-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A5j1jQE/NxEtIgtKi0HKxpLV8dIL89d9vdNMaO1Tw84t4BF1geGuXftJfKg8Fyga 3sNNLT8dROjKfRpsfxFxCw== 0000928816-04-001486.txt : 20041230 0000928816-04-001486.hdr.sgml : 20041230 20041230105735 ACCESSION NUMBER: 0000928816-04-001486 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20041031 FILED AS OF DATE: 20041230 DATE AS OF CHANGE: 20041230 EFFECTIVENESS DATE: 20041230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN WORLD FUND CENTRAL INDEX KEY: 0000807639 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04932 FILM NUMBER: 041232760 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6173751702 MAIL ADDRESS: STREET 1: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN WORLD TRUST DATE OF NAME CHANGE: 19901024 N-CSR 1 worldfund1.txt JOHN HANCOCK WORLD FUND 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 EX-99.CERT 2 exnn2.txt CERTIFICATION CERTIFICATION I, James A. Shepherdson, certify that: 1. I have reviewed this report on Form N-CSR of the John Hancock World Fund (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2004 - --------------------------------- James A. Shepherdson President and Chief Executive Officer CERTIFICATION I, William H. King, certify that: 1. I have reviewed this report on Form N-CSR of the John Hancock World Fund (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2004 - --------------------------------- William H. King Vice President and Treasurer EX-99.906 CERT 3 exnnos3.txt CERTIFICATION 906 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached Report of John Hancock World Fund (the "registrant") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. - --------------------------- James A. Shepherdson President and Chief Executive Officer Dated: December 21, 2004 - --------------------------- William H. King Vice President and Treasurer Dated: December 21, 2004 A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.CODE ETH 4 exncodeth4.txt CODE OF ETHICS Code of Ethics of * John Hancock Advisers, LLC * Sovereign Asset Management Co. * each John Hancock fund * John Hancock Funds, LLC (together, called "John Hancock Funds") May 1, 2004 - -------------------------------------------------------------------------------- 1. General Principles......................................................2 2. To Whom Does This Code Apply?...........................................2 3. Overview of Policies....................................................3 4. Policies Outside the Code of Ethics.....................................4 >> Company Conflict & Business Practice Policy..........................4 >> Inside Information Policy and Procedures.............................4 5. Policies in the Code of Ethics..........................................5 >> Restriction on Gifts.................................................5 >> Preclearance of Securities Transactions..............................5 >> Ban on Short-Term Profits............................................6 >> Ban on IPOs..........................................................7 >> Disclosure of Private Placement Conflicts............................7 >> Seven Day Blackout Period............................................8 6. Reports and Other Disclosures Outside the Code of Ethics................8 >> Broker Letter/Duplicate Confirm Statements...........................8 7. Reports and Other Disclosures In the Code of Ethics.....................9 >> Initial Holdings Report and Annual Holdings Report...................9 >> Quarterly Transaction Reports........................................9 >> Annual Certification................................................10 8. Limited Access Persons.................................................10 9. Subadvisers............................................................10 10. Reporting Violations...................................................10 11. Interpretation and Enforcement.........................................11 Appendix A: Categories of Personnel.........................................12 Appendix B: Preclearance Procedures.........................................13 Appendix C: Limited Access Persons..........................................17 Appendix D: Subadvisers....................................................18 Appendix E: Administration and Recordkeeping...............................19 - -------------------------------------------------------------------------------- 1. General Principles Each person within the John Hancock Funds organization is responsible for maintaining the very highest ethical standards when conducting business. This means that: o You have a duty at all times to place the interests of our clients first. o All of your personal securities transactions must be conducted consistent with this code of ethics and in such a manner as to avoid any actual or potential conflict of interest or other abuse of your position of trust and responsibility. o You should not take inappropriate advantage of your position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to our clients' accounts. 2. To Whom Does This Code Apply? This code of ethics applies to you if you are a director, officer or employee of John Hancock Advisers, LLC, Sovereign Asset Management Co., John Hancock Funds, LLC or a "John Hancock fund" (any fund or account advised by John Hancock Advisers, LLC). It also applies to you if you are an employee of John Hancock Life Insurance Co. or its subsidiaries who participates in making recommendations for, or receives information about, portfolio trades of the John Hancock funds. Please note that if a policy described below applies to you, it applies to your personal accounts, those of a spouse, "significant other," minor children or family members sharing a household, as well as all accounts over which you have discretion or give advice or information. "Significant others" are defined for these purposes as two people who (1) share the same primary residence; (2) share living expenses; and (3) are in a committed relationship and intend to remain in the relationship indefinitely. There are three main categories for persons covered by this code of ethics, taking into account their positions, duties and access to information regarding fund portfolio trades. You have been notified about which of these categories applies to you, based on the Compliance Department's understanding of your current role. If you have a level of investment access beyond your assigned category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to notify Tim Fagan, Assistant Investment Compliance Officer. The basic definitions of the three main categories, with examples, are provided below. The more detailed definitions of each category are attached as Appendix A. - --------------------------------------- -------------------------------------- -------------------------------------- "Regular Access" person "Investment Access" person A person who regularly obtains "Non-Access" person information regarding fund portfolio A person who regularly participates trades. A person who does not regularly in a fund's investment process. examples: participate in a fund's investment --------- process or obtain information o personnel in Investment regarding fund portfolio trades. examples: Operations or Compliance - --------- o most FFM personnel examples: o portfolio managers o Technology personnel with --------- o analysts access to investment systems o wholesalers o traders o attorneys and some legal o inside wholesalers who administration personnel don't attend investment o investment admin. personnel "morning meetings" o certain administrative personnel - --------------------------------------- -------------------------------------- --------------------------------------
2 3. Overview of Policies Please refer to the following chart to determine which policies apply to your category. These policies are described in detail below. - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Investment Regular Access Non-Access Access Person Person Person - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- General principles yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policies outside the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Conflict of interest policy yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Inside information policy yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policies in the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Restriction on gifts yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Pre-clearance requirement yes yes Limited - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Ban on short-term profits yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Ban on IPOs yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Disclosure of private placement conflicts yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Seven day blackout period yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Reports and other disclosures outside the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Broker letter/duplicate confirms yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Reports and other disclosures in the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Annual recertification form yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Initial/annual holdings reports yes yes no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Quarterly transaction reports yes yes no - ------------------------------------------------------ ---------------------- ---------------------- ----------------------
3 4. Policies Outside the Code of Ethics John Hancock Funds has certain policies that are not part of the code of ethics, but are equally important. The two most important of these policies are (1) the Company Conflict and Business Practice Policy; and (2) the Inside Information Policy. >> Company Conflict & Business Practice Policy - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- A conflict of interest occurs when your private interests interfere or could potentially interfere with your responsibilities at work. You must not place yourself or the company in a Non-Access Persons position of actual or potential conflict. This Policy covers a number of important issues. For example, you cannot serve as a director of any company without first obtaining the required written executive approval. Other important issues in this Policy include: o personal investments or business relationships o misuse of inside information o receiving or giving of gifts, entertainment or favors o misuse or misrepresentation of your corporate position o disclosure of confidential or proprietary information o antitrust activities o political campaign contributions and expenditures on public officials >> Inside Information Policy and Procedures - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- The antifraud provisions of the federal securities laws generally prohibit persons with material non-public information from trading on or communicating the information to others. Sanctions for violations can include civil injunctions, permanent bars from the securities industry, civil penalties up to three times the profits made or losses avoided, criminal fines and jail sentences. While Investment Access persons are most likely to come in contact with material non-public information, the rules (and sanctions) in this area apply to all John Hancock Funds personnel and extend to activities both related and unrelated to your job duties. The Inside Information Policy and Procedures covers a number of important issues, such as: o The misuse of material non-public information o The information barrier procedure o The "restricted list" and the "watch list" o broker letters and duplicate confirmation statements (see section 6 of this code of ethics) 4 5. Policies in the Code of Ethics >> Restriction on Gifts - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- You and your family cannot accept preferential treatment or favors from securities brokers or dealers or other organizations with which John Hancock Funds might transact business except in accordance with the Company Conflict and Business Practice Policy. For the protection of both you and John Hancock Funds, the appearance of a possible conflict of interest must be avoided. You should exercise caution in any instance in which business travel and lodging are paid for by someone other than John Hancock Funds. The purpose of this policy is to minimize the basis for any charge that you used your John Hancock Funds position to obtain for yourself opportunities which otherwise would not be offered to you. Please see the Company Conflict and Business Practice Policy's "Compensation and Gifts" section for additional details regarding restrictions on gifts and exceptions for "nominal value" gifts. >> Preclearance of Securities Transactions - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Also, for a limited category of trades: -------------------------- Non-Access Persons - ---------------------------------------- If you are an Investment Access person or Regular Access person, you must "preclear" (i.e.: receive advance approval of) any personal securities transactions. "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. Due to this preclearance requirement, participation in investment clubs is prohibited. Preclearance of private placements requires some special considerations--the decision will take into account whether, for example: (1) the investment opportunity should be reserved for John Hancock Funds clients; and (2) it is being offered to you because of your position with John Hancock Funds. The following securities are exempt from the preclear policy: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper & high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, if you are an Investment Access person or Regular Access person, you now must preclear shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** If you are a Non-Access person, you must preclear transactions in securities of any closed-end funds advised by John Hancock Advisers, LLC. A Non-Access person is not required to preclear other trades. However, please keep in mind that a Non-Access person is required to report securities transactions after every trade (even those that are not required to be precleared) by submitting duplicate confirmation statements, as described in section 6 of this code of ethics. 5 The preclearance policy is designed to proactively identify possible "problem trades" that raise front-running, manipulative market timing or other conflict of interest concerns (example: when an Investment Access person trades a security on the same day as a John Hancock fund). Please keep in mind that even if you receive a preclearance, or are exempt from preclearing a securities transaction, you are still prohibited from engaging in any fraud or manipulative practice (such as front-running or manipulative market timing) with respect to a John Hancock fund. You preclear a trade by following the steps outlined in the preclearance procedures, which are attached as Appendix B. Please note that: o You may not trade until clearance is received. o Clearance approval is valid only for the date granted (i.e. the preclearance date and the trade date should be the same. However, for preclearance of John Hancock mutual funds, the preclearance date may be the trade date or the order submission date) . o A separate procedure should be followed for requesting preclearance of a private placement or a derivative, as detailed in Appendix B. The Compliance Department must maintain a five-year record of all clearances of private placement purchases by Investment Access persons, and the reasons supporting the clearances. >> Ban on Short-Term Profits - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person, you cannot profit from the purchase and sale (or sale and purchase) of the same (or equivalent) securities within 60 calendar days. The purpose of this policy is to address the risk, real or perceived, of front-running, manipulative market timing or other abusive practices involving short-term personal trading. Any profits realized on short-term trades must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity. This policy applies to trades for your personal accounts, those of a spouse, "significant other," minor children or family members sharing a household, as well as all accounts over which you have discretion or give advice or information. If you give away a security, it is considered a sale. The following securities are exempt from this ban on short-term profits: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper & high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, the short-term profit ban for Investment Access persons now applies to shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** You may invest in derivatives or sell short provided the transaction period exceeds the 60-day holding period. 6 You may request an exemption from this policy for involuntary sales due to unforeseen corporate activity (such as a merger), or hardship reasons (such as unexpected medical expenses) by sending an e-mail to Tim Fagan, Assistant Investment Compliance Officer. >> Ban on IPOs - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person, you may not acquire securities in an initial public offering. You may not purchase any newly-issued securities until the next business (trading) day after the offering date. This policy applies to trades for your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. There are two main reasons for this prohibition: (1) these purchases may suggest that persons have taken inappropriate advantage of their positions for personal profit; and (2) these purchases may create at least the appearance that an investment opportunity that should have been available to the John Hancock funds was diverted to the personal benefit of an individual employee. You may request an exemption for certain investments that do not create a potential conflict of interest, such as: (1) securities of a mutual bank or mutual insurance company received as compensation in a demutualization and other similar non-voluntary stock acquisitions; or (2) fixed rights offerings. >> Disclosure of Private Placement Conflicts - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person and you own securities purchased in a private placement, you must disclose that holding when you participate in a decision to purchase or sell that same issuer's securities for a John Hancock fund. Private placements are securities exempt from SEC registration under section 4(2), section 4(6) or rules 504 -506 of the Securities Act of 1933. The investment decision must be subject to an independent review by investment personnel with no personal interest in the issuer. This policy applies to holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. The purpose of this policy is to provide appropriate scrutiny in situations in which there is a potential conflict of interest. 7 >> Seven Day Blackout Period - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are a portfolio manager (or were identified to the Compliance Department as part of a portfolio management team) you are prohibited from buying or selling a security within seven calendar days before and after that security is traded for a fund that you manage unless no conflict of interest exists in relation to that security. In addition, all investment access persons are prohibited from knowingly buying or selling a security within seven calendar days before and after that security is traded for a John Hancock fund unless no conflict of interest exists in relation to that security. If a John Hancock fund trades in a security within seven calendar days before or after you trade in that security, you may be required to demonstrate that you did not know that the trade was being considered for that John Hancock fund. You will be required to sell any security purchased in violation of this policy unless it is determined that no conflict of interest exists in relation to that security. Any profits realized on trades during a seven day blackout period must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity. This policy applies to holdings in your personal accounts, those of a spouse, "significant other" or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. 6. Reports and Other Disclosures Outside the Code of Ethics >> Broker Letter/Duplicate Confirm Statements - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- As required by the Inside Information Policy, you must inform your stockbroker that you are employed by an investment adviser or broker. Your broker is subject to certain rules designed to prevent favoritism toward your accounts. You may not accept negotiated commission rates that you believe may be more favorable than the broker grants to accounts with similar characteristics. When you open a brokerage account, before any trades are made, you must: o Notify the broker-dealer with which you are opening an account that you are a registered associate of JHF; o Ask the firm in writing to have duplicate written confirmations of any trade, as well as statements or other information concerning the account, sent to the JHF Compliance Department (contact: Fred Spring), 10th Floor, 101 Huntington Avenue, Boston, MA 02199; and o Notify the JHF Compliance Department, in writing, that you have an account before you place any trades. 8 These requirements apply to holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. ***Please note that, effective May 1, 2004, the broker letter/duplicate confirm statements requirement now applies to shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** 7. Reports and Other Disclosures In the Code of Ethics >> Initial Holdings Report and Annual Holdings Report - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- You must file an initial holdings report within 10 calendar days after becoming an Investment Access person or a Regular Access person. You must also file an annual holdings report (as of December 31st) within 30 calendar days after the calendar year end. These reports must cover all holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. You must report: o holdings of all securities except: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, you must now report holdings of shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds).*** o all brokerage accounts that contain securities (including brokerage accounts that only contain securities exempt from reporting). >> Quarterly Transaction Reports - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- You must file a quarterly transaction report within 10 calendar days after the end of a calendar quarter if you are an Investment Access person or a Regular Access person. This report must cover all transactions during the past calendar quarter in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. You must report: o transactions in all securities except: (1) direct obligations of the U.S. Government, (2) open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including 9 repurchase agreements. ***Please note that, effective May 1, 2004, you must now report transactions of shares of open-end mutual funds that are advised John Hancock Advisers, LLC (excluding the money market funds and any by dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** o the opening of any brokerage account that contains securities (including brokerage accounts that only contain securities exempt from reporting). >> Annual Certification - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- You must provide an annual certification at a date designated by the Compliance Department that: (1) you have read and understood this code of ethics; (2) you recognize that you are subject to its policies; and (3) you have complied with its requirements. You are required to make this certification to demonstrate that you understand the importance of these policies and your responsibilities under the Code. 8. Limited Access Persons There is an additional category of persons called "Limited Access" persons. This category consists only of directors of John Hancock Advisers, LLC or the John Hancock funds who: (a) are not also officers of John Hancock Advisers, LLC; and (b) do not ordinarily obtain information about fund portfolio trades. A more detailed definition of Limited Access persons, and a list of the policies that apply to them, is attached as Appendix C. 9. Subadvisers A subadviser to a John Hancock fund has a number of responsibilities under this code of ethics, as described in Appendix D. 10. Reporting Violations If you know of any violation of our code of ethics, you have a responsibility to immediately report it. You should also report any deviations from the controls and procedures that safeguard John Hancock Funds and the assets of our clients. You can report confidentially to: o Tim Fagan (375-6205); or Susan Newton (375-1702) or o Your manager or department head 10 11. Interpretation and Enforcement This code of ethics cannot anticipate every situation in which personal interests may be in conflict with the interests of our clients. You should be responsive to the spirit and intent of this code of ethics as well as its specific provisions. When any doubt exists regarding any code of ethics provision or whether a conflict of interest with clients might exist, you should discuss the transaction beforehand with the Legal Department (contacts: Tim Fagan (375-6205) or Susan Newton (375-1702)). The code of ethics is designed to detect and prevent fraud against clients and fund investors, and to avoid the appearance of impropriety. If you feel inequitably burdened by any policy, you should feel free to contact Susan Newton or the Ethics and Business Practices Committee. Exceptions may be granted where warranted by applicable facts and circumstances. To provide assurance that policies are effective, the Compliance Department will monitor and check personal securities transaction reports and certifications against fund portfolio transactions. Other internal auditing procedures may be adopted from time to time. Additional administration and recordkeeping procedures are described in Appendix E. The Ethics and Business Practices Committee of John Hancock Funds has general responsibility for this code of ethics. The Legal Department will refer violations to the Ethics and Business Practices Committee for review and appropriate action. The following factors will be considered when the Ethics and Business Practices Committee determines a fine or other disciplinary action: o the person's position and function (senior personnel may be held to a higher standard); o the amount of the trade; o whether the funds or accounts hold the security and were trading the same day; o whether the violation was by a family member. o whether the person has had a prior violation and which policy was involved. o whether the employee self-reported the violation. You can request reconsideration of any disciplinary action by submitting a written request to the Ethics and Business Practices Committee. No less frequently than annually, a written report of all material violations and sanctions, significant conflicts of interest and other related issues will be submitted to the boards of directors of the John Hancock funds for their review. Sanctions for violations could include fines, limitation of personal trading activity, suspension or termination of the violator's position with John Hancock Funds and/or a report to the appropriate regulatory authority. 11 Appendix A: Categories of Personnel You have been notified about which of these categories applies to you, based on the Compliance Department's understanding of your current role. If you have a level of investment access beyond that category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to immediately notify Tim Fagan (375-6205) or Fred Spring (375-4987). 1) Investment Access person: You are an Investment Access person if you are an employee of John Hancock Advisers, LLC, a John Hancock fund, or John Hancock Life Insurance Company or its subsidiaries who, in connection with your regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by a John Hancock fund. (examples: portfolio managers, analysts, traders) 2) Regular Access person: You are a Regular Access person if: o You are an officer (vice president and higher) or director of John Hancock Advisers, LLC or a John Hancock fund. (Some directors may be Limited Access persons--please see Appendix C for this definition.) o You are: -an employee of John Hancock Advisers, LLC, a John Hancock fund or John Hancock Life Insurance Co. or its subsidiaries , or -a director, officer (vice president and higher) or employee of John Hancock Funds, LLC who: (i) in connection with your regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of securities by a John Hancock fund; or (ii) your functions relate to the making of any recommendation to the fund regarding the purchase or sale of securities by a John Hancock fund. (examples: Investment Operations personnel, Compliance Department personnel, most Fund Financial Management personnel, investment administrative personnel, Technology Resources personnel with access to investment systems, attorneys and some legal administration personnel) 3) Non-Access person: You are a non-access person if you are an employee of John Hancock Advisers, LLC, John Hancock Funds, LLC or a John Hancock fund who does not fit the definitions of any of the other three categories (Investment Access Person, Regular Access Person or Limited Access Person). To be a non-access person, you must not obtain information regarding the purchase or sale of securities by a John Hancock fund in connection with your regular functions or duties. (examples: wholesalers, inside wholesalers, certain administrative staff) 4) Limited Access Person: Please see Appendix C for this definition. Appendix B: Preclearance Procedures CODE OF ETHICS PRE-CLEARANCE PROCEDURES You should read the Code of Ethics to determine whether you must obtain a preclearance before you enter into a securities transaction. If you are required to obtain a preclearance, you should follow the procedures detailed below. 1. Pre-clearance for Public Securities including Derivatives, Futures, Options and Selling Short: A request to pre-clear should be entered into the John Hancock Personal Trading & Reporting System. The John Hancock Personal Trading & Reporting System is located under your Start Menu on your Desktop. It can be accessed by going to JH Applications/Personal Trading & Reporting/ Personal Trading & Reporting and by entering your Web Security Services user id and password. If JH Applications or the John Hancock Personal Trading & Reporting System is not on your Desktop, please contact the HELP Desk at (617) 375-4357 for assistance. The Trade Request Screen: At times you may receive a message like "System is currently unavailable". The system is scheduled to be offline from 8:00 PM until 7:00 AM each night. Ticker/Security Cusip: Fill in this one of these fields with the proper information of the security you want to buy or sell. Then click the [Lookup] button. Select one of the hyperlinks for the desired security, and the system will populate the proper fields Ticker, Security Cusip, Security Name and Security Type automatically on the Trade Request Screen. If You Don't Know the Ticker, Cusip, or Security Name: If you do not know the full ticker, you may type in the first few letters followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Intel, but all you can remember of the ticker is that it begins with int, so you enter int* for Ticker. If any tickers beginning with int are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will populate Security Cusip, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the full cusip, you may type in the first few numbers followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Microsoft, but all you can remember of the cusip is that it begins with 594918, so you enter 594918* for Ticker. If any cusips beginning with 594918 are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will fill in Ticker, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the Ticker but have an idea of what the Security Name is, you may type in an asterisk, a few letters of the name and an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of American Brands, so you enter *amer* for Security Name. Any securities whose names have amer in them are displayed on a new screen, where you are asked to select the hyperlink of the one you want, and the system will fill in Ticker, Cusip and Security Type automatically on the Trade Request Screen. Other Items on the Trade Request Screen: Brokerage Account: Click on the dropdown arrow to the right of the Brokerage Account field to choose the account to be used for the trade. Transaction Type: Choose one of the values displayed when you click the dropdown arrow to the right of this field. Trade Date: You may only submit trade requests for the current date. Note: One or more of these fields may not appear on the Request Entry screen if the information is not required. Required fields are determined by the compliance department. Click the [Submit Request] button to send the trade request to your compliance department. Once you click the [Submit Request] button, you will be asked to confirm the values you have entered. Review the information and click the [Confirm] button if all the information is correct. After which, you will receive immediate feedback in your web browser. (Note: We suggest that you print out this confirmation and keep it as a record of the trade you have made). After this, you can either submit another trade request or logout. 14 Attention Investment Access Persons: If the system identifies a potential violation of the Ban on Short Term Profits Rule, your request will be sent to the Compliance Department for review and you will receive feedback via the e-mail system. Starting Over: To clear everything on the screen and start over, click the [Clear Screen] button. Exiting Without Submitting the Trade Request: If you decide not to submit the trade request before clicking the [Submit Request] button, simply exit from the browser by clicking the [X] button on the upper right or by pressing [Alt+F4], or by clicking the Logout hyperlink on the lower left side of the screen. Ticker/Security Name Lookup Screen: You arrive at this screen from the Trade Request Screen, where you've clicked the [Lookup] button (see above, "If You Don't Know the Ticker, Cusip, or Security Name"). If you see the security you want to trade, you simply select its corresponding hyperlink, and you will automatically return to the Trade Request Screen, where you finish making your trade request. If the security you want to trade is not shown, that means that it is not recognized by the system under the criteria you used to look it up. Keep searching under other names (click the [Return to Request] button) until you are sure that the security is not in the system. If you determine that the desired security is not in the system, please contact a member of the compliance department to add the security for you. Contacts are listed below: Fred Spring x54987 Adding Brokerage Accounts: To access this functionality, click on the Add Brokerage Account hyperlink on the left frame of your browser screen. You will be prompted to enter the Brokerage Account Number, Brokerage Account Name, Date Opened, and Broker. When you click the [Create New Brokerage Account] button, you will receive a message that informs you whether the account was successfully created. 15 3. Pre-clearance for Private Placements and Initial Public Offerings: You may request a preclearance of private placement securities or an Initial Public Offering by contacting Fred Spring via Microsoft Outlook (please "cc." Tim Fagan on all such requests). Please keep in mind that the code of ethics prohibits Investment Access persons from purchasing securities in an initial public offering. The request must include: |_| the associate's name; |_| the associate's John Hancock Funds' company; |_| the complete name of the security; |_| the seller and whether or not the seller is one with whom the associate does business on a regular basis; |_| any potential conflict, present or future, with fund trading activity and whether the security might be offered as inducement to later recommend publicly traded securities for any fund; and |_| the date of the request. Clearance of private placements or initial public offerings may be denied if the transaction could create the appearance of impropriety. Clearance of initial public offerings will also be denied if the transaction is prohibited for a person due to his or her access category under the code of ethics. 16 Appendix C: Limited Access Persons You are a Limited Access person if you are a director of John Hancock Advisers, LLC or a John Hancock fund and you meet the two following criteria: (a) you are not an officer of John Hancock Advisers, LLC or a John Hancock fund; and (b) you do not obtain information in the ordinary course of business regarding the purchase or sale of securities by a John Hancock fund. (examples: certain directors of John Hancock Advisers, LLC or a John Hancock fund) The following policies apply to your category. These policies are described in detail in the code of ethics. o Fundamental concept o Inside information policy and procedures* o Broker letter/Duplicate Confirms* o Initial/annual holdings reports* o Quarterly transaction reports* o Annual recertification* *Exception: If you are an independent director of a John Hancock fund: o you are exempt from the broker letter/duplicate confirms requirement o you are exempt from the inside information policy and procedures o you do not have to file an initial holdings report. o you do not have to file an annual holdings report. o you do not have to file a quarterly transaction report unless you knew (or should have known) that during the 15 calendar days before or after you trade a security, either: (i) a John Hancock fund purchased or sold the same security, or (ii) a John Hancock fund or John Hancock Advisers, LLC considered purchasing or selling the same security. This policy applies to holdings in your personal accounts, those of a spouse, "significant other" or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. If this situation occurs, it is your responsibility to contact Tim Fagan, Assistant Investment Compliance Officer, at (617) 375-6205 and he will assist you with the requirements of the quarterly transaction report. 17 Appendix D: Subadvisers A subadviser to a John Hancock fund has a number of responsibilities under this code of ethics. If John Hancock Advisers, LLC determines that a subadviser has failed to comply with the provisions of Rule 17j-1, John Hancock Advisers, LLC may deem the subadviser's directors, officers or employees to be subject to this code of ethics. >> Approval of Code of Ethics Each subadviser to a John Hancock fund must provide a copy of its code of ethics to the trustees of the relevant John Hancock funds for approval initially and within 60 calendar days of any material amendment. The trustees will give their approval if they determine that the code: o contains provisions reasonably necessary to prevent the subadviser's Access Persons (as defined in Rule 17j-1) from engaging in any conduct prohibited by Rule 17j-1; o requires the subadviser's Access Persons to make reports to at least the extent required in Rule 17j-1(d); o requires the subadviser to institute appropriate procedures for review of these reports by management or compliance personnel (as contemplated by Rule 17j-1(d)(3)); o provides for notification of the subadviser's Access Persons in accordance with Rule 17j-1(d)(4); and o requires the subadviser's Access Persons who are Investment Personnel to obtain the pre-clearances required by Rule 17j-1(e); >> Reports and Certifications Each subadviser must provide an annual report and certification to John Hancock Advisers, LLC and the fund's trustees in accordance with Rule 17j-1(c)(2)(ii). The subadviser must also provide other reports or information that John Hancock Advisers, LLC may reasonably request. >> Recordkeeping Requirements The subadviser must maintain all records for its Access Persons as required by Rule 17j-1(f). 18 Appendix E: Administration and Recordkeeping >> Adoption and Approval The trustees of a John Hancock fund must approve the code of ethics of an adviser, subadviser or affiliated principal underwriter before initially retaining its services. Any material change to a code of ethics of a John Hancock fund, John Hancock Funds, LLC, John Hancock Advisers, LLC or a subadviser to a fund must be approved by the trustees of the John Hancock fund, including a majority of trustees who are not interested persons, no later than six months after adoption of the material change. >> Administration No less frequently than annually, John Hancock Funds, LLC, John Hancock Advisers, LLC, each subadviser and each John Hancock fund will furnish to the trustees of each John Hancock fund a written report that: o describes issues that arose during the previous year under the code of ethics or the related procedures, including, but not limited to, information about material code or procedure violations, and o certifies that each entity has adopted procedures reasonably necessary to prevent its access persons from violating its code of ethics. >> Recordkeeping The Compliance Department will maintain: o a copy of the current code of ethics for John Hancock Funds, LLC, John Hancock Advisers, LLC, and each John Hancock fund, and a copy of each code of ethics in effect at any time within the past five years. o a record of any violation of the code of ethics, and of any action taken as a result of the violation, for six years. o a copy of each report made by an Access person under the code of ethics, for six years (the first two years in a readily accessible place). o a record of all persons, currently or within the past five years, who are or were required to make reports under the code of ethics. This record will also indicate who was responsible for reviewing these reports. o a copy of each code of ethics report to the trustees, for six years (the first two years in a readily accessible place). o a record of any decision, and the reasons supporting the decision, to approve the acquisition by an Investment Access person of initial public offering securities or private placement securities, for six years. 19 EX-99 5 exnaudit5.txt AUDIT COMMITTEE CHARTER JOHN HANCOCK FUNDS AUDIT COMMITTEE CHARTER A. Membership. The Audit Committee shall be composed exclusively of Trustees ("Independent Trustees") who are not "interested persons" as defined in the Investment Company Act of 1940, as amended, of John Hancock Advisers, LLC and who satisfy the independence and financial literacy requirements in this charter. The Audit Committee shall be composed at least three Independent Trustees who are designated for membership from time to time by the Administration Committee, subject to ratification by the Board of Trustees. In selecting Independent Trustees to serve on the Audit Committee, the Administration Committee should select members who are free of any relationship that, in the opinion of the Administration Committee, may interfere or give the appearance of interfering with such member's individual exercise of independent judgment. Unless otherwise determined by the Board, no member of the Audit Committee may serve on the audit committee of more than two other public companies (other than another John Hancock Fund). Except as otherwise permitted by the applicable rules of the New York Stock Exchange, each member of the Audit Committee shall be independent as defined by such NYSE rules and Rule 10A-3(b)(1) of the Exchange Act. Each member of the Audit Committee must be financially literate, as such qualification is interpreted by the Board of Trustees in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Audit Committee. At least one member of the Audit Committee must have accounting or related financial management expertise, as the Board of Trustees interprets such qualification in its business judgment. B. Overview. The Audit Committee's purpose is to: 1. assist the Board of Trustee's oversight of (1) the integrity of the funds' financial statements, (2) the funds' compliance with legal and regulatory requirements (except to the extent such responsibility is delegated to another committee), (3) the independent auditor's qualifications and independence, and (4) the performance of the funds' internal audit function and independent auditors; 2. act as a liaison between the funds' independent accountants and the full Board; and 3. prepare an Audit Committee Report as required by the Securities and Exchange Commission ("SEC") to the extent required to be included in the funds' annual proxy statement or other filings. The Audit Committee shall discharge its responsibilities, and shall access the information provided by the funds' management and independent auditors, in accordance with its business judgment. Management is responsible for the preparation of the fund's financial statements and the independent auditors are responsible for auditing those financial statements. The Audit Committee and the Board of Trustees recognize that management (including the internal audit staff) and the independent auditors have more experience, expertise, resources and time, and more detailed knowledge and information regarding a fund's accounting, auditing, internal control and financial reporting practices than the Audit Committee does. Accordingly, the Audit Committee's oversight role does not provide any expert or special assurance as to the financial statements and other financial information provided by a fund to its shareholders and others. The independent auditors are responsible for auditing the funds' financial statements and for reviewing the funds' unaudited interim financial statements. The authority and responsibilities set forth in this charter do not reflect or create any duty or obligation of the Audit Committee to plan or conduct any audit, to determine or certify that any fund's financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee any independent auditor's report. C. Oversight. The independent auditors shall report directly to the Audit Committee, and the Audit Committee shall be directly responsible for oversight of the work of the independent auditors, including resolution of disagreements between any fund's management and the independent auditors regarding financial reporting. In connection with its oversight role, the Audit Committee should also review with the independent auditors, from time to time as appropriate: significant risks and uncertainties with respect to the quality, accuracy or fairness of presentation of a fund's financial statements; recently disclosed problems with respect to the quality, accuracy or fairness of presentation of the financial statements of companies similarly situated to the funds and recommended actions which might be taken to prevent or mitigate the risk of problems at the funds arising from such matters; accounting for unusual transactions; adjustments arising from audits that could have a significant impact on the funds' financial reporting process; and any recent SEC comments on the funds' SEC reports, including, in particular, any compliance comments. The Audit Committee should inquire of the independent auditor concerning the quality, not just the acceptability, of the funds' accounting determinations and other judgmental areas and question whether management's choices of accounting principles are, as a whole, conservative, moderate or aggressive. D. Specific Responsibilities. The Audit Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall deem necessary or appropriate: 1. To oversee the funds' auditing and accounting process. 2. To approve, and recommend to the full Board of Trustees for its ratification and approval in accord with applicable law, the selection, appointment, retention and compensation of an independent auditor for each fund prior to the engagement of such independent auditor. The Committee should meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit. The Committee should periodically consider whether, in order to assure continuing auditor independence, there should be regular rotation of the independent audit firm and obtain and review a copy of the most recent report on the independent auditor issued by the Public Company Accounting Oversight Board pursuant to Section 104 of the Sarbanes-Oxley Act. 3. To periodically review and evaluate the lead partner and other senior members of the independent auditor's team and confirm the regular rotation of the lead audit partner and reviewing partner as required by Section 203 of the Sarbanes-Oxley Act. 4. To confirm that the officers of the funds were not employed by the independent auditor, or if employed, did not participate in any capacity in the audit of the funds, in each case, during the one-audit-year period preceding the date of initiation of the audit, as required by Section 206 of the Sarbanes-Oxley Act. 5. To pre-approve all audit and non-audit services provided to each fund by its independent auditor, directly or by establishing pre-approval policies and procedures pursuant to which such services may be rendered, provided however, that any such policies and procedures are detailed as to particular services, the Audit Committee is informed of each service, and any such policies and procedures do not include the delegation of the Audit Committee's responsibilities under the Securities Exchange Act of 1934 or applicable rules or listing requirements. The Committees should periodically compare the fees paid for audit services to those paid by peer companies as a means of assessing whether the scope of audit work is sufficient. 6. To pre-approve all non-audit services provided by a fund's independent auditor to the fund's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the fund, if the engagement relates directly to the operations and financial reporting of the fund. The Committee is authorized to delegate, to the extent permitted by law, pre-approval responsibilities to one or more members of the Committee who shall report to the Committee regarding approved services at the Committee's next regularly scheduled meeting. The Committee is also authorized to adopt policies and procedures which govern the pre-approval of audit, audit-related, tax and other services provided by the independent accountants to the funds. 7. To monitor the independent auditor of each fund throughout the engagement to attempt to identify: conflicts of interest between management and the independent auditor as a result of employment relationships; the provision of prohibited non-audit services to a fund by its independent auditor; violations of audit partner rotation requirements; and prohibited independent auditor compensation arrangements whereby individuals employed by the auditor are compensated based on selling non-audit services to the fund. The independent auditors should promptly contact the Audit Committee or its Chair about any significant issue or disagreement concerning a fund's accounting practices or financial statements that is not resolved to their satisfaction or if Section 10A(b) of the Exchange Act has been implicated. 8. To meet with independent auditors, including private meetings, as necessary, management's internal auditors, and the funds' senior management (i) to review the arrangements for and scope of the annual audit and any special audits; (ii) to review the form and substance of the funds' financial statements and reports, including each fund's disclosures under "Management's Discussion of Fund Performance" and to discuss any matters of concern relating to the funds' financial statements, including any adjustments to such statements recommended by the independent accountants, or other results of an audit; (iii) to consider the independent accountants' comments with respect to the funds' financial policies, procedures and internal accounting controls and management's responses thereto; (iv) to review the resolution of any disagreements between the independent accountants and management regarding the funds' financial reporting; and (v) to review the form of opinion the independent accountants propose to render to the Board and shareholders. The Audit Committee should request from the independent auditors a frank assessment of management. 9. With respect to any listed fund, to consider whether it will recommend to the Board of Trustees that the audited financial statements be included in a fund's annual report. The Board delegates to the Audit Committee the authority to release the funds' financial statements for publication in the annual and semi-annual report, subject to the Board's right to review and ratify such financial statements following publication. With respect to each fund, to review and discuss with each fund's management and independent auditor the funds' audited financial statements and the matters about which Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU 380) requires discussion. The Audit Committee shall prepare an annual committee report for inclusion where necessary in the proxy statement of a fund relating to its annual meeting of security holders or in any other filing required by the SEC's rules. 10. To receive and consider reports on the audit functions of the independent auditors and the extent and quality of their auditing programs. 11. To oversee the adoption and implementation of any codes of ethics required under applicable law. 12. To obtain and review, at least annually, a report by the independent auditor describing: the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and, to access the auditor's independence, all relationships between the independent auditor and each fund, including the disclosures required by any applicable Independence Standards Board Standard No. 1. The Audit Committee shall engage in an active dialogue with each independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the auditor. 13. To review with the independent auditor any problems that may be reported to it arising out of a fund's accounting, auditing or financial reporting functions and management's response, and to receive and consider reports on critical accounting policies and practices and alternative treatments discussed with management. 14. To review the procedures for allocating fund brokerage, the allocation of trades among various accounts under management and the fees and other charges for fund brokerage. 15. To receive and consider reports from the independent auditors regarding reviews of the operating and internal control structure of custodian banks and transfer agents, including procedures to safeguard fund assets. 16. To monitor securities pricing procedures and review their implementation with management, management's internal auditors, independent auditors and others as may be required. 17. To establish and monitor, or cause to be established and monitored, procedures for the receipt, retention, and treatment of complaints received by a fund regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of the investment adviser, administrator, principal underwriter or any other provider of accounting related services for a listed fund, as well as employees of the fund regarding questionable accounting or auditing matters, as and when required by applicable rules or listing requirements. The procedures currently in effect are attached as Exhibit A. 18. To report regularly to the Board of Trustees, including the Audit Committee's conclusions with respect to the independent auditor and the funds' financial statements and accounting controls. E. Subcommittees. The Audit Committee may, to the extent permitted by applicable law, form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances. Any decision of a subcommittee to preapprove audit or non-audit services shall be presented to the full Audit Committee at its next meeting. F. Additional Responsibilities. The Committee shall serve as the "qualified legal compliance committee" (as such term is defined in 17 CFR Part 205)("QLCC"), the duties of which are listed on Exhibit B to this charter; and shall also perform other tasks assigned to it from time to time by the Administration Committee or the full Board, and will report findings and recommendations to the Administration Committee or the full Board, as appropriate. G. Funding. Each fund shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Trustees, for payment of: 1. Compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the fund. 2. Compensation to any advisers employed by the Audit Committee under its authority to engage independent counsel and other advisers. 3. Ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties. H. Governance. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, presiding over meetings, and making reports to the Administration Committee or the full Board, as appropriate. The designation of a person as an "audit committee financial expert", within the meaning of the rules under Section 407 of the Sarbanes-Oxley Act of 2002, shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on such person as a member of the Committee, nor shall it decrease the duties and obligations of other Committee members or the Board. The compensation of Audit Committee members shall be as determined by the Board of Trustees. No member of the Audit Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from a fund, other than fees paid in his or her capacity as a member of the Board of Trustees or a committee of the Board. The members of the Audit Committee should confirm that the minutes of the Audit Committee's meetings accurately describe the issues considered by the Committee, the process the Committee used to discuss and evaluate such issues and the Committee's final determination of how to proceed. The minutes should document the Committee's consideration of issues in a manner that demonstrates that the Committee acted with due care. I. Evaluation. At least annually, the Audit Committee evaluate its own performance, including whether the Audit Committee is meeting frequently enough to discharge its responsibilities appropriately. J. Miscellaneous. The Committee shall meet as often as it deems appropriate, with or without management, as circumstances require. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain independent counsel and other advisers, experts or consultants, at the funds' expense, as it determines necessary to carry out its duties. The Committee shall have direct access to such officers of and service providers to the funds as it deems desirable. K. Review. The Committee shall review this charter at least annually and shall recommend such changes to the Administration Committee or the full Board as it deems desirable. EXHIBIT A Policy for Raising and Investigating Complaints or Concerns About Accounting or Auditing Matters As contemplated by the Audit Committee Charter, the Committee has established the following procedures for: the receipt, retention and treatment of complaints received by a fund regarding accounting, internal accounting controls or auditing matters; and the confidential, anonymous submission by employees of the John Hancock Advisers, LLC or its affiliates of concerns regarding questionable accounting or auditing matters. A. Policy Objectives The objective of this policy is to provide a mechanism by which complaints and concerns regarding accounting, internal accounting controls or auditing matters may be raised and addressed without the fear or threat of retaliation. The funds desire and expects that the employees and officers of John Hancock Advisers, LLC or any other service provider to the funds will report any complaints or concerns they may have regarding accounting, internal accounting controls or auditing matters. B. Procedures for Raising Complaints and Concerns Persons with complaints regarding accounting, internal accounting controls or auditing matters or concerns regarding questionable accounting or auditing matters may submit such complaints or concerns to the attention of funds' Secretary by sending a letter or other writing to the funds' principal executive offices. Complaints and concerns may be made anonymously to any of the above individuals. In addition any complaints or concerns may also be communicated anonymously, directly to any member of the Audit Committee. C. Procedures for Investigating and Resolving Complaints and Concerns All complaints and concerns received will be promptly forwarded to the Audit Committee of the Board of Trustees or the chair of the Audit Committee, unless they are determined to be without merit by Secretary of the funds. If sent only to the chair, the chair may determine the appropriate response or may refer the issues to the entire Audit Committee. In any event, the funds' Secretary will provide a record of all complaints and concerns received (whether or not determined to have merit) to the Audit Committee each fiscal quarter. The Audit Committee will evaluate any complaints or concerns received (including those reported to the committee on a quarterly basis and which the funds' Secretary has previously determined to be without merit). If the Audit Committee requires additional information to evaluate any complaint or concern, it may conduct an investigation, including interviews of persons believed to have relevant information. The Audit Committee may, in its discretion, assume responsibility for directing or conducting any investigation or may delegate such responsibility to another person or entity. After its evaluation of the complaint or concern, the Audit Committee will authorize such follow-up actions, if any, as deemed necessary and appropriate to address the substance of the complaint or concern. The funds reserves the right to take whatever action the Audit Committee believes appropriate, up to an including discharge of any employee deemed to have engaged in improper conduct. Regardless of whether a complaint or concern is submitted anonymously, the Audit Committee will strive to keep all complaints and concerns and the identity of those who submit them and participate in any investigation as confidential as possible, limiting disclosure to those with a business need to know. John Hancock Advisers, LLC and its affiliates shall not penalize or retaliate against any person or entity for reporting a complaint or concern, unless it is determined that the complaint or concern was made with knowledge that it was false. The funds will not tolerate retaliation against any person or entity for submitting, or for cooperating in the investigation of, a complaint or concern. Moreover, any such retaliation is unlawful and may result in criminal action. Any retaliation will warrant disciplinary action against the offending party, up to and including termination of employment. John Hancock Advisers, LLC and its subadvisers shall include this policy in its employee manual and shall distribute, at least annually, the policy to all of its employees. The funds shall retain records of all complaints and concerns received, and the disposition thereof, for five years. EXHIBIT B-QLCC DUTIES AND RESPONSIBILITIES The QLCC shall adopt written procedures for the confidential receipt, retention, and consideration of any report of evidence of a material violation. The QLCC has the authority and responsibility, once a report of evidence of a material violation by a Fund, its officers, directors, employees or agents has been received by the QLCC: (i) to inform the CLO and CEO of such report (except in the case where the reporting attorney reasonably believes that it would be futile to report evidence of a material violation to the CLO and CEO, and has informed the QLCC of such belief); and (ii) to determine whether an investigation is necessary or appropriate, and, if it determines an investigation is necessary or appropriate, to: (A) notify the full board of directors; (B) initiate an investigation, which may be conducted either by the CLO or by outside attorneys; and (C) retain such additional expert personnel as the QLCC deems necessary; and, at the conclusion of such investigation, to: (A) recommend, by majority vote, that the Fund implement an appropriate response to evidence of a material violation; and (B) inform the CLO and the CEO and the Board of Trustees of the results of any such investigation and the appropriate remedial measures. (iii) by majority vote, to take all other appropriate action, including notifying the U.S. Securities and Exchange Commission in the event that the Fund fails in any material respect to implement an appropriate response that the QLCC has recommended. -----END PRIVACY-ENHANCED MESSAGE-----