ITEM 1. REPORT TO STOCKHOLDERS.
John Hancock
Bond
Fund
ANNUAL
REPORT
5.31.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 20
Trustees & officers
page 35
For your information
page 41
Dear Fellow Shareholders,
After a weak first quarter 2003 due to the stalled economy, rising oil
prices and concerns about corporate earnings and the war in Iraq, the
stock market staged a strong rebound in April and May, with the end of
war and better-than-expected first-quarter corporate earnings. As a
result, the major indexes wiped out their first-quarter losses and wound
up gaining ground year to date through May 31, 2003. The Dow Jones
Industrial Average returned 7.17% and the Standard & Poor's 500 Index
rose 10.34%. A rebound in the distressed technology sector sent the
tech-heavy Nasdaq Composite Index up 19.50%. Bonds, which have
outperformed stocks for the last three years, continued their upward
trend this year, as investors still sought their relative safety and
growing demand pushed bond prices up.
After the jarring stock market losses of the last three years, it's a
relief for investors to be reminded that the market is indeed cyclical,
and does eventually move up -- not just down. But while the stock market
has been making its way back, the ride has been extremely volatile.
Uncertainty still abounds about the strength of the economy,
geopolitical issues, corporate governance problems, rising unemployment
and the sustainability of corporate earnings growth. Even though the
statistics suggest we might be emerging from this long, difficult bear
market, we're not quite ready to call it history.
While no one can predict whether this market upturn can be sustained,
and when the bear market cycle will turn, investors can take charge of
how they maneuver through such uncertain times. First, take a look at
how your portfolio is allocated among stocks, bonds and cash to make
sure it's in the proper balance. Work with your investment professional,
who knows your long-term goals and can help keep you on the right track,
rather than being lured by today's stars, which could wind up tomorrow's
laggards. And as always, keep a long-term investment horizon. We believe
this offers the best way for you to survive the tough times and reach
your investment objectives.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of May 31, 2003. They
are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks a
high level of
current income
consistent with
prudent invest-
ment risk by
investing in a
diversified
portfolio of bonds
and other debt
securities, includ-
ing corporate
bonds and U.S.
government and
agency securities.
Over the last twelve months
* Bonds posted double-digit gains as interest rates declined amid a
sluggish economic environment.
* Corporate bonds were the best performers, followed by Treasury and
mortgage-backed securities.
* The Fund expanded its holdings of mortgage-backed securities and
lower-rated corporate bonds.
[Bar chart with heading "John Hancock Bond Fund." Under the heading is
a note that reads "Fund performance for the year ended May 31, 2003."
The chart is scaled in increments of 7% with 0% at the bottom and 14%
at the top. The first bar represents the 12.26% total return for Class
A. The second bar represents the 11.48% total return for Class B. The
third bar represents the 11.48% total return for Class C. The fourth
bar represents the 12.71 total return for Class I. A note below the
chart reads "Total returns for the Fund are at net asset value with
all distributions reinvested."]
Top 10 issuers
28.7% Federal National Mortgage Association
10.5% United States Treasury
3.1% Financing Corp.
2.6% Federal Home Loan Mortgage Corp.
1.9% Government National Mortgage Association
1.2% Capital One Bank
1.2% General Motors Acceptance Corp.
1.0% Ford Motor Credit Co.
1.0% CSC Holdings, Inc.
0.9% HCA, Inc.
As a percentage of net assets on May 31, 2003.
BY HOWARD C. GREENE, CFA, BARRY H. EVANS, CFA AND BENJAMIN A. MATTHEWS,
PORTFOLIO MANAGERS
John Hancock
Bond Fund
MANAGERS'
REPORT
Interest rates declined sharply during the year ended May 31, 2003,
providing a boost to U.S. bond performance. Bonds posted double-digit
gains thanks to weak economic conditions and heightened uncertainty. The
economy grew sluggish in mid-2002 and continued its sub-par growth into
2003 despite an interest-rate cut by the Federal Reserve in early
November. Growing uncertainty -- initially about fraudulent accounting
practices and later the war with Iraq -- also led many investors to seek
shelter in the relative safety of the bond market.
The "flight to quality" initially benefited Treasury bonds the most and
Treasury yields ended the period at their lowest levels in 45 years. But
corporate bonds proved to be the best performers thanks to strong
returns during the latter half of the period.
"Bonds posted double-
digit gains thanks to
weak economic condi-
tions and heightened
uncertainty."
FUND PERFORMANCE
For the year ended May 31, 2003, John Hancock Bond Fund's Class A, Class
B, Class C and Class I shares posted total returns of 12.26%, 11.48%,
11.48% and 12.71%, respectively, at net asset value. The average A-rated
corporate debt fund returned 11.39% according to Lipper Inc.1, while the
Lehman Brothers Government/Credit Bond Index posted a 14.57% return.
Keep in mind that your net asset value return will be different from the
Fund's performance if you were not invested in the Fund for the entire
period and did not reinvest all distributions. See pages six and seven
for historical performance information.
PORTFOLIO THEMES
There were two key themes in the portfolio during the past year. The
first was an emphasis on higher-yielding securities, such as corporate
and mortgage-backed bonds. In particular, the gap between corporate and
Treasury bond yields reached historically wide levels through the summer
of 2002. We took advantage of the opportunity to capture higher yields
in a declining interest-rate environment.
[Photos of Howard Greene, Barry Evans and Ben Matthews flush right
next to first paragraph.]
The other theme was lowering the overall credit quality of the
portfolio. In part, we were anticipating a recovery in the credit cycle,
which is typically led by lower-rated bonds. But it was also a
relative-value trade -- selling Treasury and high-quality corporate
bonds that had performed well early in the period, and replacing them
with lower-rated corporate bonds that had underperformed.
CORPORATE BONDS BOOST PERFORMANCE
Corporate bonds comprised about half of the portfolio throughout the
past year. This positioning hurt performance early in the period as the
slowing economy and high-profile bankruptcies at WorldCom and Adelphia
boosted demand for Treasury bonds at the expense of corporate
securities.
"Our focus on lower-rated
corporate bonds was a key
contributor to Fund per-
formance, especially since
the beginning of 2003."
By October, however, with Treasury yields at 45-year lows, investors
turned their attention to the corporate bond market in search of higher
yields. In addition, we began to see evidence of better corporate
stewardship. Unlike the late 1990s, when many companies took on heavy
debt loads to finance growth, numerous corporations have been reducing
debt and shoring up their balance sheets in an effort to restore
financial health and investor confidence.
Our focus on lower-rated corporate bonds was a key contributor to Fund
performance, especially since the beginning of 2003. During the past
year, we boosted our holdings of below-investment-grade bonds (also
known as "high-yield" or "junk" bonds) from 11% to 18% of the portfolio.
We also increased our holdings of corporate bonds rated BBB, the lowest
investment-grade rating. These lower-quality bonds have been the
performance leaders in the bond market over the past six months.
[Table at top left-hand side of page entitled "Top five sectors." The
first listing is Government-U.S. agencies 33%, the second is
Government-United States 11%, the third Utilities 8%, the fourth Media
6%, and the fifth Telecommunications 5%.]
Some of the best values we found among lower-rated bonds were in the
beaten-down utilities and telecommunications sectors. Examples include
Nisource Finance Corp., an Indiana-based electricity producer and
pipeline company that successfully reduced leverage by issuing stock,
and Canadian telecom provider Telus, whose bond valuations suffered
after a ratings downgrade in late 2002, but have since recovered.
[Pie chart at middle of page with heading "Portfolio diversification
As a percentage of net assets on 5-31-03." The chart is divided into
four sections (from top to left): Corporate bonds 51%, U.S. government
& agency bonds 44%, Short-term investments & other 4% and Preferred
stocks 1%.]
MORTGAGES STRUGGLE
Another significant change was expanding the Fund's position in
mortgage-backed securities from 14% to 25% of the portfolio. Early in
the period, falling mortgage rates sparked a refinancing boom that
weighed on the performance of mortgage-backed bonds. When rates reached
record lows in late 2002, we added high-quality mortgage-backed
securities to the portfolio at extremely attractive yields.
[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is
Household Finance followed by an up arrow with the phrase "Consumer
lender acquired by HSBC." The second listing is Citizens
Communications followed by an up arrow with the phrase "Rural telecom
provider reduced its debt." The third listing is Corporation Durango
followed by a down arrow with the phrase "Missed an interest payment,
undergoing voluntary restructuring."]
Unfortunately, mortgage rates continued to fall in 2003, triggering two
additional refinancing waves in March and May. As a result, mortgages
didn't perform as well as we anticipated, though their returns were
comparable to that of short-term Treasury bonds. Going forward, however,
mortgage-backed securities should outperform as interest rates stabilize
and refinancing activity eases.
"With the economy stuck
in first gear, we expect
the Fed to...maintain an
accommodative interest-
rate policy..."
OUTLOOK
We see parallels between the current environment and the early 1990s. At
that time, there was an economic downturn, and the U.S. banking system
was in disarray following the savings and loan scandals of the late
'80s. The Federal Reserve cut its federal funds rate sharply, from 9% to
3%, and maintained this relatively low rate for an extended period of
time, allowing banks to rebuild their balance sheets and return to
stability.
Today, the banking system is in good shape, but corporate America in
general has been mired in accounting scandals, economic weakness and
excess debt. With the economy stuck in first gear, we expect the Fed to
repeat its strategy from a decade ago: maintain an accommodative
interest-rate policy until corporations (and consumers) can repair their
balance sheets and wring out excess capacity.
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. The managers'
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT
PERFORMANCE
For the period ended
May 31, 2003
The index used for
comparison is the
Lehman Brothers
Government/Credit
Bond Index, an
unmanaged index that
measures the perfor
mance of U.S.
government bonds,
U.S. corporate bonds,
and Yankee bonds.
It is not possible
to invest directly in
an index.
Class A Class B Class C Class I 1 Index
Inception date 11-9-73 11-23-93 10-1-98 9-4-01 --
Average annual returns with maximum sales charge (POP)
One year 7.23% 6.48% 9.37% 12.71% 14.57%
Five years 5.87% 5.80% -- -- 8.14%
Ten years 6.68% -- -- -- 7.64%
Since inception -- 6.34% 5.36% 8.99% --
Cumulative total returns with maximum sales charge (POP)
One year 7.23% 6.48% 9.37% 12.71% 14.57%
Five years 33.02% 32.59% -- -- 47.89%
Ten years 90.87% -- -- -- 108.78%
Since inception -- 79.56% 27.58% 16.14% --
SEC 30-day yield as of May 31, 2003
3.31% 2.78% 2.75% 3.99% --
Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of
4.5% and Class C shares of 1%, and the applicable contingent deferred
sales charge (CDSC) on Class B and Class C shares. The Class B shares'
CDSC declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the
sixth year. Class C shares held for less than one year are subject to a
1% CDSC. Sales charge is not applicable for Class I shares. The return
and principal value of an investment in the Fund will fluctuate, so that
shares, when redeemed, may be worth more or less than the original cost.
Index figures do not reflect sales charges and would be lower if they
did.
The returns reflect past results and should not be considered indicative
of future performance. The performance table above and the chart on the
next page do not reflect the deduction of taxes that a shareholder would
pay on fund distributions or the redemption of fund shares.
1 For certain types of investors as described in the Fund's prospectus
for Class I shares.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the Lehman Brothers Government/Credit Bond Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents Index 1 and is equal to $20,878
as of May 31, 2003. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Bond Fund,
before sales charge, and is equal to $19,980 as of May 31, 2003. The
third bar represents the same hypothetical $10,000 investment made in
the John Hancock Bond Fund, after sales charge, and is equal to
$19,087 as of May 31, 2003.
Class B 1 Class C 1 Class I 2
Period beginning 11-23-93 10-1-98 9-4-01
Without sales charge $17,956 $12,889 $11,614
With maximum sales charge -- $12,760 --
Index $19,905 $13,949 $11,846
Assuming all distributions were reinvested for the period indicated, the
table above shows the value of a $10,000 investment in the Fund's Class
B, Class C and Class I shares, respectively, as of May 31, 2003.
Performance of the classes will vary based on the difference in sales
charges paid by shareholders investing in the different classes and the
fee structure of those classes.
1 No contingent deferred sales charge applicable.
2 For certain types of investors as described in the Fund's prospectus
for Class I shares.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
May 31, 2003
This schedule is divided into three main categories: bonds, preferred
stocks and short-term investments. Bonds are further broken down by
industry group. Short-term investments, which represent the Fund's cash
position, are listed last.
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
BONDS 94.62% $1,400,299,135
(Cost $1,323,588,817)
Agricultural Operations 0.08% 1,115,964
Bunge Ltd. Finance Corp.,
Note 05-15-13 (R) 5.875% BBB $1,085 1,115,964
Banks -- Foreign 1.39% 20,608,186
Barclays Bank Plc,
Perpetual Bond (6.86% to 06-15-32 then variable)
(United Kingdom) 06-15-49 (R) 6.860 A+ 4,290 5,066,220
Royal Bank of Scotland Group Plc,
Perpetual Bond (7.648% to 09-30-31 then variable)
(United Kingdom) 08-31-49 7.648 A- 5,220 6,781,151
Socgen Real Estate Co. LLC,
Perpetual Bond Ser A (7.64% to 09-30-07
then variable) 12-29-49 (R) 7.640 A 7,565 8,760,815
Banks -- United States 2.13% 31,509,836
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 5,775 6,774,416
Capital One Bank,
Sr Note 07-30-04 6.500 BBB- 7,000 7,227,346
Sr Note 06-15-05 8.250 BBB- 3,000 3,257,964
Sr Note 02-01-06 + 6.875 BBB- 2,535 2,708,473
Colonial Bank,
Sub Note 06-01-11 9.375 BBB- 1,480 1,705,037
J.P. Morgan Chase & Co.,
Sub Note 03-15-12 6.625 A 4,970 5,743,019
Zions Financial Corp.,
Gtd Note (6.95% to 05-15-06 then variable) 05-15-11 6.950 BBB- 3,820 4,093,581
Building 0.21% 3,105,326
Lennar Corp.,
Gtd Sr Note Ser B 05-01-10 9.950 BBB- 2,615 3,105,326
Business Services -- Misc. 0.87% 12,913,972
Cendant Corp.,
Note 08-15-06 + 6.875 BBB 6,855 7,622,136
Sr Note 01-15-08 + 6.250 BBB 3,755 4,128,461
Muzak LLC/Muzak Finance Corp.,
Sr Note 02-15-09 (R) + 10.000 B 1,135 1,163,375
Chemicals 0.56% 8,308,262
Lyondell Chemical Co.,
Gtd Sr Note 12-15-08 + 9.500 BB 1,660 1,589,450
Sr Sec Note 12-15-08 (R) 9.500 BB 775 742,062
Nova Chemicals Corp.,
Sr Note (Canada) 05-15-06 + 7.000 BB+ 4,400 4,620,000
Rhodia S.A.,
Sr Sub Note (France) 06-01-11 (R) 8.875 BB- 1,350 1,356,750
Commercial Services 0.05% 763,250
Coinmach Corp.,
Sr Note 02-01-10 9.000 B 710 763,250
Computers 0.30% 4,497,280
NCR Corp.,
Note 06-15-09 7.125 BBB- 3,175 3,493,030
Unisys Corp.,
Sr Note 03-15-10 6.875 BB+ 975 1,004,250
Containers 0.56% 8,364,937
BWAY Corp.,
Sr Sub Note 10-15-10 (R) 10.000 B- 1,460 1,503,800
Owens-Brockway Glass Container, Inc.,
Gtd Sr Sec Note 11-15-12 8.750 BB 2,365 2,515,769
Sr Note 05-15-13 (R) 8.250 B+ 1,015 1,025,150
Sealed Air Corp.,
Sr Note 04-15-08 (R) 5.375 BBB 3,160 3,320,218
Diversified Operations 0.63% 9,298,461
Brascan Corp.,
Note (Canada) 03-01-10 5.750 A- 2,815 3,023,879
General Electric Co.,
Note 02-01-13 5.000 AAA 5,875 6,274,582
Energy 0.39% 5,725,593
MidAmerican Energy Holdings,
Sr Bond 09-15-28 8.480 BBB- 4,290 5,725,593
Finance 3.15% 46,591,088
Ford Motor Credit Co.,
Note 02-01-06 6.875 BBB 5,735 6,030,215
Note 10-28-09 7.375 BBB 7,975 8,304,471
General Electric Capital Corp.,
Note Ser A 03-15-32 6.750 AAA 2,620 3,137,746
General Motors Acceptance Corp.,
Note 01-19-10 7.750 BBB 4,855 5,314,040
Note 08-28-12 + 6.875 BBB 3,705 3,836,920
Household Finance Corp.,
Note 05-15-11 6.750 A 7,760 9,033,982
Humpuss Funding Corp.,
Gtd Note 12-15-09 (R) 7.720 B3 2,382 1,905,846
Morgan Stanley,
Note 05-15-10 + 4.250 A+ 3,515 3,644,264
Newcourt Credit Group,
Gtd Note Ser B (Canada) 02-16-05 6.875 A 3,480 3,727,365
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04 (R) 8.400 BBB- 1,644 1,656,239
Finance -- Consumer Loans 0.77% 11,383,143
Bank One Issuance Trust,
Pass Thru Ctf Ser 2003-C1 Class C1 09-15-10 4.540 BBB 3,095 3,220,581
Capital One Master Trust,
Sub Bond Ser 2000-3 Class C 10-15-10 7.900 BBB 3,885 4,164,254
Citibank Credit Card Issuance Trust,
Pass Thru Ctf Ser 2003-C3 Class C3 04-07-10 4.450 BBB 3,870 3,998,308
Food 0.95% 14,098,251
Corn Productions International, Inc.,
Sr Note 08-15-09 8.450 BBB- 6,115 6,757,075
Del Monte Corp.,
Sr Sub Note 12-15-12 (R) 8.625 B 2,430 2,578,837
General Foods Corp.,
Deb 06-15-11 7.000 A- 1,145 1,147,617
Kraft Foods, Inc.,
Note 11-01-11 5.625 BBB+ 3,315 3,614,722
Government -- Foreign 0.75% 11,099,122
Colombia, Republic of,
Bond (Colombia) 01-28-33 10.375 BB 1,645 1,887,637
Gtd Bond (Colombia) 04-09-11 + 9.750 BB+ 2,400 2,707,735
Panama, Republic of,
Bond (Panama) 01-16-23 + 9.375 BB 3,025 3,418,250
Peru, Republic of,
Note (Peru) 01-15-08 9.125 BB- 2,805 3,085,500
Government -- International Agencies 0.65% 9,601,014
Corporacion Andina de Fomento,
Note (Supra National) 05-21-13 5.200 A 2,440 2,479,794
International Bank for Reconstruction & Development,
Deb (Supra National) 09-01-16 8.250 AAA 5,000 7,121,220
Government -- U.S. 10.54% 156,022,804
United States Treasury,
Bond 08-15-17 + 8.875 AAA 25,469 39,194,397
Bond 05-15-18 + 9.125 AAA 4,670 7,369,115
Bond 02-15-31 + 5.375 AAA 71,065 82,568,647
Note 02-15-08 + 3.000 AAA 70 72,527
Note 08-15-09 + 6.000 AAA 8,805 10,485,857
Note 02-15-13 + 3.875 AAA 14,925 15,585,551
Note 05-15-13 + 3.625 AAA 730 746,710
Government -- U.S. Agencies 33.28% 492,538,440
Federal Home Loan Mortgage Corp.,
15 Yr Pass Thru Ctf 06-01-18** 5.000 AAA 17,805 18,411,474
20 Yr Pass Thru Ctf 01-01-16 11.250 AAA 198 223,395
Pass Thru Ctf Ser 2496 Class PE 07-15-31 5.500 AAA 5,425 5,842,178
Pass Thru Ctf Ser 2563 Class PA 03-15-31 4.250 AAA 10,183 10,394,652
Note 09-15-05 2.875 AAA 3,285 3,383,327
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 02-01-08 7.500 AAA 344 366,340
15 Yr Pass Thru Ctf 09-01-10 to 06-01-17 7.000 AAA 3,719 3,961,810
15 Yr Pass Thru Ctf 02-01-18 5.500 AAA 28,471 29,571,291
15 Yr Pass Thru Ctf 06-01-18** 4.500 AAA 12,785 13,104,625
15 Yr Pass Thru Ctf 06-01-18** 5.000 AAA 37,270 38,609,409
30 Yr Pass Thru Ctf 02-01-33 6.500 AAA 14,010 14,600,876
30 Yr Pass Thru Ctf 02-01-33 to 06-01-33** 6.000 AAA 151,579 157,420,990
30 Yr Pass Thru Ctf 06-01-33** 5.500 AAA 77,060 79,901,588
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 6.940 AAA 2,486 2,581,718
Pass Thru Ctf Ser 2002-73 Class PE 10-25-31 5.500 AAA 13,048 13,995,891
Pass Thru Ctf Ser 2003-16 Class PD 10-25-16 5.000 AAA 10,690 11,452,913
Pass Thru Ctf Ser 2003-17 Class QT 08-25-27 5.000 AAA 13,365 14,054,133
Financing Corp.,
Bond 02-08-18 9.400 AAA 23,500 36,498,696
Bond 08-03-18 10.350 AAA 6,045 10,088,307
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 01-15-16 10.500 AAA 50 58,328
30 Yr Pass Thru Ctf 07-15-16 to 01-15-25 9.000 AAA 2,000 2,228,749
30 Yr Pass Thru Ctf 11-15-19 to 05-15-21 9.500 AAA 694 782,390
30 Yr Pass Thru Ctf 06-15-20 to 03-15-25 10.000 AAA 204 236,081
30 Yr Pass Thru Ctf 09-15-28 6.500 AAA 2,500 2,624,405
30 Yr Pass Thru Ctf 06-01-32 to 03-15-33** 6.000 AAA 21,143 22,144,874
Insurance 2.50% 36,959,751
CIGNA Corp.,
Sr Note 10-15-11 6.375 BBB+ 3,235 3,641,730
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) 6.950 A 3,725 4,166,882
Fund American Cos., Inc.,
Note 05-15-13 5.875 BBB- 2,715 2,834,775
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 3,985 5,039,722
MONY Group, Inc. (The),
Sr Note 12-15-05 7.450 BBB+ 3,965 4,108,676
New York Life Insurance Co.,
Note 05-15-33 (R) 5.875 AA- 7,860 8,316,194
Travelers Property Casualty Corp.,
Sr Note 03-15-13 5.000 A- 2,270 2,397,479
UnumProvident Corp.,
Sr Note 03-01-11 7.625 BBB- 2,695 2,814,844
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 AA 3,120 3,639,449
Leisure 1.47% 21,709,065
Argosy Gaming Co.,
Sr Sub Note 09-01-11 + 9.000 B+ 1,880 2,021,000
Harrah's Operating Co., Inc.,
Gtd Sr Sub Note 12-15-05 7.875 BB+ 6,110 6,537,700
HMH Properties, Inc.,
Gtd Sr Sec Note Ser A 08-01-05 + 7.875 B+ 2,800 2,856,000
Hyatt Equities LLC,
Note 06-15-07 (R) 6.875 BBB 5,105 5,340,565
MTR Gaming Group, Inc.,
Gtd Sr Note 04-01-10 (R) 9.750 B+ 1,400 1,452,500
Trump Hotels & Casino Resorts Holdings, L.P./Trump
Funding, Inc.,
1st Mtg Note 03-15-10 (R) 11.625 B- 1,910 1,757,200
Waterford Gaming LLC/Waterford Gaming
Finance Corp.,
Sr Note 03-15-10 (R) 9.500 B+ 1,630 1,744,100
Machinery 0.28% 4,103,463
Kennametal, Inc.,
Sr Note 06-15-12 7.200 BBB 3,715 4,103,463
Media 5.86% 86,787,591
AT&T Broadband Corp.,
Gtd Note 03-15-13 8.375 BBB 5,072 6,377,472
British Sky Broadcasting Group Plc,
Gtd Sr Note (United Kingdom) 07-15-09 8.200 BB+ 6,195 7,232,662
Charter Communications Holdings LLC/Charter
Communications Capital Corp.,
Sr Note 10-01-09 10.750 CCC- 2,500 1,825,000
Clear Channel Communications, Inc.,
Gtd Sr Sub Note 11-01-08 8.000 BBB- 5,150 6,012,625
Continental Cablevision, Inc.,
Sr Deb 08-01-13 9.500 BBB 3,280 3,942,455
Sr Note 05-15-06 8.300 BBB 2,110 2,414,465
Cox Communications, Inc.,
Note 08-15-04 7.500 BBB 5,530 5,878,169
CSC Holdings, Inc.,
Sr Sub Deb 05-15-16 + 10.500 B+ 2,350 2,614,375
EchoStar DBS Corp.,
Sr Note 02-01-09 + 9.375 BB- 2,830 3,031,637
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 2,495 2,557,375
Grupo Televisa S.A.,
Note (Mexico) 09-13-11 + 8.000 BBB- 2,905 3,253,600
Innova S. de R.L.,
Sr Note (Mexico) 04-01-07 12.875 B- 1,340 1,353,400
Lenfest Communications, Inc.,
Sr Note 11-01-05 8.375 BBB 5,920 6,652,997
Liberty Media Corp.,
Note 05-15-13 5.700 BBB- 3,050 3,188,385
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 4,400 5,693,090
Rogers Cablesystems, Ltd.,
Sr Note Ser B (Canada) 03-15-05 10.000 BBB- 4,880 5,221,600
Shaw Communications, Inc.,
Sr Note (Canada) 04-11-10 8.250 BB+ 2,110 2,289,350
TCI Communications, Inc.,
Sr Deb 02-01-12 9.800 BBB 2,550 3,366,775
Tele-Communications, Inc.,
Sr Deb 04-15-22 10.125 BBB 2,675 3,809,853
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB+ 6,806 8,627,306
XM Satellite Radio, Inc.,
Sr Sec Disc Note (Zero to 12-31-05 then
14.00%) 12-31-09 (A) Zero Caa1 2,000 1,445,000
Medical 1.10% 16,282,643
HCA, Inc.,
Note 12-15-14 9.000 BBB- 3,182 3,911,146
Sr Note 09-01-10 8.750 BBB- 7,785 9,188,231
Quest Diagnostics, Inc.,
Gtd Sr Note 07-12-06 6.750 BBB 2,835 3,183,266
Metal 0.90% 13,251,859
Freeport-McMoRan Copper & Gold, Inc.,
Sr Note 02-01-10 (R) 10.125 B- 2,065 2,289,052
Great Central Mines, Ltd.,
Sr Note (Australia) 04-01-08 8.875 CC 1,990 1,124,350
Inco, Ltd.,
Bond (Canada) 09-15-32 7.200 BBB- 3,915 4,552,769
Noranda, Inc.,
Note (Canada) 02-15-11 8.375 BBB- 1,415 1,614,683
Timken Co.,
Note 02-15-10 + 5.750 BBB- 3,460 3,671,005
Mortgage Banking 2.81% 41,584,350
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 06-15-31 6.790 Aaa 4,314 4,794,524
Conseco Finance Securitizations Corp.,
Pass Thru Ctf Ser 2002-A Class A-3 04-15-32 5.330 AAA 7,110 7,233,350
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 8.100 AAA 1,868 1,866,872
Credit Suisse First Boston Mortgage Securities Corp.,
Comm Mtg Pass Thru Ctf Ser 1998-C1
Class A-1A 05-17-40 6.260 AAA 6,393 6,857,976
Deutsche Mortgage & Asset Receiving Corp.,
Comm Mtg Pass Thru Ctf Ser 1998-C1
Class C 06-15-31 6.861 A2 3,585 4,105,279
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1998-C1 Class A-1 05-15-30 6.411 Aaa 7,668 8,145,224
MBNA Master Credit Card Trust,
Sub Bond Ser 1999-B Class C 08-15-11 6.650 BBB 1,985 2,183,874
Morgan Stanley Dean Witter Capital I Trust,
Pass Thru Ctf Ser 2001-IQA Class A-1 12-18-32 4.570 Aaa 6,074 6,397,251
Oil & Gas 3.21% 47,501,131
Alberta Energy Co., Ltd.,
Note (Canada) 09-15-30 8.125 A- 2,860 3,995,938
Note (Canada) 11-01-31 7.375 A- 2,910 3,759,272
Enterprise Products Partners L.P.,
Note 03-01-33 (R) 6.875 BBB 7,975 9,094,722
Kinder Morgan, Inc.,
Sr Note 09-01-12 6.500 BBB 2,700 3,106,588
Louis Dreyfus Natural Gas Corp.,
Note 12-01-07 6.875 BBB+ 2,695 3,055,642
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB 1,925 2,579,702
PDVSA Finance, Ltd.,
Note (Cayman Islands) 11-16-12 8.500 B- 3,315 2,900,625
Pemex Project Funding Master Trust,
Gtd Note (Mexico) 10-13-10 9.125 BBB- 9,250 11,296,562
Tosco Corp.,
Note 02-15-30 8.125 A- 4,250 5,854,175
Valero Energy Corp.,
Note 06-15-05 8.375 BBB 1,700 1,857,905
Paper & Paper Products 1.59% 23,528,168
Abitibi-Consolidated, Inc.,
Bond (Canada) 08-01-10 + 8.550 BB+ 9,110 10,386,675
Corporacion Durango S.A. de C.V.,
Sr Note (Mexico) 07-15-09 (R) *** 13.750 D 5,750 2,357,500
MDP Acquisitions Plc,
Sr Note (Ireland) 10-01-12 (R) 9.625 B 805 866,381
Sr Note (Ireland) 10-01-12 9.625 B 2,050 2,206,312
Stone Container Corp.,
Sr Note 02-01-11 9.750 B 2,280 2,473,800
Sr Note 07-01-12 8.375 B 5,000 5,237,500
Real Estate Investment Trusts 0.41% 6,132,810
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB+ 2,380 2,690,619
Healthcare Realty Trust, Inc.,
Sr Note 05-01-11 8.125 BBB- 1,450 1,624,322
iStar Financial, Inc.,
Sr Note 03-15-08 7.000 BB+ 1,725 1,817,869
Retail 0.88% 13,029,962
Delhaize America, Inc.,
Gtd Note 04-15-06 7.375 BB+ 3,095 3,265,225
Food Lion, Inc.,
Note 08-30-06 8.730 BB+ 2,500 2,606,250
Gap, Inc. (The),
Note 12-15-08 + 10.550 BB+ 1,500 1,792,500
Penney (J.C.) Co., Inc.,
Note 03-01-10 8.000 BB+ 2,215 2,264,838
Toys "R" Us, Inc.,
Note 04-15-13 7.875 BBB- 2,950 3,101,149
Revenue Bonds 0.44% 6,554,380
Golden State Tobacco Securitization Corp.,
Rev Ser 2003-A-1 06-01-39 6.750 A- 7,000 6,554,380
Telecommunications 4.77% 70,539,842
AT&T Wireless Services, Inc.,
Sr Note 03-01-11 7.875 BBB 4,880 5,787,485
Citizens Communications Co.,
Note 05-15-06 + 8.500 BBB 6,450 7,479,962
Sr Note 08-15-04 6.375 BBB 2,650 2,776,850
Deutsche Telekom International Finance B.V.,
Gtd Note (Netherlands) 06-15-10 8.000 BBB+ 6,415 7,906,699
France Telecom S.A.,
Note (France) 03-01-11 7.750 BBB 6,055 7,572,256
Mobile Telesystems Finance S.A.,
Gtd Sr Note (Luxembourg) 01-30-08 (R) 9.750 B+ 1,625 1,771,250
Nextel Communications, Inc.,
Sr Note 11-15-09 + 9.375 B 3,295 3,533,887
PanAmSat Corp.,
Gtd Sr Note 02-01-12 8.500 B- 1,595 1,706,650
PTC International Finance B.V.,
Gtd Sr Sub Disc Note (Netherlands) 07-01-07 10.750 BB- 1,790 1,870,550
PTC International Finance II S.A.,
Gtd Sr Sub Note (Luxembourg) 12-01-09 11.250 BB- 1,110 1,221,000
Qwest Corp.,
Note 03-15-12 (R) + 8.875 B- 4,990 5,588,800
Sprint Capital Corp.,
Gtd Sr Note 11-15-08 6.125 BBB- 4,290 4,533,415
Telefonos de Mexico S.A. de C.V.,
Sr Note (Mexico) 01-26-06 + 8.250 BBB- 5,620 6,273,325
Telus Corp.,
Note (Canada) 06-01-11 8.000 BBB 8,290 9,502,413
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 BBB+ 2,645 3,015,300
Transportation 1.38% 20,351,333
Avis Group Holdings, Inc.,
Gtd Sr Sub Note 05-01-09 11.000 BBB- 2,065 2,310,219
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 A- 2,517 2,324,631
ERAC USA Finance Co.,
Note 06-15-08 (R) 7.350 BBB+ 2,635 3,085,055
Note 12-15-09 (R) 7.950 BBB+ 2,720 3,253,506
Hertz Corp.,
Sr Note 07-01-04 7.000 BBB 880 901,407
Sr Note 06-01-12 7.625 BBB 3,125 3,213,853
Jet Equipment Trust,
Equipment Trust Ctf Ser 95B2 08-15-14 (B) (R) 10.910 CC 5,800 396,314
Northwest Airlines, Inc.,
Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 B 713 427,853
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 B+ 2,999 1,529,695
TFM S.A. de C.V.,
Gtd Sr Disc Note (Mexico) 06-15-09 11.750 B+ 2,880 2,908,800
Utilities 7.78% 115,101,694
AES Eastern Energy,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 BB+ 3,715 3,810,884
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BBB- 3,969 4,668,544
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BBB- 6,607 8,042,833
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BBB 10,255 10,355,130
Dominion Resources, Inc.,
Sr Note 03-15-33 6.300 BBB+ 2,265 2,447,493
DPL, Inc.,
Sr Note 09-01-11 6.875 BBB- 3,800 4,116,152
East Coast Power LLC,
Sr Sec Note Ser B 03-31-12 7.066 BB+ 3,062 3,085,407
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 2,672 2,805,255
Illinois Power Co.,
Mtg Bond 07-15-25 7.500 B 1,885 1,625,812
IPALCO Enterprises, Inc.,
Sr Sec Note 11-14-11 7.625 BB- 3,000 3,195,000
Kansas Gas & Electric Co.,
1st Mtg Bond 08-01-05 6.500 BB+ 1,450 1,520,687
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB- 8,905 9,595,137
Deb Ser B 07-23-06 13.250 BB- 2,075 2,349,937
Niagara Mohawk Power Corp.,
Sec Fac Deb Bond 01-01-18 8.770 A 6,651 6,921,649
NorAm Energy Corp.,
Deb 02-01-08 6.500 BBB 6,065 6,600,206
Oklahoma Gas & Electric Co.,
Sr Sec Note 07-15-27 6.650 BBB+ 6,385 7,129,893
Pinnacle Partners,
Sr Note 08-15-04 (R) 8.830 BB+ 5,560 5,754,600
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BBB- 4,135 5,235,944
PSEG Energy Holdings, Inc.,
Note 04-16-07 (R) 7.750 BBB- 2,060 2,188,750
Salton Sea Funding Corp.,
Sr Sec Note Ser B 05-30-05 7.370 BB 6,973 6,990,675
Sr Sec Note Ser C 05-30-10 7.840 BB 2,340 2,334,150
Southern California Edison Co.,
1st Ref Mtg Bond 02-15-07 (R) 8.000 BB 5,495 5,962,075
Tiers-MIR-2001-14,
Coll Trust 06-15-04 (R) + 7.200 CCC 2,940 2,197,650
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 8.090 BBB- 5,560 6,167,831
Utilities -- Foreign 1.60% 23,748,770
Calpine Canada Energy Finance ULC,
Gtd Sr Note (Canada) 05-01-08 8.500 CCC+ 1,570 1,091,150
Empresa Electrica Guacolda S.A.,
Sr Sec Note (Chile) 04-30-13 (R) 8.625 BBB- 2,370 2,486,239
Empresa Nacional de Electricidad S.A.,
Note (Chile) 07-15-08 7.750 BBB- 2,000 2,069,384
HQI Transelect Chile S.A.,
Sr Note (Chile) 04-15-11 7.875 A- 7,280 8,446,715
Hydro-Quebec,
Gtd Deb Ser FU (Canada) 02-01-12 11.750 A+ 5,000 7,924,645
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) 9.625 BBB- 1,439 1,730,637
Waste Disposal Service & Equip. 0.38% 5,587,394
Allied Waste North America, Inc.,
Gtd Sr Sub Note Ser B 08-01-09 + 10.000 B+ 5,315 5,587,394
ISSUER, DESCRIPTION SHARES
PREFERRED STOCKS 1.27% $18,748,336
(Cost $18,262,702)
CSC Holdings, Inc., 11.125%, Ser M 77,778 8,108,356
CSC Holdings, Inc., 11.75%, Ser H *** 33,660 3,517,470
Dominion Resources, Inc., 9.50%, Conv 67,760 3,947,020
Nextel Communications, Inc., 11.125%, Ser E 3,083 3,175,490
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 21.42% $316,974,832
(Cost $316,543,556)
Government -- U.S. Agencies 3.38% 49,994,900
Federal National Mortgage Assn,
Disc Note Ser BB 06-05-03 Zero AAA $50,000 49,994,900
Insurance 0.11% 1,637,091
Markel Corp.,
Note 11-01-03 7.250% BBB- 1,610 1,637,091
Joint Repurchase Agreement 16.41% 242,855,000
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 05-30-03, due 06-02-03 (Secured by
U.S. Treasury Bond, 8.000% due 11-15-21 and
U.S. Treasury Inflation Indexed Bonds, 3.625%
thru 3.875%, due 04-15-28 thru 04-15-29) 1.270 242,855 242,855,000
Real Estate Investment Trusts 0.30% 4,419,112
Camden Property Trust,
Sr Note 04-15-04 7.000 BBB 4,250 4,419,112
Utilities 1.22% 18,068,729
AEP Resources, Inc.,
Sr Note 12-01-03 (R) 6.500 BBB 3,700 3,770,318
CMS Energy Corp.,
Sr Note Ser B 01-15-04 6.750 B+ 3,610 3,600,975
Nisource Finance Corp.,
Gtd Sr Note 11-15-03 7.500 BBB 8,202 8,378,236
PSEG Energy Holdings, Inc.,
Sr Note 02-10-04 + 9.125 BBB- 2,230 2,319,200
TOTAL INVESTMENTS 117.31% $1,736,022,303
OTHER ASSETS AND LIABILITIES, NET (17.31%) ($256,126,808)
TOTAL NET ASSETS 100.00% $1,479,895,495
Notes to Schedule of Investments
+ All or a portion of this security is on loan on May 31, 2003.
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, LLC,
where Standard & Poor's ratings are not available.
** A portion of these securities having an aggregate value of
$294,760,333, or 19.92% of the Fund's net assets, has been purchased as
forward commitments -- that is, the Fund has agreed on trade date to
take delivery of and to make payment for this security on a delayed
basis subsequent to the date of this schedule. The purchase price and
interest rate of these securities are fixed at trade date, although the
Fund does not earn any interest on these securities until settlement
date. The Fund has segregated assets with a current value at least
equal to the amount of the forward commitments. Accordingly, the market
value of $300,724,930 of Calpine Canada Energy Finance ULC, 8.500%,
05-01-08; Cleveland Electric Illuminating Co., 9.500%, 05-15-05;
Enterprise Products Partners L.P., 6.875%, 03-01-33; Federal Home Loan
Mortgage Corp., 4.250%, 03-15-31; Federal National Mortgage Assn.,
Zero, 06-05-03; Federal National Mortgage Assn., 6.500%, 02-01-33;
Federal National Mortgage Assn., 5.500%, 02-01-18; Federal National
Mortgage Assn., 5.500%, 10-25-31; Federal National Mortgage Assn.,
5.000%, 10-25-16; Federal National Mortgage Assn., 5.000%, 08-25-27;
Federal National Mortgage Assn., 6.000%, 03-01-33; Financing Corp.,
9.400%, 02-08-18; Financing Corp., 10.350%, 08-03-18; Government
National Mortgage Assn., 6.000%, 03-15-33; HCA, Inc., 8.750%, 09-01-10;
Household Finance Corp., 6.750%, 09-01-10; Innova S. de R.L., 12.875%,
04-01-07; Midland Funding Corp. II, 11.750%, 07-23-05; Pemex Project
Funding Master Trust, 9.125%, 10-13-10; Socgen Real Estate Co. LLC,
7.640%, 12-31-49; Telus Corp., 8.000%, 06-01-11 and Unisys Corp.,
6.875%, 03-15-10 has been segregated to cover the forward commitments.
*** Non-income-producing security.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income-producing issuer filed for protection under Federal
Bankruptcy Code or is in default of interest payment.
(R) These securities 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 securities amounted to $121,219,153 or 8.19% of
net assets as of May 31, 2003.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S.-dollar-denominated.
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.
ASSETS AND
LIABILITIES
May 31, 2003
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $1,415,540,075)
including $214,474,863 of securities loaned $1,493,167,303
Joint repurchase agreement (cost $242,855,000) 242,855,000
Cash 158,781
Receivable for investments sold 29,659,896
Receivable for shares sold 153,970
Dividends and interest receivable 18,997,089
Other assets 122,615
Total assets 1,785,114,654
LIABILITIES
Payable for investments purchased 302,767,321
Payable for shares repurchased 770,983
Dividends payable 329,594
Payable to affiliates
Management fee 566,157
Distribution and service fee 139,371
Other 368,631
Other payables and accrued expenses 277,102
Total liabilities 305,219,159
NET ASSETS
Capital paid-in 1,433,275,598
Accumulated net realized loss on investments (30,586,774)
Net unrealized appreciation of investments 77,627,228
Distributions in excess of net investment income (420,557)
Net assets $1,479,895,495
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($1,192,230,276 [DIV] 75,989,984 shares) $15.69
Class B ($232,893,020 [DIV] 14,844,041 shares) $15.69
Class C ($45,384,410 [DIV] 2,892,760 shares) $15.69
Class I ($9,387,789 [DIV] 598,397 shares) $15.69
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($15.69 [DIV] 95.5%) $16.43
Class C ($15.69 [DIV] 99%) $15.85
1 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.
See notes to
financial statements.
OPERATIONS
For the year ended
May 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Interest (including securities lending income of $401,621
and net of foreign withholding taxes of $5,665) $83,058,057
Dividends 2,615,183
Total investment income 85,673,240
EXPENSES
Investment management fee 7,177,130
Class A distribution and service fee 3,436,647
Class B distribution and service fee 2,358,278
Class C distribution and service fee 456,802
Class A, B and C transfer agent fee 3,346,443
Class I transfer agent fee 11,314
Accounting and legal services fee 483,783
Custodian fee 308,318
Registration and filing fee 97,561
Trustees' fee 90,147
Printing 85,938
Miscellaneous 82,262
Auditing fee 47,300
Legal fee 12,588
Interest expense 11,148
Total expenses 18,005,659
Net investment income 67,667,581
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 37,149,906
Change in unrealized appreciation (depreciation)
of investments 60,407,234
Net realized and unrealized gain 97,557,140
Increase in net assets from operations $165,224,721
See notes to
financial statements.
CHANGES IN
NET ASSETS
This 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, if
any, paid to
shareholders and
any increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
5-31-02 1 5-31-03
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income $76,566,258 $67,667,581
Net realized gain (loss) (2,029,586) 37,149,906
Change in net unrealized
appreciation (depreciation) 6,556,254 60,407,234
Increase in net assets
resulting from operations 81,092,926 165,224,721
Distributions to shareholders
From net investment income
Class A (66,846,281) (58,775,529)
Class B (12,081,364) (10,462,357)
Class C (1,858,217) (2,024,816)
Class I 2 (465) (461,750)
(80,786,327) (71,724,452)
From Fund share transactions 38,414,077 (36,619,370)
NET ASSETS
Beginning of period 1,384,293,920 1,423,014,596
End of period 3 $1,423,014,596 $1,479,895,495
1 Audited by previous auditor.
2 Class I shares began operations on 9-4-01.
3 Includes distributions in excess of net investment income of $145,440
and $420,557, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 5-31-99 1 5-31-00 1 5-31-01 1 5-31-02 1,2 5-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $15.25 $14.76 $13.93 $14.69 $14.71
Net investment income 3 0.97 0.96 0.92 0.82 0.72
Net realized and unrealized
gain (loss) on investments (0.49) (0.83) 0.76 0.06 1.02
Total from
investment operations 0.48 0.13 1.68 0.88 1.74
Less distributions
From net investment income (0.97) (0.96) (0.92) (0.86) (0.76)
Net asset value,
end of period $14.76 $13.93 $14.69 $14.71 $15.69
Total return 4 (%) 3.11 0.97 12.38 6.10 12.26
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1,279 $1,098 $1,140 $1,144 $1,192
Ratio of expenses
to average net assets (%) 1.07 1.11 1.12 1.11 1.12
Ratio of net investment
income to average net assets (%) 6.35 6.69 6.38 5.51 4.84
Portfolio turnover (%) 228 162 235 189 273
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 5-31-99 1 5-31-00 1 5-31-01 1 5-31-02 1,2 5-31-03
Net asset value,
beginning of period $15.25 $14.76 $13.93 $14.69 $14.71
Net investment income 3 0.86 0.86 0.83 0.72 0.62
Net realized and unrealized
gain (loss) on investments (0.49) (0.83) 0.76 0.06 1.02
Total from
investment operations 0.37 0.03 1.59 0.78 1.64
Less distributions
From net investment income (0.86) (0.86) (0.83) (0.76) (0.66)
Net asset value,
end of period $14.76 $13.93 $14.69 $14.71 $15.69
Total return 4 (%) 2.39 0.27 11.64 5.37 11.48
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $239 $197 $218 $236 $233
Ratio of expenses
to average net assets (%) 1.77 1.81 1.78 1.81 1.82
Ratio of net investment
income to average net assets (%) 5.65 6.00 5.71 4.81 4.15
Portfolio turnover (%) 228 162 235 189 273
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 5-31-99 1,5 5-31-00 1 5-31-01 1 5-31-02 1,2 5-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $15.61 $14.76 $13.93 $14.69 $14.71
Net investment income 3 0.55 0.85 0.82 0.72 0.62
Net realized and unrealized
gain (loss) on investments (0.85) (0.83) 0.76 0.06 1.02
Total from
investment operations (0.30) 0.02 1.58 0.78 1.64
Less distributions
From net investment income (0.55) (0.85) (0.82) (0.76) (0.66)
Net asset value,
end of period $14.76 $13.93 $14.69 $14.71 $15.69
Total return 4 (%) 1.95 6 0.28 11.60 5.36 11.48
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $21 $24 $26 $44 $45
Ratio of expenses
to average net assets (%) 1.77 7 1.80 1.82 1.81 1.82
Ratio of net investment
income to average net assets (%) 5.65 7 6.01 5.66 4.81 4.15
Portfolio turnover (%) 228 162 235 189 273
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 5-31-02 1,2,5 5-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $14.96 $14.71
Net investment income 3 0.66 0.78
Net realized and unrealized
gain (loss) on investments (0.21) 1.02
Total from
investment operations 0.45 1.80
Less distributions
From net investment income (0.70) (0.82)
Net asset value,
end of period $14.71 $15.69
Total return 4 (%) 3.04 6 12.71
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 8 $9
Ratio of expenses
to average net assets (%) 0.68 7 0.72
Ratio of net investment income
to average net assets (%) 5.94 7 5.23
Portfolio turnover (%) 189 273
1 Audited by previous auditor.
2 As required, effective June 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies, as revised, relating to the amortization of premiums and
accretion of discounts on debt securities. The effect of this change on
per share amounts for the year ended May 31, 2002, was to decrease net
investment income per share by $0.04, increase (decrease) net realized
and unrealized gains (losses) per share by $0.04 and, had the Fund not
made these changes to amortization and accretion, the annualized ratio
of net investment income to average net assets would have been 5.81%,
5.11%, 5.09% and 6.24% for Class A, Class B, Class C and Class I shares,
respectively. Per share ratios and supplemental data for periods prior
to June 1, 2001, have not been restated to reflect this change in
presentation.
3 Based on the average of the shares outstanding.
4 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
5 Class C shares and Class I shares began operations on 10-1-98 and
9-4-01, respectively.
6 Not annualized.
7 Annualized.
8 Less than $500,000.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Bond Fund (the "Fund") is a diversified series of John
Hancock Sovereign Bond Fund, an open-end management investment company
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to generate a high level of current income,
consistent with prudent investment risk.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B, Class C and Class I shares.
The shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class that bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost, which approximates market value.
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, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
LLC, may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the Fund's
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Some securities may be purchased
on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the Fund at a future date, usually beyond
the customary settlement date.
Discount and premium on securities
The Fund accretes discount and amortizes premium from par value on
securities from either the date of issue or the date of purchase over the
life of the security.
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 and service fees, if any, and transfer agent fees for Class
I shares, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be 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.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Fund has
entered into a syndicated line of credit agreement with various banks.
This agreement enables the Fund to participate with other funds managed
by the Adviser in an unsecured line of credit with banks, which permits
borrowings of up to $250 million, collectively. In ter est is charged to
each fund, based on its borrowing. In addition, a commitment fee is
charged to each fund based on the average daily unused portion of the
line of credit and is allocated among the participating funds. The Fund
had no borrowing activity under the line of credit during the year ended
May 31, 2003.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. These fees are included in interest income.
The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on
loan. As with other extensions of credit, the Fund may bear the risk of
delay of the loaned securities in recovery or even loss of rights in the
collateral, should the borrower of the securities fail financially. On
May 31, 2003, the Fund loaned securities having a market value of
$214,474,863 collateralized by securities in the amount of $218,894,634.
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $30,484,831 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward
is used by the Fund, no capital gain distributions will be made. The loss
carryforward expires as follows: May 31, 2008 -- $10,076,619, May 31,
2009 -- $20,372,435 and May 31, 2010 -- $35,777.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. The Fund may place a debt
obligation on non-accrual status and reduce related interest income by
ceasing current accruals and writing off interest receivables when the
collection of interest has become doubtful. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains on the ex-dividend date. 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. During
the year ended May 31, 2003, the tax character of distributions paid was
as follows: ordinary income -- $71,724,452. Distributions paid by the
Fund with respect to each class of shares are calculated in the same
manner, at the same time and are in the same amount, except for the
effect of expenses that may be applied differently to each class.
As of May 31, 2003, there were no distributable earnings on a tax basis.
Such distributions and distributable earnings, on a tax basis, are
determined in conformity with income tax regulations, which may differ
from accounting prin ci ples generally accepted in the United States of
America. Distri bu tions in excess of tax basis earnings and profits, if
any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of America,
incorporates estimates made by management in determining the reported
amount of assets, liabilities, revenues and expenses of the Fund. Actual
results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.50% of the first $1,500,000,000 of the Fund's average daily net asset
value, (b) 0.45% of the next $500,000,000, (c) 0.40% of the next
$500,000,000 and (d) 0.35% of the Fund's average daily net asset value
in excess of $2,500,000,000.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has adopted
Distribution Plans with respect to Class A, Class B and Class C pursuant
to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH
Funds for the services it provides as distributor of shares of the Fund.
Ac cord ingly, the Fund makes monthly payments to JH Funds at an annual
rate not to exceed 0.30% of Class A average daily net assets and 1.00%
of Class B and Class C average daily net assets. A maximum of 0.25% of
such payments may be service fees as defined by the Con duct Rules of
the National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During
the year ended May 31, 2003, JH Funds received net up-front sales charges
of $841,004 with regard to sales of Class A shares. Of this amount,
$90,559 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $338,361 was paid as sales
commissions to unrelated broker-dealers and $412,084 was paid as sales
commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer. The Adviser's indirect parent, John
Hancock Life Insurance Company ("JHLICo"), is the indirect sole
shareholder of Signator Investors. During the year ended May 31, 2003, JH
Funds received net up-front sales charges of $100,014 with regard to
sales of Class C shares. Of this amount, $97,418 was paid as sales
commissions to unrelated broker-dealers and $2,596 was paid as sales
commissions to sales personnel of Signator Investors.
Class B shares that are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares that are redeemed within one year of purchase
are subject to a CDSC at a rate of 1.00% of the lesser of the current
market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds
and are used in whole or in part to defray its expenses for providing
distribution-related services to the Fund in connection with the sale of
Class B and Class C shares. During the year ended May 31, 2003, CDSCs
received by JH Funds amounted to $661,375 for Class B shares and $21,234
for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. For Class A, Class B
and Class C shares, the Fund pays a monthly transfer agent fee at an
annual rate of 0.015% of each Class's average daily net asset value,
plus a fee based on the number of shareholder accounts and reimbursement
for certain out-of-pocket expenses aggregated and allocated to each
class on the basis of its relative net asset value. For Class I shares,
the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of
the average daily net asset value plus certain out-of-pocket expenses
attributable to Class I shares. Effective June 1, 2003, for Class I
shares the Fund will pay a monthly transfer agent fee at a total annual
rate of 0.05% of Class I shares' average daily net asset value.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of approximately 0.03% of the average net
assets of the Fund.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investments as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding
dollar value. The Fund has an unlimited number of shares authorized with
no par value.
YEAR ENDED 5-31-02 1 YEAR ENDED 5-31-03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 9,535,119 $141,492,300 8,023,117 $119,537,680
Distributions reinvested 3,593,103 53,313,751 3,230,030 48,137,822
Repurchased (12,985,535) (192,313,344) (13,031,036) (194,047,897)
Net increase (decrease) 142,687 $2,492,707 (1,777,889) ($26,372,395)
CLASS B SHARES
Sold 5,168,809 $76,839,086 3,435,375 $50,874,917
Distributions reinvested 471,880 6,999,215 501,577 7,467,519
Repurchased (4,458,118) (65,938,032) (5,112,010) (76,105,101)
Net increase (decrease) 1,182,571 $17,900,269 (1,175,058) ($17,762,665)
CLASS C SHARES
Sold 1,777,434 $26,375,380 950,362 $14,094,274
Distributions reinvested 71,089 1,053,001 106,568 1,585,178
Repurchased (637,152) (9,417,343) (1,137,091) (16,982,912)
Net increase (decrease) 1,211,371 $18,011,038 (80,161) ($1,303,460)
CLASS I SHARES 2
Sold 668 $10,063 152,828 $2,306,536
Issued in reorganization -- -- 566,449 8,309,863
Distributions reinvested -- -- 30,706 458,285
Repurchased -- -- (152,254) (2,255,534)
Net increase 668 $10,063 597,729 $8,819,150
NET INCREASE (DECREASE) 2,537,297 $38,414,077 (2,435,379) ($36,619,370)
1 Audited by previous auditor.
2 Class I shares began operations on 9-4-01.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities, other
than short-term securities and obligations of the U.S. government,
during the year ended May 31, 2003, aggregated $445,110,465 and
$535,373,947, respectively. Purchases and proceeds from sales or
maturities of obligations of the U.S. government aggregated
$3,428,981,122 and $3,275,738,399, respectively, during the year ended
May 31, 2003.
The cost of investments owned on May 31, 2003, including short-term
investments, for federal income tax purposes was $1,663,890,703. Gross
unrealized appreciation and depreciation of investments aggregated
$86,191,863 and $14,060,263, respectively, resulting in net unrealized
appreciation of $72,131,600. The difference between book basis and tax
basis net unrealized appreciation of investments is attributable
primarily to the tax deferral of losses on wash sales and amortization
of premiums and accretion of discounts on debt securities.
NOTE E
Reclassification of accounts
During the year ended May 31, 2003, the Fund reclassified amounts to
reflect a decrease in accumulated net realized loss on investments of
$2,663,780, a decrease in accumulated net investment loss of $3,781,754
and a decrease in capital paid-in of $6,445,534. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of May 31, 2003. 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 accounting principles generally accepted in the United
States of America, book and tax differences in accounting for deferred
compen sation, expiring capital loss carryovers and premium amortization
tax adjustment. The calculation of net investment income per share in
the Financial Highlights excludes these adjustments.
NOTE F
Reorganization
On May 29, 2002, the shareholders of the John Hancock Active Bond Fund
("Active Bond Fund") approved an Agreement and Plan of Reorganization,
which provided for the transfer of substantially all of the assets and
liabilities of the Active Bond Fund in exchange solely for Class I
shares of the Fund. The acquisition was accounted for as a tax-free
exchange of 566,449 Class I shares of the Fund for the net assets of the
Active Bond Fund, which amounted to $8,309,863, including $75,770 of
unrealized appreciation after the close of business on June 7, 2002.
NOTE G
Change in Independent Auditor
Based on the recommendation of the Audit Committee of the Fund, the Board
of Trustees has determined not to retain Ernst & Young LLP as the Fund's
independent auditor and voted to appoint PricewaterhouseCoopers LLP for
the fiscal year ended May 31, 2003. During the two most recent fiscal
years, Ernst & Young LLP's audit reports contained no adverse opinion or
disclaimer of opinion; nor were their reports qualified as to
uncertainty, audit scope, or accounting principles. Further, there were
no disagreements between the Fund and Ernst & Young LLP on accounting
principles, financial statements disclosure or audit scope, which, if not
resolved to the satisfaction of Ernst & Young LLP, would have caused them
to make reference to the disagreement in their reports.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors
To the Board of Trustees and Shareholders of John Hancock Bond Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of John
Hancock Bond Fund (the "Fund"), one of the portfolios constituting the
John Hancock Sovereign Bond Fund, at May 31, 2003, the results of its
operations, the changes in its net assets and the financial highlights
for the year then ended, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these financial statements
in accordance with auditing standards generally accepted in the United
States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included
confirmation of securities owned at May 31, 2003, by correspondence with
the custodian and brokers, provides a reasonable basis for our opinion.
The statement of changes in net assets of the Fund for the year ended
May 31, 2002, and the financial highlights for each of the periods ended
on or before May 31, 2002, were audited by other independent auditors,
whose report dated July 5, 2002, expressed an unqualified opinion
thereon.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 9, 2003
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended May 31, 2003.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended May 31, 2003, 3.66% of the dividends qualify for the
corporate dividends-received deduction.
The fund hereby designates the maximum amount allowable of its net
taxable income as qualified dividend income as provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003. This amount will be
reflected on Form 1099-DIV for the calendar year 2003.
Shareholders will be mailed a 2003 U.S. Treasury Department Form
1099-DIV in January 2004. This will reflect the total of all
distributions that are taxable for the calendar year 2003.
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who
oversee your John Hancock fund. Officers elected by the Trustees manage
the day-to-day operations of the Fund and execute policies formulated by
the Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1988 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp.
Richard P. Chapman, Jr., Born: 1935 1975 21
President and Chief Executive Officer, Brookline Bancorp. (lending)
(since 1972); Chairman and Director, Lumber Insurance Co. (insurance)
(until 2000); Chairman and Director, Northeast Retirement Services, Inc.
(retirement administration) (since 1998).
William J. Cosgrove, Born: 1933 1991 21
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc.; Director, Hudson City Bancorp; Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell, Born: 1932 1996 21
President, Farrell, Healer & Co., Inc. (venture capital management firm)
(since 1980) and General Partner of the Venture Capital Fund of NE
(since 1980); Trustee, Marblehead Savings Bank (since 1994); prior to
1980, headed the venture capital group at Bank of Boston Corporation.
William F. Glavin 2, Born: 1932 1996 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (since 1994) and Inco Ltd.
Patti McGill Peterson 2, Born: 1943 1996 30
Executive Director, Council for International Exchange of Scholars
(since 1998); Vice President, Institute of International Education
(since January 1998); Senior Fellow, Cornell Institute of Public Affairs,
Cornell University (until 1997); President Emerita of Wells College and
St. Lawrence University; Director, Niagara Mohawk Power Corporation
(electric utility).
John A. Moore 2, Born: 1939 1996 30
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Senior Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
John W. Pratt, Born: 1931 1996 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 52
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC ("Subsidiaries, LLC"), Hancock
Natural Resource Group, Independence Investment LLC, Independence
Fixed Income LLC, John Hancock Advisers, LLC (the "Adviser") and
The Berkeley Financial Group, LLC ("The Berkeley Group"), John
Hancock Funds, LLC ("John Hancock Funds"), Massachusetts Business
Development Corporation; Director, John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc.") (until 1999).
Maureen R. Ford, Born: 1955 2000 52
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC, Independence Fixed Income LLC and
John Hancock Signature Services ("Signature Services"); Senior Vice President,
MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp., Executive Vice President and Chief Investment
Officer, Baring Asset Management, London UK (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1992
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1988
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of
the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1984
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or
her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
OUR FAMILY
OF FUNDS
- -------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Spectrum Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- -------------------------------------------------------
Sector Biotechnology Fund
Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- -------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Bond Fund
Investment Grade Bond Fund
Strategic Income Fund
- -------------------------------------------------------
International International Fund
Pacific Basin Equities Fund
- -------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- -------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
For more complete information on any John Hancock Fund
and a prospectus, which includes charges and expenses,
call your financial professional, or John Hancock Funds at
1-800-225-5291. Please read the prospectus carefully before
investing or sending money.
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FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
Bond Fund.
2100A 5/03
7/03
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's principal executive officer and principal financial officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
ITEM 10. EXHIBITS.
(a) Not applicable at this time.
(b)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b)(2) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule
30a-2(b) under the Investment Company Act of 1940, are attached. The
certifications furnished pursuant to this paragraph are not deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise
subject to the liability of that section. Such certifications are not deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Registrant
specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By:
- ---------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: July 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
- -----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: July 24, 2003
By:
- -----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: July 24, 2003