extent required to prevent expenses from exceeding 0.85%
of the Fund's average daily net assets. The Adviser had reserved the right to
terminate this limitation in the future. Accordingly, for the period ended
February 11, 1999, the reduction in the Fund's expenses with any additional
amounts not borne by the Fund by virtue of the expense limit amounted to
$32,555.
The Fund had a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended February
11, 1999, all sales of shares of beneficial interest were sold at net asset
value. The Fund paid all expenses of printing prospectuses and other sales
literature, all fees and expenses in connection with qualification as a dealer
in various states, and all other expenses in connection with the sale and
offering for sale of the shares of the Fund which have not been herein
specifically allocated to the Trust.
The Fund had a transfer agent agreement with John Hancock Signature Services,
Inc. ("Signature Services"), an indirect wholly owned subsidiary of John Hancock
Mutual Life Insurance Company (JHMLICo.) The Fund paid transfer agent fees at an
annual fee accrued daily of 0.05% of its average daily net assets, plus certain
out-of-pocket expenses.
The Fund had an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
<PAGE>
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione were directors and/or officers of the Adviser, and/or
its affiliates as well as Trustees of the Fund. The compensation of unaffiliated
Trustees was borne by the Fund. The unaffiliated Trustees could have elected to
defer for tax purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund made investments into other
John Hancock funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Fund's deferred compensation liability
were recorded on the Fund's books as another asset. The deferred compensation
liability and the related other asset were always equal and are marked to market
on a periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses. At February 11, 1999, the Fund's investment to
cover the deferred compensation had unrealized appreciation of $1.
NOTE C-
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of
the U.S. government and its agencies and short-term securities, during the
period ended February 11, 1999, aggregated $6,568,915 and $7,896,021,
respectively. Purchases and proceeds from sales of obligations of the U.S.
government and its agencies aggregated $1,982,083 and $10,099,203 respectively,
during the period ended February 11, 1999.
NOTE D-
RECLASSIFICATION OF ACCOUNTS
During the period ended February 11, 1999, the Fund had reclassified amounts
to reflect a decrease in accumulated net realized gain on investments of
$195,278, a decrease in distributions in excess of net investment income of
$167,117 and an increase in capital paid-in of $28,161. This represented the
amount necessary to report these balances on a tax basis, excluding certain
temporary differences, as of February 11, 1999. These reclassifications, which
have no impact on the net asset value of the Fund, are primarily attributable to
net realized loss on foreign currency transactions in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles. The calculation of net investment income per
share in the financial highlights excluded these adjustments.
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for the period ended February 11, 1999.
The Fund designated distributions to shareholders of $192,658 as long-term
capital gain dividend.
