--------------------------------------------------
The latest report from your Fund's management team
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ANNUAL REPORT
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[PHOTO]
European
Equity Fund
OCTOBER 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-----------------------------------
TRUSTEES
DENNIS S. ARONOWITZ*
STEPHEN L. BROWN
RICHARD P. CHAPMAN, JR.*
WILLIAM J. COSGROVE
LELAND O. ERDAHL
RICHARD A. FARRELL
MAUREEN R. FORD
GAIL D. FOSLER
WILLIAM F. GLAVIN
ANNE C. HODSDON
DR. JOHN A. MOORE
PATTI MCGILL PETERSON
JOHN W. PRATT*
RICHARD S. SCIPIONE
*Members of the Audit Committee
OFFICERS
STEPHEN L. BROWN
Chairman
MAUREEN R. FORD
Vice Chairman and Chief Executive Officer
ANNE C. HODSDON
President, Chief Operating Officer
and Chief Investment Officer
OSBERT M. HOOD
Executive Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Vice President and Compliance Officer
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK SIGNATURE SERVICES, INC.
1 JOHN HANCOCK WAY, SUITE 1000
BOSTON, MASSACHUSETTS 02199-7603
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
SUB-INVESTMENT ADVISER
INDOCAM INTERNATIONAL INVESTMENT SERVICES
90 BOULEVARD PASTEUR
PARIS, FRANCE 75015
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109-1803
INDEPENDENT AUDITORS
PRICEWATERHOUSECOOPERS LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is to
welcome you to the New Millennium! I wish you all the best for a century filled
with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make new
resolutions, or re-commit to old ones. It seems fitting, therefore, that this
special New Year 2000 coincides with a very important, although certainly less
exotic, event.
Starting last October, personalized Social Security statements are being sent to
125 million workers over age 25, showing estimates of the retirement, disability
and survivor benefits that they and their families are eligible to receive now
and in the future.
The statements, to be sent out annually, will provide people with a glimpse of
what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for them
at all. But many people also already know that government benefits will only
fulfill a small piece of their retirement needs.
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[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to fourth paragraph.]
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The best thing about this massive mailing is that it can serve as a wake-up call
to encourage families to focus more on planning for their financial future.
When you receive your statement, expected to be within three months of your next
birthday, we urge you to read it carefully for accuracy, making sure your annual
earnings history and amounts you have contributed over the years are correct.
Keep in mind that the estimated benefits are precisely that, and that rules and
regulations may change by the time you retire. Also remember that they are not
inflation adjusted, so it would be unrealistic to expect them to have the same
purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your investment
professional, or to select one if you are not working with somebody. He or she
can help you focus on establishing and maintaining a sound plan to achieve a
comfortable retirement. Together, you should make sure to maximize your
participation in tax-advantaged programs like IRAs and 401(k)s.
The stakes are too high to leave your retirement lifestyle to chance. Congress'
awareness-raising effort is commendable. The next step is yours. Mark the
beginning of the New Millennium by taking it.
Sincerely,
/s/ Maureen R. Ford
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
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BY DIDIER LE CONTE FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
European Equity Fund
European equity markets ride a roller coaster year
European equity markets experienced an up-and-down 12 months during John Hancock
European Equity Fund's fiscal year ended October 31, 1999. Most of the gains
came in the first half, when evidence of a turnaround in the economies of the
Far East boosted European markets with strong ties there. In the second half,
rising interest rates curtailed the growth of European equities. To illustrate,
the Morgan Stanley Capital International (MSCI) Europe Index returned 12.85% in
U.S. dollar terms during the year ended October 31, 1999, but only 1.69% over
the past six months.
The trend toward higher interest rates started in May, as European markets
responded to the U.S. Federal Reserve Board's announced inclination toward
hiking short-term interest rates to slow U.S. economic growth and head off
inflation. The Fed followed through with rate increases in June and August. As
these events transpired, European rates rose in anticipation of a similar rate
hike by the European Central Bank, even though inflation in Europe was generally
under control and the central bank had even lowered rates by 0.5% in April.
Nonetheless, the European Central Bank reversed that cut with a 0.5% increase in
short-term rates shortly after the end of the period -- the first time the bank
had ever raised rates. Other European central banks followed suit. The rate
increase signaled the central bank's concern about inflation, a desire to
attract investors by offering competitive rates and an attempt to protect the
value of the euro, which had declined sharply between its introduction in
January and mid-July. Since then, the euro has recovered some, but not all, of
its lost ground.
"...rising interest rates curtailed the growth of European equities."
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[A 3 1/2" x 2 1/2" photo bottom right side of John Hancock European Equity Fund.
Caption below reads "European Equity Fund management team members (l-r):
Brigitte Carriere, Gerard Bailly, Claire Chaves d'Oliveira, Patrice de Larrad
and Didier Le Conte."]
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3
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John Hancock Funds - European Equity Fund
"We continued to pursue a more growth-oriented strategy..."
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[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is BP Amoco 4.0%, the second is Vodafone Group 3.2%, the third British
Telecommunications 3.1%, the fourth Nokia 3.0% and the fifth Giaxo Wellcome
2.8%. A note below the table reads "As a percentage of net assets on October 31,
1999."]
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Fund performance
For its part, John Hancock European Equity Fund performed in line with its
competitors. For the year ended October 31, 1999, the Fund's Class A and Class B
shares posted total returns of 10.82% and 10.16%, respectively, at net asset
value, compared with the 10.72% return of the average European region fund,
according to Lipper Inc.(1) The Fund's Class C shares, which were introduced on
March 1, 1999, returned 3.95% from inception through October 31, 1999. Remember
that your net asset value return will vary from the Fund's stated performance if
you were not invested in the Fund for the entire period and did not reinvest all
dividends. Historical performance information can be found on pages six and
seven.
Rise and fall of cyclical stocks
We witnessed an emergence of, and then reversal in, economically sensitive
stocks during the year. These cyclical stocks, such as energy, metals, paper and
steel, benefited from economic recoveries in the Far East, since Europe serves
as a major supplier there. Cyclicals continued to build momentum through March,
especially oil companies, which benefited from higher fuel oil prices. By
August, however, cyclicals retreated as investors took profits, and that trend
continued into September and October.
The Fund followed the growth of the oil industry with investments in that
area starting in March, including a major stake in BP Amoco. This proved to be
one of the best-performing stocks in the Fund, due to the continuation of the
company's impressive cost-cutting programs, the merger with Amoco that helped
develop even larger economies of scale and an announcement of an imminent
acquisition of Arco.
Fund focuses on growth
Funds in our Lipper category were, on the whole, more balanced among cyclical
and other stocks than ours. We continued to pursue a more growth-oriented
strategy, keeping significant investments in higher-growth industries such as
capital goods, technology, media and telecommunications, as well as
significantly more investments than the MSCI index in retail and business
services.
These high-growth sectors, and many of the Fund's investments in them,
rebounded sharply toward the end of the period. In telecommunications, Vodafone
Group -- one of the Fund's top investments and a solid performer -- announced an
agreement with Bell Atlantic. Another winner for the Fund was British
Telecommunications, which did well due to reduced costs and the signing of a
major pact with AT&T to expand both companies' reach in global mobile
communications.
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[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...And What's Behind The Numbers". The first listing is Nokia
followed by an up arrow with the phrase "Mobile communications giant continually
beats earnings expectations." The second listing is BP Amoco followed by an up
arrow with phrase "Boistered by impressive cost-cutting programs." The third
listing is Novartis followed by a down arrow with the phrase "Problems in its
agrochemical division." A note below the table reads "See `Schedule of
Investments.' Investment holdings are subject to change."]
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4
<PAGE>
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John Hancock Funds - European Equity Fund
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[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the year ended October 31, 1999." The
chart is scaled in increments of 2% with 0% at the bottom and 12% at the top.
The first bar represents the 10.82% total return for John Hancock European
Equity Fund Class A. The second bar represents the 10.16% total return for John
Hancock European Equity Fund Class B. The third bar represents the 3.95%* total
return for John Hancock European Equity Fund Class C. The fourth bar represents
the 10.72% total return for Average European region fund. A note below the chart
reads "Total returns for John Hancock European Equity Fund are at net asset
value with all distributions reinvested. The average European region fund is
tracked by Lipper, Inc.1 See the following two pages for historical performance
information. *From inception March 1, 1999 through October 31, 1999."]
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Overweight in pharmaceuticals
For the first eight months of the period, the Fund had an overweighting in
pharmaceutical firms, whose stocks suffered in the spring when they fell from
their previously high valuations as investors turned their attention toward
cyclical stocks. In addition, pharmaceuticals were hurt by pricing pressure from
governments trying to reduce their health-care benefit costs. Among the Fund's
investments, Novartis fell along with others in the industry, but was actually
hurt more by problems with its agrochemical division, which produces fertilizers
and seed.
Bottom-up approach
We are first and foremost stock pickers, which means that considerations about
country and industry sector weightings are subordinate to our approach of
choosing investments in good companies, one company at a time. That said, the
best-performing market in Europe during the period was Finland, driven by the
stellar returns of Nokia, the Finnish telecommunications equipment manufacturer
that accounts for 70% of that market. Nokia -- one of our top holdings and
performers -- was able to consistently beat earnings forecasts. Sweden was
second, helped by telecommunications equipment manufacturer Ericsson, another of
the Fund's top investments. France followed on the strength of its economic
recovery. On the down side, southern Europe -- including Spain, Portugal and
Italy -- lagged behind.
Outlook
We expected the rate increase that occurred shortly after the end of the period.
The market welcomed the measure and remained convinced that the overall European
economy is capable of sustaining its current pace of growth without inducing
inflation. Individual country economies in Europe have come much more in harmony
with one another. Both economic and corporate profit growth forecasts have been
revised upward, and intense consolidation activity continues to excite
investors. While there could be some stock price volatility and a reduction of
trading volume at the end of the year due to concerns over possible Y2K computer
problems, after the turn of the year we believe we could see a resumption in the
ascent of European equities.
"Both economic and corporate profit growth forecasts have been revised
upward..."
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This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic and
currency risks and differences in accounting standards and financial reporting.
(1) Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
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John Hancock Funds - European Equity Fund
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A LOOK AT PERFORMANCE
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The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock European Equity Fund. Total return measures
the change in value of an investment from the beginning to the end of a period,
assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting, before you invest or send money.
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CLASS A
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For the period ended September 30, 1999
SINCE
ONE INCEPTION
YEAR (3/2/98)
------ ---------
Cumulative Total Returns 6.57% 0.09%
Average Annual Total Returns(1) 6.57% 0.06%
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CLASS B
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For the period ended September 30, 1999
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ ---------
Cumulative Total Returns 6.30% (9.46%)
Average Annual Total Returns(1) 6.30% (7.19%)
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CLASS C
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For the period ended September 30, 1999
SINCE
INCEPTION
(3/1/99)
---------
Cumulative Total Return (2.86%)
Average Annual Total Return(1,2) (2.86%)
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses on Class A shares to
1.90% and on Class B and Class C shares to 2.60% of the Fund's average
daily net assets. Without the limitation of expenses, the average annual
total return for the one-year period and since inception would have been
6.15% and (0.70%), respectively, for Class A shares and 5.88% and (7.86%),
respectively, for Class B shares. The total return since inception would
have been (3.05%) for Class C shares.
(2) Not annualized.
6
<PAGE>
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John Hancock Funds - European Equity Fund
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WHAT HAPPENED TO A $10,000 INVESTMENT...
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The charts on the right show how much a $10,000 investment in the John Hancock
European Equity Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in the Morgan Stanley Capital International (MSCI) Europe Index-- an
unmanaged index used to measure the performance of securities listed on European
stock exchanges. It is not possible to invest in an index. Past performance is
not indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock European Equity Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
Europe Index and is equal to $11,772 as of October 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock European Equity Fund on March 2, 1998, before sales charge, and is equal
to $11,160 as of October 31, 1999. The third line represents the value of the
same hypothetical investment made in the John Hancock European Equity Fund,
after sales charge, and is equal to $10,602 as of October 31, 1999.
Line chart with the heading John Hancock European Equity Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
Europe Index and is equal to $10,559 as of October 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock European Equity Fund on June 1, 1998, before sales charge, and is equal
to $9,991 as of October 31, 1999. The third line represents the value of the
same hypothetical investment made in the John Hancock European Equity Fund,
after sales charge, and is equal to $9,591 as of October 31, 1999.
Line chart with the heading John Hancock European Equity Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
Europe Index and is equal to $10,592 as of October 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock European Equity Fund on March 1, 1999, before sales charge, and is equal
to $10,395 as of October 31, 1999. The third line represents the value of the
same hypothetical investment made in the John Hancock European Equity Fund,
after sales charge, and is equal to $10,295 as of October 31, 1999.
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7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Statement of Assets and Liabilities
October 31, 1999
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<TABLE>
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks and warrants (cost - $26,114,607)..................................... $29,282,788
Short-term investments (cost - $1,740,539) - Note A............................................... 1,740,539
-----------
31,023,327
Receivable for investments sold.................................................................... 108,498
Receivable for shares sold......................................................................... 327
Dividends receivable............................................................................... 14,326
Foreign tax receivable............................................................................. 28,394
Interest receivable................................................................................ 291
Other assets....................................................................................... 73
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Total Assets..................................................................... 31,175,236
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Liabilities:
Due to custodian including foreign currency (cost - $108,498)...................................... 107,610
Payable for investments purchased.................................................................. 363,726
Payable for forward foreign currency exchange contracts purchased - Note A......................... 4,017
Payable upon return of securities on loan - Note A................................................. 1,072,539
Payable to John Hancock Advisers, Inc. and affiliates - Note B..................................... 26,332
Accounts payable and accrued expenses.............................................................. 45,785
-----------
Total Liabilities................................................................ 1,620,009
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Net Assets:
Capital paid-in.................................................................................... 29,280,011
Accumulated net realized loss on investments, financial futures contracts and foreign currency
transactions...................................................................................... (2,816,155)
Net unrealized appreciation of investments and foreign currency transactions....................... 3,167,552
Accumulated net investment loss.................................................................... (76,181)
-----------
Net Assets....................................................................... $29,555,227
===============================================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding
unlimited number of shares authorized with no par value)
Class A - $14,364,589/1,286,837.................................................................... $11.16
=================================================================================================================
Class B - $14,996,639/1,356,487.................................................................... $11.06
=================================================================================================================
Class C* - $193,999/17,548......................................................................... $11.06
=================================================================================================================
Maximum Offering Price Per Share**
Class A - ($11.16 x 105.26%)....................................................................... $11.75
=================================================================================================================
</TABLE>
* Class C shares commenced operations on March 1, 1999.
** 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.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on October 31, 1999. You'll
also find the net asset value and the maximum offering price per share as of
that date.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Statement of Operations
Year ended October 31, 1999
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<TABLE>
<S> <C>
Investment Income:
Interest (including income on securities loaned of $383)........................................... $14,517
Dividends (net of foreign withholding taxes of $63,534)............................................ 448,211
-----------
462,728
-----------
Expenses:
Investment management fee - Note B................................................................ 274,110
Distribution and service fee - Note B
Class A......................................................................................... 43,423
Class B......................................................................................... 159,362
Class C......................................................................................... 462
Transfer agent fee - Note B....................................................................... 117,027
Custodian fee..................................................................................... 89,106
Registration and filing fees...................................................................... 63,829
Auditing fee...................................................................................... 20,164
Printing.......................................................................................... 12,801
Accounting and legal services fee - Note B........................................................ 5,005
Miscellaneous..................................................................................... 2,859
Trustees' fees.................................................................................... 1,500
Legal fees........................................................................................ 319
Interest expense - Note A......................................................................... 148
-----------
Total Expenses................................................................... 790,115
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Less Expense Reductions - Note B................................................. (99,368)
-----------------------------------------------------------------------------------------------
Net Expenses..................................................................... 690,747
-----------------------------------------------------------------------------------------------
Net Investment Loss.............................................................. (228,019)
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Realized and Unrealized Gain (Loss) on Investments,
Financial Futures Contracts and Foreign Currency Transactions:
Net realized loss on investments sold.............................................................. (1,346,934)
Net realized loss on financial futures contracts................................................... (967)
Net realized loss on foreign currency transactions................................................. (72,570)
Change in net unrealized appreciation/depreciation
of investments.................................................................................... 4,248,484
Change in net unrealized appreciation/depreciation
of foreign currency transactions.................................................................. 1,090
-----------
Net Realized and Unrealized Gain on Investments,
Financial Futures Contracts and Foreign Currency Transactions.................... 2,829,103
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations........................................................ $2,601,084
===============================================================================================
</TABLE>
The 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.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 2, 1998
(COMMENCEMENT OF OPERATIONS) YEAR ENDED
TO OCTOBER 31, 1998 OCTOBER 31, 1999
------------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss.......................................................... ($46,072) ($228,019)
Net realized loss on investments sold, financial futures contracts and
foreign currency transactions.............................................. (1,556,583) (1,420,471)
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions...................................................... (1,082,022) 4,249,574
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations............ (2,684,677) 2,601,084
----------- -----------
From Fund Share Transactions - Net: *........................................... 30,678,971 (1,040,151)
----------- -----------
Net Assets:
Beginning of period.......................................................... -- 27,994,294
End of period (including accumulated net investment loss of $39,219 and
----------- -----------
$76,181, respectively)..................................................... $27,994,294 $29,555,227
=========== ===========
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH 2, 1998
(COMMENCEMENT OF OPERATIONS) YEAR ENDED
TO OCTOBER 31, 1998 OCTOBER 31, 1999
--------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CLASS A **
Shares sold............................................... 1,635,681 $17,462,387 1,184,807 $12,972,731
Less shares repurchased................................... (429,021) (4,383,005) (1,104,630) (12,013,213)
--------- ----------- ---------- -----------
Net increase.............................................. 1,206,660 $13,079,382 80,177 $959,518
========= =========== ========== ===========
CLASS B ***
Shares sold............................................... 1,817,977 $20,041,352 955,152 $10,400,345
Less shares repurchased................................... (239,566) (2,441,763) (1,177,076) (12,586,150)
--------- ----------- ---------- -----------
Net increase (decrease)................................... 1,578,411 $17,599,589 (221,924) ($2,185,805)
========= =========== ========== ===========
CLASS C ****
Shares sold............................................... -- -- 18,445 $195,641
Less shares repurchased................................... -- -- (897) (9,505)
--------- ----------- ---------- -----------
Net increase.............................................. -- -- 17,548 $186,136
========= =========== ========== ===========
</TABLE>
** Class A shares commenced operations on March 2, 1998.
*** Class B shares commenced operations on June 1, 1998.
**** Class C shares commenced operations on March 1, 1999.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders, if any, and any increase or decrease in money shareholders
invested in the Fund. The footnote illustrates the number of Fund shares sold
and repurchased during the last two periods, along with the corresponding dollar
value.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH 2, 1998
(COMMENCEMENT OF OPERATIONS) YEAR ENDED
TO OCTOBER 31, 1998 OCTOBER 31, 1999
------------------- ----------------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period................................ $10.00 $10.07
------- -------
Net Investment Income (Loss)(1)..................................... 0.01 (0.04)
Net Realized and Unrealized Gain on Investments, Financial Futures
Contracts and Foreign Currency Transactions........................ 0.06 1.13
------- -------
Total From Investment Operations................................... 0.07 1.09
------- -------
Net Asset Value, End of Period...................................... $10.07 $11.16
======= =======
Total Investment Return at Net Asset Value(2)....................... 0.70%(3) 10.82%
Total Adjusted Investment Return at Net Asset Value(2,4)............ (0.24%)(3) 10.49%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)............................ $12,147 $14,365
Ratio of Expenses to Average Net Assets ............................ 1.90%(5) 1.90%(7)
Ratio of Adjusted Expenses to Average Net Assets(6)................. 3.31%(5) 2.23%(7)
Ratio of Net Investment Income (Loss) to Average Net Assets ........ 0.16%(5) (0.38%)
Ratio of Adjusted Net Investment Loss to Average Net Assets(6)...... (1.25%)(5) (0.71%)
Portfolio Turnover Rate............................................. 31% 64%
Fee Reduction Per Share(1).......................................... $0.10 $0.04
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JUNE 1, 1998
(COMMENCEMENT OF OPERATIONS) YEAR ENDED
TO OCTOBER 31, 1998 OCTOBER 31, 1999
------------------- ----------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period.................................. $11.07 $10.04
------- -------
Net Investment Loss(1)................................................ (0.04) (0.12)
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts and Foreign Currency Transactions.................. (0.99) 1.14
------- -------
Total From Investment Operations..................................... (1.03) 1.02
------- -------
Net Asset Value, End of Period........................................ $10.04 $11.06
======= =======
Total Investment Return at Net Asset Value(2)......................... (9.30%)(3) 10.16%
Total Adjusted Investment Return at Net Asset Value(2,4).............. (9.89%)(3) 9.83%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted).............................. $15,847 $14,997
Ratio of Expenses to Average Net Assets .............................. 2.60%(5) 2.60%(7)
Ratio of Adjusted Expenses to Average Net Assets(6)................... 4.01%(5) 2.93%(7)
Ratio of Net Investment Loss to Average Net Assets ................... (1.12%)(5) (1.08%)
Ratio of Adjusted Net Investment Loss to Average Net Assets(6)........ (2.53%)(5) (1.41%)
Portfolio Turnover Rate............................................... 31% 64%
Fee Reduction Per Share(1)............................................ $0.06 $0.04
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH 1, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
------------
<S> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period.......................................... $10.64
-------
Net Investment Loss(1)........................................................ (0.07)
Net Realized and Unrealized Gain on Investments, Financial Futures Contracts
and Foreign Currency Transactions............................................ 0.49
-------
Total From Investment Operations............................................. 0.42
-------
Net Asset Value, End of Period................................................ $11.06
=======
Total Investment Return at Net Asset Value(2)................................. 3.95%(3)
Total Adjusted Investment Return at Net Asset Value(2,4)...................... 3.73%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)...................................... $194
Ratio of Expenses to Average Net Assets ...................................... 2.60%(5,7)
Ratio of Adjusted Expenses to Average Net Assets(6)........................... 2.93%(5,7)
Ratio of Net Investment Loss to Average Net Assets ........................... (1.17%)(5)
Ratio of Adjusted Net Investment Loss to Average Net Assets(6)................ (1.50%)(5)
Portfolio Turnover Rate....................................................... 64%
Fee Reduction Per Share(1).................................................... $0.03
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Not annualized.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Annualized.
(6) Unreimbursed, without fee reduction.
(7) Expense ratios do not include interest expense due to bank loans, which
amounted to less than 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Schedule of Investments
October 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
European Equity Fund on October 31, 1999. It's divided into four main
categories: common stocks, preferred stocks, warrants and short-term
investments. The common and preferred stocks and warrants are further broken
down by country. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Finland (3.50%)
Nokia AB (Telecommunications)........... 7,700 $881,279
Tieto Corp. (Computers)................. 4,400 152,729
-----------
1,034,008
-----------
France (17.38%)
Alcatel SA (Telecommunications)......... 2,020 315,523
Axa SA (Insurance)...................... 2,300 324,422
Bouygues SA (Building).................. 700 243,714
Carrefour SA (Retail)................... 2,950 546,120
Credit Lyonnais SA (Banks - Foreign).... 5,067 153,230
France Telecom S.A.
(Telecommunications)................. 5,162 498,713
Legrand SA (Electronics)................ 1,000 239,296
L'Oreal SA (Cosmetics & Personal Care).. 354 236,259
Pinault-Printemps-Redoute SA (Retail)... 1,750 333,726
PSA Peugeot Citroen SA
(Automobile/Trucks).................. 1,250 239,953
Rexel SA (Electronics).................. 2,800 250,340
Schneider Electric SA (Machinery)....... 4,300 296,254
STMicroelectronics NV (Electronics)..... 3,000 263,488
Suez Lyonnaise des Eaux SA
(Diversified Operations)............. 1,485 239,767
Total Fina SA (Oil & Gas)............... 4,900 662,297
Vivendi SA (Diversified Operations)..... 3,868 293,139
-----------
5,136,241
-----------
Germany (11.69%)
Allianz AG (Insurance).................. 1,759 535,634
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign).................... 4,640 304,548
Bayerische Motoren Werke (BMW) AG
(Automobile/Trucks).................. 5,300 168,917
DaimlerChrysler AG
(Automobile/Trucks).................. 4,320 336,255
Deutsche Telekom AG
(Telecommunications)................. 8,500 390,710
Douglas Holding AG (Retail)............. 3,780 171,564
Dresdner Bank AG (Banks - Foreign)...... 9,450 484,574
Fresenius AG (Medical).................. 700 98,664
Mannesmann AG (Machinery)............... 2,000 314,503
Muenchener Rueckversicherungs-
Gesellschaft AG (Insurance).......... 32 7,338
Siemens AG (Diversified Operations)..... 4,800 430,922
Veba AG (Diversified Operations)........ 3,900 210,854
-----------
3,454,483
-----------
Ireland (0.86%)
CRH Plc (Building)...................... 13,500 254,890
-----------
Italy (6.49%)
Assicurazioni Generali SpA (Insurance).. 6,850 219,758
Eni SpA (Oil & Gas)..................... 23,475 137,289
San Paolo-IMI SpA (Banks - Foreign)..... 19,500 252,696
Telecom Italia Mobile (TIM) SpA
(Telecommunications)................. 93,000 581,063
Telecom Italia SpA - RCN
(Telecommunications)................. 16,700 144,216
Telecom Italia SpA (Telecommunications). 42,500 208,766
UniCredito Italiano SpA
(Banks - Foreign).................... 80,000 374,459
-----------
1,918,247
-----------
Netherlands (10.64%)
Aegon NV (Insurance).................... 5,200 479,959
Akzo Nobel NV (Chemicals)............... 8,400 361,727
Dordtsche Petroleum-Industrie
Maatschappij NV
(Diversified Operations)............. 14,200 722,915
Fortis (NL) NV (Insurance).............. 8,432 290,289
IHC Caland N.V. (Transport)............. 3,260 141,448
ING Groep N.V. (Banks - Foreign)........ 5,967 351,980
Koninklijke Numico NV (Food)............ 3,644 148,526
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Netherlands (continued)
Randstad Holding NV
(Business Services - Misc.).......... 2,860 $145,000
Unilever NV (Food)...................... 3,571 236,638
Wolters Kluwer NV (Media)............... 8,000 267,338
-----------
3,145,820
-----------
Norway (0.60%)
Tomra Systems ASA (Machinery)........... 4,650 177,741
-----------
Spain (5.23%)
Banco Santander Central Hispano, SA
(Banks - Foreign).................... 53,000 550,233
Centros Comerciales Pryca, SA (Retail).. 7,226 135,824
Endesa SA (Utilities)................... 14,000 280,234
Telefonica SA* (Telecommunications)..... 35,218 579,369
-----------
1,545,660
-----------
Sweden (3.21%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications)................. 15,300 636,260
Skandia Forsakrings AB (Insurance)...... 14,000 311,527
-----------
947,787
-----------
Switzerland (7.36%)
Adecco SA (Business Services - Misc.)... 540 327,337
Credit Suisse Group (Banks - Foreign)... 1,190 228,741
Nestle SA (Food)........................ 193 372,250
Novartis AG (Medical)................... 240 358,984
Roche Holding AG (Medical).............. 40 480,220
UBS AG (Banks - Foreign)................ 550 160,024
Zurich Allied AG (Insurance)............ 435 246,280
-----------
2,173,836
-----------
United Kingdom (31.03%)
Bank of Scotland* (Banks - Foreign)..... 20,650 258,223
Barclays Plc (Banks - Foreign).......... 11,800 362,007
BP Amoco Plc (Oil & Gas)................ 122,500 1,189,635
British Aerospace Plc (Aerospace)....... 22,389 132,443
British Telecommunications Plc
(Telecommunications)................. 50,700 919,745
Carlton Communications Plc (Media)...... 24,581 177,722
CMG Plc (Computers)..................... 9,200 355,147
Compass Group Plc (Food)................ 32,000 341,785
Dixons Group Plc (Retail)............... 7,300 129,310
Energis (Telecommunications)............ 8,400 269,156
Glaxo Wellcome Plc (Medical)............ 28,000 826,332
HSBC Holdings Plc (Banks - Foreign)..... 27,000 332,082
Kingfisher Plc (Retail)................. 22,700 248,422
Lloyds TSB Group Plc (Banks - Foreign).. 44,900 621,225
Misys Plc (Computers)................... 21,543 179,475
Pearson Plc (Media)..................... 20,000 450,237
SEMA Group Plc (Computers).............. 25,000 326,586
Siebe PLC (Diversified Operations)...... 43,300 212,740
SmithKline Beecham Plc (Medical)........ 54,000 696,550
Smiths Industries Plc (Manufacturing)... 15,500 210,379
Vodafone Group Plc
(Telecommunications)................. 200,000 931,692
-----------
9,170,893
-----------
TOTAL COMMON STOCKS
(Cost $25,714,473) (97.99%) 28,959,606
------- -----------
PREFERRED STOCKS
Germany (1.09%)
Fresenius AG (Medical).................. 355 58,065
SAP AG (Computers)...................... 600 264,435
-----------
TOTAL PREFERRED STOCKS
(Cost $399,300) (1.09%) 322,500
------- -----------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-
Gesellschaft AG* (Insurance)......... 16 682
-----------
TOTAL WARRANTS
(Cost $834) (0.00%) 682
------- -----------
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS
(Cost $26,114,607) (99.08%) 29,282,788
------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
INTEREST PAR VALUE MARKET
RATE (000s OMITTED) VALUE
---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.26%)
Investment in a joint
repurchase agreement
transaction with SBC
Warburg, Inc. - Dated
10-29-99, due 11-01-99
(Secured by U.S.
Treasury Bonds, 8.125%
thru 9.875%, due
11-15-15 thru
08-15-21) -- Note A........ 5.23% $668 $668,000
-----------
Cash Equivalents (3.63%)
Navigator Securities Lending
Prime Portfolio**..................... 1,073 1,072,539
-----------
TOTAL SHORT-TERM INVESTMENTS (5.89%) 1,740,539
-------- -----------
TOTAL INVESTMENTS (104.97%) 31,023,327
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (4.97%) (1,468,100)
-------- -----------
TOTAL NET ASSETS (100.00%) $29,555,227
======== ===========
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
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.
16
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - European Equity Fund
Portfolio Concentration
October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Fund invests in securities issued by companies of other countries. The
performance of the Fund is closely tied to the economic conditions within the
countries in which it invests. The concentration of investments by country for
individual securities held by the Fund is shown in the schedule of investments.
In addition, the concentration of investments can be aggregated by various
industry groups. The table below shows the percentages of the Fund's investments
at October 31, 1999, assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- ---------------
Aerospace................................... 0.45%
Automobile/Trucks........................... 2.52
Banks - Foreign............................. 15.00
Building.................................... 1.69
Business Services - Misc. ................. 1.60
Chemicals................................... 1.22
Computers................................... 4.33
Cosmetics & Personal Care................... 0.80
Diversified Operations...................... 7.14
Electronics................................. 2.55
Food........................................ 3.72
Insurance................................... 8.17
Machinery................................... 2.67
Manufacturing............................... 0.71
Media....................................... 3.03
Medical..................................... 8.52
Oil & Gas................................... 5.30
Retail...................................... 6.73
Telecommunications.......................... 21.50
Transportation.............................. 0.48
Utilities................................... 0.95
Short-Term Investments...................... 5.89
------
TOTAL INVESTMENTS 104.97%
======
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - European Equity Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series: John Hancock European Equity Fund (the "Fund"), John Hancock
Global Health Sciences Fund and John Hancock Pacific Basin Equities Fund. The
other series of the Trust are reported in separate financial statements. The
Fund's investment objective is to achieve long-term capital appreciation through
investment in a diversified portfolio of European equity securities.
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 Trustees
authorized the issuance of Class C shares effective March 1, 1999. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights 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 which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., 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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $2,685,265 of capital loss
carryforwards available, to the extent provided by regulations, to offset future
net realized capital gains. To the extent such carryforwards are used by the
Fund, no capital gains distributions will be made. The carry-forwards expire as
follows: October 31, 2006 -- $1,450,896 and October 31, 2007 -- $1,234,369.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 is made aware of 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
18
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - European Equity Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles 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.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks,
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund based on its borrowings. In
addition, a commitment fee is charged based on the average daily unused portion
of the line of credit and is allocated among the participating funds. The
maximum loan balance for the Fund during the year for which loans were
outstanding amounted to $327,000 with a rate of 5.50%. At October 31, 1999,
there was no loan outstanding.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear 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. At October 31, 1999, the Fund
loaned securities having a market value of $1,040,503 collateralized by cash in
the amount of $1,072,539, which was invested in a short-term instrument.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments 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 exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of
19
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - European Equity Fund
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk if they are offset by the currency amount of the underlying
transaction.
At October 31, 1999, open forward foreign currency exchange contracts were
as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE DEPRECIATION
- -------- ------------------- ---- ------------
BUYS
Euro Currency 276,735 NOV 99 $3,363
Pound Sterling 44,208 NOV 99 654
------
$4,017
======
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures tends to decrease the Fund's exposure to
the underlying instrument or hedge other Fund instruments. At the time the Fund
enters into a financial futures contract, it will be required to deposit with
its custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price on the board of trade or U.S. commodities exchange on
which it trades. Subsequent payments to and from the broker, known as "variation
margin," are made on a daily basis as the market price of the financial futures
contract fluctuates. Daily variation margin adjustments, arising from this "mark
to market," will be recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1999, there were no open positions in financial futures
contracts.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Adviser is responsible for managing the Fund's investment business affairs
and overseeing the investment activities of the sub-adviser, Indocam
International Investment Services ("IIIS") (the "Sub-Adviser"). Under the
present investment management contract, the Fund pays a monthly management fee
to the Adviser for a continuous investment program 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 and (b) 0.70% of the Fund's average daily net asset value
in excess of $500,000,000.
The Adviser has a sub-investment management contract with the Sub-Adviser
under which the Sub-Adviser, subject to the review of the Trustees and the
overall supervision of the Adviser, provides the Fund with investment services
and advice with respect to that portion of the Fund's assets invested in
countries other than the United States. The Adviser pays the Sub-Adviser a fee
at the annual rate of 0.35% of the average daily net assets of the Fund.
The Adviser has agreed to limit the Fund's expenses on Class A, Class B
and Class C shares to 1.90%, 2.60% and 2.60%, respectively, of the Fund's
average daily net assets. Accordingly, the reduction in the Adviser's fee
amounted to $99,368 for the year ended
20
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - European Equity Fund
October 31, 1999. The Adviser reserves the right to terminate this limitation in
the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1999, net sales charges received with regard to sales of Class A shares
amounted to $116,079. Out of this amount, $13,274 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $76,245
was paid as sales commissions to unrelated broker-dealers and $26,560 was paid
as sales commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer (formerly known as John Hancock
Distributors, Inc.). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares which are redeemed within six years of purchase will be
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. Proceeds
from the CDSC 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 shares. For the year ended October 31, 1999,
contingent deferred sales charges paid to JH Funds amounted to $103,335.
Class C shares which are redeemed within one year of purchase will be
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 CDSC are paid to JH Funds and are used in whole or
part to defray its expenses for providing distribution related services to the
Fund in connection with the sale of Class C shares. For the year ended October
31, 1999, contingent deferred sales charges paid to JH Funds amounted to $450.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, 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. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not exceed 0.30%
of Class A average daily net assets and 1.00% of Class B and Class C average
daily net assets, to reimburse JH Funds for its distribution and service costs.
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.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Maureen R. Ford,
Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are directors and/or officers of
the Adviser and/or its affiliates, as well as Trustees of the Fund through
December 31, 1999. 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 will be 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 investment as well as any unrealized gains or
losses.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended October 31, 1999, aggregated $18,959,391 and
$19,775,359, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the year ended October 31, 1999.
21
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - European Equity Fund
The cost of investments owned at October 31, 1999 (including short-term
investments) for federal income tax purposes was $28,066,214. Gross unrealized
appreciation and depreciation of investments aggregated $4,119,715 and
$1,162,602, respectively, resulting in unrealized appreciation of $2,957,113.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect a decrease in net realized loss on investments of $72,602, a decrease in
accumulated net investment loss of $191,057 and a decrease in capital paid-in of
$263,659. This represents the amount necessary to report these balances on a tax
basis, excluding certain temporary difference, as of October 31, 1999.
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 the treatment of net operating losses and net realized
gain/loss on foreign currency transactions in the computation of distributable
income and capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
22
<PAGE>
================================================================================
John Hancock Funds - European Equity Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock European Equity Fund and the Trustees of
John Hancock World 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 European Equity Fund
(the "Fund") (a series of John Hancock World Fund) at October 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits, which
included confirmation of securities owned at October 31, 1999, by correspondence
with the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
23
<PAGE>
================================================================================
----------------
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 Randolph, MA
1-800-225-5291 1-800-554-6713 (TDD) Permit No. 75
INTERNET: www.jhfunds.com ----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
European Equity Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[Recycle Logo] Printed on Recycled Paper 9200A 10/99
12/99
<PAGE>
--------------------------------------------------
The latest report from your Fund's management team
--------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
[PHOTO]
Global Health
Sciences Fund
OCTOBER 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
----------------------------------------
TRUSTEES
DENNIS S. ARONOWITZ*
STEPHEN L. BROWN
RICHARD P. CHAPMAN, JR.*
WILLIAM J. COSGROVE
LELAND O. ERDAHL
RICHARD A. FARRELL
MAUREEN R. FORD
GAIL D. FOSLER
WILLIAM F. GLAVIN
ANNE C. HODSDON
DR. JOHN A. MOORE
PATTI MCGILL PETERSON
JOHN W. PRATT*
RICHARD S. SCIPIONE
*Members of the Audit Committee
OFFICERS
STEPHEN L. BROWN
Chairman
MAUREEN R. FORD
Vice Chairman and Chief Executive Officer
ANNE C. HODSDON
President, Chief Operating Officer
and Chief Investment Officer
OSBERT M. HOOD
Executive Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Vice President and Compliance Officer
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK SIGNATURE SERVICES, INC.
1 JOHN HANCOCK WAY, SUITE 1000
BOSTON, MASSACHUSETTS 02217-1000
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109-1803
INDEPENDENT AUDITORS
PRICEWATERHOUSECOOPERS LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
----------------------------------------
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is to
welcome you to the New Millennium! I wish you all the best for a century filled
with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make new
resolutions, or re-commit to old ones. It seems fitting, therefore, that this
special New Year 2000 coincides with a very important, although certainly less
exotic, event.
Starting last October, personalized Social Security statements are being sent to
125 million workers over age 25, showing estimates of the retirement, disability
and survivor benefits that they and their families are eligible to receive now
and in the future.
The statements, to be sent out annually, will provide people with a glimpse of
what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for them
at all. But many people also already know that government benefits will only
fulfill a small piece of their retirement needs.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to fourth paragraph.]
- --------------------------------------------------------------------------------
The best thing about this massive mailing is that it can serve as a wake-up call
to encourage families to focus more on planning for their financial future.
When you receive your statement, expected to be within three months of your next
birthday, we urge you to read it carefully for accuracy, making sure your annual
earnings history and amounts you have contributed over the years are correct.
Keep in mind that the estimated benefits are precisely that, and that rules and
regulations may change by the time you retire. Also remember that they are not
inflation adjusted, so it would be unrealistic to expect them to have the same
purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your investment
professional, or to select one if you are not working with somebody. He or she
can help you focus on establishing and maintaining a sound plan to achieve a
comfortable retirement. Together, you should make sure to maximize your
participation in tax-advantaged programs like IRAs and 401(k)s.
The stakes are too high to leave your retirement lifestyle to chance. Congress'
awareness-raising effort is commendable. The next step is yours. Mark the
beginning of the New Millennium by taking it.
Sincerely,
/s/ Maureen R. Ford
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY LINDA I. MILLER, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
ROBERT D. HALLISEY, JR., ASSISTANT PORTFOLIO MANAGER
John Hancock Global Health Sciences Fund
Biotechs recover, but the rest of health care on sick leave
Health-care stocks turned in a rather anemic performance compared to the overall
market during the past 12 months. Although they had been red hot since 1995,
health-care stocks finally took a breather when the strength of the U.S. economy
prompted investors to look for faster-growing companies outside the sector.
Investors were also spooked by the potential for further government changes to
reimbursement of health care, particularly proposals to include drug benefits in
Medicare. High valuations and the lack of new product announcements delayed the
drug companies' progress. Meanwhile, health-care service providers -- including
hospitals and HMOs -- continued to suffer from uncertainty over health-care
reform.
Nevertheless, not all sub-sectors were out of favor. One area that
benefited from the trend toward fast-growing companies was biotech, which was
buoyed by new product introductions, positive earnings surprises and budding
industry consolidation. Biotech stocks got an added boost from the rotation of
money away from big, slower-growth drug companies. The performance of medical
device companies was mixed because of good growth on the one hand and
consolidation and competitive concerns on the other.
Fund performance
Our smaller-than-average stake in biotech companies and our larger-than-average
weighting in large drug companies caused the Fund to lag its peers during the
year. For the 12 months ended October 31, 1999, John Hancock Global Health
Sciences Fund's Class A and Class B shares posted total returns of 1.15% and
0.43%, respectively, at net asset value. Class C shares,
"Health-care stocks turned in a rather anemic performance..."
- --------------------------------------------------------------------------------
[A 2" x 2 1/2" photo bottom right side of John Hancock Global Health Sciences
Fund. Caption below reads "Fund portfolio management team members (l-r): Linda
Miller and Robert Hallisey."]
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
John Hancock Funds - Global Health Sciences Fund
"Our best performers over the year were biotech companies..."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Merck 5.5%, the second is Warner-Lambert 5.3%, the third
Schering-Plough 5.3%, the fourth Johnson & Johnson 5.3% and the fifth
Bristol-Myers Squibb 5.3%. A note below the table reads "As a percentage of net
assets on October 31, 1999."]
- --------------------------------------------------------------------------------
which were launched on March 1, 1999, returned -3.27% at net asset value for the
first eight months of operations. The average healthcare/biotechnology fund
returned 14.00% for the year, according to Lipper Inc.(1) 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. Please see pages six and seven for longer-term performance
information.
Biotechs rebound
Our best performers over the year were biotech companies, which made up roughly
17% of the Fund's investments at the end of the period, compared to 3% at the
beginning. One of the biggest winners in that category was Amgen, the maker of
Epogen, a drug used to combat anemia suffered by kidney dialysis patients. In
addition to enthusiasm for that treatment, Amgen was also helped by news of
product development for diseases like prostate cancer and rheumatoid arthritis.
Another good performer was Biogen, which produces the multiple-sclerosis drug
Avonex. Also topping the charts were: MedImmune, maker of a treatment for
respiratory infections; Alkermes, which makes biotech drug delivery systems, and
IDEC Pharmaceuticals, which launched an innovative and well-received new drug to
treat blood cancers like lymphoma.
Bristol, J&J beat trend
Against a difficult backdrop for large pharmaceutical companies, Bristol-Myers
Squibb and Johnson & Johnson performed reasonably well. Part of their relatively
strong performance stemmed from the fact that their valuations hadn't soared as
high as some of their competitors, although each also had individual reasons for
their success. Bristol-Myers Squibb is on the verge of a new product cycle, with
the eagerly awaited hypertension drug Vanlev currently in development. Johnson &
Johnson beat earnings expectations, with each of its divisions showing
improvement. To a lesser extent, the company was lifted by the success of its
cholesterol-lowering agent Benecol that is used in margarine. In contrast, the
remainder of our drug stocks -- particularly Pfizer, Schering-Plough and Eli
Lilly & Co. -- were disappointments, as slowing earnings growth and weak product
pipelines drove investors elsewhere.
Despite their recent disappointing performance, we continued to maintain
sizable positions in drug stocks. There certainly won't be a reversal in the
aging of America, a trend that will drive demand growth for health-care products
and services. And while there weren't any blockbuster new drug introductions
this
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...And What's Behind The Numbers". The first listing is Amgen
followed by an up arrow with the phrase "Good news on new product development."
The second listing is Biogen followed by an up arrow with phrase "Boosted along
with the biotech sector." The third listing is Eli Lily followed by a down arrow
with the phrase "Caught up in drug stock decline." A note below the table reads
"See `Schedule of Investments.' Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
John Hancock Funds - Global Health Sciences Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the year ended October 31, 1999." The
chart is scaled in increments of 3% with -6% at the bottom and 15% at the top.
The first bar represents the 1.15% total return for John Hancock Global Health
Sciences Fund Class A. The second bar represents the 0.43% total return for John
Hancock Global Health Sciences Fund Class B. The third bar represents the
- -3.27%* total return for John Hancock Global Health Sciences Fund Class C. The
fourth bar represents the 14.00% total return for Average
health-care/biotechnology fund. A note below the chart reads "Total returns for
John Hancock Global Health Sciences Fund are at net asset value with all
distributions reinvested. The average health-care/biotechnology fund is tracked
by Lipper, Inc.1 See the following two pages for historical performance
information. *From inception March 1, 1999 through October 31, 1999."]
- --------------------------------------------------------------------------------
year, that won't always be the case. Next year we're likely to see the
introduction of flu drugs -- one from Roche Holding and its partner Gilead
Sciences and one from Glaxo Wellcome -- as well as treatments for irritable
bowel disease. Although our expectations for those drugs are relatively modest
in comparison to the blockbusters we witnessed in 1998, the new drug pipeline
looks especially promising in the new millennium.
Device companies revive
After emerging from a substantial amount of consolidation, the medical device
industry recently showed signs of healing. Stryker, Allergan Specialty
Therapeutics and Medtronic all posted decent gains and were among our top
performers. Investors rewarded Stryker for its able acquisition of Howmedica. An
excellent management team, which came on board about two years ago, helped steer
Allergan toward better earnings growth and financial results. Medtronic was
another winner, thanks to a strong new cardiovascular product cycle for products
such as pacemakers, internal defibrillators and new products potentially for the
treatment of congestive heart failure.
Long-term prognosis strong
Over the short term, health-care stocks may be stymied. Ongoing strength in the
economy will probably continue to lure investors away from health care toward
more economically sensitive, faster-growing stocks. Furthermore, the sector is
now more volatile than its reputation for consistency would suggest, in response
to concerns about industry consolidation and federal legislation. That's why we
plan to maintain a defensive posture, concentrating on lower-valuation stocks in
most sectors, but keeping our eyes open for fast-growing opportunities in the
biotech arena. Over the longer term, we have a much different diagnosis. In our
view, the health-care sector continues to offer many exciting long-term growth
opportunities. The advent of new products and services, coupled with an aging
population, including now 50-year-old Baby Boomers increasingly becoming
health-care consumers, should favor health-care companies in the years to come.
"The advent of new products and services, coupled with an aging population...
should favor health-care companies..."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic and
currency risks and differences in accounting standards and financial reporting.
Sector investing is subject to different, and sometimes 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
<PAGE>
================================================================================
John Hancock Funds - Global Health Sciences Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Global Health Sciences Fund. Total return
measures the change in value of an investment from the beginning to the end of a
period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting, before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/1/91)
---- ----- ---------
Cumulative Total Returns (5.99%) 96.38% 229.91%
Average Annual Total Returns (5.99%) 14.45% 16.09%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/7/94)
---- ----- ---------
Cumulative Total Returns (6.63%) 97.26% 91.92%
Average Annual Total Returns (6.63%) 14.55% 12.42%
- --------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
SINCE
INCEPTION
(3/1/99)
---------
Cumulative Total Return (9.66%)
Average Annual Total Return (9.66%)(1)
Note to Performance
(1) Not annualized.
6
<PAGE>
================================================================================
John Hancock Funds - Global Health Sciences Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Global Health Sciences Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index--an unmanaged index that
includes 500 widely traded common stocks and is a commonly used measure of stock
market performance. It is not possible to invest in an index. Past performance
is not indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Global Health Sciences Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Index and is equal to $42,243 as of October 31, 1999. The
second line represents the value of the hypothetical $10,000 investment made in
the John Hancock Global Health Sciences Fund on October 1, 1991, before sales
charge, and is equal to $36,858 as of October 31, 1999. The third line
represents the value of the same hypothetical investment made in the John
Hancock Global Health Sciences Fund, after sales charge, and is equal to $35,002
as of October 31, 1999.
Line chart with the heading John Hancock Global Health Sciences Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Index and is equal to $32,719 as of October 31, 1999. The
second line represents the value of the hypothetical $10,000 investment made in
the John Hancock Global Health Sciences Fund on March 7, 1994, before sales
charge, and is equal to $20,450 as of October 31, 1999. The third line
represents the value of the same hypothetical investment made in the John
Hancock Global Health Sciences Fund, after sales charge, and is equal to $20,350
as of October 31, 1999.
Line chart with the heading John Hancock Global Health Sciences Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the
Standard & Poor's 500 Index and is equal to $11,099 as of October 31, 1999. The
second line represents the value of the hypothetical $10,000 investment made in
the John Hancock Global Health Sciences Fund on March 1, 1999, before sales
charge, and is equal to $9,673 as of October 31, 1999. The third line represents
the value of the same hypothetical investment made in the John Hancock Global
Health Sciences Fund, after sales charge, and is equal to $9,576 as of October
31, 1999.
- --------------------------------------------------------------------------------
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on October 31, 1999. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
October 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks (cost - $186,047,881) ....................... $241,164,444
Short-term investments (cost - $36,700,915)
- Note A ................................................ 36,700,915
-------------
277,865,359
Cash ....................................................... 246
Receivable for investments sold ............................ 793,135
Receivable for shares sold ................................. 302,519
Dividends receivable ....................................... 105,350
Foreign tax receivable ..................................... 2,790
Interest receivable ........................................ 3,675
Other assets ............................................... 4,087
-------------
Total Assets ............................. 279,077,161
----------------------------------------------------------
Liabilities:
Payable for investments purchased .......................... 2,998,169
Payable for shares repurchased ............................. 174,873
Payable upon return of securities on loan - Note A ......... 28,268,915
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................... 595,320
Accounts payable and accrued expenses ...................... 73,987
-------------
Total Liabilities ........................ 32,111,264
----------------------------------------------------------
Net Assets:
Capital paid-in ............................................ 199,258,005
Accumulated net realized loss on investments and
foreign currency transactions ............................. (7,405,866)
Net unrealized appreciation of investments and
foreign currency transactions ............................. 55,116,531
Accumulated net investment loss ............................ (2,773)
-------------
Net Assets ............................... $246,965,897
==========================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value)
Class A - $92,766,462/2,706,401 ............................ $34.28
============================================================================
Class B - $152,322,686/4,639,332 ........................... $32.83
============================================================================
Class C* - $1,876,749/57,160 ............................... $32.83
============================================================================
Maximum Offering Price Per Share**
Class A - ($34.28 x 105.26%) ............................... $36.08
============================================================================
* Class C shares commenced operations on March 1, 1999.
** 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.
The 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.
Statement of Operations
Year ended October 31, 1999
- --------------------------------------------------------------------------------
Investment Income:
Dividends
(net of foreign withholding taxes of $41,735) ............. $1,726,284
Interest
(including income on securities loaned of $60,179) ........ 899,568
-----------
2,625,852
-----------
Expenses:
Investment management fee - Note B ........................ 1,896,096
Distribution and service fee - Note B
Class A ................................................. 280,458
Class B ................................................. 1,482,985
Class C ................................................. 5,151
Transfer agent fee - Note B ............................... 917,837
Custodian fee ............................................. 92,993
Registration and filing fees .............................. 87,692
Accounting and legal services fee - Note B ................ 40,236
Advisory board fee - Note B ............................... 40,000
Auditing fee .............................................. 30,513
Printing .................................................. 29,864
Trustees' fees ............................................ 11,295
Legal fees ................................................ 2,343
-----------
Total Expenses ........................... 4,917,463
-----------------------------------------------------------
Net Investment Loss ...................... (2,291,611)
-----------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss on investments sold ...................... (6,016,135)
Net realized loss on foreign currency transactions ......... (7,704)
Change in net unrealized appreciation/depreciation
of investments ............................................ 8,367,638
Change in net unrealized appreciation/depreciation
of foreign currency transactions .......................... (252)
-----------
Net Realized and Unrealized
Gain on Investments and
Foreign Currency
Transactions ............................. 2,343,547
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................ $51,936
===========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1998 1999
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ........................................................................ ($1,698,807) ($2,291,611)
Net realized loss on investments sold and foreign currency transactions .................... (1,389,101) (6,023,839)
Change in net unrealized appreciation/depreciation of investments and foreign
currency transactions .................................................................... 16,823,770 8,367,386
------------- -------------
Net Increase in Net Assets Resulting from Operations ..................................... 13,735,862 51,936
------------- -------------
Distributions to Shareholders:
Distributions from net realized gain on investments sold and foreign currency transactions
Class A - ($0.5126 and none per share, respectively) ..................................... (891,908) --
Class B - ($0.5126 and none per share, respectively) ..................................... (951,137) --
------------- -------------
Total Distributions to Shareholders ...................................................... (1,843,045) --
------------- -------------
From Fund Share Transactions - Net: * ......................................................... 89,358,253 39,104,970
------------- -------------
Net Assets:
Beginning of period ........................................................................ 106,557,921 207,808,991
------------- -------------
End of period (including accumulated net investment loss
of $1,897 and $2,773, respectively) ...................................................... $207,808,991 $246,965,897
============= =============
</TABLE>
*Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1998 1999
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................................. 1,619,964 $53,582,895 3,253,210 $111,435,835
Shares issued to shareholders in reinvestment of distributions 27,245 834,213 -- --
----------- ------------- ------------- -------------
1,647,209 54,417,108 3,253,210 111,435,835
Less shares repurchased ...................................... (926,858) (29,707,988) (3,023,257) (103,321,157)
----------- ------------- ------------- -------------
Net increase ................................................. 720,351 $24,709,120 229,953 $8,114,678
=========== ============= ============= =============
CLASS B
Shares sold .................................................. 2,488,498 $81,014,505 2,247,732 $75,438,648
Shares issued to shareholders in reinvestment of distributions 26,809 797,000 -- --
----------- ------------- ------------- -------------
2,515,307 81,811,505 2,247,732 75,438,648
Less shares repurchased ...................................... (543,276) (17,162,372) (1,398,156) (46,313,310)
----------- ------------- ------------- -------------
Net increase ................................................. 1,972,031 $64,649,133 849,576 $29,125,338
=========== ============= ============= =============
CLASS C **
Shares sold .................................................. -- -- 58,751 $1,916,419
Less shares repurchased ...................................... -- -- (1,591) (51,465)
----------- ------------- ------------- -------------
Net increase ................................................. -- -- 57,160 $1,864,954
=========== ============= ============= =============
</TABLE>
** Class C shares commenced operations on March 1, 1999.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, if any, and any increase or decrease in
money shareholders invested in the Fund. The footnote illustrates the number of
Fund shares sold, reinvested and repurchased during the last two periods, along
with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM
----------------------- SEPTEMBER 1, 1996 TO
1995 1996 OCTOBER 31, 1996(1)
--------- --------- --------------------
<S> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ................... $16.51 $21.61 $25.43
------- ------- -------
Net Investment Loss(2) ................................. (0.36) (0.19) (0.05)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ..................... 5.46 4.15 (0.27)
------- ------- -------
Total from Investment Operations ...................... 5.10 3.96 (0.32)
------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions ..................... -- (0.14) --
------- ------- -------
Net Asset Value, End of Period ......................... $21.61 $25.43 $25.11
======= ======= =======
Total Investment Return at Net Asset Value(3) .......... 30.89% 18.39% (1.26%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $24,394 $42,405 $42,618
Ratio of Expenses to Average Net Assets ................ 2.56% 1.80% 1.92%(5)
Ratio of Net Investment Loss to Average Net Assets ..... (1.99%) (0.75%) (1.04%)(5)
Portfolio Turnover Rate ................................ 38% 68% 24%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ................... $16.46 $21.35 $24.94
------- ------- -------
Net Investment Loss(2) ................................. (0.55) (0.34) (0.08)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ..................... 5.44 4.07 (0.26)
------- ------- -------
Total from Investment Operations ...................... 4.89 3.73 (0.34)
------- ------- -------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions ..................... -- (0.14) --
------- ------- -------
Net Asset Value, End of Period ......................... $21.35 $24.94 $24.60
======= ======= =======
Total Investment Return at Net Asset Value(3) .......... 29.71% 17.53% (1.36%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $6,333 $36,591 $37,521
Ratio of Expenses to Average Net Assets ................ 3.45% 2.42% 2.62%(5)
Ratio of Net Investment Loss to Average Net Assets ..... (2.91%) (1.33%) (1.74%)(5)
Portfolio Turnover Rate ................................ 38% 68% 24%
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ................... $25.11 $30.25 $33.89
------- -------- --------
Net Investment Loss(2) ................................. (0.19) (0.23) (0.18)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ..................... 6.56 4.38 0.57
------- -------- --------
Total from Investment Operations ...................... 6.37 4.15 0.39
------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions ..................... (1.23) (0.51) --
------- -------- --------
Net Asset Value, End of Period ......................... $30.25 $33.89 $34.28
======= ======== ========
Total Investment Return at Net Asset Value(3) .......... 26.63% 13.91% 1.15%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $53,122 $83,928 $92,766
Ratio of Expenses to Average Net Assets ................ 1.68% 1.61% 1.60%
Ratio of Net Investment Loss to Average Net Assets ..... (0.71%) (0.71%) (0.52%)
Portfolio Turnover Rate ................................ 57% 39% 61%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ................... $24.60 $29.40 $32.69
------- -------- --------
Net Investment Loss(2) ................................. (0.37) (0.45) (0.41)
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions ..................... 6.40 4.25 0.55
------- -------- --------
Total from Investment Operations ...................... 6.03 3.80 0.14
------- -------- --------
Less Distributions:
Distributions from Net Realized Gain on Investments Sold
and Foreign Currency Transactions ..................... (1.23) (0.51) --
------- -------- --------
Net Asset Value, End of Period ......................... $29.40 $32.69 $32.83
======= ======== ========
Total Investment Return at Net Asset Value(3) .......... 25.76% 13.11% 0.43%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $53,436 $123,880 $152,323
Ratio of Expenses to Average Net Assets ................ 2.38% 2.31% 2.30%
Ratio of Net Investment Loss to Average Net Assets ..... (1.41%) (1.41%) (1.22%)
Portfolio Turnover Rate ................................ 57% 39% 61%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1999
----------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period ..................... $33.94
------
Net Investment Loss(2) ................................... (0.28)
Net Realized and Unrealized Loss on Investments
and Foreign Currency Transactions ...................... (0.83)
------
Total from Investment Operations ......................... (1.11)
------
Net Asset Value, End of Period ........................... $32.83
======
Total Investment Return at Net Asset Value(3) ............ (3.27%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................. $1,877
Ratio of Expenses to Average Net Assets .................. 2.40%(5)
Ratio of Net Investment Loss to Average Net Assets ....... (1.30%)(5)
Portfolio Turnover Rate .................................. 61%
(1) Effective October 31, 1996, the fiscal year end changed from August 31 to
October 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment loss, gains (losses),
distributions and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
Schedule of Investments
October 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Global Health Sciences Fund on October 31, 1999. It's 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.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Chemicals - Specialty (2.80%)
Waters Corp.* ............................... 130,000 $ 6,906,250
-----------
Computer Services (0.05%)
Gartner Group, Inc.* ........................ 14,973 140,372
-----------
Drugs - Biotechnology (16.62%)
Affymetrix, Inc.* ........................... 30,000 2,643,750
Alkermes, Inc.* ............................. 65,000 2,295,313
Amgen, Inc.* ................................ 110,000 8,772,500
Biogen, Inc.* ............................... 75,000 5,559,375
Cephalon, Inc.* ............................. 50,000 812,500
Genentech, Inc.* ............................ 37,500 5,465,625
Gilead Sciences, Inc.* ...................... 30,000 1,895,625
IDEC Pharmaceuticals Corp.* ................. 25,000 2,904,688
ILEX Oncology, Inc.* ........................ 25,000 350,000
Immunex Corp.* .............................. 40,000 2,520,000
MedImmune, Inc.* ............................ 37,500 4,200,000
Pharmacopeia, Inc.* ......................... 40,000 595,000
Progenics Pharmaceuticals, Inc.* ............ 35,000 752,500
SangStat Medical Corp.* ..................... 45,000 973,125
Titan Pharmaceuticals, Inc.* ................ 30,000 253,125
Triangle Pharmaceuticals, Inc.* ............. 12,000 195,000
Vertex Pharmaceuticals, Inc.* .............. 30,000 858,750
-----------
41,046,876
-----------
Drugs - Diversified (24.44%)
Abbott Laboratories ......................... 200,000 8,075,000
American Home Products Corp. ................ 150,000 7,837,500
Bristol-Myers Squibb Co. .................... 170,000 13,058,125
Johnson & Johnson ........................... 125,000 13,093,750
Pharmacia & Upjohn, Inc. .................... 95,000 5,124,063
Warner-Lambert Co. .......................... 165,000 13,169,063
-----------
60,357,501
-----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Drugs - Major - Domestic (15.01%)
Lilly (Eli) & Co. ........................... 40,000 $ 2,755,000
Merck & Co., Inc. ........................... 172,000 13,684,750
Pfizer, Inc. ................................ 190,000 7,505,000
Schering-Plough Corp. ....................... 265,000 13,117,500
-----------
37,062,250
-----------
Drugs - Major - International (9.46%)
AstraZeneca Group Plc, American
Depositary Receipts (ADR)
(United Kingdom) .......................... 50,000 2,287,500
Elan Corp. Plc (ADR) (Ireland)* ............. 30,000 772,500
Glaxo Wellcome Plc (ADR)
(United Kingdom) .......................... 90,000 5,388,750
Novartis AG (ADR) (Switzerland) ............. 25,000 1,870,398
Roche Holding AG (Switzerland) .............. 300 3,601,653
Sanofi - Synthelabo SA (France)* ............ 28,600 1,261,978
SmithKline Beecham Plc (ADR)
(United Kingdom) .......................... 109,000 6,976,000
Teva Pharmaceutical Industries Ltd.
(ADR) (Israel) ............................ 25,000 1,209,375
-----------
23,368,154
-----------
Drugs - Specialty (2.02%)
Forest Laboratories, Inc.* .................. 95,000 4,358,125
Watson Pharmaceutical, Inc.* ................ 20,000 635,000
-----------
4,993,125
-----------
Drugs & Sundries - Wholesale (3.42%)
Allscripts, Inc.* ........................... 20,000 312,500
Cardinal Health, Inc. ....................... 80,000 3,450,000
Express Scripts, Inc. (Class A)* ............ 60,000 2,947,500
Priority Healthcare Corp.* .................. 22,500 451,406
Syncor International Corp.* ................. 35,000 1,281,875
-----------
8,443,281
-----------
Healthcare - Management (2.17%)
Accredo Health, Inc.* ....................... 37,500 1,237,500
Covance, Inc.* .............................. 30,000 290,625
Hanger Orthopedic Group, Inc.* .............. 37,500 461,719
IMPATH, Inc.* ............................... 65,000 1,560,000
ProVantage Health Services, Inc.* ........... 35,000 409,063
Renal Care Group, Inc.* ..................... 75,000 1,396,875
-----------
5,355,782
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Healthcare - Software/Services (3.39%)
Chemdex Corp.* .............................. 20,000 $ 762,500
Dendrite International, Inc.* .............. 26,250 823,594
IMS Health, Inc. ............................ 120,000 3,480,000
MedQuist, Inc.* ............................. 35,000 1,120,000
Omnicare, Inc. .............................. 80,000 740,000
PE Corp-PE Biosystems Group ................. 22,500 1,459,688
-----------
8,385,782
-----------
Insurance (3.03%)
CIGNA Corp. ............................... 40,000 2,990,000
United HealthCare Corp. ................... 25,000 1,292,188
Wellpoint Health Networks, Inc.* .......... 55,000 3,190,000
-----------
7,472,188
-----------
Medical Devices and Products (12.86%)
Allergan, Inc. ............................ 57,500 6,174,063
Allergan Specialty Therapeutics, Inc.
(Class A)* .............................. 55,000 680,625
Baxter International, Inc. ................ 35,000 2,270,625
Biomet, Inc. .............................. 35,000 1,054,375
Boston Scientific Corp.* .................. 45,000 905,625
Cytyc Corp.* .............................. 15,000 596,250
Guidant Corp.* ............................ 65,000 3,209,375
Medtronic, Inc. ........................... 225,000 7,790,625
Novoste Corp.* ............................ 25,000 429,688
Stryker Corp. ............................. 140,000 8,645,000
-----------
31,756,251
-----------
Pollution Control (0.14%)
Stericycle, Inc.* ......................... 22,000 343,750
-----------
Real Estate Investment Trusts (0.23%)
Alexandria Real Estate Equities, Inc. ..... 20,000 575,000
-----------
Retail - Drug Stores (2.01%)
CVS Corp. ................................. 85,000 3,692,182
Walgreen Co. .............................. 44,000 1,108,250
PlanetRx.com, Inc.* ....................... 6,700 157,450
-----------
4,957,882
-----------
TOTAL COMMON STOCKS
(Cost $186,047,881) ............ (97.65%) 241,164,444
------- -----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.41%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
10-29-99, due 11-01-99
(Secured by U.S. Treasury
Bonds, 8.125% thru 9.875%,
due 11-15-15 thru 08-15-21)
-- Note A .................... 5.23% $ 8,432 $ 8,432,000
-------------
Cash Equivalents (11.45%)
Navigator Securities Lending
Prime Portfolio** ............ 28,269 28,268,915
-------------
TOTAL SHORT-TERM INVESTMENTS (14.86%) 36,700,915
-------- -------------
TOTAL INVESTMENTS (112.51%) 277,865,359
-------- -------------
OTHER ASSETS AND LIABILITIES, NET (12.51%) (30,899,462)
-------- -------------
TOTAL NET ASSETS (100.00%) $ 246,965,897
======== =============
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
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
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Global Health Sciences Fund
Portfolio Concentration (Unaudited)
- --------------------------------------------------------------------------------
The Global Health Sciences Fund invests primarily in equity securities of
issuers in the health care industry in the United States and abroad. The
concentration of investments by industry category for individual securities held
by the Fund is shown in the schedule of investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentage of the Fund's investments at
October 31, 1999 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ----------------------- ------------------
France ..................................................... 0.51%
Ireland .................................................... 0.31
Israel ..................................................... 0.49
Switzerland ................................................ 2.22
United Kingdom ............................................. 5.93
United States .............................................. 103.05
------
TOTAL INVESTMENTS 112.51%
======
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Health Sciences Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series: John Hancock Global Health Sciences Fund (the "Fund"), John
Hancock European Equity Fund and John Hancock Pacific Basin Equities Fund. The
other series of the Trust are reported in separate financial statements. The
investment objective of the Fund is long-term capital appreciation through
investments in an international portfolio consisting primarily of equity
securities of issuers in the health-care industry.
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 Trustees
authorized the issuance of Class C shares effective March 1, 1999. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights 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 which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation."
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., 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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, at October 31, 1999, the Fund has $6,190,367 of
capital loss carryforwards available, to the extent provided by regulations, to
offset future net realized capital gains. If such carryforwards are used by the
Fund, no capital gain distribution will be made. The Fund's carryforwards expire
as follows: October 31, 2006 -- $1,300,348 and October 31, 2007 -- $4,890,019.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
15
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Health Sciences Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which are not 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 size of the funds.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowings. In
addition, a commitment fee is charged 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 for the year ended October 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral should
the borrower of the securities fail financially. At October 31, 1999, the Fund
loaned securities having a market value of $28,170,088 collateralized by cash in
the amount of $28,268,915, which was invested in a short-term instrument.
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 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments 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 exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of
16
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Health Sciences Fund
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk if they are offset by the currency amount of the underlying
transaction.
There were no open forward foreign currency contracts at October 31, 1999.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Fund's exposure to the
underlying instrument. Selling futures tends to decrease the Fund's exposure to
the underlying instrument or hedge other Fund instruments. At the time the Fund
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities, known as
"initial margin," equal to a certain percentage of the value of the financial
futures contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange on
which it trades. Subsequent payments to and from the broker, known as "variation
margin," are made on a daily basis as the market price of the financial futures
contract fluctuates. Daily variation margin adjustments, arising from this "mark
to market," are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1999, there were no open positions in financial futures
contracts.
OPTIONS The Fund may purchase or sell option contracts. Listed options will be
valued at the last quoted sales price on the exchange on which they are
primarily traded. Over-the-counter options are valued at the mean between the
last bid and asked prices. Upon the writing of a call or put option, an amount
equal to the premium received by the Fund is included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the written option.
The Fund may use options contracts to manage its exposure to changing
security prices. Writing puts and buying calls tend to increase the Fund's
exposure to the underlying instrument and buying puts and writing calls tend to
decrease the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms ("credit risk"), or if the Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options have
minimal credit risk because the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit risk and liquidity risks in over-the-counter
option contracts, the Fund will continuously monitor the creditworthiness of all
its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
At October 31, 1999, there were no written option transactions.
NOTE B -
MANAGEMENT FEE, ADMINISTRATIVE SERVICES
AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a quarterly
management fee to the Adviser for a continuous investment
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Health Sciences Fund
program 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 a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the year ended October
31, 1999, net sales charges received with regard to Class A shares amounted to
$700,780. Out of this amount, $65,482 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $489,675 was
paid as sales commissions to sales personnel of unrelated broker-dealers and
$145,623 was paid as sales commissions to personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect parent,
John Hancock Mutual Life Insurance Company ("JHMLICo"), is the indirect sole
shareholder of Signator Investors.
Class B shares which are redeemed within six years of purchase will be
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. Proceeds
from the CDSC 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 shares. For the year ended October 31, 1999,
contingent deferred sales charges paid to JH Funds amounted to $616,240.
Class C shares which are redeemed within one year of purchase will be
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 CDSC are paid to JH Funds and are used in whole or
in part to defray its expenses related to providing distribution related
services to the Fund in connection with the sale of Class C shares. For the year
ended October 31, 1999, contingent deferred sales charges amounted to $65.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan with
respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds at an annual rate not to exceed 0.30% of Class A average daily net assets
and 1.00% of Class B and Class C average daily net assets to reimburse JH Funds
for its distribution and service costs. 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.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
The Fund has an independent advisory board composed of scientific and
medical experts who provide the investment officers of the Fund with advice and
consultation on health care developments, for which the Fund pays the advisory
board a fee.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Maureen R. Ford,
Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are directors and/or officers of
the Adviser, and/or its affiliates, as well as Trustees of the Fund through
December 31, 1999. 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 investment as well as any unrealized gains or
losses.
18
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Global Health Sciences Fund
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended October 31, 1999, aggregated $180,633,714 and
$138,529,168, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the year ended October 31, 1999.
The cost of investments (including short-term investments) owned at
October 31, 1999 for federal income tax purposes was $223,964,296. Gross
unrealized appreciation and depreciation of investments aggregated $63,360,741
and $9,459,678 respectively, resulting in net unrealized appreciation of
$53,901,063.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect a decrease in net realized loss on investments of $7,704, a decrease in
accumulated net investment loss of $2,290,735 and a decrease in capital paid-in
of $2,298,439. This represents the amount necessary to report these balances on
a tax basis, excluding certain temporary difference, as of October 31, 1999.
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 the treatment of net operating losses and realized
gain/loss on foreign currency transactions in the computation of distributable
income and capital gains under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
19
<PAGE>
================================================================================
John Hancock Funds - Global Health Sciences Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock Global Health Sciences Fund and the Trustees
of John Hancock World 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 Global Health Sciences
Fund (formerly John Hancock Global Rx Fund, the "Fund") (a series of John
Hancock World Fund) at October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and the significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities owned at October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
20
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Health Sciences Fund
21
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Health Sciences Fund
22
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Global Health Sciences Fund
23
<PAGE>
================================================================================
----------------
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 Randolph, MA
1-800-225-5291 1-800-554-6713 (TDD) Permit No. 75
INTERNET: www.jhfunds.com ----------------
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Global Health Sciences Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[Recycle Logo] Printed on Recycled Paper 2800A 10/99
12/99
<PAGE>
---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC]
Pacific Basin
Equities Fund
OCTOBER 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
------------------------------------------
TRUSTEES
DENNIS S. ARONOWITZ*
STEPHEN L. BROWN
RICHARD P. CHAPMAN, JR.*
WILLIAM J. COSGROVE
LELAND O. ERDAHL
RICHARD A. FARRELL
MAUREEN R. FORD
GAIL D. FOSLER
WILLIAM F. GLAVIN
ANNE C. HODSDON
DR. JOHN A. MOORE
PATTI MCGILL PETERSON
JOHN W. PRATT*
RICHARD S. SCIPIONE
*Members of the Audit Committee
OFFICERS
STEPHEN L. BROWN
Chairman
MAUREEN R. FORD
Vice Chairman and Chief Executive Officer
ANNE C. HODSDON
President, Chief Operating Officer
and Chief Investment Officer
OSBERT M. HOOD
Executive Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Vice President and Compliance Officer
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TRANSFER AGENT
JOHN HANCOCK SIGNATURE SERVICES, INC.
1 JOHN HANCOCK WAY, SUITE 1000
BOSTON, MASSACHUSETTS 02217-1000
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
SUB-INVESTMENT ADVISER
INDOCAM ASIA ADVISERS LIMITED
ONE EXCHANGE SQUARE
HONG KONG
PRINCIPAL DISTRIBUTOR
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
LEGAL COUNSEL
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109-1803
INDEPENDENT AUDITORS
PRICEWATERHOUSECOOPERS LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
I am delighted that one of my first official duties at John Hancock Funds is to
welcome you to the New Millennium! I wish you all the best for a century filled
with momentous occasions.
Every New Year, of course, provides us with a built-in opportunity to make new
resolutions, or re-commit to old ones. It seems fitting, therefore, that this
special New Year 2000 coincides with a very important, although certainly less
exotic, event.
Starting last October, personalized Social Security statements are being sent to
125 million workers over age 25, showing estimates of the retirement, disability
and survivor benefits that they and their families are eligible to receive now
and in the future.
The statements, to be sent out annually, will provide people with a glimpse of
what they can expect from the government when they retire. This should be
comforting to those who feared that Social Security wouldn't be there for them
at all. But many people also already know that government benefits will only
fulfill a small piece of their retirement needs.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to fourth paragraph.]
- --------------------------------------------------------------------------------
The best thing about this massive mailing is that it can serve as a wake-up call
to encourage families to focus more on planning for their financial future.
When you receive your statement, expected to be within three months of your next
birthday, we urge you to read it carefully for accuracy, making sure your annual
earnings history and amounts you have contributed over the years are correct.
Keep in mind that the estimated benefits are precisely that, and that rules and
regulations may change by the time you retire. Also remember that they are not
inflation adjusted, so it would be unrealistic to expect them to have the same
purchasing power in the future as they would today.
We also encourage you to use this mailing as a reason to contact your investment
professional, or to select one if you are not working with somebody. He or she
can help you focus on establishing and maintaining a sound plan to achieve a
comfortable retirement. Together, you should make sure to maximize your
participation in tax-advantaged programs like IRAs and 401(k)s.
The stakes are too high to leave your retirement lifestyle to chance. Congress'
awareness-raising effort is commendable. The next step is yours. Mark the
beginning of the New Millennium by taking it.
Sincerely,
/s/ Maureen R. Ford
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY AYAZ EBRAHIM FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Pacific Basin Equities Fund
Economic recovery takes hold more quickly
than expected in Pacific Region
The dramatic turnaround in the Asian markets pleased -- and surprised -- many
investors this year. As you well know, currency turmoil and financial crisis
plagued the Pacific region for much of 1998. By year end, however, we began to
see signs that the worst of the crisis was over. At that point, hopes for a
sharp economic rebound were dim, given the daunting financial and structural
reforms facing the region. Investors braced themselves for a slow and painful
recovery.
By the second quarter of 1999, however, the economic picture had improved
significantly. Interest rates dropped sharply throughout the region and
financial restructuring started to take hold more quickly than expected. South
Korea was one of the most aggressive restructuring stories, quickly sorting out
bad loans and improving lending practices. Japan also started to implement
much-needed financial reforms, addressing the critical problems in its banking
system. In addition, exports rebounded nicely. Not only did exports to the U.S.
and Europe pick up, but we also saw a sharp increase in exports within Asia,
thanks to pent-up consumer demand.
Economic turnaround fuels strong returns
Given all of the region's positive economic news, Pacific Basin stocks posted
outstanding returns during the period. For the 12 months ended October 31, 1999,
John Hancock Pacific Basin Equities Fund's Class A and Class B shares returned
65.07% and 63.99%, respectively, at net asset value. By comparison, the average
Pacific region fund returned 67.12%, according to Lipper, Inc.(1) The Fund's
Class C shares, which were introduced on March 1, 1999, returned 52.81% from
inception through October 31, 1999. 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. Please
see pages six and seven for historical performance information.
What caused the Fund to trail slightly our peers was our relatively
smaller weighting in Japan. Although we are optimistic about Japan's economic
prospects, we believe other countries in the region offer better growth
potential. As a result, we have maintained a substantial, but neutral, weighting
in Japan. Many of our competitors have made much more aggressive bets in
"South Korea was one of the most aggressive restructuring stories..."
3
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
"We established a 5% stake in China during the last six months..."
- --------------------------------------------------------------------------------
[Pie chart at top left hand column with heading "Portfolio Diversification." The
chart is divided into ten sections (from top to left): Indonesia 2%, Malaysia
3%, China 5%, Australia 6%, Singapore 6%, Taiwan 9%, Hong Kong 11%, South Korea
11%, Short-term Investments & Other 12% and Japan 35%. A note below the chart
reads "As a percentage of net assets on October 31, 1999."]
- --------------------------------------------------------------------------------
Japan and that certainly paid off during Japan's recent stock market rally. Our
neutral position may have held back our short-term performance, but we are
confident that the portfolio is well positioned to take advantage of the
region's recovery in the long term.
Japan
Several positive trends have fueled Japan's recent stock market resurgence.
First, the government has addressed its banking crisis with a $65 million
bailout and significant financial reforms. Corporations have announced
aggressive cost-cutting programs. Finally, foreign investors have flooded back
into the market to take advantage of incredible stock values. The result has
been a sharp jump in both stock prices and the value of the Japanese yen.
As mentioned above, we are confident that Japan is on the road to
recovery, but its recovery will likely be slower than that of other countries in
the region. So we've maintained a neutral stock position, ending the year at 35%
of the Fund's net assets. Our main focus is on stocks that will benefit from the
trend toward the expansion of information technology and convergence of
multimedia such as Sony and Fujitsu. We're also holding strong positions in
financial stocks, such as Sakura Bank, which will benefit from the country's
significant bank reforms.
Hong Kong
For two reasons, we've cut our Hong Kong position in half -- from 23% a year ago
to 11%. First, we felt the time was right to take profits in many of our
property stocks, which had jumped up sharply on the heels of falling interest
rates. Second, we believe that several Chinese stocks now offer better value. As
a result, we've used the proceeds of our recent sales to initiate a Chinese
stock position.
With our remaining Hong Kong holdings, our emphasis remains on consumer
stocks, which should benefit from the recent pick-up in consumer demand. Two
favorite stocks are Esprit Holdings and Giordana International. We believe these
retailers are poised to benefit from the shift in consumer taste from luxury
clothing to "quality-for-value" items.
China
We established a 5% stake in China during the last six months as the economy
there continues to grow, thanks to strong exports and increasing domestic
consumption. What's more, reform of state-owned enterprises is continuing,
benefiting power, mining and auto companies. With less efficient and less
environmentally friendly companies being shut down, the remaining
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...And What's Behind The Numbers". The first listing is Guoco Group
followed by an up arrow with the phrase "Undervalued financial conglomerate."
The second listing is Fast Retailing followed by an up arrow with phrase
"Benefiting from shift from luxury to value goods." The third listing is Sekisui
House followed by a down arrow with the phrase "Market focus on growth rather
than value." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the year ended October 31, 1999." The
chart is scaled in increments of 10% with 0% at the bottom and 70% at the top.
The first bar represents the 65.07% total return for John Hancock Pacific Basin
Equities Fund Class A. The second bar represents the 63.99% total return for
John Hancock Pacific Basin Equities Fund Class B. The third bar represents the
52.81%* total return for John Hancock Pacific Basin Equities Fund Class C. The
fourth bar represents the 67.12% total return for Average Pacific region fund. A
note below the chart reads "Total returns for John Hancock Pacific Basin
Equities Fund are at net asset value with all distributions reinvested. The
average Pacific region fund is tracked by Lipper, Inc.1 See the following two
pages for historical performance information. *From inception March 1, 1999
through October 31, 1999."]
- --------------------------------------------------------------------------------
players have gained market share and improved earnings. Recent additions to the
portfolio include Yanzhou Coal Mining and Shanghai Petrochemical. Not only are
they benefiting from the worldwide recovery in fuel prices, but they're also
getting an extra lift from the increase in power consumption throughout China.
South Korea
We've doubled our position in South Korea over the last year to 11%, since the
country has implemented one of the most dramatic shakeups in the banking sector.
What's more, domestic consumption is on the rise. Not surprisingly, we've
focused our purchases on banks, such as Housing & Commercial Bank, since they
are reaping the benefits of Korea's dramatic financial reforms. We also favor
electronics companies, such as Samsung Electronics, which are poised to benefit
from the increase in worldwide demand for electronics.
Outlook
We remain optimistic about the region's prospect for recovery. For starters, the
manufacturing cycle in Asia is emerging from the doldrums. Electronic component
shortages are one of the first signs that the situation is turning around. As we
enter the millennium, we expect to see demand for electronics continue to
strengthen, especially with the expansion of information technology in Japan and
other Asian countries. What's more, consumption will likely continue its upward
trend. After two years with virtually no consumer spending, pent-up demand is
being unleashed. In fact, we've seen retail sales in Korea and Singapore shoot
up dramatically and that trend is likely to continue throughout the region.
"We remain optimistic about the region's prospect for recovery."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
International investing involves special risks such as political, economic and
currency risks and differences in accounting standards and financial reporting.
(1) Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
5
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
A LOOK AT PERFORMANCE
- --------------------------------------------------------------------------------
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Pacific Basin Equities Fund. Total return
measures the change in value of an investment from the beginning to the end of a
period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable sales
charge of 5%. Class B performance reflects a maximum contingent deferred sales
charge (maximum 5% and declining to 0% over six years). Class C performance
includes a contingent deferred sales charge (1% declining to 0% after one year).
All figures represent past performance and are no guarantee of future results.
Keep in mind that the total return and share price of the Fund's investments
will fluctuate. As a result, your Fund's shares may be worth more or less than
their original cost, depending on when you sell them. Please read your
prospectus for a discussion of the risks associated with international
investing, including currency and political risks and differences in accounting
standards and financial reporting before you invest or send money.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
ONE FIVE TEN
YEAR YEARS YEARS
-------- ---------- --------
Cumulative Total Returns 67.59% (10.37%) 43.31%
Average Annual Total Returns 67.59% (2.17%) 3.66%
- --------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/7/94)
-------- ---------- ---------
Cumulative Total Returns 70.42% (10.63%) (7.85%)
Average Annual Total Returns 70.42% (2.22%) (1.46%)
- --------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------
For the period ended September 30, 1999
SINCE
INCEPTION
(3/1/99)
---------
Cumulative Total Return 46.63%
Average Annual Total Return 46.63%(1)
Note to Performance
(1) Not annualized.
6
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
- --------------------------------------------------------------------------------
WHAT HAPPENED TO A $10,000 INVESTMENT...
- --------------------------------------------------------------------------------
The charts on the right show how much a $10,000 investment in the John Hancock
Pacific Basin Equities Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley Capital International (MSCI) Pacific
Index -- an unmanaged index that measures performance for a diverse range of
global stock markets, including Australia, Hong Kong, Japan, New Zealand and
Singapore/Malaysia. It is not possible to invest in an index. Past performance
is not indicative of future results.
- --------------------------------------------------------------------------------
Line chart with the heading John Hancock Pacific Basin Equities Fund Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the value
of the hypothetical $10,000 investment made in the John Hancock Pacific Basin
Equities Fund on October 31, 1989, before sales charge, and is equal to $15,724
as of October 31, 1999. The second line represents the value of the same
hypothetical investment made in the John Hancock Pacific Basin Equities Fund,
after sales charge, and is equal to $14,938 as of October 31, 1999. The third
line represents the MSCI Pacific Index and is equal to $9,874 as of October 31,
1999.
Line chart with the heading John Hancock Pacific Basin Equities Fund Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the MSCI
Pacific Index and is equal to $10,085 as of October 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made in the John
Hancock Pacific Basin Equities Fund on March 7, 1994, before sales charge, and
is equal to $9,629 as of October 31, 1999. The third line represents the value
of the same hypothetical investment made in the John Hancock Pacific Basin
Equities Fund, after sales charge, and is equal to $9,529 as of October 31,
1999.
Line chart with the heading John Hancock Pacific Basin Equities Fund Class C,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines. The first line represents the value
of the hypothetical $10,000 investment made in the John Hancock Pacific Basin
Equities Fund on March 1, 1999, before sales charge, and is equal to $15,281 as
of October 31, 1999. The second line represents the value of the same
hypothetical investment made in the John Hancock Pacific Basin Equities Fund,
after sales charge, and is equal to $15,181 as of October 31, 1999. The third
line represents the MSCI Pacific Index and is equal to $14,296 as of October 31,
1999.
- --------------------------------------------------------------------------------
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Statement of Assets and Liabilities
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments at value - Note C:
Common stocks, rights and warrants (cost - $51,615,215) ........................ $63,742,009
Preferred stocks (cost - $829,514) ............................................. 718,524
Bonds (cost - $392,437) ........................................................ 432,000
Short-term investments (cost - $12,757,449) - Note A ........................... 12,757,449
------------
77,649,982
Cash ............................................................................ 894
Foreign currency, at value (cost - $751,885) .................................... 751,077
Receivable for shares sold ...................................................... 101,490
Dividends receivable ............................................................ 77,799
Interest receivable ............................................................. 6,498
Other assets .................................................................... 4,210
------------
Total Assets .................................................. 78,591,950
------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased ............................................... 2,089,406
Payable for forward foreign currency exchange contracts purchased - Note A ...... 1,964
Payable for shares repurchased .................................................. 65,611
Payable for securities on loan - Note A ......................................... 5,878,449
Foreign tax payable ............................................................. 7,696
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ........................................................ 147,924
Accounts payable and accrued expenses ........................................... 64,304
------------
Total Liabilities ............................................. 8,255,354
------------------------------------------------------------------------------
Net Assets:
Capital paid-in ................................................................. 63,611,388
Accumulated net realized loss on investments and foreign currency transactions .. (5,151,579)
Net unrealized appreciation of investments and foreign currency transactions .... 12,039,945
Accumulated net investment loss ................................................. (163,158)
------------
Net Assets .................................................... $70,336,596
==============================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value)
Class A - $32,554,069/2,250,857 ................................................. $14.46
================================================================================================
Class B - $36,827,751/2,651,009 ................................................. $13.89
================================================================================================
Class C* - $954,776/68,730 ...................................................... $13.89
================================================================================================
Maximum Offering Price Per Share**
Class A - ($14.46 x 105.26%) .................................................... $15.22
================================================================================================
</TABLE>
* Class C commenced operations on March 1, 1999.
** 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.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on October 31, 1999. You'll
also find the net asset value and the maximum offering price per share as of
that date.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Statement of Operations
Year ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $38,361) .............................. $497,726
Interest (including income on securities loaned of $25,378) .......................... 140,710
------------
638,436
------------
Expenses:
Investment management fee - Note B .................................................. 319,039
Distribution and service fee - Note B
Class A ........................................................................... 57,656
Class B ........................................................................... 204,930
Class C ........................................................................... 1,683
Transfer agent fee - Note B ......................................................... 205,901
Custodian fee ....................................................................... 160,109
Registration and filing fees ........................................................ 88,852
Auditing fee ........................................................................ 30,630
Printing ............................................................................ 13,495
Accounting and legal services fee - Note B .......................................... 6,962
Trustees' fees ...................................................................... 1,513
Legal fees .......................................................................... 486
------------
Total Expenses ..................................................... 1,091,256
-----------------------------------------------------------------------------------
Net Investment Loss ................................................ (452,820)
-----------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold ................................................ 8,786,291
Net realized loss on foreign currency transactions ................................... (100,931)
Change in net unrealized appreciation/depreciation of investments .................... 10,432,055
Change in net unrealized appreciation/depreciation of foreign currency transactions .. (21,877)
------------
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions ...................................... 19,095,538
-----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ............... $18,642,718
===================================================================================
</TABLE>
The 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.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss .................................................... ($28,009) ($452,820)
Net realized gain (loss) on investments sold and foreign
currency transactions ................................................ (14,494,802) 8,685,360
Change in net unrealized appreciation/depreciation of investments
and foreign currency transactions .................................... 6,619,151 10,410,178
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........ (7,903,660) 18,642,718
------------ ------------
From Fund Share Transactions - Net:* ...................................... (2,642,510) 23,810,812
------------ ------------
Net Assets:
Beginning of period .................................................... 38,429,236 27,883,066
------------ ------------
End of period (including accumulated net investment loss of $241,167
and $163,158, respectively) .......................................... $27,883,066 $70,336,596
============ ============
</TABLE>
*Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1998 1999
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .............. 6,871,046 $63,598,308 7,531,188 $89,355,732
Less shares repurchased .. (7,006,277) (65,982,694) (6,960,105) (81,316,658)
------------ ------------ ------------ ------------
Net increase (decrease) .. (135,231) ($2,384,386) 571,083 $8,039,074
============ ============ ============ ============
CLASS B
Shares sold .............. 2,024,172 $18,385,168 3,427,833 $41,992,258
Less shares repurchased .. (1,999,604) (18,643,292) (2,330,940) (27,119,544)
------------ ------------ ------------ ------------
Net increase (decrease) .. 24,568 ($258,124) 1,096,893 $14,872,714
============ ============ ============ ============
CLASS C **
Shares sold .............. -- -- 103,934 $1,376,290
Less shares repurchased .. -- -- (35,204) (477,266)
------------ ------------ ------------ ------------
Net increase ............. -- -- 68,730 $899,024
============ ============ ============ ============
</TABLE>
** Class C shares commenced operations on March 1, 1999.
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment and foreign currency gains and losses,
distributions paid to shareholders, if any, and any increase or decrease in
money shareholders invested in the Fund. The footnote illustrates the number of
Fund shares sold, reinvested and repurchased during the last two periods, along
with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM YEAR ENDED OCTOBER 31,
----------------------- SEPTEMBER 1, 1996 TO -----------------------------------
1995 1996 OCTOBER 31, 1996(6) 1997 1998 1999
--------- ---------- ------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ..... $15.88 $14.11 $14.74 $14.47 $11.63 $8.76
------ ------ ------ ------ ------ ------
Net Investment Income (Loss)(1) .......... 0.02(2) (0.02) (0.02) (0.07) 0.02 (0.09)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ........................... (1.24) 0.65 (0.25) (2.66) (2.89) 5.79
------ ------ ------ ------ ------ ------
Total from Investment Operations ..... (1.22) 0.63 (0.27) (2.73) (2.87) 5.70
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ........................... (0.55) -- -- (0.11) -- --
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ........... $14.11 $14.74 $14.47 $11.63 $8.76 $14.46
====== ====== ====== ====== ====== ======
Total Investment Return at Net Asset
Value(3) ............................... (7.65%) 4.47% (1.83%)(4) (19.03%) (24.68%) 65.07%
Ratio and Supplemental Data
Net Assets, End of Period (000s omitted).. $37,417 $41,951 $38,694 $21,109 $14,717 $32,554
Ratio of Expenses to Average Net Assets... 2.05% 1.97% 2.21%(5) 2.06% 2.46% 2.37%
Ratio of Net Investment Income (Loss)
to Average Net Assets................... 0.13%(3) (0.15%) (0.83%)(5) (0.49%) 0.22% (0.77%)
Portfolio Turnover Rate................... 48% 73% 15% 118% 230% 174%
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM YEAR ENDED OCTOBER 31,
----------------------- SEPTEMBER 1, 1996 TO -----------------------------------
1995 1996 OCTOBER 31, 1996(6) 1997 1998 1999
--------- ---------- ------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ...... $15.84 $13.96 $14.49 $14.20 $11.32 $8.47
------- ------- ------- ------- ------- -------
Net Investment Loss(1) .................... (0.09) (0.13) (0.04) (0.18) (0.04) (0.17)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions ............................ (1.24) 0.66 (0.25) (2.59) (2.81) 5.59
------- ------- ------- ------- ------- -------
Total from Investment Operations ...... (1.33) 0.53 (0.29) (2.77) (2.85) 5.42
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions ............................ (0.55) -- -- (0.11) -- --
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............ $13.96 $14.49 $14.20 $11.32 $8.47 $13.89
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset
Value(3) ................................ (8.38%) 3.80% (2.00%)(4) (19.67%) (25.18%) 63.99%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .. $14,368 $32,342 $30,147 $17,320 $13,166 $36,828
Ratio of Expenses to Average Net Assets ... 2.77% 2.64% 2.90%(5) 2.76% 3.16% 3.07%
Ratio of Net Investment Loss to Average
Net Assets .............................. (0.66%) (0.86%) (1.52%)(5) (1.19%) (0.48%) (1.47%)
Portfolio Turnover Rate ................... 48% 73% 15% 118% 230% 174%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31, 1999
----------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period .......................... $9.09
-------
Net Investment Loss(1) ........................................ (0.13)
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions ............................ 4.93
-------
Total from Investment Operations ........................... 4.80
-------
Net Asset Value, End of Period ................................ $13.89
=======
Total Investment Return at Net Asset Value(3) ................. 52.81%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ...................... $955
Ratio of Expenses to Average Net Assets ....................... 3.14%(5)
Ratio of Net Investment Loss to Average Net Assets ............ (1.76%)(5)
Portfolio Turnover Rate ....................................... 174%(4)
(1) Based on the average of the shares outstanding at the end of each month.
(2) May not accord to amounts shown elsewhere in the financial statements due
to the timing of sales and repurchases of Fund shares in relation to
fluctuating market values of the investments of the Fund.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Effective October 31, 1996, the fiscal year end changed from August 31 to
October 31.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Schedule of Investments
October 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Pacific Basin Equities Fund on October 31, 1999. It's divided into six main
categories: common stocks, rights, warrants, preferred stocks, bonds and
short-term investments. Common stocks, rights, warrants, preferred stocks and
bonds are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Australia (5.83%)
Brambles Industries Ltd.
(Diversified Operations) .................... 11,883 $334,180
Capral Aluminium Ltd. (Metal) ................ 348,380 427,884
Foster's Brewing Group Ltd. (Beverages) ....... 109,300 290,512
National Australia Bank Ltd.
(Banks - Foreign) ........................... 19,200 296,301
National Foods Ltd. (Food) .................... 161,674 298,989
Pacifica Group Ltd. (Manufacturing) ........... 158,846 512,862
Pasminco Ltd. (Metal) ......................... 738,500 706,412
Qantas Airways Ltd. (Transport) ............... 160,600 511,049
Smorgon Steel Group Ltd. (Steel) .............. 273,190 369,332
Telstra Corp. Ltd. (Installment Receipts)
(Telecommunications)* ....................... 28,220 90,519
WMC Ltd. (Metal) .............................. 61,000 261,795
------------
4,099,835
------------
China (4.75%)
Jiangxi Copper Co. Ltd. (Metal)* .............. 2,507,000 387,256
Shandong International Power
Development Co. Ltd. (Utilities)* ........... 7,370,000 1,176,392
Shanghai Petrochemical Co. Ltd.
(Chemicals) ................................. 2,688,000 553,620
Yanzhou Coal Mining Co. Ltd. (Metal) .......... 3,682,000 1,220,461
------------
3,337,729
------------
Hong Kong (11.45%)
Aeon Credit Service Co. Ltd. (Finance) ........ 500,000 205,960
Bank of East Asia, Ltd. (Banks - Foreign) ..... 205,000 448,607
Cable & Wireless HKT Ltd.
(Telecommunications) ........................ 168,000 383,858
Cheung Kong Holdings Ltd.
(Real Estate Operations) .................... 127,000 1,156,626
Esprit Holdings Ltd. (Manufacturing) .......... 640,000 601,403
Fairwood Holdings Ltd. (Retail)* .............. 18,324,000 452,881
First Pacific Co. Ltd.
(Diversified Operations) .................... 916,000 530,604
Giordana International Ltd. (Retail) .......... 500,000 530,991
Guoco Group Ltd. (Finance) .................... 692,000 1,843,908
HSBC Holdings Plc (Banks - Foreign) ........... 73,200 881,020
JCG Holdings Ltd. (Finance) ................... 486,000 264,317
New World Development Co. Ltd.
(Real Estate Operations) .................... 143,000 270,593
Swire Pacific Ltd. (Class A)
(Diversified Operations) .................... 68,500 339,480
Tech Tronic Industries Co. Ltd.
(Electronics) ............................... 828,000 147,086
------------
8,057,334
------------
Indonesia (1.51%)
PT Bank Negara Indonesia
(Banks - Foreign)* .......................... 7,748,000 395,595
PT Medco Energi Corp. (Oil & Gas)* ............ 1,511,000 666,780
------------
1,062,375
------------
Japan (35.33%)
Bank of Fukuoka, Ltd. (Banks - Foreign) ....... 122,000 939,542
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) ........................... 57,000 944,625
Fast Retailing Co. Ltd. (Retail) .............. 3,800 911,096
Fuji Heavy Industries Ltd.
(Automobile/Trucks) ......................... 74,000 628,791
Fujitsu Ltd. (Computers) ...................... 57,000 1,716,505
Fujitsu Systems Construction Ltd.
(Engineering/R&D Services) .................. 51,000 997,794
Marubeni Corp. (Diversified Operations) ....... 371,000 1,181,279
NEC Corp. (Electronics) ....................... 30,000 607,078
NIDEC Corp. (Machinery) ....................... 2,600 504,939
Nikko Securities Co., Ltd. (The)
(Broker Services) ........................... 42,000 394,744
Nippon Telegraph & Telephone Corp.
(Telecommunications) ........................ 50 767,239
Nippon Thompson Co., Ltd. (Machinery) ......... 69,000 447,339
Nomura Securities Co., Ltd.
(Broker Services) ........................... 149,000 2,459,279
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Japan (continued)
NTT Mobile Communication Network, Inc.
(Telecommunications) ........................ 90 $2,390,908
Orix Corp. (Leasing Companies) ................ 9,600 1,288,961
Ricoh Co., Ltd. (Office) ...................... 46,000 750,417
Sakura Bank, Ltd. (The)
(Banks - Foreign) ........................... 302,000 2,595,109
Sony Corp. (Electronics) ...................... 13,300 2,074,019
Takeda Chemical Industries, Ltd.
(Medical) ................................... 22,000 1,263,834
Takefuji Corp. (Finance) ...................... 9,800 1,268,821
Toyota Motor Corp. (Automobile/Trucks) ........ 6,000 207,730
United Arrows Ltd. (Retail) ................... 4,000 510,214
------------
24,850,263
------------
Malaysia (2.87%)
Affin Holdings Berhad (Banks - Foreign) ....... 493,000 404,779
Jaya Tiasa Holdings Berhad (Building) ......... 102,000 186,553
Malayan Banking Berhad
(Banks - Foreign) ........................... 85,000 288,553
Malaysian Pacific Industries Berhad
(Electronics) ............................... 162,000 703,421
Unisem (M) Berhad (Electronics) ............... 106,000 432,368
------------
2,015,674
------------
New Zealand (0.38%)
Warehouse Group Ltd. (The) (Retail) ........... 68,500 265,628
------------
Philippine Islands (0.21%)
La Tondena Distillers, Inc. (Beverages) ....... 160,000 147,631
------------
Singapore (5.75%)
First Capital Corp. Ltd.
(Real Estate Operations) .................... 641,000 763,049
NatSteel Electronics Ltd. (Electronics) ....... 163,000 636,987
Pacific Century Regional Developments
Ltd. (Real Estate Operations)* .............. 458,000 2,643,420
------------
4,043,456
------------
South Korea (11.41%)
Housing & Commercial Bank
(Banks - Foreign)* .......................... 92,460 2,443,503
Korea Line Co. (Transport)* ................... 16,827 185,174
Korea Telecom Corp.
(Telecommunications) ........................ 21,470 1,444,459
Pohang Iron & Steel Co. Ltd. (Steel) .......... 3,600 432,180
Samsung Electronics Co. (Electronics) ......... 15,120 2,521,050
Samsung Securities Co. Ltd. (Finance) ......... 9,190 321,784
Shinsegae Department Store Co. (Retail) ....... 12,300 675,757
------------
8,023,907
------------
Taiwan (8.69%)
Asustek Computer, Inc. (Computers)* ........... 94 987
China Steel Corp. (Steel) ..................... 574,000 441,538
Compal Electronics, Inc. (Computers)* ......... 37,875 127,165
D-Link Corp. (Computers) ...................... 25,600 42,774
Far Eastern Textile Ltd. (Textile) ............ 603,040 825,093
Hon Hai Precision Industry Co., Ltd.
(Electronics)* .............................. 196,000 1,340,857
Nan Ya Plastic Corp. (Chemicals) .............. 676,000 1,182,787
Powerchip Semiconductor Corp., Global
Depositary Receipts (Electronics)* .......... 93,200 1,113,740
Taishin International Bank
(Banks - Foreign)* .......................... 1,335,040 761,798
Vanguard International Semiconductor
Corp. (Electronics)* ........................ 254,912 277,253
------------
6,113,992
------------
Thailand (0.78%)
Golden Land Property Development Pcl
(Real Estate Operations)* ................... 861,000 334,542
MBK Properties & Development Pcl
(Real Estate Operations)* ................... 363,000 216,267
------------
550,809
------------
TOTAL COMMON STOCKS
(Cost $50,789,105) (88.96%) 62,568,633
------------ ------------
RIGHTS
South Korea (0.06%)
Samsung Securities Co. Ltd. (Finance)* ........ 2,205 23,346
Shinsegae Department Store Co.
(Retail)* ................................... 2,150 20,649
------------
43,995
------------
TOTAL RIGHTS
(Cost $0) (0.06%) 43,995
------------ ------------
WARRANTS
Singapore (1.61%)
Development Bank of Singapore
(Banks - Foreign)* .......................... 1,105,000 1,129,381
------------
TOTAL WARRANTS
(Cost $826,110) (1.61%) 1,129,381
------------ ------------
TOTAL COMMON STOCKS, RIGHTS
AND WARRANTS
(Cost $51,615,215) (90.63%) 63,742,009
------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
PREFERRED STOCKS
Taiwan (0.04%)
Taishin International Bank
(Banks - Foreign)* .......................... 93,555 $29,494
------------
Thailand (0.98%)
Siam Commercial Bank Pcl
(Banks - Foreign)* .......................... 608,000 689,030
------------
TOTAL PREFERRED STOCKS
(Cost $829,514) (1.02%) 718,524
-------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
---- --------------
BONDS
China (0.61%)
Huaneng Power International, Inc.,
Conv Bond 05-21-04 .............. 1.75% $450 432,000
------------
TOTAL BONDS
(Cost $392,437) (0.61%) 432,000
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.78%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
10-29-99, due 11-01-99
(Secured by U.S. Treasury
Bonds 8.125% thru 9.875%,
due 11-15-15 thru 08-15-21)
-- Note A ..................... 5.23 6,879 6,879,000
------------
Cash Equivalent (8.36%)
Navigator Securities Lending
Prime Portfolio** ........................... 5,878 5,878,449
------------
TOTAL SHORT-TERM INVESTMENTS (18.14%) 12,757,449
-------- ------------
TOTAL INVESTMENTS (110.40%) 77,649,982
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (10.40%) (7,313,386)
-------- ------------
TOTAL NET ASSETS (100.00%) $70,336,596
======== ============
* Non income-producing security.
** Represents investment of security lending collateral - Note A.
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.
16
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Pacific Basin Equities Fund
Industry Diversification
October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other countries.
The performance of the Fund is closely tied to the economic conditions within
the countries in which it invests. The concentration of investments by country
for individual securities held by the Fund is shown in the schedule of
investments. In addition, the concentration of investments can be aggregated by
various industry groups. The table below shows the percentages of the Fund's
investments at October 31, 1999, assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- -------------
Automobile/Trucks ....................... 1.19%
Banks - Foreign ......................... 17.41
Beverages ............................... 0.62
Broker Services ......................... 4.06
Buildings ............................... 0.27
Chemicals ............................... 2.47
Computers ............................... 2.68
Diversified Operations .................. 3.39
Electronics ............................. 14.01
Energy .................................. 0.61
Engineering/R&D Services ................ 1.42
Finance ................................. 5.58
Food .................................... 0.43
Leasing Companies ....................... 1.83
Machinery ............................... 1.35
Manufacturing ........................... 1.58
Medical ................................. 1.80
Metal ................................... 4.27
Office .................................. 1.07
Oil & Gas ............................... 0.95
Real Estate Operations .................. 7.66
Retail .................................. 4.79
Steel ................................... 1.77
Telecommunications ...................... 7.22
Textile ................................. 1.17
Transport ............................... 0.99
Utilities ............................... 1.67
Short-Term Investments .................. 18.14
------
TOTAL INVESTMENTS 110.40%
======
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
NOTE A -
ACCOUNTING POLICIES
John Hancock World Fund (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series: John Hancock Pacific Basin Equities Fund (the "Fund"), John
Hancock European Equity Fund and John Hancock Global Health Sciences Fund. The
other series of the Trust are reported in separate financial statements. The
Fund's investment objective is to seek long-term capital appreciation through
investment in a diversified portfolio of equity securities of issuers located in
countries of the Pacific Basin.
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 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 which bears distribution and service expenses under
terms of a distribution plan have exclusive voting rights to that distribution
plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., 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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.
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 which is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, at October 31, 1999, the fund has $5,120,554 of
capital loss carryforwards available, to the extent provided by regulations, to
offset future net realized capital gains. If such carryforwards are used by the
Fund, no capital gain distribution will be made. The Fund's entire carryforward
expires on October 31, 2006 -- $5,120,554.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 is made aware of 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 all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
18
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the relative net assets of the respective classes. Distribution
and service fees, if any, are calculated daily at the class level based on the
appropriate net assets of each class and the specific expense rate(s) applicable
to each class.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual fund. Expenses which 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles 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.
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. Effective March 12, 1999,
the Fund entered into a syndicated line of credit agreement with various banks
and the agreements previously in effect were terminated. This agreement enables
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowings. In
addition, a commitment fee is charged 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 for the year ended October 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain qualified brokers
who pay the Fund negotiated lender fees. These fees are included in interest
income. The loans are collateralized at all times with cash or securities with a
market value at least equal to the market value of the securities on loan. As
with other extensions of credit, the Fund may bear 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. At October 31, 1999 the Fund loaned
securities having a market value of $5,651,198 collateralized by cash in the
amount of $5,878,449, which was invested in a short-term instrument.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments 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 exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at the time
the forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential inability
of
19
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities. The
Fund may also purchase and sell forward contracts to facilitate the settlement
of foreign currency denominated portfolio transactions, under which it intends
to take delivery of the foreign currency. Such contracts normally involve no
market risk if they are offset by the currency amount of the underlying
transaction.
At October 31, 1999, open forward foreign currency exchange contracts for
the Fund were as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT DATE DEPRECIATION
- -------- ------------------- ---- ------------
BUY
Japanese Yen 62,600,000 NOV 99 $1,964
=======
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Adviser is solely responsible for advising the Fund with respect to
investments in the United States and Canada.
The Fund and the Adviser also have a sub-investment management contract
with John Hancock Advisers International Limited (the "Sub-Adviser"), a wholly
owned subsidiary of the Adviser, under which the Sub-Adviser, subject to the
review of the Trustees and overall supervision of the Adviser, provides the Fund
with investment management services and advice with respect to that portion of
the Fund's assets invested in countries other than the United States and Canada.
The Adviser and Indocam Asia Advisers Limited (IAAL) have a second subadvisory
contract. Pursuant to such contract, IAAL will serve as co-subadviser to the
Fund with the Sub-Adviser. IAAL provides additional expertise in Asian and
Pacific Basin countries.
Under the present investment management contract, the Fund pays a
quarterly management fee to the Adviser for a continuous investment program
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 Adviser pays
the Sub-Adviser a quarterly management fee equivalent, on an annual basis, to
the sum of (a) 0.50% of the first $200,000,000 of the Fund's average daily net
asset value and (b) 0.4375% of the Fund's average daily net asset value in
excess of $200,000,000. As of September 1, 1994, the Sub-Adviser has waived all
but 0.05% of their fee. The Adviser pays IAAL a quarterly subadvisory fee at the
annual rate of (a) 0.30% of the first $100,000,000 of the Fund's average daily
net assets managed by IAAL plus (b) 40% percent of the gross management fee
received by the Adviser pursuant to the investment management contract with
respect to the Fund's average daily net assets in excess of $100,000,000 which
are managed by IAAL (the rate increases to 50% on net assets in excess of
$250,000,000).
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended October
31, 1999, net sales charges received with regard to sales of Class A shares
amounted to $78,059. Of this amount, $19,908 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $31,764 was paid
as sales commissions to unrelated broker-dealers and $26,387 was paid as sales
commissions to sales personnel of Signator Investors, Inc. ("Signator
Investors"), a related broker-dealer (formerly known as John Hancock
Distributors, Inc.). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
Class B shares which are redeemed within six years of purchase will be
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. Proceeds
from the CDSC 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 shares. For the year ended October 31, 1999,
contingent deferred sales charges paid to JH Funds amounted to $82,548.
Class C shares which are redeemed within one year of purchase will be
subject to a CDSC at a rate of 1.00% of the lesser of the current
20
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Pacific Basin Equities Fund
market value at the time of redemption or the original purchase cost of the
shares being redeemed. Proceeds from CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses related to providing distribution
related services to the Fund in connection with the sale of Class C shares. For
the year ended October 31, 1999, there were no contingent deferred sales
charges.
In addition, to reimburse JH Funds for the services it provides as
distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B and Class C
average daily net assets, to reimburse JH Funds for its distribution and service
costs. 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.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHMLICo. The
Fund pays transfer agent fees based on the number of shareholder accounts and
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Maureen R. Ford,
Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are directors and/or officers of
the Adviser and/or its affiliates, as well as Trustees of the Fund through
December 31, 1999. 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 will be 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 investment as well as any unrealized gains or
losses.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended October 31, 1999 aggregated $88,828,117 and
$67,175,925, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the year ended October 31, 1999.
The cost of investments owned at October 31, 1999 (including short-term
investments) for federal income tax purposes was $67,317,289. Gross unrealized
appreciation and depreciation of investments aggregated $13,341,224 and
$3,008,531, respectively, resulting in unrealized appreciation of $10,332,693.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1999, the Fund has reclassified amounts to
reflect an increase in net realized loss on investments and foreign currency
transactions of $530,782, a decrease in accumulated net investment loss of
$530,829 and a decrease in capital paid-in of $47. This represents the amount
necessary to report these balances on a tax basis, excluding certain temporary
difference, as of October 31, 1999. 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 realized
gain/loss on foreign currency transactions and Passive Foreign Investment
Companies in the computation of distributable income and capital gains under
federal tax rules versus generally accepted accounting principles. The
calculation of net investment income per share in the financial highlights
excludes these adjustments.
21
<PAGE>
================================================================================
John Hancock Funds - Pacific Basin Equities Fund
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock Pacific Basin Equities Fund
and the Trustees of John Hancock World 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 Pacific Basin Equities
Fund (the "Fund") (a series of John Hancock World Fund) at October 31, 1999, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended October 31,
1999.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1999 U.S. Treasury Department Form 1099-DIV
in January of 2000. This will reflect the tax character of all distributions for
the calendar year 1999.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
22
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Pacific Basin Equities Fund
23
<PAGE>
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