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