UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4932
John Hancock World Fund
(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Susan S. Newton, Secretary
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-375-1702
Date of fiscal year end: October 31
Date of reporting period: October 31, 2004
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Health Sciences
Fund
10.31.2004
Annual Report
[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 James A. Shepherdson, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Manager's report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 15
Trustees & officers
page 29
For more information
page 33
Dear Fellow Shareholders,
The stock market made little, if any, headway year-to-date through October
2004, as it wrestled with a variety of uncertainties. Questions about the
continuing strength of the economy, the effects of rising interest rates
and expectations for corporate earnings growth kept investors jittery. In
addition, record high crude oil prices, geopolitical issues and a closely
contested U.S. presidential race all weighed on the market. The picture
brightened in early November with the election over and oil prices
moderating somewhat.
Year-to-date through October 31, 2004, the Standard & Poor's 500 Index was
up 3.06%, while the Dow Jones Industrial Average and the Nasdaq Composite
Index were slightly negative, returning -2.40% and -1.05%, respectively.
Despite the Federal Reserve's three hikes in short-term interest rates from
historic lows, bonds still managed to outperform stocks, with the Lehman
Brothers Aggregate Bond Index up 4.22%.
In news closer to home, we are pleased to announce that on June 15, 2004,
your fund's Board of Trustees appointed Charles L. Ladner as independent
Chairman of the Board of Trustees, a position previously held by John
Hancock Funds LLC's former Chairman and Chief Executive Officer, Maureen
Ford Goldfarb. This appointment came in advance of new SEC regulations
requiring all mutual funds to have independent chairmen.
Mr. Ladner has served as an independent member of John Hancock Funds' Board
of Trustees since 1992 and formerly held the position of Senior Vice
President and Chief Financial Officer of UGI Corporation, a public utility
holding company in Valley Forge, PA, until his retirement in 1998. He
brings a wealth of knowledge, experience and leadership and we are
delighted to have him serve as Chairman.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of October 31, 2004. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
long-term growth of
capital by normally
investing at least
80% of its assets
in stocks of U.S.
and foreign health
sciences companies.
Over the last twelve months
* Health care stocks posted decent returns, but lagged the overall stock
market chiefly due to uncertainty over the presidential election and
product disappointments.
* The Fund benefited from good stock selection, particularly in the biotech
and medical technology sectors.
* Large drug companies and generic drug makers disappointed investors due
to pipeline and pricing concerns.
[Bar chart with heading "John Hancock Health Sciences Fund." Under the
heading is a note that reads "Fund performance for the year ended October
31, 2004." The chart is scaled in increments of 5% with 0% at the bottom
and 10% at the top. The first bar represents the 8.62% total return for
Class A. The second bar represents the 7.86% total return for Class B. The
third bar represents the 7.86% total return for Class C. A note below the
chart reads "Total returns for the Fund are at net asset value with all
distributions reinvested."]
Top 10 holdings
4.7% Medtronic, Inc.
4.6% Amgen, Inc.
4.4% UnitedHealth Group, Inc.
4.3% Pfizer, Inc.
2.9% Stryker Corp.
2.8% Teva Pharmaceutical Industries Ltd.
2.7% Zimmer Holdings, Inc.
2.7% Genentech, Inc.
2.7% St. Jude Medical, Inc.
2.4% Gilead Sciences, Inc.
As a percentage of net assets on October 31, 2004.
1
BY LINDA I. MILLER, CFA, PORTFOLIO MANAGER
MANAGER'S
REPORT
JOHN HANCOCK
Health Sciences Fund
Health care stocks posted decent returns for the 12 months ended October
31, 2004, although they lagged the overall stock market primarily due to
the uncertainty over the outcome of the U.S. presidential election and
product-related disappointments. In the months leading up to the
cliffhanger race for the president, investors worried that a change in
administration would mean more regulation, would open the door to cheap
drugs from abroad, would impose price curbs and would tamper with the
recent Medicare reform initiatives. Product-related disappointments --
including Merck's recall of its arthritis treatment Vioxx after it was
shown to increase the risk of heart attacks and strokes, and Chiron's
inability to ship flu vaccine after the U.K. suspended manufacturing of the
product -- clouded the outlook for some segments of the health care group
in the final months of the period. That said, there were plenty of
positives for the health care sector during the year. Investors generally
rewarded companies with innovative and exciting products, as well as those
that continued to improve operational performance through cost control and
efficiency programs.
"Health care stocks posted decent
returns for the 12 months ended
October 31, 2004..."
Performance review
For the 12 months ended October 31, 2004, John Hancock Health Sciences
Fund's Class A, Class B and Class C shares posted total returns of 8.62%,
7.86% and 7.86%, respectively, at net asset value. During the same one-year
period, the Russell 3000 Healthcare Index returned 3.02% and the average
health/biotechnology fund had a total return of 5.93%, according to Lipper,
Inc.,1 while the Standard & Poor's 500 Index returned 9.42%. 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 results.
2
[A photo of Linda Miller flush right next to first paragraph.]
Managed care, biotechs top the charts
At the top of our best-performers list during the year were a number of
managed care holdings, including UnitedHealth Group, Wellpoint Health and
Anthem, Inc. These companies derived earnings increases from hefty
health-care premium hikes they charged their customers, which more than
offset the rising medical costs the HMOs incurred. They also benefited from
their focus on enhancing productivity, controlling costs and improving
their balance sheets.
Many of our biotech holdings also performed quite well this year. Our
biggest winners were OSI Pharmaceuticals and Biogen Idec. OSI's stock price
began zooming higher in June on news that its experimental cancer drug
Tarceva had extended survival in late-stage lung cancer patients. Tarceva
is what's known as an epidermal growth factor receptor inhibitor that
shrinks tumors by blocking proteins that promote the spread of cancer
cells. In the fall, the stock got another boost when the company announced
that it had received fast-track regulatory approval from the Food and Drug
Administration for Tarceva, meaning the agency has six months from the
application receipt date, or until January 30, 2005, to take action. OSI is
developing the drug with Genentech, another of the Fund's larger and
better-performing holdings during the year.
"At the top of our best-performers
list during the year were a number
of managed care holdings..."
Biogen Idec's shares also posted strong gains in part due to excitement
over the company's Antegren drug to treat multiple sclerosis. The drug may
launch later this year or early in 2005. Another winner was Eyetech
Pharmaceuticals, which was buoyed by investors' enthusiasm over the
company's experimental treatment Macugen, a drug for the sight-robbing
disease called wet age-related macular degeneration. Investors also liked
the fact that the company has plenty of financial support from its
marketing and development partner Pfizer. We also enjoyed good gains from
our holdings in Tularik, which was lifted mid-year by news that the company
- -- which develops potential therapies for cancer, diabetes and obesity --
was to be acquired by Amgen, the world's largest biotech company.
Unfortunately, Amgen's stock moved sideways for most of the year despite
continuing strong sales and profits from its drugs for anemia and
arthritis.
3
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Health care equipment 27%, the second is Biotechnology
26%, the third is Pharmaceuticals 20%, the fourth is Health care services 11%
and the fifth is Managed health care 6%.]
Our focus on medical device companies also aided performance. St. Jude
Medical posted rising profits thanks to robust sales of its new product
used to treat heart failure. Device makers Medtronic and Guidant also
performed well, particularly after the Centers for Medicare and Medicaid
Services announced that they would expand reimbursement coverage of cardiac
defibrillator devices to new patients.
Drug companies falter
Our underweighting in big drug companies, which came under pressure due to
political and pipeline concerns, helped us, but our holdings in generic
drug companies generally detracted from performance. Generic drug makers --
including Mylan Laboratories, Barr Pharmaceuticals and Watson
Pharmaceuticals -- were hurt by increased competition and pressure to
reduce prices. We also suffered losses with Chiron, which plummeted on news
that U.K. authorities prohibited the company from shipping Fluvirin this
season, which accounts for about 50% of the flu vaccines sold in the U.S.
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 10-31-04." The chart is divided into two
sections (from top to left): Common stocks 96%, and Short-term investments
& other 4%. ]
Outlook
We're reasonably optimistic about the prospects for health care stocks. The
world's aging population provides strong underpinnings for the bullish
future of health care stocks over the long term. We believe that there are
other, more near-term factors working in the group's favor. Just after the
Fund's fiscal year ended, President Bush was re-elected to a second term.
That seemed to reassure investors that status quo, rather than radical
4
[Table at top of page entitled "Scorecard." The header for the left column
is "Investment" and the header for the right column is "Period's
performance...and what's behind the numbers." The first listing is OSI
Pharmaceuticals followed by an up arrow with the phrase "Positive clinical
trials for lung-cancer drug boosts stock." The second listing is Medtronic
followed by an up arrow with the phrase "Expanded reimbursement for heart
products fuels demand." The third listing is Chiron followed by a down
arrow with the phrase "U.K. shuts down manufacturing of flu vaccine."]
change, will be the watchwords for national health-care policies.
Furthermore, the fact that the economy is growing at a modest pace is a
positive. Historically speaking, health care companies tend to do best in
that environment because more robust economic growth tends to attract
investors to faster-growing segments of the market. Given those relatively
benign external factors, the performance of health care stocks likely will
hinge on innovation, new product approval and valuations. We're impressed
with the current pace of innovation, although new product approvals may
slow somewhat as the FDA takes a more cautious view in light of recent
developments with Merck and Chiron. In terms of valuations, there remain
many reasonably priced opportunities, although some stocks appear to have
gotten too expensive. In our view, those factors all add up to an
environment that we believe plays to our stock-picking strengths.
"We're reasonably optimistic about
the prospects for health care stocks."
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. The manager's statements
reflect her 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.
Sector investing is subject to greater risks than the market as a whole.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
5
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2004
Class A Class B Class C
Inception date 10-1-91 3-7-94 3-1-99
Average annual returns with maximum sales charge (POP)
One year 3.20% 2.86% 6.86%
Five years 5.26 5.28 5.60
Ten years 10.83 10.76 --
Since inception -- -- 4.31
Cumulative total returns with maximum sales charge (POP)
One year 3.20 2.86 6.86
Five years 29.21 29.33 31.33
Ten years 179.56 177.87 --
Since inception -- -- 27.04
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5%, and
the applicable contingent deferred sales charge (CDSC) on Class B and Class
C shares. The returns for Class C shares have been adjusted to reflect the
elimination of the front-end sales charge effective July 15, 2004. 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. 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.
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.
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable.
6
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 two separate indexes.
Russell
Cum Value Cum Value 3000
of $10K of $10K S&P 500 Healthcare
Plot Date (No Load) (w/Load) Index Index
10-31-94 $10,000 $9,500 $10,000 $10,000
11-30-94 9,800 9,308 9,636 10,041
4-30-95 11,110 10,552 11,046 11,358
10-31-95 13,100 12,443 12,643 13,921
4-30-96 16,334 15,515 14,383 16,142
10-31-96 14,834 14,089 15,689 17,231
4-30-97 15,238 14,473 17,998 19,574
10-31-97 18,784 17,841 20,729 22,954
4-30-98 21,977 20,874 25,394 29,094
10-31-98 21,397 20,323 25,290 30,618
4-30-99 21,150 20,089 30,932 32,603
10-31-99 21,643 20,556 31,782 33,248
4-30-00 25,462 24,184 34,069 34,275
10-31-00 31,561 29,977 33,722 40,986
4-30-01 28,058 26,649 29,652 37,826
10-31-01 27,281 25,912 25,325 37,291
4-30-02 27,016 25,660 25,911 35,255
10-31-02 23,611 22,425 21,499 30,427
4-30-03 24,012 22,807 22,464 31,557
10-31-03 27,097 25,737 25,976 33,549
4-30-04 31,687 30,097 27,605 37,431
10-31-04 29,433 27,956 28,411 34,564
[Line chart with the heading "GROWTH OF $10,000." Within the chart are
four lines. The first line represents the Russell 3000 Healthcare Index and
is equal to $34,564 as of October 31, 2004. The second line represents the
value of the hypothetical $10,000 investment made in the John Hancock
Health Sciences Fund, before sales charge, and is equal to $29,433 as of
October 31, 2004. The third line represents Standard & Poor's 500 Index
and is equal to $28,411 as of October 31, 2004. The fourth line represents
the value of the same hypothetical investment made in the John Hancock
Health Sciences Fund, after sales charge, and is equal to $27,956 as of
October 31, 2004.]
Class B 1 Class C 1
Period beginning 10-31-94 3-1-99
Health Sciences Fund $27,787 $12,704
Index 1 28,411 9,939
Index 2 34,564 10,164
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
and Class C shares, respectively, as of October 31, 2004. The Class C
shares investment with maximum sales charge has been adjusted to reflect
the elimination of the front-end sales charge effective July 15, 2004.
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.
Standard & Poor's 500 Index -- Index 1 -- is an unmanaged index that
includes 500 widely traded common stocks.
Russell 3000 Healthcare Index -- Index 2 -- is a capitalization-weighted
index composed of companies involved in medical services or health care.
It is not possible to invest directly in an index. Index figures do not
reflect sales charges and would be lower if they did.
1 No contingent deferred sales charge applicable.
7
YOUR
EXPENSES
These examples are intended to help you understand your ongoing operating
expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
* Transaction costs which include sales charges (loads) on purchases or
redemptions (varies by share class), minimum account fee charge, etc.
* Ongoing operating expenses including management fees, distribution and
service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on April 30, 2004, with the same
investment held until October 31, 2004.
Account value Expenses paid
$1,000.00 Ending value during period
on 4-30-04 on 10-31-04 ended 10-31-04 1
- --------------------------------------------------------------------------
Class A $928.90 $7.68
Class B 925.60 11.05
Class C 925.60 11.05
Together with the value of your account, you may use this information to
estimate the operating expenses that you paid over the period. Simply
divide your account value at October 31, 2004 by $1,000.00, then multiply
it by the "expenses paid" for your share class from the table above. For
example, for an account value of $8,600.00, the operating expenses should
be calculated as follows:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each class's
actual expense ratio and an assumed 5% annual return before expenses (which
is not your fund's actual return). It assumes an account value of $1,000.00
on April 30, 2004, with the same investment held until October 31, 2004.
Look in any other fund shareholder report to find its hypothetical example
and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 4-30-04 on 10-31-04 ended 10-31-04 1
- -------------------------------------------------------------
Class A $1,017.17 $8.03
Class B 1,013.66 11.55
Class C 1,013.66 11.55
Remember, these examples do not include any transaction costs, such as
sales charges; therefore, these examples will not help you to determine the
relative total costs of owning different funds. If transaction costs were
included, your expenses would have been higher. See the prospectus for
details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.58%, 2.28%
and 2.28% for Class A, Class B and Class C, respectively, multiplied by the
average account value over the period, multiplied by [number of days in
most recent fiscal half-year/365 or 366] (to reflect the one-half year
period).
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2004
This schedule is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry
group. Short-term investments, which represent the Fund's cash position,
are listed last.
Issuer Shares Value
Common stocks 96.41% $262,127,775
(Cost $184,126,224)
Biotechnology 26.18% 71,178,084
Affymetrix, Inc. (I)(L) 76,300 2,327,150
Alkermes, Inc. (I)(L) 43,029 532,269
Amgen, Inc. (I) 220,000 12,496,000
AtheroGenics, Inc. (I)(L) 55,000 1,646,700
Biogen Idec, Inc. (I)(L) 100,000 5,816,000
Celgene Corp. (I) 70,000 2,073,400
Charles River Laboratories International, Inc. (I)(L) 55,000 2,573,450
Cotherix, Inc. (I) 154,540 927,240
Eyetech Pharmaceuticals, Inc. (I)(L) 80,000 3,395,200
Genentech, Inc. (I)(L) 160,000 7,284,800
Genzyme Corp. (I)(L) 110,000 5,771,700
Gilead Sciences, Inc. (I)(L) 190,000 6,579,700
Kosan Biosciences, Inc. (I) 140,000 875,000
Millennium Pharmaceuticals, Inc. (I)(L) 165,000 2,141,700
Nabi Biopharmaceuticals (I) 97,500 1,350,375
Neurocrine Biosciences, Inc. (I)(L) 70,000 3,258,500
OSI Pharmaceuticals, Inc. (I)(L) 50,000 3,249,000
Protein Design Labs, Inc. (I)(L) 100,000 1,915,000
Sepracor, Inc. (I)(L) 60,000 2,755,800
Telik, Inc. (I)(L) 60,000 1,107,000
Vicuron Pharmaceuticals, Inc. (I) 100,000 1,402,000
ZymoGenetics, Inc. (I) 90,000 1,700,100
Health Care Equipment 27.49% 74,741,600
American Medical Systems Holdings, Inc. (I) 65,000 2,411,500
ArthroCare Corp. (I)(L) 110,000 3,389,100
Beckman Coulter, Inc. 50,000 2,975,000
Boston Scientific Corp. (I) 165,000 5,824,500
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Health Care Equipment (continued)
DENTSPLY International, Inc. 55,000 $2,860,550
Fisher Scientific International, Inc. (I)(L) 50,000 2,868,000
Gen-Probe, Inc. (I) 85,000 2,978,400
Guidant Corp. 50,000 3,331,000
Integra LifeSciences Holdings (I) 62,500 2,005,000
Invitrogen Corp. (I)(L) 40,000 2,316,000
Kinetic Concepts, Inc. (I) 80,000 3,986,400
Medtronic, Inc. 250,000 12,777,500
St. Jude Medical, Inc. (I) 95,000 7,274,150
Stryker Corp. (L) 180,000 7,756,200
Varian Medical Systems, Inc. (I)(L) 115,000 4,617,250
Zimmer Holdings, Inc. (I)(L) 95,000 7,371,050
Health Care Facilities 4.19% 11,394,900
Community Health Systems, Inc. (I) 100,000 2,682,000
DaVita, Inc. (I) 110,000 3,258,200
HCA, Inc. 60,000 2,203,800
VCA Antech, Inc. (I) 145,000 3,250,900
Health Care Services 11.33% 30,813,400
Accredo Health, Inc. (I) 30,000 690,900
Advisory Board Co. (The) (I)(L) 85,000 2,769,300
Caremark Rx, Inc. (I)(L) 190,000 5,694,300
Covance, Inc. (I) 85,000 3,376,200
ICON Plc American Depositary Receipts (ADR) (Ireland) (I)(L) 75,000 2,475,750
IDX Systems Corp. (I) 80,000 2,682,800
Medco Health Solutions, Inc. (I) 100,000 3,391,000
Omnicare, Inc. 50,000 1,379,500
Quest Diagnostics, Inc. 35,000 3,063,900
Stericycle, Inc. (I)(L) 75,000 3,399,750
WebMD Corp. (I)(L) 250,000 1,890,000
Health Care Supplies 1.80% 4,882,900
Johnson & Johnson 80,000 4,670,400
Retractable Technologies, Inc. (I)(L) 50,000 212,500
Managed Health Care 5.72% 15,564,000
Anthem, Inc. (I)(L) 45,000 3,618,000
UnitedHealth Group, Inc. 165,000 11,946,000
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Issuer Shares Value
Pharmaceuticals 19.70% $53,552,891
Abbott Laboratories 130,000 5,541,900
Alcon, Inc. (Switzerland) 65,000 4,628,000
Allergan, Inc. 25,000 1,789,000
AstraZeneca Plc (ADR) (United Kingdom) 70,000 2,884,000
EPIX Pharmaceuticals, Inc. (I) 100,000 1,563,000
Forest Laboratories, Inc. (I) 65,000 2,899,000
IVAX Corp. (L) 110,000 1,991,000
Medicines Co. (The) (I)(L) 125,000 3,330,000
Novartis AG (ADR) (Switzerland) 130,000 6,241,300
Pfizer, Inc. 400,000 11,580,000
Roche Holding AG (Switzerland) 35,000 3,565,691
Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 290,000 7,540,000
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 34.89% $94,873,709
(Cost $94,873,709)
Joint Repurchase Agreement 3.03% 8,252,000
Investment in a joint repurchase agreement transaction with
Morgan Stanley -- Dated 10-29-04, due 11-01-04
(secured by U.S. Treasury Bond 8.125% due 08-15-19,
U.S. Treasury Note 5.875% due 11-15-04, U.S. Treasury
Inflation Indexed Bonds 3.625% due 04-15-28 and
3.375% due 04-15-32, and U.S. Treasury Inflation
Indexed Notes 3.375% thru 3.875% due 01-15-09
thru 01-15-12) 1.770% $8,252 8,252,000
Shares
Cash Equivalents 31.86% 86,621,709
AIM Cash Investment Trust (T) 86,621,709 86,621,709
Total investments 131.30% $357,001,484
Other assets and liabilities, net (31.30%) ($85,101,313)
Total net assets 100.00% $271,900,171
See notes to
financial statements.
12
FINANCIAL STATEMENTS
Notes to Schedule of Investments
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of October 31, 2004.
(T) Represents investment of securities lending collateral. Parenthetical
disclosure of a foreign country in the security description represents
country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
13
FINANCIAL STATEMENTS
PORTFOLIO
CONCENTRATION
October 31, 2004
(unaudited)
This table shows the
Fund's investments
as a percentage
of net assets,
aggregated by
various countries
and industries.
Country diversification Value as a percentage of Fund's net assets
- -------------------------------------------------------------------------
Ireland 0.91%
Israel 2.77
Switzerland 5.31
United Kingdom 1.06
United States 121.25
Industry distribution Value as a percentage of Fund's net assets
- -------------------------------------------------------------------------
Biotechnology 26.18%
Health Care Equipment 27.49
Health Care Facilities 4.19
Health Care Services 11.33
Health Care Supplies 1.80
Managed Health Care 5.72
Pharmaceuticals 19.70
Short-term Investments 34.89
See notes to
financial statements.
14
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
October 31, 2004
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 $278,999,933)
including $84,985,627 of securities loaned $357,001,484
Cash 227
Receivable for investments sold 3,783,776
Receivable for shares sold 27,247
Dividends and interest receivable 64,522
Other assets 15,198
Total assets 360,892,454
Liabilities
Payable for investments purchased 1,318,475
Payable for shares repurchased 274,704
Payable upon return of securities loaned 86,621,709
Payable to affiliates
Management fees 574,977
Distribution and service fees 29,469
Other 91,228
Other payables and accrued expenses 81,721
Total liabilities 88,992,283
Net assets
Capital paid-in 187,729,419
Accumulated net realized gain on investments
and foreign currency transactions 6,175,749
Net unrealized appreciation of investments
and translation of assets and liabilities
in foreign currencies 78,001,877
Accumulated net investment loss (6,874)
Net assets $271,900,171
Net asset value per share
Based on net asset values and shares outstanding --
the Fund has an unlimited number of shares
authorized with no par value
Class A ($125,125,836 [DIV] 2,895,273 shares) $43.22
Class B ($133,553,641 [DIV] 3,354,889 shares) $39.81
Class C ($13,220,694 [DIV] 332,110 shares) $39.81
Maximum offering price per share
Class A 1 ($43.22 [DIV] 95%) $45.49
1 On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See notes to
financial statements.
15
FINANCIAL STATEMENTS
OPERATIONS
For the year ended
October 31, 2004
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends (net of foreign withholding taxes of $38,303) $1,174,458
Securities lending 211,734
Interest 105,822
Total investment income 1,492,014
Expenses
Investment management fees 2,283,152
Class A distribution and service fees 384,964
Class B distribution and service fees 1,550,706
Class C distribution and service fees 142,009
Class A, B and C transfer agent fees 1,164,726
Accounting and legal services fees 80,623
Printing 66,101
Custodian fees 46,680
Miscellaneous 51,456
Registration and filing fees 39,232
Professional fees 37,199
Trustees' fees 16,788
Securities lending fees 5,640
Interest 124
Total expenses 5,869,400
Less expense reductions (370)
Net expenses 5,869,030
Net investment loss (4,377,016)
Realized and unrealized gain (loss)
Net realized gain (loss) on
Investments 22,497,612
Foreign currency transactions (18,637)
Change in net unrealized appreciation (depreciation) of
Investments 5,298,985
Translation of assets and liabilities in foreign currencies 237
Net realized and unrealized gain 27,778,197
Increase in net assets from operations $23,401,181
See notes to
financial statements.
16
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's net assets
has changed
during the last
two periods. The
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
any increase or
decrease in money
shareholders
invested in the
Fund.
Year Year
ended ended
10-31-03 10-31-04
Increase (decrease) in net assets
From operations
Net investment loss ($4,025,912) ($4,377,016)
Net realized gain 19,286,206 22,478,975
Change in net unrealized
appreciation (depreciation) 21,020,120 5,299,222
Increase in net assets resulting
from operations 36,280,414 23,401,181
From Fund share transactions (36,109,836) (35,461,797)
Net assets
Beginning of period 283,790,209 283,960,787
End of period 1 $283,960,787 $271,900,171
1 Includes accumulated net investment loss of $5,777 and $6,874, respectively.
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
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 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $34.28 $49.99 $40.06 $34.67 $39.79
Net investment loss 1 (0.33) (0.37) (0.41) (0.38) (0.47)
Net realized and unrealized
gain (loss) on investments 16.04 (5.99) (4.98) 5.50 3.90
Total from
investment operations 15.71 (6.36) (5.39) 5.12 3.43
Less distributions
From net realized gain -- (3.57) -- -- --
Net asset value, end of period $49.99 $40.06 $34.67 $39.79 $43.22
Total return 2 (%) 45.83 (13.56) (13.45) 14.77 8.62
Ratios and supplemental data
Net assets, end of period
(in millions) $178 $145 $110 $117 $125
Ratio of expenses
to average net assets (%) 1.50 1.50 1.59 1.67 1.57
Ratio of net investment loss
to average net assets (%) (0.75) (0.87) (1.06) (1.04) (1.08)
Portfolio turnover (%) 147 91 85 95 54
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $32.83 $47.55 $37.68 $32.39 $36.91
Net investment loss 1 (0.60) (0.63) (0.63) (0.59) (0.72)
Net realized and unrealized
gain (loss) on investments 15.32 (5.67) (4.66) 5.11 3.62
Total from
investment operations 14.72 (6.30) (5.29) 4.52 2.90
Less distributions
From net realized gain -- (3.57) -- -- --
Net asset value, end of period $47.55 $37.68 $32.39 $36.91 $39.81
Total return 2 (%) 44.84 (14.18) (14.04) 13.95 7.86
Ratios and supplemental data
Net assets, end of period
(in millions) $294 $231 $162 $154 $134
Ratio of expenses
to average net assets (%) 2.20 2.20 2.29 2.37 2.27
Ratio of net investment loss
to average net assets (%) (1.46) (1.57) (1.76) (1.74) (1.77)
Portfolio turnover (%) 147 91 85 95 54
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $32.83 $47.55 $37.68 $32.39 $36.91
Net investment loss 1 (0.64) (0.63) (0.63) (0.59) (0.72)
Net realized and unrealized
gain (loss) on investments 15.36 (5.67) (4.66) 5.11 3.62
Total from
investment operations 14.72 (6.30) (5.29) 4.52 2.90
Less distributions
From net realized gain -- (3.57) -- -- --
Net asset value, end of period $47.55 $37.68 $32.39 $36.91 $39.81
Total return 2 (%) 44.84 (14.18) (14.04) 13.95 7.86
Ratios and supplemental data
Net assets, end of period
(in millions) $14 $15 $12 $13 $13
Ratio of expenses
to average net assets (%) 2.20 2.20 2.29 2.37 2.27
Ratio of net investment loss
to average net assets (%) (1.50) (1.58) (1.76) (1.73) (1.78)
Portfolio turnover (%) 147 91 85 95 54
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
See notes to
financial statements.
20
NOTES TO
STATEMENTS
Note A
Accounting policies
John Hancock Health Sciences Fund (the "Fund") is a non-diversified series
of John Hancock World Fund, an open-end management investment company
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term growth of capital.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C 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 the 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, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, at fair
value as determined in good faith in accordance with procedures approved by
the Trustees. Short-term debt investments, which have a remaining maturity
of 60 days or less may be valued at amortized cost which approximates
market value. Investments in AIM Cash Investment Trust are valued at their
net asset value each business day. 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, LLC (the
"Adviser"), a wholly owned subsidiary of John Hancock Financial Services,
Inc., 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.
21
Foreign currency
translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 4:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign currency 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 currency 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
rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
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 asset value of the respective classes. Distri
bution and service fees, if any, are calculated daily at the class level
based on the appropriate net asset value of each class and the specific
expense rate(s) applicable to each class.
Expenses
The majority of 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. Interest 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 October 31, 2004.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. 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 October 31, 2004, the Fund loaned securities having a
market value of $84,985,627
22
collateralized by cash in the amount of $86,621,709. The cash collateral
was invested in a short-term instrument. Security lending expenses are
paid by the Fund to the Adviser.
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.
Dividends, interest
and distributions
Dividend income on investment securities is recorded on the ex-dividend or,
in the case of some foreign securities, on the date thereafter when the
Fund identifies the dividend. Interest income on investment securities is
recorded on the accrual basis. Foreign income may be subject to foreign
withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains, if any, on the ex-dividend date. 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 October 31, 2004, the components of distributable earnings on a tax
basis were $10,199,370 of undistributed long-term gain.
Such distributions and distributable earnings, on a tax basis, are
determined in conformity with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America.
Distributions 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 quarterly management fee to
the Adviser equivalent, on an annual basis, to the sum of: (a) 0.80% of the
first $200,000,000 of the Fund's average daily net asset value and (b)
0.70% of the Fund's average daily net asset value in excess of
$200,000,000.
The Fund has an agreement with its custodian bank under which custody fees
are reduced by brokerage commissions offsets applied during the period.
Accord ingly, the expense reductions related to custody fee offsets
amounted to $370, and had no impact on the Fund's ratio of expenses to
average net assets for the year ended October 31, 2004.
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. Accordingly, the
Fund makes monthly payments to JH Funds at an annual rate not to exceed
0.30% of Class A average daily net asset value and 1.00% of Class B and
Class C average daily net asset value. A maximum of 0.25% of such payments
may be service fees as defined by the Conduct 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 shares are assessed up-front sales charges.
23
During the year ended October 31, 2004, JH Funds received net up-front
sales charges of $185,741 with regard to sales of Class A shares. Of this
amount, $26,095 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $123,039 was paid as
sales commissions to unrelated broker-dealers and $36,607 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. Prior to July 15, 2004, Class C
shares were assessed up-front sales charges. During the year ended October
31, 2004, JH Funds received net up-front sales charges of $16,227 with
regard to sales of Class C shares. Of this amount, $15,688 was paid as
sales commissions to unrelated broker-dealers and $539 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 October 31, 2004, CDSCs received by JH Funds
amounted to $242,814 for Class B shares and $555 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), 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 0.05% of the 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. Signature
Services agreed to voluntarily reduce the Fund's asset-based portion of the
transfer agent fee if the total transfer agent fee exceeds the Lipper, Inc.
median transfer agency fee for comparable mutual funds by 0.05%. There were
no transfer agent fee reductions during the year ended October 31, 2004.
Signature Services reserves the right to terminate this limitation at any
time.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year
amounted to $80,623. The Fund also paid the Adviser the amount of $755 for
certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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.
24
Note C
Fund share transactions
This listing illustrates the number of Fund shares sold and repurchased
during the last two periods, along with the corresponding dollar value.
Year ended 10-31-03 Year ended 10-31-04
Shares Amount Shares Amount
Class A shares
Sold 611,552 $22,343,109 838,297 $37,031,926
Repurchased (856,289) (30,738,589) (881,741) (38,668,127)
Net decrease (244,737) ($8,395,480) (43,444) ($1,636,201)
Class B shares
Sold 333,518 $11,357,801 570,109 $22,972,932
Repurchased (1,141,112) (38,411,221) (1,396,371) (56,382,735)
Net decrease (807,594) ($27,053,420) (826,262) ($33,409,803)
Class C shares
Sold 65,171 $2,217,346 92,939 $3,788,765
Repurchased (86,440) (2,878,282) (105,002) (4,204,558)
Net decrease (21,269) ($660,936) (12,063) ($415,793)
Net decrease (1,073,600) ($36,109,836) (881,769) ($35,461,797)
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 October 31, 2004, aggregated $156,021,664 and $187,937,528,
respectively.
The cost of investments owned on October 31, 2004, including short-term
investments, for federal income tax purposes was $283,023,554. Gross
unrealized appreciation and depreciation of investments aggregated
$76,622,172 and $2,644,242, respectively, resulting in net unrealized
appreciation of $73,977,930. The difference between book basis and tax
basis net unrealized appreciation of investments is attributable primarily
to the tax deferral of losses on certain sales of securities.
Note E
Reclassification
of accounts
During the year ended October 31, 2004, the Fund reclassified amounts to
reflect an increase in accumulated net realized gain on investments of
$18,929, a decrease in accumulated net investment loss of $4,375,919 and a
decrease in capital paid-in of $4,394,848. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2004. 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, and book and
tax differences in accounting for net operating loss, deferred compensa
tion and certain foreign currency adjustments. The calculation of net
investment loss per share in the Fund's Finan cial Highlights excludes
these adjustments.
Note F
Subsequent event
A special meeting of shareholders was held on December 1, 2004, at which
time one or more new
25
Trustees were elected to the Fund's Board of Trustees. Several Trustees
had reached the age for mandatory retirement and plan to retire in 2004
and 2005. The Board of Trustees recommended and shareholders approved a
proposal to consolidate the two panels into one Board of Trustees for all
open-end funds within the John Hancock funds complex. The effective date
for the newly elected Trustees to the Fund will be January 1, 2005.
26
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Registered Public
Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Health Sciences 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 the
John Hancock Health Sciences Fund (the "Fund") at October 31, 2004, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, 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 audits. We conducted our audits of these financial statements
in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 2004, by correspondence
with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2004
27
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 October 31, 2004.
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 2004.
Shareholders will be mailed a 2004 U.S. Treasury Department Form 1099-DIV
in January 2005. This will reflect the total of all distributions that are
taxable for the calendar year 2004.
28
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
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
Charles L. Ladner, 2 Born: 1938 2004 49
Independent Chairman (since 2004); Chairman and Trustee, Dunwoody
Village, Inc. (retirement services) (until 2003); Senior Vice President and
Chief Financial Officer, UGI Corporation (public utility holding company)
(retired 1998); Vice President and Director for AmeriGas, Inc. (retired
1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution);
Director, EnergyNorth, Inc. (until 1995); Director, Parks and History
Association (since 2001).
Dennis S. Aronowitz, Born: 1931 1991 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp (since 1998).
Richard P. Chapman, Jr., Born: 1935 1991 21
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); 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. (financial reinsurance) (until 2004); Director, Hudson City Savings Bank
(since 1995); Director, Hudson City Bancorp (since 1999); 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 President, the Venture Capital Fund of NE (since 1980);
prior to 1980, headed the venture capital group at Bank of Boston Corporation;
Trustee, Marblehead Savings Bank (since 1994).
29
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
William F. Glavin, 2 Born: 1932 1996 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
John A. Moore, 2 Born: 1939 1996 31
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (until 2003); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 1996 31
Executive Director, Council for International Exchange of Scholars and
Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1998); Former President of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford
Foundation, International Fellowships Program (since 2002); Director,
Lois Roth Endowment (since 2002); Director, Council for International
Educational Exchange (since 2003).
John W. Pratt, Born: 1931 1996 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
Non-Independent 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
James A. Shepherdson, Born: 1952 2004 49
President and Chief Executive Officer
Executive Vice President, Manulife Financial Corporation (since 2004);
Chairman, Director, President and Chief Executive Officer, John Hancock
Advisers, LLC and The Berkeley Financial Group, LLC (holding company);
Chairman, Director, President and Chief Executive Officer, John Hancock
Funds, LLC; Chairman, President, Director and Chief Executive Officer,
Sovereign Asset Management Corporation ("SAMCorp"); Director, Chairman
and President, NM Capital Management, Inc.; President, John Hancock
Retirement Services, John Hancock Life Insurance Company (until 2004);
Chairman, Essex Corporation (until 2004); Co-Chief Executive Officer,
MetLife Investors Group (until 2003); Senior Vice President, AXA/Equitable
Insurance Company (until 2000).
30
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 H. King, Born: 1952 1991
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 1991
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 Financial Group, LLC;
Vice President, Signature Services (until 2000); Director, Senior Vice President and Secretary,
NM Capital Management, Inc.
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 Non-independent Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
31
OUR FAMILY
OF FUNDS
- --------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap 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 Fund
Investment Grade Bond Fund
Strategic Income 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
A fund's investment objectives, risks, charges and expenses are included in
the prospectus and should be considered carefully before investing. For a
prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291 or visit our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
32
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way,
Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available on
a quarterly basis 60 days after the fiscal quarter on our Web site or upon
request by calling 1-800-225-5291, or on the Securities and Exchange
Commission's Web site, www.sec.gov.
33
[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.jhfunds.com/edelivery
This report is for the information of
the shareholders of the John Hancock
Health Sciences Fund.
2800A 10/04
12/04
JOHN HANCOCK
Biotechnology Fund
10.31.2004
Annual Report
[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 James A. Shepherdson, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Manager's report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 14
Trustees & officers
page 28
For more information
page 33
Dear Fellow Shareholders,
The stock market made little, if any, headway year-to-date through October
2004, as it wrestled with a variety of uncertainties. Questions about the
continuing strength of the economy, the effects of rising interest rates
and expectations for corporate earnings growth kept investors jittery. In
addition, record high crude oil prices, geopolitical issues and a closely
contested U.S. presidential race all weighed on the market. The picture
brightened in early November with the election over and oil prices
moderating somewhat.
Year-to-date through October 31, 2004, the Standard & Poor's 500 Index was
up 3.06%, while the Dow Jones Industrial Average and the Nasdaq Composite
Index were slightly negative, returning -2.40% and -1.05%, respectively.
Despite the Federal Reserve's three hikes in short-term interest rates from
historic lows, bonds still managed to outperform stocks, with the Lehman
Brothers Aggregate Bond Index up 4.22%.
In news closer to home, we are pleased to announce that on June 15, 2004,
your fund's Board of Trustees appointed Charles L. Ladner as independent
Chairman of the Board of Trustees, a position previously held by John
Hancock Funds LLC's former Chairman and Chief Executive Officer, Maureen
Ford Goldfarb. This appointment came in advance of new SEC regulations
requiring all mutual funds to have independent chairmen.
Mr. Ladner has served as an independent member of John Hancock Funds' Board
of Trustees since 1992 and formerly held the position of Senior Vice
President and Chief Financial Officer of UGI Corporation, a public utility
holding company in Valley Forge, PA, until his retirement in 1998. He
brings a wealth of knowledge, experience and leadership and we are
delighted to have him serve as Chairman.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of October 31, 2004. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
long-term capital
appreciation by
normally investing
at least 80% of its
assets in securities
of U.S. and foreign
biotechnology
companies.
Over the last twelve months
* Biotechnology stocks posted decent returns, but performed far better in
the first half than they did in the second.
* The Fund benefited from good stock selection.
* Smaller companies with funding concerns disappointed investors.
[Bar chart with heading "John Hancock Biotechnology Fund". Under the
heading is a note that reads "Fund performance for the year ended October
31, 2004." The chart is scaled in increments of 4% with 0% at the bottom
and 8% at the top. The first bar represents the 6.36% total return for
Class A. The second bar represents the 5.65% total return for Class B. The
third bar represents the 5.65% total return for Class C. A note below the
chart reads "Total returns for the Fund are at net asset value with all
distributions reinvested."]
Top 10 holdings
13.1% Amgen, Inc.
6.3% Biogen Idec, Inc.
5.3% Gilead Sciences, Inc.
4.4% Genentech, Inc.
4.0% Genzyme Corp.
3.1% Teva Pharmaceutical Industries Ltd.
2.6% Affymetrix, Inc.
2.5% OSI Pharmaceuticals, Inc.
2.4% Medicines Co. (The)
2.4% Celgene Corp.
As a percentage of net assets on October 31, 2004
1
BY LINDA I. MILLER, CFA, PORTFOLIO MANAGER
MANAGER'S
REPORT
JOHN HANCOCK
Biotechnology Fund
Biotechnology stocks posted decent returns for the 12 months ended October
31, 2004, although they fared far better in the first half of the period
than they did in the second. Much of the sector's early strength can be
traced to relatively strong economic conditions, which fueled demand for
faster growing stocks, as well as positive clinical trial results and a
rise in product approvals. But as robust economic growth gave way to more
anemic conditions, biotech and other fast-growing stock sectors started to
fade when investors gravitated to more stable, defensive sectors. Weakened
equity markets called into question the ability of some biotech companies
to tap them for funding. Other difficulties confronting biotechs included
worries that a change in the White House would mean more regulation, open
the door to cheap drugs from abroad, impose price curbs and tamper with the
recent Medicare reform initiatives. Product-related disappointments further
clouded the outlook for biotech stocks in the final months of the period.
"Biotechnology stocks posted
decent returns for the 12 months
ended October 31, 2004, although
they fared far better in the first
half of the period than they did in
the second."
Performance review
For the 12 months ended October 31, 2004, John Hancock Biotechnology Fund's
Class A, Class B and Class C shares posted total returns of 6.36%, 5.65%
and 5.65%, respectively, at net asset value. During the same one-year
period, the more broadly diversified average health/biotechnology fund had
a total return of 5.93%, according to Lipper, Inc.,1 while the Standard &
Poor's 500 Index returned 9.42% and the Nasdaq Biotechnology Index returned
- -2.81%. 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 results. The Fund's outperformance of its
peers and benchmark Nasdaq Biotechnology Index can be attributed primarily
to strong stock selection within the health care group.
2
[A photo of Linda Miller flush right next to first paragraph.]
New drugs boost leaders
At the top of our best-performers list were OSI Pharmaceuticals and Biogen
Idec. OSI's stock price began zooming higher in June on news that its
experimental cancer drug Tarceva had extended survival in late-stage lung
cancer patients. Tarceva is what's known as an epidermal growth factor
receptor inhibitor that shrinks tumors by blocking proteins that promote
the spread of cancer cells. In the fall, the stock got another boost when
the company announced that it had received fast-track regulatory approval
from the Food and Drug Administration for Tarceva, meaning the agency has
six months from the application receipt date, or until January 30, 2005, to
take action. Biogen Idec's shares also posted strong gains in part due to
excitement over the company's Antegren drug to treat the symptoms of
multiple sclerosis, which may launch later this year. Another winner was
Eyetech Pharmaceuticals, which was buoyed by investors' enthusiasm over the
company's experimental treatment Macugen, a drug for the sight-robbing
disease called wet age-related macular degeneration. Investors also liked
the fact that the company has plenty of financial support from its
marketing and development partner Pfizer. We also enjoyed good gains from
our holdings in Tularik, which was lifted mid-year by news that the company
- -- which develops potential therapies for cancer, diabetes and obesity --
was to be acquired by Amgen, the world's largest biotech company.
Unfortunately, Amgen's stock stumbled in reaction to concerns about new
pricing guidelines for its chemotherapy-related products.
Other winners included Gilead Sciences, which enjoyed better-than-expected
financial results thanks to strong sales growth of its HIV treatments, and
Sepracor, which bounced back from a dismal 2003 thanks to clinical success
of its drug used to treat insomnia.
"Merger and acquisition
activity provided the
underpinnings for some of
our other best performers."
"Urge to merge"
Merger and acquisition activity provided the underpinnings for some of our
other best performers. The stock price of Atrix Labs, which markets an
injectable prostate drug, was boosted on news that it would be acquired by
Vancouver-based biotech company QLT. Likewise, Ilex Oncology Inc, which
makes
3
a leukemia treatment, moved higher on news that Genzyme Corp. planned
to acquire it.
[Table at top left-hand side of page entitled "Top industry groups." The
first listing is Biotechnology 67%; the second is Pharmaceuticals 14%, the
third is Health care equipment 10% and the fourth is Health care services 5%.]
Early stage companies fall out of favor
Companies dependent on the capital markets to fund their future growth fell
out of favor during the year and were among our biggest disappointments.
The main worry was that given the downturn in the stock market in the
second half of the period, some biotech companies wouldn't be able to raise
enough money to bring exciting and innovative products to market. Among our
holdings that were hurt by this development were Human Genome Sciences,
Amylin Pharmaceuticals, NPS Pharmaceuticals and Onyx Pharmaceuticals. We
also suffered losses with Chiron, which plummeted on news that U.K.
authorities prohibited the company from shipping Fluvirin this season,
which was to account for about 50% of the flu vaccines sold in the United
States. We sold the stock.
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 10-31-04." The chart is divided into two
sections (from top to left): Common stocks 95%, and Short-term investments
& other 5%. ]
Outlook
We're reasonably optimistic about the prospects for biotech stocks. The
world's aging population provides strong support for a bullish outlook for
the group over the long term. We believe that there are other, more
near-term factors working in the group's favor. Just after the Fund's
fiscal year ended, President Bush was re-elected to a second term. That
seemed to reassure investors that status quo, rather than radical change,
will be the watchwords for national health care policies. Furthermore,
large biotech companies enjoy a marketplace that has high barriers to
entry, thereby limiting potential competition over the next year or so. But
the performance
4
[Table at top of page entitled "Scorecard." The header for the left column
is "Investment" and the header for the right column is "Period's
performance...and what's behind the numbers." The first listing is OSI
Pharmaceuticals followed by an up arrow with the phrase "Positive clinical
trials for lung cancer drug boost stock." The second listing is Gilead
Sciences followed by an up arrow with the phrase, "Strong sales of HIV
treatments fuel better financial results." The third listing is Chiron
followed by a down arrow with the phrase, "U.K. shuts down manufacturing
of flu vaccine."]
of biotech stocks will continue to hinge on innovation, new product
approvals and valuations. We're impressed with the current pace of
innovation, although new product approval may slow somewhat as the FDA
takes a more cautious view in light of recent developments with Merck and
Chiron. In terms of valuations, there remain many reasonably priced
opportunities, although some stocks appear to have gotten too expensive.
Given that funding could remain an issue for smaller companies, they are
likely to remain the type of investment they've always been: more
speculative ventures with poten tially higher rewards. In our view, those
factors all add up to an environment that we believe plays to our
stock-picking strengths.
"We're reasonably optimistic about
the prospects for biotech stocks."
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. The manager's statements
reflect her 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.
Sector investing is subject to greater risks than the market as a whole.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
5
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2004
Class A Class B Class C
Inception date 3-1-01 3-1-01 3-1-01
Average annual returns with maximum sales charge (POP)
One year 1.03% 0.65% 4.65%
Since inception -7.64 -7.74 -6.98
Cumulative total returns with maximum sales charge (POP)
One year 1.03 0.65 4.65
Since inception -25.28 -25.60 -23.30
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5% and the
applicable contingent deferred sales charge (CDSC) on Class B and Class C
shares. The returns for Class C shares have been adjusted to reflect the
elimination of the front-end sales charge effective July 15, 2004. 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. 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.
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.
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable.
6
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 two separate indexes.
Cum Value Cum Value Nasdaq
of $10K of $10K S&P 500 Biotechnology
Plot Date (No Load) (w/Load) Index Index
3-1-01 $10,000 $9,500 $10,000 $10,000
3-31-01 8,520 8,091 9,366 7,966
4-30-01 9,870 9,373 10,094 9,476
7-31-01 9,300 8,832 9,817 9,030
10-31-01 9,490 9,012 8,621 8,975
1-31-02 8,609 8,176 9,227 8,104
4-30-02 6,927 6,578 8,820 6,768
7-31-02 5,606 5,324 7,498 5,334
10-31-02 5,556 5,276 7,318 5,314
1-31-03 5,105 4,848 7,103 5,051
4-30-03 5,586 5,305 7,647 5,966
7-31-03 7,368 6,997 8,296 7,614
10-31-03 7,398 7,025 8,842 7,432
1-31-04 8,429 8,004 9,560 8,048
4-30-04 8,979 8,527 9,397 8,121
7-31-04 7,808 7,415 9,389 7,138
10-31-04 7,868 7,472 9,663 7,338
[Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents Standard & Poor's 500 Index and is equal
to $9,663 as of October 31, 2004. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock Biotechnology
Fund, before sales charge, and is equal to $7,868 as of October 31, 2004.
The third line represents the value of the same hypothetical $10,000
investment made in the John Hancock Biotechnology Fund, after sales charge,
and is equal to $7,472 as of October 31, 2004. The fourth line represents the
NASDAQ Biotechnology Index and is equal to $7,338 as of October 31, 2004.]
Class B Class C 1
Period beginning 3-1-01 3-1-01
Without sales charge $7,670 $7,670
With maximum sales charge 7,440 7,670
Index 1 9,663 9,663
Index 2 7,338 7,338
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
and Class C shares, respectively, as of October 31, 2004. The Class C
shares investment with maximum sales charge has been adjusted to reflect
the elimination of the front-end sales charge effective July 15, 2004.
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.
Standard & Poor's 500 Index -- Index 1 -- is an unmanaged index that
includes 500 widely traded common stocks.
Nasdaq Biotechnology Index -- Index 2 -- is an unmanaged index that
represents the largest and most actively traded Nasdaq biotechnology
stocks.
It is not possible to invest directly in an index. Index figures do not
reflect sales charges and would be lower if they did.
1 No contingent deferred sales charge applicable.
7
YOUR
EXPENSES
These examples are intended to help you understand your ongoing operating
expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
* Transaction costs which include sales charges (loads) on purchases or
redemptions (varies by share class), minimum account fee charge, etc.
* Ongoing operating expenses including management fees, distribution and
service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on April 30, 2004, with the same
investment held until October 31, 2004.
Account value Expenses paid
$1,000.00 Ending value during period
on 4-30-04 on 10-31-04 ended 10-31-04 1
- --------------------------------------------------------------------------
Class A $876.30 $7.55
Class B 873.60 10.83
Class C 873.60 10.83
Together with the value of your account, you may use this information to
estimate the operating expenses that you paid over the period. Simply
divide your account value at October 31, 2004 by $1,000.00, then multiply
it by the "expenses paid" for your share class from the table above. For
example, for an account value of $8,600.00, the operating expenses should
be calculated as follows:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each class's
actual expense ratio and an assumed 5% annual return before expenses (which
is not your fund's actual return). It assumes an account value of $1,000.00
on April 30, 2004, with the same investment held until October 31, 2004.
Look in any other fund shareholder report to find its hypothetical example
and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 4-30-04 on 10-31-04 ended 10-31-04 1
- --------------------------------------------------------------------------
Class A $1,017.09 $8.11
Class B 1,013.57 11.64
Class C 1,013.57 11.64
Remember, these examples do not include any transaction costs, such as
sales charges; therefore, these examples will not help you to determine the
relative total costs of owning different funds. If transaction costs were
included, your expenses would have been higher. See the prospectus for
details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.60%, 2.30%
and 2.30% for Class A, Class B, Class C, respectively, multiplied by the
average account value over the period, multiplied by [number of days in
most recent fiscal half-year/365 or 366] (to reflect the one-half year
period).
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2004
This schedule is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry
group. Short-term investments, which represent the Fund's cash position,
are listed last.
Issuer Shares Value
Common stocks 95.21% $19,776,244
(Cost $17,245,155)
Biotechnology 66.85% 13,884,994
Abgenix, Inc. (I) 31,000 282,410
Alkermes, Inc. (I) 11,000 136,070
Amgen, Inc. (I) 48,000 2,726,400
Amylin Pharmaceuticals, Inc. (I)(L) 6,000 127,800
Applera Corp.-Celera Genomics Group (I) 30,000 384,600
AtheroGenics, Inc. (I)(L) 8,500 254,490
Biogen Idec, Inc. (I) 22,500 1,308,600
Celgene Corp. (I) 17,000 503,540
Cephalon, Inc. (I) 9,000 429,030
Charles River Laboratories International, Inc. (I) 4,000 187,160
Eyetech Pharmaceuticals, Inc. (I)(L) 6,500 275,860
Genentech, Inc. (I) 20,000 910,600
Genzyme Corp. (I) 16,000 839,520
Gilead Sciences, Inc. (I) 32,000 1,108,160
Human Genome Sciences, Inc. (I) 10,000 102,900
Kosan Biosciences, Inc. (I) 30,000 187,500
Martek Biosciences Corp. (I) 6,500 305,864
Medarex, Inc. (I)(L) 32,500 247,325
MedImmune, Inc. (I) 10,000 284,200
Millennium Pharmaceuticals, Inc. (I)(L) 30,000 389,400
Nabi Biopharmaceuticals (I) 9,900 137,115
Neurocrine Biosciences, Inc. (I)(L) 9,000 418,950
OSI Pharmaceuticals, Inc. (I)(L) 8,000 519,840
Protein Design Labs, Inc. (I) 22,000 421,300
QIAGEN N.V. (Netherlands) (I) 20,000 212,800
Sepracor, Inc. (I)(L) 10,000 459,300
Telik, Inc. (I)(L) 7,000 129,150
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Biotechnology (continued)
Vicuron Pharmaceuticals, Inc. (I) 15,500 $217,310
ZymoGenetics, Inc. (I) 20,000 377,800
Health Care Equipment 9.95% 2,067,000
Affymetrix, Inc. (I)(L) 18,000 549,000
Applera Corp.-Applied Biosystems Group 12,500 238,500
Caliper Life Sciences, Inc. (I) 60,000 420,000
EPIX Pharmaceuticals, Inc. (I) 6,000 93,780
Fisher Scientific International, Inc. (I)(L) 4,000 229,440
Gen-Probe, Inc. (I) 12,000 420,480
Invitrogen Corp. (I) 2,000 115,800
Health Care Services 4.65% 965,600
Accredo Health, Inc. (I) 10,000 230,300
Cytokinetics, Inc. (I) 18,500 166,500
Nektar Therapeutics (I) 20,000 288,200
Onyx Pharmaceuticals, Inc. (I) 10,000 280,600
Health Care Supplies 0.20% 42,500
Retractable Technologies, Inc. (I) 10,000 42,500
Pharmaceuticals 13.56% 2,816,150
ARIAD Pharmaceuticals, Inc. (I) 25,000 141,750
Enzon Pharmaceuticals, Inc. (I) 15,000 242,550
ICOS Corp. (I)(L) 6,000 135,120
Medicines Co. (The) (I) 19,000 506,160
MGI Pharma, Inc. (I)(L) 8,000 213,360
Nuvelo, Inc. (I) 33,000 302,940
Rigel Pharmaceuticals, Inc. (I) 20,000 480,000
Salix Pharmaceuticals, Ltd. (I) 9,000 144,270
Teva Pharmaceutical Industries Ltd., American Depositary Receipt (ADR) (Israel) 25,000 650,000
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 24.57% $5,102,676
(Cost $5,102,676)
Joint Repurchase Agreement 5.62% 1,167,000
Investment in a joint repurchase agreement transaction with
Morgan Stanley -- Dated 10-29-04, due 11-01-04
(secured by U.S. Treasury Bond 8.125% due 08-15-19
and U.S. Treasury Note 5.875% due 11-15-04 and U.S.
Treasury Inflation Indexed Bonds 3.375% thru 3.625%
due 04-15-28 thru 04-15-32, and U.S. Treasury Inflation
Indexed Notes 3.375% thru 3.875% due 01-15-09
thru 01-15-12) 1.770% $1,167 1,167,000
Shares
Cash Equivalents 18.95% 3,935,676
AIM Cash Investment Trust (T) 3,935,676 3,935,676
Total investments 119.78% $24,878,920
Other assets and liabilities, net (19.78%) ($4,108,862)
Total net assets 100.00% $20,770,058
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of October 31, 2004.
(T) Represents investment of securities lending collateral.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
12
FINANCIAL STATEMENTS
PORTFOLIO
CONCENTRATION
October 31, 2004
(unaudited)
This table shows the
Fund's investments
as a percentage
of net assets,
aggregated by
various industries.
Industry distribution Value as a percentage of Fund's net assets
- -------------------------------------------------------------------------
Biotechnology 66.85%
Health Care Equipment 9.95
Health Care Services 4.65
Health Care Supplies 0.20
Pharmaceuticals 13.56
Short-term investments 24.57
See notes to
financial statements.
13
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
October 31, 2004
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 $22,347,831)
including $3,856,536 of securities loaned $24,878,920
Cash 989
Receivable for shares sold 8,369
Interest receivable 172
Receivable from affiliates 13,247
Other assets 407
Total assets 24,902,104
Liabilities
Payable for investments purchased 102,855
Payable for shares repurchased 22,261
Payable upon return of securities loaned 3,935,676
Payable to affiliates
Management fees 16,265
Distribution and service fees 2,153
Other 8,059
Other payables and accrued expenses 44,777
Total liabilities 4,132,046
Net assets
Capital paid-in 23,198,244
Accumulated net realized loss on investments (4,959,215)
Net unrealized appreciation of investments 2,531,089
Accumulated net investment loss (60)
Net assets $20,770,058
Net asset value per share
Based on net asset values and shares outstanding --
the Fund has an unlimited number of shares
authorized with no par value
Class A ($8,226,985 [DIV] 1,046,686 shares) $7.86
Class B ($8,799,514 [DIV] 1,147,551 shares) $7.67
Class C ($3,743,559 [DIV] 488,240 shares) $7.67
Maximum offering price per share
Class A 1 ($7.86 [DIV] 95%) $8.27
1 On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
See notes to
financial statements.
14
FINANCIAL STATEMENTS
OPERATIONS
For the year ended
October 31, 2004
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Securities lending $15,184
Interest 12,168
Dividends (net of foreign withholding taxes of $525) 4,331
Total investment income 31,683
Expenses
Investment management fees 207,042
Class A distribution and service fees 29,159
Class B distribution and service fees 97,259
Class C distribution and service fees 35,591
Transfer agent fees 96,824
Registration and filing fees 41,890
Professional fees 21,515
Printing 18,263
Custodian fees 17,224
Miscellaneous 7,017
Accounting and legal services fees 6,216
Trustees' fees 1,183
Securities lending fees 404
Total expenses 579,587
Less expense reductions (118,517)
Net expenses 461,070
Net investment loss (429,387)
Realized and unrealized gain (loss)
Net realized gain on investments 2,324,411
Change in net unrealized appreciation (depreciation)
of investments (932,719)
Net realized and unrealized gain 1,391,692
Increase in net assets from operations $962,305
See notes to
financial statements.
15
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's net assets
has changed
during the last
two periods. The
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
any increase or
decrease in money
shareholders
invested in the
Fund.
Year Year
ended ended
10-31-03 10-31-04
Increase (decrease) in net assets
From operations
Net investment loss ($214,497) ($429,387)
Net realized gain (loss) (1,112,209) 2,324,411
Change in net unrealized
appreciation (depreciation) 4,607,427 (932,719)
Increase in net assets resulting
from operations 3,280,721 962,305
From Fund share transactions 5,261,545 904,366
Net assets
Beginning of period 10,361,121 18,903,387
End of period 1 $18,903,387 $20,770,058
1 Includes accumulated net investment loss of $17 and $60, respectively.
See notes to
financial statements.
16
FINANCIAL HIGHLIGHTS
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 10-31-01 1 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $10.00 $9.49 $5.55 $7.39
Net investment loss 2 (0.07) (0.09) (0.08) (0.12)
Net realized and unrealized
gain (loss) on investments (0.44) (3.84) 1.92 0.59
Total from
investment operations (0.51) (3.93) 1.84 0.47
Less distributions
From net investment income -- (0.01) -- --
Net asset value, end of period $9.49 $5.55 $7.39 $7.86
Total return 3,4 (%) (5.10)5 (41.46) 33.15 6.36
Ratios and supplemental data
Net assets, end of period
(in millions) $6 $5 $8 $8
Ratio of expenses
to average net assets (%) 1.60 6 1.60 1.60 1.60
Ratio of adjusted expenses
to average net assets 7(%) 4.34 6 2.59 2.65 2.12
Ratio of net investment loss
to average net assets (%) (1.15)6 (1.29) (1.35) (1.46)
Portfolio turnover (%) 63 97 130 80
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 10-31-01 1 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $10.00 $9.44 $5.49 $7.26
Net investment loss 2 (0.13) (0.14) (0.13) (0.17)
Net realized and unrealized
gain (loss) on investments (0.43) (3.81) 1.90 0.58
Total from
investment operations (0.56) (3.95) 1.77 0.41
Net asset value, end of period $9.44 $5.49 $7.26 $7.67
Total return 3,4 (%) (5.60)5 (41.84) 32.24 5.65
Ratios and supplemental data
Net assets, end of period
(in millions) $4 $4 $8 $9
Ratio of expenses
to average net assets (%) 2.30 6 2.30 2.30 2.30
Ratio of adjusted expenses
to average net assets 7(%) 5.05 6 3.29 3.35 2.82
Ratio of net investment
loss to average net assets (%) (2.01)6 (1.99) (2.05) (2.16)
Portfolio turnover (%) 63 97 130 80
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 10-31-01 1 10-31-02 10-31-03 10-31-04
Per share operating performance
Net asset value,
beginning of period $10.00 $9.44 $5.49 $7.26
Net investment loss 2 (0.13) (0.14) (0.13) (0.17)
Net realized and unrealized
gain (loss) on investments (0.43) (3.81) 1.90 0.58
Total from
investment operations (0.56) (3.95) 1.77 0.41
Net asset value, end of period $9.44 $5.49 $7.26 $7.67
Total return 3,4 (%) (5.60)5 (41.84) 32.24 5.65
Ratios and supplemental data
Net assets, end of period
(in millions) $2 $2 $2 $4
Ratio of expenses
to average net assets (%) 2.30 6 2.30 2.30 2.30
Ratio of adjusted expenses
to average net assets 7(%) 5.05 6 3.29 3.35 2.82
Ratio of net investment
loss to average net assets (%) (2.07)6 (1.99) (2.05) (2.16)
Portfolio turnover (%) 63 97 130 80
1 Class A, Class B and Class C shares began operations on 3-1-01.
2 Based on the average of the shares outstanding.
3 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
4 Total returns would have been lower had certain expenses not been reduced
during the periods shown.
5 Not annualized.
6 Annualized.
7 Does not take into consideration expense reductions during the periods
shown.
See notes to
financial statements.
19
NOTES TO
STATEMENTS
Note A
Accounting policies
John Hancock Biotechnology Fund (the "Fund") is a non-diversified series of
John Hancock World Fund, an open-end management investment company
registered under the Investment Company Act of 1940. The investment
objective of the Fund is to achieve long-term capital appreciation.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B and Class C 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 the 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 may be
valued at amortized cost, which approximates market value. Investments in
AIM Cash Investment Trust are valued at their net asset value each business
day.
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 John Hancock Financial Services,
Inc., 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.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the
20
fund level and allocated daily to each class of shares based on the
appropriate net asset value of the respective classes. Distribution and
service fees, if any, are calculated daily at the class level based on the
appropriate net asset value of each class and the specific expense rate(s)
applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund are allocated
in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
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. Interest 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 October 31, 2004.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. 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 October 31, 2004, the Fund loaned securities having a
market value of $3,856,536 collateralized by cash in the amount of
$3,935,676. The cash collateral was invested in a short-term instrument.
Securities lending expenses are paid by the Fund to the Adviser.
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 $4,431,628 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: October 31, 2010 -- $3,046,491 and October
31, 2011 -- $1,385,137.
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. 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, if any, on the ex-dividend date. 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 October 31, 2004, there were no distributable earnings on a tax
basis.
Such distributions and distributable earnings, on a
21
tax basis, are determined in conformity with income tax regulations, which
may differ from accounting principles generally accepted in the United
States of America. Distributions 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) 0.90% of the
first $500,000,000 of the Fund's average daily net asset value, (b) 0.85%
of the next $500,000,000 and (c) 0.80% of the Fund's average daily net
asset value in excess of $1,000,000,000.
The Adviser has agreed to limit the Fund's total expenses excluding the
distribution and service fees, to 1.30% of the Fund's average daily net
asset value, on an annual basis, at least until February 28, 2005.
Accordingly, the expense reduction related to the total expense limitation
amounted to $118,517 for the year ended October 31, 2004. The Adviser
reserves the right to terminate this limitation in the future.
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. Accordingly, the
Fund makes monthly payments to JH Funds at an annual rate not to exceed
0.30% of Class A average daily net asset value and 1.00% of Class B and
Class C average daily net asset value. A maximum of 0.25% of such payments
may be service fees, as defined by the Conduct 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 shares are assessed up-front sales charges. During the year ended
October 31, 2004, JH Funds received net up-front sales charges of $76,596
with regard to sales of Class A shares. Of this amount, $11,828 was
retained and used for printing prospectuses, advertising, sales literature
and other purposes, $60,031 was paid as sales commissions to unrelated
broker-dealers and $4,737 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.
Prior to July 15, 2004, Class C shares were assessed up-front sales
charges. During the year ended October 31, 2004, JH Funds received net
up-front sales charges of $6,678 with regard to sales of Class C shares. Of
this amount, $6,487 was paid as sales commissions to unrelated
broker-dealers and $191 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
22
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 October 31, 2004, CDSCs received by JH Funds
amounted to $25,546 for Class B shares and $1,979 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., ("Signature Services") an indirect subsidiary of JHLICo.
The Fund pays a monthly transfer agent fee at an annual rate of 0.05% of
the Fund'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. Signature Services agreed to voluntarily reduce the Fund's
asset-based portion of the transfer agent fee if the total transfer agent
fee exceeds the Lipper, Inc. median transfer agency fee for comparable
mutual funds by 0.05%. There were no transfer agent fee reductions during
the year ended October 31, 2004. Signature Services reserves the right to
terminate this limitation at any time.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year
amounted to $6,216. The Fund also paid the Adviser the amount of $369 for
certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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.
23
Note C
Fund share transactions
This listing illustrates the number of Fund shares sold and repurchased
during the last two periods, along with the corresponding dollar value.
Year ended 10-31-03 Year ended 10-31-04
Shares Amount Shares Amount
Class A shares
Sold 559,783 $3,876,141 995,092 $8,365,725
Repurchased (274,305) (1,674,677) (1,047,383) (8,849,637)
Net increase (decrease) 285,478 $2,201,464 (52,291) ($483,912)
Class B shares
Sold 715,050 $4,927,300 588,836 $4,817,701
Repurchased (354,315) (2,274,524) (585,849) (4,633,982)
Net increase 360,735 $2,652,776 2,987 $183,719
Class C shares
Sold 111,436 $716,782 248,261 $1,998,289
Repurchased (52,642) (309,477) (100,421) (793,730)
Net increase 58,794 $407,305 147,840 $1,204,559
Net increase 705,007 $5,261,545 98,536 $904,366
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 October 31, 2004, aggregated $17,482,336 and $17,673,959,
respectively.
The cost of investments owned on October 31, 2004, including short-term
investments, for federal income tax purposes, was $22,875,417. Gross
unrealized appreciation and depreciation of investments aggregated
$3,493,712 and $1,490,209, respectively, resulting in net unrealized
appreciation of $2,003,503. The difference between book basis and tax basis
net unrealized appreciation of investments is attributable primarily to the
tax deferral of losses on certain sales of securities.
Note E
Reclassification
of accounts
During the year ended October 31, 2004, the Fund reclassified amounts to
reflect a decrease in accumulated net realized loss on investments of $20,
a decrease in accumulated net investment loss of $429,344 and a decrease in
capital paid-in of $429,364. This represents the amounts necessary to
report these balances on a tax basis, ex clud ing certain temporary
differences, as of October 31, 2004. 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, and book and tax differences in
accounting for deferred compensation and net operating loss. The
calculation of net investment loss per share in the Fund's Financial
Highlights excludes these adjustments.
Note F
Subsequent event
A special meeting of shareholders was held on December 1, 2004, at which
time one or more new Trustees were elected to the Fund's Board of Trustees.
Several Trustees had reached
24
the age for mandatory retirement and plan to retire in 2004 and 2005. The
Board of Trustees recommended and shareholders approved a proposal to
consolidate the two panels into one Board of Trustees for all open-end
funds within the John Hancock funds complex. The effective date for the
newly elected Trustees to the Fund will be January 1, 2005.
25
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Registered Public
Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Biotechnology 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 Biotechnology Fund (the "Fund") at October 31, 2004, the results of
its operations, the changes in its net assets and the financial highlights
for the periods indicated, 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 audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 2004 by correspondence
with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2004
26
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 October 31, 2004.
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 2004.
Shareholders will be mailed a 2004 U.S. Treasury Department Form 1099-DIV
in January 2005. This will reflect the total of all distributions that are
taxable for calendar year 2004.
27
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
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
Charles L. Ladner, 2 Born: 1938 2004 49
Independent Chairman (since 2004); Chairman and Trustee, Dunwoody
Village, Inc. (retirement services) (until 2003); Senior Vice President and
Chief Financial Officer, UGI Corporation (public utility holding company)
(retired 1998); Vice President and Director for AmeriGas, Inc. (retired
1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution);
Director, EnergyNorth, Inc. (until 1995); Director, Parks and History
Association (since 2001).
Dennis S. Aronowitz, Born: 1931 2001 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp (since 1998).
Richard P. Chapman, Jr., Born: 1935 2001 21
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Director, Lumber Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast Retirement Services, Inc. (retirement
administration) (since 1998).
William J. Cosgrove, Born: 1933 2001 21
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc. (financial reinsurance) (until 2004); Director, Hudson City Savings Bank
(since 1995); Director, Hudson City Bancorp (since 1999); Trustee, Scholarship
Fund for Inner City Children (since 1986).
Richard A. Farrell, Born: 1932 2001 21
President, Farrell, Healer & Co., Inc. (venture capital management firm)
(since 1980) and President, the Venture Capital Fund of NE (since 1980);
prior to 1980, headed the venture capital group at Bank of Boston Corporation;
Trustee, Marblehead Savings Bank (since 1994).
28
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
William F. Glavin, 2 Born: 1932 2001 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
John A. Moore, 2 Born: 1939 2001 31
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (until 2003); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 2001 31
Executive Director, Council for International Exchange of Scholars and
Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1998); Former President of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford
Foundation, International Fellowships Program (since 2002); Director,
Lois Roth Endowment (since 2002); Director, Council for International
Educational Exchange (since 2003).
John W. Pratt, Born: 1931 2001 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
Non-Independent 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
James A. Shepherdson, Born: 1952 2004 49
President and Chief Executive Officer
Executive Vice President, Manulife Financial Corporation (since 2004);
Chairman, Director, President and Chief Executive Officer, John Hancock
Advisers, LLC and The Berkeley Financial Group, LLC (holding company);
Chairman, Director, President and Chief Executive Officer, John Hancock
Funds, LLC; Chairman, President, Director and Chief Executive Officer,
Sovereign Asset Management Corporation ("SAMCorp"); Director, Chairman
and President, NM Capital Management, Inc.; President, John Hancock
Retirement Services, John Hancock Life Insurance Company (until 2004);
Chairman, Essex Corporation (until 2004); Co-Chief Executive Officer,
MetLife Investors Group (until 2003); Senior Vice President, AXA/Equitable
Insurance Company (until 2000).
29
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 H. King, Born: 1952 2001
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 2001
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 Financial Group, LLC;
Vice President, Signature Services (until 2000); Director, Senior Vice President and Secretary,
NM Capital Management, Inc.
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 Non-independent Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
30
OUR FAMILY
OF FUNDS
- --------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap 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 Fund
Investment Grade Bond Fund
Strategic Income 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
A fund's investment objectives, risks, charges and expenses are included in
the prospectus and should be considered carefully before investing. For a
prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291 or visit our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
31
ELECTRONIC
DELIVERY
Now available from
John Hancock Funds
Instead of sending annual and semiannual reports and prospectuses through
the U.S. mail, we'll notify you by e-mail when these documents are
available for online viewing.
How does electronic delivery benefit you?
* No more waiting for the mail to arrive; you'll receive an e-mail
notification as soon as the document is ready for online viewing.
* Reduces the amount of paper mail you receive from John Hancock Funds.
* Reduces costs associated with printing and mailing.
Sign up for electronic delivery today at
www.jhfunds.com/edelivery
32
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way,
Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available on
a quarterly basis 60 days after the fiscal quarter on our Web site or upon
request by calling 1-800-225-5291, or on the Securities and Exchange
Commission's Web site, www.sec.gov.
33
[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.jhfunds.com/edelivery
This report is for the information of
the shareholders of the John Hancock
Biotechnology Fund.
7300A 10/04
12/04
ITEM 2. CODE OF ETHICS.
As of the end of the period, October 31, 2004, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
Chief Executive Officer, Chief Financial Officer and Treasurer
(respectively, the principal executive officer, the principal financial
officer and the principal accounting officer, the "Senior Financial
Officers"). A copy of the code of ethics is filed as an exhibit to this
Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
William F. Glavin is the audit committee financial expert and is
"independent", pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant(s) in
connection with statutory and regulatory filings or engagements amounted to
$45,200 for the fiscal year ended October 31, 2003 (broken out as follows:
John Hancock Biotechnology Fund - $17,000 and John Hancock Health Sciences
Fund - $28,200) and $47,500 for the fiscal year ended October 31, 2004
(broken out as follows: John Hancock Biotechnology Fund - $17,850 and John
Hancock Health Sciences Fund - $29,650). These fees were billed to the
registrant and were approved by the registrant's audit committee.
(b) Audit-Related Services
There were no audit-related fees during the fiscal year ended October 31,
2003 and fiscal year ended October 31, 2004 billed to the registrant or to
the registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that provides
ongoing services to the registrant ("control affiliates").
(c) Tax Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the tax compliance, tax advice and tax planning
("tax fees") amounted to $6,000 for the fiscal year ended October 31, 2003
(broken out as follows: John Hancock Biotechnology Fund - $3,000 and John
Hancock Health Sciences Fund - $3,000) and $6,300 for the fiscal year ended
October 31, 2004 (broken out as follows: John Hancock Biotechnology Fund -
$3,150 and John Hancock Health Sciences Fund - $3,150). The nature of the
services comprising the tax fees was the review of the registrant's income
tax returns and tax distribution requirements. These fees were billed to
the registrant and were approved by the registrant's audit committee. There
were no tax fees billed to the control affiliates.
(d) All Other Fees
There were no other fees during the fiscal year ended October 31, 2003 and
fiscal year ended October 31, 2004 billed to the registrant or to the
control affiliates.
(e)(1) See attachment "Approval of Audit, Audit-related, Tax and Other
Services", with the audit committee pre-approval policies and procedures.
(e)(2) There were no fees that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended October 31,
2003 and October 31, 2004 on behalf of the registrant or on behalf of the
control affiliates that relate directly to the operations and financial
reporting of the registrant.
(f) According to the registrant's principal accountant, for the fiscal year
ended October 31, 2004, the percentage of hours spent on the audit of the
registrant's financial statements for the most recent fiscal year that were
attributed to work performed by persons who were not full-time, permanent
employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant(s)
for services rendered to the registrant and rendered to the registrant's
control affiliates for each of the last two fiscal years of the registrant
were $6,000 for the fiscal year ended October 31, 2003 and $62,762 for the
fiscal year ended October 31, 2004.
(h) The audit committee of the registrant has considered the non-audit
services provided by the registrant's principal accountant(s) to the
control affiliates and has determined that the services that were not
pre-approved are compatible with maintaining the principal accountant(s)'
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds -
Administration Committee Charter.
ITEM 10. 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
accounting 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 changes in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal half-year (the registrant's second fiscal half-year in the case of
an annual report) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive
officer and principal accounting 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)(1) Separate certifications for the registrant's principal executive
officer and principal accounting 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.
(c)(1) Approval of Audit, Audit-related, Tax and Other Services is
attached.
(c)(2) Contact person at the registrant.
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.
John Hancock World Fund
By:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: December 21, 2004
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:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: December 21, 2004
By:
-----------------------
William H. King
Vice President and Treasurer
Date: December 21, 2004