The latest report from your
Fund's management team
ANNUAL REPORT
Health Sciences
Fund
(formerly Global Health Sciences Fund)
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
A fter providing investors with sky-high returns for the last five
years, the financial markets have brought investors back down to earth
in 2000. Rising interest rates and oil prices, the prospects of a slowing
economy and earnings fears all caught up with pricey growth stocks -
technology in particular. A dramatic plunge in the spring and again in the
fall caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY LINDA I. MILLER, CFA, PORTFOLIO MANAGER
[A 2" x 3" photo bottom middle of page of John Hancock Health Sciences
Fund. Caption below reads "Linda Miller."]
John Hancock
Health Sciences Fund
Health-care stocks enjoy strong gains
Health-care stocks had a terrific year, posting robust gains in the face
of lackluster returns for the overall stock market. At the top of the
list were biotech stocks. Their rise was fueled by excitement over the
success of the Human Genome Project, which is expected to foster the
development of breakthrough drugs that will come to market over the next
several years.
The performance of large pharmaceutical company stocks also helped lift
the health-care sector's returns. Drug stocks rebounded in 2000 after a
lackluster performance in 1999 due to concerns about the presidential
election and fears of drug price controls resulting from a major
restructuring of the Medicare program. Companies that offered exciting
new drugs -- therapies for everything from diabetes to Alzheimer's
Disease to serious infections -- recently have done quite well.
Companies with drugs facing near-term patent expiration, or where
product developments were less than expected, were disappointments.
While patent expirations were tough medicine for some drug companies'
stocks, anticipated patent expirations proved to be the right
prescription for generic and specialty drug stocks.
Medical technology companies, too, had a nice year. The instrumentation
stocks were strong thanks to robust demand for their products that
stemmed from exciting new genetic research underway at pharmaceutical
and biotechnology companies and in academic labs.
"At the top
of the list
were biotech
stocks."
The biggest turnaround in health care this year, however, was the hearty
showing of health insurers, or HMOs, and hospital companies. These
sectors revived as a strong economy allowed many individuals to buy
health insurance, and afforded increases in premiums not seen in several
years. As a result, insurers hiked payments to hospitals. And now
towards the end of the year, it appears that the government also may
ease up on Medicare payments as well.
Fund performance
For the 12 months ended October 31, 2000, John Hancock Health Sciences
Fund had strong absolute results, with its Class A, Class B and Class C
shares posting total returns of 45.83%, 44.84% and 44.84%, respectively,
at net asset value. The average health-care/biotechnology fund returned
81.23% during the 12-month period, 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.
[Table at top left-hand column entitled "Top Five Stock Holdings." The
first listing is Pfizer 4.7%, the second is Medtronic 3.6%, the third
Allergan 3.3%, the fourth ALZA 3.2% and the fifth Baxter International
3.0%. A note below the table reads "As a percentage of net assets on
October 31, 2000."]
"...we choose
to moderate
risk through
diversifica-
tion."
Given our desire to remain diversified across a number of industries
within the health-care group, our weighting in biotech was smaller than
many of our peers, at approximately 25%. That caused our performance to
lag theirs. What's more, the Fund's peer group contains a fair number of
funds that are exclusively or more heavily tilted toward the biotech
sector than are we. Various subsectors of the health-care group
routinely fall in and out of favor. Rather than make the Fund's
performance dependent on the fortunes of one sector, we choose to
moderate risk through diversification. Although short-term results might
not support this strategy, we believe that long-term results should.
[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 Genentech followed by an up arrow with the phrase "Enthusiasm for
biotech sector and upcoming products." The second listing is Medtronic
followed by an up arrow with phrase "Spurred by medical device
advances." The third listing is Bristol-Myers Squibb followed by a down
arrow with the phrase "Concerns over patent expiration and new product
introductions." A note below the table reads "See 'Schedule of
Investments,' Investment holdings are subject to change."]
Biotech leaders
Biotech industry leader Genentech was one of our best performers
throughout the year. Its success stemmed from the company's pipeline of
new products, including several for cancer and metabolic diseases. Some
of these products were developed with other of our holdings. For
example, Alkermes, a maker of biotech drug delivery systems, developed a
sustained release version of Genentech's growth hormone, and IDEC
Pharmaceuticals, a monoclonal antibody company, developed a treatment
for lymphoma cancers that Genentech markets. The market-leading biotech
equipment companies Waters Corp. and Applied Bio -- which makes DNA test
and measurement equipment -- also posted strong gains. Demand for the
companies' products grew quickly as biotech labs built out their
genomics research capabilities and drug companies added more research
efforts.
Devices, service companies strong
Within the medical device industry, we had a number of good performers.
Medtronic, for example, benefited from the introduction of a broad array
of new products. In addition, investors were very enthusiastic about the
company's future products that will be used to treat chronic conditions
-- such as congestive heart failure -- which are currently not
well-served by either drugs or existing devices. Stryker, an orthopedics
company, benefited from the excellent job it did in absorbing Howmedica,
which it acquired from Pfizer. Its growth rate accelerated in the
process.
[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, 2000." The chart is scaled in increments of 10% with 0% at
the bottom and 100% at the top. The first bar represents the 45.83%
total return for John Hancock Health Sciences Fund Class A. The second
bar represents the 44.84% total return for John Hancock Health Sciences
Fund Class B. The third bar represents the 44.84% total return for John
Hancock Health Sciences Fund Class C. The fourth bar represents the
81.23% total return for Average health-care/biotechnology fund. A note
below the chart reads "Total returns for John Hancock 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."]
Health-care service companies also performed well. Drug distributor
Cardinal Health benefited from the improving fortunes of drug companies,
as well as by the fact that it offers value-added products to its
customers. Health maintenance organization UnitedHealth Group was lifted
by its ability to expand its enrollment, increase its prices ahead of
rising costs, add more services such as dental care, and increase
productivity thanks to previous investments in technology.
Some drug stocks lag
While some of our drug holdings, such as Warner-Lambert (now Pfizer),
did well on the success of new product introductions, others that faced
impending patent expirations were disappointing. Bristol-Myers Squibb,
for example, weakened when it encountered concerns over the expiration
of the patents on some of its anti-cancer and diabetes drugs.
Furthermore, the FDA stalled the introduction of the company's eagerly
anticipated high blood pressure drug Vanlev. Similarly, Johnson &
Johnson fell as its Propulsid product was withdrawn from the market and
other products were late getting to market.
"We continue
to have a
positive out-
look for the
health-care
industry..."
Outlook
We continue to have a positive outlook for the health-care industry
despite the near-term uncertainties, which include the moderation in
U.S. economic growth, continued weak economies in Europe and Asia, the
unclear national political objectives and the high valuations of certain
sectors in health care. But many major multinational health-care
companies have reported relatively strong earnings growth, despite weak
foreign currencies. This growth should be supported by continued
industry consolidation that should result in efficiencies across several
sectors. Furthermore, new technological advances and a robust funding
environment should support strong new product development in many areas.
And a moderate political agenda and moderating economy should represent
a favorable background for investing in domestic health-care facilities
and service organizations. Longer-term, the continued aging of
populations in the mature economies of the world will drive increasing
demand for health-care products and services.
-------------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the
end of the Fund's period discussed in this report. Of course, the
manager's views are subject to change as market and other conditions
warrant.
Sector investing is subject to greater risks than the market as a whole.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock 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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 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 carefully for a discussion of the
risks associated with industry-segment investing, before you invest or
send money.
CLASS A
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/1/91)
------ ------- ---------
Cumulative Total Returns 38.55% 128.91% 410.44%
Average Annual Total Returns 38.55% 18.01% 19.66%
CLASS B
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/7/94)
------ ------- ---------
Cumulative Total Returns 39.84% 130.68% 196.20%
Average Annual Total Returns 39.84% 18.20% 17.73%
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (3/1/99)
------ ---------
Cumulative Total Returns 42.41% 38.71%
Average Annual Total Returns 42.41% 21.67%
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock 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 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 value of the hypothetical $10,000 investment made in the
John Hancock Health Sciences Fund on October 1, 1991, before sales
charge, and is equal to $53,749 as of October 31, 2000. The second line
represents the value of the same hypothetical investment made in the
John Hancock Health Sciences Fund, after sales charge, and is equal to
$51,061 as of October 31, 2000. The third line represents the Standard &
Poor's 500 Index and is equal to $44,811 as of October 31, 2000.
Line chart with the heading John Hancock Health Sciences Fund Class B*,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock Health Sciences Fund on March 7, 1994, before sales charge,
and is equal to $34,708 as of October 31, 2000. The second line
represents the Standard & Poor's 500 Index and is equal to $29,620 as of
October 31, 2000.
Line chart with the heading John Hancock 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 value of the hypothetical $10,000 investment made in the
John Hancock Health Sciences Fund on March 1, 1999, before sales charge,
and is equal to $14,010 as of October 31, 2000. The second line
represents the value of the same hypothetical investment made in the
John Hancock Health Sciences Fund, after sales charge, and is equal to
$13,870 as of October 31, 2000. The third line represents the Standard &
Poor's 500 Index and is equal to $11,773 as of October 31, 2000.
*No contingent deferred sales charge applicable.
<TABLE>
<CAPTION>
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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $345,407,768) $473,236,373
Short-term investments (cost -
$83,204,139) 83,204,139
-----------------
556,440,512
Cash 117,352
Receivable for investments sold 4,338,232
Receivable for shares sold 412,752
Dividends receivable 80,975
Interest receivable 5,169
Other assets 10,843
-----------------
Total Assets 561,405,835
-----------------
Liabilities:
Payable for investments purchased 19,231,744
Payable for shares repurchased 132,641
Payable for securities on loan - Note A 54,840,139
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 1,022,861
Accounts payable and accrued expenses 137,082
-----------------
Total Liabilities 75,364,467
-----------------
Net Assets:
Capital paid-in 324,064,679
Accumulated net realized gain on
investments and foreign currency
transactions 34,152,262
Net unrealized appreciation of
investments and foreign currency
transactions 127,828,231
Accumulated net investment loss (3,804)
-----------------
Net Assets $486,041,368
=================
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 - $177,848,582/3,557,550 $49.99
==============================================================
Class B - $293,870,921/6,180,081 $47.55
==============================================================
Class C - $14,321,865/301,200 $47.55
==============================================================
Maximum Offering Price Per Share:
Class A* - ($49.99/95%) $52.62
==============================================================
Class C - ($47.55/99%) $48.03
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales, the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $35,911) $1,707,192
Interest 820,701
Income on securities loaned 189,993
-----------------
2,717,886
-----------------
Expenses:
Investment management fee - Note B 2,741,156
Distribution and service fee - Note B
Class A 401,690
Class B 2,210,684
Class C 80,572
Transfer agent fee - Note B 1,191,256
Custodian fee 134,062
Registration and filing fees 111,754
Accounting and legal services fee -
Note B 68,957
Auditing fee 31,200
Advisory board - Note B 30,000
Printing 24,748
Trustees' fees 16,683
Miscellaneous 20,137
Legal fees 2,920
-----------------
Total Expenses 7,065,819
-----------------
Net Investment Loss (4,347,933)
-----------------
Realized and Unrealized Gain (Loss)
on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 56,381,266
Net realized loss on foreign currency
transactions (786,198)
Change in net unrealized appreciation
(depreciation) of investments 72,712,042
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (342)
-----------------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 128,306,768
-----------------
Net Increase in Net Assets Resulting
from Operations $123,958,835
=================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
-------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($2,291,611) ($4,347,933)
Net realized gain (loss) on
investments sold and foreign
currency transactions (6,023,839) 55,595,068
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 8,367,386 72,711,700
----------------- -----------------
Net Increase in Net Assets
Resulting from Operations 51,936 123,958,835
----------------- -----------------
From Fund Share Transactions - Net: * 39,104,970 115,116,636
----------------- -----------------
Net Assets:
Beginning of period 207,808,991 246,965,897
----------------- -----------------
End of period (including
accumulated net investment loss
of $2,773 and $3,804,
respectively) $246,965,897 $486,041,368
================= =================
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
CLASS A
Shares sold 3,253,210 $111,435,835 6,803,768 $295,102,700
Less shares repurchased (3,023,257) (103,321,157) (5,952,619) (257,149,155)
----------------- ----------------- ----------------- -----------------
Net increase 229,953 $8,114,678 851,149 $37,953,545
================= ================= ================= =================
CLASS B
Shares sold 2,247,732 $75,438,648 3,160,721 $132,966,633
Less shares repurchased (1,398,156) (46,313,310) (1,619,972) (65,800,140)
----------------- ----------------- ----------------- -----------------
Net increase 849,576 $29,125,338 1,540,749 $67,166,493
================= ================= ================= =================
CLASS C**
Shares sold 58,751 $1,916,419 289,772 $11,955,280
Less shares repurchased (1,591) (51,465) (45,732) (1,958,682)
----------------- ----------------- ----------------- -----------------
Net increase 57,160 $1,864,954 244,040 $9,996,598
================= ================= ================= =================
** Class C shares began 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, 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.
</TABLE>
<TABLE>
<CAPTION>
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:
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED OCTOBER 31,
AUGUST 31, OCTOBER 31, -------------------------------------------------------
1996 1996(1) 1997 1998 1999 2000
------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $21.61 $25.43 $25.11 $30.25 $33.89 $34.28
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Loss(2) (0.19) (0.05) (0.19) (0.23) (0.18) (0.33)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 4.15 (0.27) 6.56 4.38 0.57 16.04
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment
Operations 3.96 (0.32) 6.37 4.15 0.39 15.71
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold and
Foreign Currency
Transactions (0.14) -- (1.23) (0.51) -- --
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $25.43 $25.11 $30.25 $33.89 $34.28 $49.99
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 18.39% (1.26%)(4) 26.63% 13.91% 1.15% 45.83%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $42,405 $42,618 $53,122 $83,928 $92,766 $177,849
Ratio of Expenses to Average
Net Assets 1.80% 1.92%(5) 1.68% 1.61% 1.60% 1.50%
Ratio of Net Investment Loss
to Average Net Assets (0.75%) (1.04%)(5) (0.71%) (0.71%) (0.52%) (0.75%)
Portfolio Turnover Rate 68% 24% 57% 39% 61% 147%
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $21.35 $24.94 $24.60 $29.40 $32.69 $32.83
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Loss(2) (0.34) (0.08) (0.37) (0.45) (0.41) (0.60)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 4.07 (0.26) 6.40 4.25 0.55 15.32
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment
Operations 3.73 (0.34) 6.03 3.80 0.14 14.72
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold and
Foreign Currency
Transactions (0.14) -- (1.23) (0.51) -- --
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $24.94 $24.60 $29.40 $32.69 $32.83 $47.55
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 17.53% (1.36%)(4) 25.76% 13.11% 0.43% 44.84%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $36,591 $37,521 $53,436 $123,880 $152,323 $293,871
Ratio of Expenses to Average
Net Assets 2.42% 2.62%(5) 2.38% 2.31% 2.30% 2.20%
Ratio of Net Investment Loss
to Average Net Assets (1.33%) (1.74%)(5) (1.41%) (1.41%) (1.22%) (1.46%)
Portfolio Turnover Rate 68% 24% 57% 39% 61% 147%
See notes to financial statements.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999(6) 2000
------------- -------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $33.94 $32.83
------------- -------------
Net Investment Loss(2) (0.28) (0.64)
Net Realized and Unrealized
Loss on Investments and
Foreign Currency
Transactions (0.83) 15.36
------------- -------------
Total from Investment
Operations (1.11) 14.72
------------- -------------
Net Asset Value, End of
Period $32.83 $47.55
============= =============
Total Investment Return at
Net Asset Value(3) (3.27%)(4) 44.84%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,877 $14,322
Ratio of Expenses to Average
Net Assets 2.40%(5) 2.20%
Ratio of Net Investment Loss
to Average Net Assets (1.30%)(5) (1.50%)
Portfolio Turnover Rate 61% 147%
(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.
(6) Class C shares began operations on March 1, 1999.
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 each class. 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.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Health Sciences Fund on October 31, 2000. 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.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ---------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Chemicals - Specialty (0.95%)
Charles River Laboratories International, Inc.* 50,000 $1,312,500
Genencor International, Inc.* 120,000 3,300,000
------------
4,612,500
------------
Drugs - Biotechnology (24.77%)
Alkermes, Inc.* 135,000 5,003,437
Allergan Specialty Therapeutics, Inc. (Class A)* 85,000 1,880,625
Amgen, Inc.* 250,000 14,484,375
Biogen, Inc.* 45,000 2,708,438
Chiron Corp.* 115,000 4,980,937
COR Therapeutics, Inc.* 125,000 7,062,500
Corvas International, Inc.* 50,000 1,062,500
Cubist Pharmaceuticals, Inc.* 60,000 2,578,125
Genentech, Inc* 140,000 11,550,000
Genzyme Corp.* 40,000 2,840,000
Gilead Sciences, Inc.* 50,000 4,300,000
Human Genome Sciences, Inc.* 86,000 7,601,594
ICOS Corp.* 90,000 4,623,750
IDEC Pharmaceuticals Corp.* 25,000 4,903,125
ILEX Oncology, Inc.* 1,000 36,250
Immunex Corp.* 130,000 5,533,125
Inhale Therapeutic Systems, Inc.* 70,000 3,482,500
Intermune Pharmaceuticals, Inc.* 55,000 2,750,000
MedImmune, Inc.* 150,000 9,806,250
Millennium Pharmaceuticals, Inc.* 100,000 7,256,250
NPS Pharmaceuticals, Inc.* 100,000 4,287,500
QLT, Inc. (Canada)* 120,000 5,968,125
Texas Biotechnology Corp.* 175,000 2,581,250
Tularik, Inc.* 60,000 1,905,000
Visible Genetics, Inc. (Canada)* 40,000 1,210,000
------------
120,395,656
------------
Drugs - Diversified (8.07%)
Abbott Laboratories 185,000 9,770,313
American Home Products Corp. 70,000 4,445,000
Bristol-Myers Squibb Co. 20,000 1,218,750
Johnson & Johnson 100,000 9,212,500
Pharmacia Corp. 265,000 14,575,000
------------
39,221,563
------------
Drugs - Major - Domestic (7.79%)
Merck & Co., Inc. 140,000 12,591,250
Pfizer, Inc. 525,000 22,673,437
Schering-Plough Corp. 50,000 2,584,375
------------
37,849,062
------------
Drugs - Major - International (0.73%)
AstraZeneca Group Plc, American Depositary
Receipts (ADR) (United Kingdom) 75,000 3,576,563
------------
Drugs - Specialty (12.35%)
Allergan, Inc. 190,000 15,971,875
Alpharma, Inc. (Class A) 200,000 7,762,500
ALZA Corp.* 190,000 15,378,125
Elan Corp. Plc (ADR) (Ireland)* 130,000 6,751,875
Forest Laboratories, Inc.* 35,000 4,637,500
Serono SA (ADR) (Switzerland)* 175,000 3,959,375
Shire Pharmaceuticals Group Plc (United
Kingdom)* 275,000 5,586,154
------------
60,047,404
------------
Drugs & Sundries - Wholesale (3.71%)
Cardinal Health, Inc. 150,000 14,212,500
Syncor International Corp.* 150,000 3,853,125
------------
18,065,625
------------
Electronics - Components Misc. (6.22%)
Affymetrix, Inc.* 80,000 4,430,000
Caliper Technologies Corp.* 15,000 845,625
Exelixis, Inc.* 75,000 1,654,688
PE Corp.-PE Biosystems Group 75,000 8,775,000
Waters Corp.* 200,000 14,512,500
------------
30,217,813
------------
Health care - Hospitals (6.69%)
Community Health System, Inc.* 175,000 4,932,813
HCA-The Healthcare Co. 190,000 7,588,125
Province Healthcare Co.* 150,000 6,318,750
Tenet Healthcare Corp.* 135,000 5,307,187
Universal Health Services, Inc. (Class B)* 100,000 8,387,500
------------
32,534,375
------------
Health care - Management (0.75%)
Accredo Health, Inc.* 70,000 3,027,500
HEALTHSOUTH Corp.* 50,000 600,000
------------
3,627,500
------------
Insurance (8.85%)
CIGNA Corp. 45,000 5,487,750
Oxford Health Plans, Inc.* 60,000 2,025,000
Trigon Healthcare, Inc.* 125,000 8,960,937
UnitedHealth Group, Inc. 125,000 13,671,875
Wellpoint Health Networks Inc.* 110,000 12,863,125
------------
43,008,687
------------
Medical Devices and Products (16.48%)
Aspect Medical Systems, Inc.* 110,000 976,250
Baxter International, Inc. 180,000 14,793,750
Bruker Daltonics, Inc.* 20,500 702,125
Cyberonics, Inc.* 90,000 2,092,500
Cytyc Corp.* 50,000 2,968,750
Edwards Lifesciences Corp.* 100,000 1,343,750
Guidant Corp.* 185,000 9,793,437
Medtronic, Inc. 320,000 17,380,000
Novoste Corp.* 120,000 3,030,000
PerkinElmer, Inc. 40,000 4,780,000
Sonic Innovations, Inc.* 165,000 794,063
Stryker Corp. 300,000 14,137,500
Varian Medical Systems, Inc.* 100,000 4,887,500
Wilson Greatbatch Technologies, Inc.* 100,000 2,400,000
------------
80,079,625
------------
TOTAL COMMON STOCKS
(Cost $345,407,768) (97.36%) 473,236,373
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.84%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 6.000% and 9.125%, due
02-15-26 and 05-15-18) -- Note A 6.56% $28,364 $28,364,000
------------
Non-Cash Security Lending Collateral
(0.03%)
U.S. Treasury Strips 5.97% thru 6.75%,
due 05-15-11 thru 02-15-23** 171 170,518
------------
NUMBER OF SHARES
----------------
Cash Equivalents (11.25%)
Navigator Securities Lending Prime
Portfolio** 54,669,621 54,669,621
------------
TOTAL SHORT-TERM INVESTMENTS (17.12%) 83,204,139
--------- ------------
TOTAL INVESTMENTS (114.48%) 556,440,512
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (14.48%) (70,399,144)
--------- ------------
TOTAL NET ASSETS (100.00%) $486,041,368
========= ============
* 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.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration (Unaudited)
------------------------------------------------------------------------
The 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, 2000 assigned to the various country categories.
MARKET VALUE
AS A PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
----------------------- ------------------
<S> <C>
Canada 1.48%
Ireland 1.39
Switzerland 0.81
United Kingdom 1.88
United States 108.92
-------
TOTAL INVESTMENTS 114.48%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Health Sciences Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Health Sciences Fund (previously known as John Hancock
Global Health Sciences Fund), (the "Fund"), is a non-diversified series
of John Hancock World Fund, an open-end management investment company,
registered under the Investment Company Act of 1940. The investment
objective of the Fund is 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
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.
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.
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, resulting from changes in the
exchange rate.
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution and service fees, if any, are
calculated daily at the class level based on the appropriate net assets
of each class and the specific expense rate(s) applicable to each class.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative sizes of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity under
the line of credit during the year ended October 31, 2000.
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, 2000, the Fund loaned securities having a
market value of $51,495,745 collateralized by cash and securities in the
amount of $54,840,139. The cash collateral was invested in
short-term instruments.
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 the
potential inability of 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. The Fund
had no open forward foreign currency contracts at October 31, 2000.
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.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all dividends and 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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with accounting principles generally accepted in the United
States of America incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.80% 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. 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 makes 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $395,665 with regard to sales of Class A shares. Of
this amount, $62,638 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $174,530 was paid as
sales commissions to unrelated broker-dealers and $158,497 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $9,906 with regard to sales of Class C shares. Of this
amount, $8,740 was paid as sales commissions to unrelated broker-dealers
and $1,166 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 for
providing distribution related services to the Fund in connection with
the sale of Class B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $641,197 for Class B and
$3,812 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended October 31, 2000, aggregated $625,535,327 and
$521,830,042, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $430,184,914. Gross
unrealized appreciation and depreciation of investments aggregated
$136,964,853 and $10,709,255, respectively, resulting in net unrealized
appreciation of $126,255,598.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized gain on investments of
$14,036,940, a decrease in accumulated net investment loss of $4,346,902
and an increase in capital paid-in of $9,690,038. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of October 31, 2000. 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, and the Fund's
use of tax accounting practice known as equalization. The calculation of
net investment income (loss) per share in the financial highlights
excludes these adjustments.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of John Hancock 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 Health Sciences Fund (formerly John Hancock Global Health
Sciences Fund, the "Fund") (a series of John Hancock World Fund) at
October 31, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility
of the Fund's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities owned at
October 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
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, 2000.
With respect to the distribution paid by the Fund for the fiscal year
ended October 31, 2000, 6.42% of the distributions qualify for the
dividends-received deduction available to corporations.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January of 2001. This will reflect the total of all
distributions which are taxable for calendar year 2000.
NOTES
John Hancock Funds -- Health Sciences Fund
NOTES
John Hancock Funds -- Health Sciences Fund
NOTES
John Hancock Funds -- Health Sciences Fund
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
Health Sciences Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
2800A 10/00
12/00
The latest report from your
Fund's management team
ANNUAL REPORT
Pacific Basin
Equities Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY AYAZ EBRAHIM FOR THE PORTFOLIO MANAGEMENT TEAM
[A 2" x 3" photo bottom middle of page of John Hancock Pacific Basin
Equities Fund. Caption below reads "Portfolio Management Team Leader
Ayaz Ebrahim."]
John Hancock
Pacific Basin Equities Fund
U.S. tech-stock sell-off halts Asian rebound
Pacific Basin markets experienced two distinct periods of performance
during the Fund's fiscal year. With economic growth picking up
throughout the region and financial restructuring taking hold, Asian
markets rallied for the first five months of the year. In April,
however, the tide turned as the sharp sell-off in U.S. technology stocks
triggered a sharp decline in Pacific Basin markets. Concerns about a
slowing U.S. economy also put additional pressure on Asian markets.
Fund performance
Given the ups and downs of Asian markets during the period, it's not
surprising that John Hancock Pacific Basin Equities Fund posted
lackluster results. For the 12 months ended October 31, 2000, the Fund's
Class A, Class B and Class C shares returned -0.57%, -1.30% and
-1.30%, respectively, at net asset value. By comparison, the average
Pacific region fund returned -11.67%, 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 historical performance information.
"Pacific Basin
markets
experienced
two distinct
periods of
performance
during the
year..."
The Fund benefited from timely shifts in the portfolio's sector
weightings throughout the year. For much of the first half, we remained
heavily weighted in technology and electronic stocks, particularly in
South Korea, Taiwan and Singapore. With information technology exploding
throughout the Pacific region, technology stocks ran up sharply. As
valuations reached precipitous levels, however, we began to pare back
our tech holdings just as the sector started its pullback in late March
and early April. We shifted into more defensive stocks with more
reasonable valuations, particularly in the real estate and financial
services industries. As we take a closer look at our investments
country-by-country, you'll notice the strategic shift toward a more
defensive investment posture.
[Pie chart at top left hand column with heading "Portfolio
Diversification." The chart is divided into nine sections (from top to
left): China 1%, Malaysia 3%, Short-Term Investments & Other 6%, Taiwan
6%, South Korea 7%, Singapore 9%, Australia & New Zealand 11%, Hong Kong
17% and Japan 40%. A note below the chart reads "As a percentage of net
assets on October 31, 2000."]
"The Fund
benefited
from timely
shifts in the
portfolio's
sector
weightings..."
Japan
We are positive on Japan's economic outlook given that signs of
sustainable economic recovery are emerging. In September, Japan's gross
domestic product (GDP) came in ahead of consensus forecast at 1.1% --
thanks to a jump in government spending and consumer demand. What's
more, Japan is making substantial progress in its restructuring efforts.
While we are positive on the economic outlook, we have maintained a
neutral weighting here at 40% of the portfolio's net assets. The reason
is that we see better growth prospects in other Asian markets such as
Hong Kong, Taiwan and South Korea. Our focus in Japan remains on
financial and real estate stocks. Sumitomo Realty & Development Co. is
one of our favorite holdings. This real estate developer has benefited
from the tight supply and demand situation in Tokyo's office building
market, as well as significant restructuring of its debts.
[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 Sumitomo Realty & Development followed by an up arrow with the phrase
"Strong demand for Tokyo office space." The second listing is Fast
Retailing followed by an up arrow with phrase "Increase in consumer
consumption." The third listing is Samsung Electronics followed by a
down arrow with the phrase "Hurt by recent technology selloff." A note
below the table reads "See 'Schedule of Investments,' Investment
holdings are subject to change."]
Australia
During the first half of the year, we reduced our Australian weighting
to roughly 1% as we believed other countries in the region offered
better value and stronger growth prospects. That strategy paid off as
many of the smaller Pacific Basin markets rallied strongly from October
to April.
With the recent downturn in Asian markets, however, we began to
reallocate money back to Australia -- increasing holdings to 10% of net
assets. From a strategic point of view, Australia is a safe haven as its
economy tends to be well insulated from troubles in the rest of Asia.
What's more, Australia's economic picture is positive with growth
averaging 3% to 4%.
Hong Kong, China grow
With a weighting of 18% of net assets by the end of October, we are very
positive on the growth prospects for Hong Kong and China. Leading
indicators suggest that an economic recovery had firmly taken hold in
Hong Kong. As for China, the economic picture is also bright with
external trade and industrial output surging and domestic consumption
showing clear signs of improvement. In Hong Kong and China, we've
invested in a mix of technology, financial and real estate stocks. One
favorite remains Hong Kong's HSBC -- one of the best-managed banks in
the world.
South Korea, Taiwan cut
We've recently reduced our weightings in Taiwan and South Korea to 6%
and 7%, respectively, for several reasons. The recent decline in Asian
markets hit Taiwan and South Korea hardest, due to their heavy exposure
to the electronics and technology sectors. What's more, Taiwan suffered
from political uncertainty as its new government struggled to implement
a cohesive economic policy. As for South Korea, although the government
has made strides with its financial restructuring efforts, it has
experienced some setbacks along the way.
[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, 2000." The chart is scaled in increments of 5% with -15% at
the bottom and 5% at the top. The first bar represents the -0.57% total
return for John Hancock Pacific Basin Equities Fund Class A. The second
bar represents the -1.30% total return for John Hancock Pacific Basin
Equities Fund Class B. The third bar represents the -1.30% total return
for John Hancock Pacific Basin Equities Fund Class C. The fourth bar
represents the -11.67 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."]
Long term, however, we remain very optimistic about the growth prospects
for both Taiwan and South Korea. In fact, with gross domestic product
forecasts of 6% to 7%, we believe both countries offer some of the best
growth potential in the region. In Taiwan, we believe the selling is
overdone at this point and we're starting to see some attractive values
emerge. One of our key holdings is Taiwan Semiconductor -- arguably, one
of the most efficient electronics manufacturers in the world. In South
Korea, we've shifted into more oil stocks such as S-Oil Corp., which
owns the country's leading oil refineries. With oil prices expected to
remain high in the next several months, we believe that S-Oil will be
one of the biggest beneficiaries.
Outlook
Despite the recent volatility in Asian markets, we remain optimistic
about the long-term prospects for the region. Stocks have dropped to a
level where they are now starting to discount a global recession. While
we do expect economic growth to slow, particularly in the U.S., we do
not believe that the global economy is headed for a recession.
"Despite the
recent
volatility...
we remain
optimistic
about the
long-term
prospects for
the region."
From our point of view, the Asian sell-off has been overdone and it's
only a matter of time before stock markets in the region start to bounce
back. Given that, we are likely to shift to a more aggressive investment
posture as we enter 2001. Looking ahead, we firmly believe the story in
the region will be all about restructuring and growth. From a
restructuring perspective, Japan is one of the brightest spots. So we
will continue to look for specific stocks there that are likely to reap
the benefits of the Japanese government's restructuring efforts. From a
growth perspective, however, we believe that the less mature economies
outside of Japan and Australia offer the best potential. As a result, we
will likely look for opportunities to increase our weightings in Taiwan,
South Korea, Hong Kong and China.
-------------------------------------------------------------------------
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.
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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 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 October 31, 2000
ONE FIVE TEN
YEAR YEARS YEARS
----- ----- ------
Cumulative Total Returns (5.54%) (1.60%) 68.05%
Average Annual Total Returns (5.54%) (0.32%) 5.33%
CLASS B
For the period ended October 31, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (3/7/94)
----- ----- ------
Cumulative Total Returns (6.13%) (1.98%) (4.96%)
Average Annual Total Returns (6.13%) (0.40%) (0.76%)
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (3/1/99)
----- ------
Cumulative Total Returns (3.24%) 49.35%
Average Annual Total Returns (3.24%) 27.18%
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) All Country Pacific Free Index, a regional index
comprised of nine developed and emerging-market countries. 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, 1990, before
sales charge, and is equal to $17,682 as of October 31, 2000. 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 $16,798 as of October 31, 2000. The third line represents the
MSCI All Country Pacific Free Index and is equal to $11,372 as of
October 31, 2000.
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 two lines. The first
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 $9,504 as of October 31, 2000. The second
line represents the MSCI All Country Pacific Free Index and is equal to
$8,504 as of October 31, 2000.
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 $15,083 as of October 31, 2000. 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 $14,932 as of October 31, 2000. The third line represents the
MSCI All Country Pacific Free Index and is equal to $12,391 as of
October 31, 2000.
*No contingent deferred sales charge applicable.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Pacific Basin Equities Fund
<TABLE>
<CAPTION>
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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks, warrants and preferred
stocks (cost - $51,279,834) $50,650,902
Joint repurchase agreement
(cost - $10,888,760) 10,888,760
-----------------
61,539,662
Cash 737
Foreign currency, at value (cost - $33,546) 33,435
Receivable for investments sold 199,522
Receivable for shares sold 2,574
Interest receivable 676
Dividends receivable 81,826
Other assets 5,585
-----------------
Total Assets 61,864,017
-----------------
Liabilities:
Payable for investment purchased 952,525
Payable for shares repurchased 170,300
Payable for securities on loan - Note A 7,179,760
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 156,160
Foreign tax payable - Note A 125,144
Accounts payable and accrued expenses 99,400
-----------------
Total Liabilities 8,683,289
-----------------
Net Assets:
Capital paid-in 54,774,305
Accumulated net realized loss on
investments and foreign currency
transactions (498,155)
Net unrealized depreciation of
investments and foreign currency
transactions (742,585)
Accumulated net investment loss (352,837)
-----------------
Net Assets $53,180,728
=================
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 - $23,127,280/1,649,606 $14.02
==============================================================
Class B - $29,100,489/2,166,856 $13.43
==============================================================
Class C - $952,959/70,954 $13.43
==============================================================
Maximum Offering Price Per Share
Class A* - ($14.02/95%) $14.76
==============================================================
Class C - ($13.43/99%) $13.57
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $108,499) $788,279
Interest 159,352
Income on securities loaned 71,116
-----------------
1,018,747
-----------------
Expenses:
Investment management fee - Note B 649,348
Distribution and service fee - Note B
Class A 104,284
Class B 451,478
Class C 12,593
Transfer agent fee - Note B 292,579
Custodian fee 229,457
Registration and filing fees 160,964
Auditing fee 33,132
Interest expense 21,370
Accounting and legal services fee - Note B 15,323
Printing 20,039
Trustees' fees 4,870
Miscellaneous 4,141
Legal fees 456
-----------------
Total Expenses 2,000,034
-----------------
Net Investment Loss (981,287)
-----------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions:
Net realized gain on investments sold 16,027,601
Net realized gain on foreign currency
transactions 19,506
Change in net unrealized appreciation
(depreciation) of investments (12,684,299)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (98,231)
-----------------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 3,264,577
-----------------
Net Increase in Net Assets Resulting
from Operations $2,283,290
=================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($452,820) ($981,287)
Net realized gain on investments
sold and foreign currency
transactions 8,685,360 16,047,107
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 10,410,178 (12,782,530)
----------------- -----------------
Net Increase in Net Assets
Resulting from Operations 18,642,718 2,283,290
----------------- -----------------
Distributions to Shareholders:
Dividends from net investment income:
Class A - (none and $0.3715 per
share, respectively) -- (729,130)
Class B - (none and $0.2933 per
share, respectively) -- (785,439)
Class C** - (none and $0.2933
per share, respectively) -- (16,867)
Distributions in excess of
net investment income:
Class A - (none and $0.0090 per
share, respectively) -- (17,572)
Class B - (none and $0.0071 per
share, respectively) -- (18,929)
Class C** - (none and $0.0071
per share, respectively) -- (406)
----------------- -----------------
Total Distributions to
Shareholders -- (1,568,343)
----------------- -----------------
From Fund Share Transactions - Net: * 23,810,812 (17,870,815)
----------------- -----------------
Net Assets:
Beginning of period 27,883,066 70,336,596
----------------- -----------------
End of period (including
accumulated net investment loss
of $163,158 and $352,837,
respectively) $70,336,596 $53,180,728
================= =================
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, and any
increase or decrease in money shareholders invested in the Fund. The
footnote illustrates the number of Fund shares sold, reinvested and
redeemed during the last two periods, along with the corresponding
dollar value.
<CAPTION>
Statement of Changes in Net Assets (continued)
---------------------------------------------------------------------------------------------------------------------------
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 7,531,188 $89,355,732 10,699,330 $179,947,030
Shares issued to shareholders in
reinvestment of distributions -- -- 45,640 681,533
----------------- ----------------- ----------------- -----------------
7,531,188 89,355,732 10,744,970 180,628,563
Less shares repurchased (6,960,105) (81,316,658) (11,346,221) (191,472,067)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 571,083 $8,039,074 (601,251) ($10,843,504)
================= ================= ================= =================
CLASS B
Shares sold 3,427,833 $41,992,258 1,939,050 $32,420,200
Shares issued to shareholders in
reinvestment of distributions -- -- 42,559 613,338
----------------- ----------------- ----------------- -----------------
3,427,833 41,992,258 1,981,609 33,033,538
Less shares repurchased (2,330,940) (27,119,544) (2,465,762) (40,082,317)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,096,893 $14,872,714 (484,153) ($7,048,779)
================= ================= ================= =================
CLASS C **
Shares sold 103,934 $1,376,290 316,429 $5,282,879
Shares issued to shareholders in
reinvestment of distributions -- -- 1,072 15,443
----------------- ----------------- ----------------- -----------------
103,934 1,376,290 317,501 5,298,322
Less shares repurchased (35,204) (477,266) (315,277) (5,276,854)
----------------- ----------------- ----------------- -----------------
Net increase 68,730 $899,024 2,224 $21,468
================= ================= ================= =================
** Class C shares commenced operations on March 1, 1999.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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:
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED OCTOBER 31,
AUGUST 31, PERIOD ENDED -------------------------------------------------------
1996 OCTOBER 31, 1996(1) 1997 1998 1999 2000
------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $14.11 $14.74 $14.47 $11.63 $8.76 $14.46
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Income
(Loss)(2) (0.02) (0.02) (0.07) 0.02 (0.09) (0.14)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 0.65 (0.25) (2.66) (2.89) 5.79 0.08
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.63 (0.27) (2.73) (2.87) 5.70 (0.06)
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net
Investment Income -- -- -- -- -- (0.37)
Distributions in Excess of
Net Investment Income -- -- -- -- -- (0.01)
Dividends from Net Realized
Gain on Investments Sold
and Foreign Currency
Transactions -- -- (0.11) -- -- --
------------- ------------- ---------- ---------- ---------- ----------
Total Distributions -- -- (0.11) -- -- (0.38)
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $14.74 $14.47 $11.63 $8.76 $14.46 $14.02
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 4.47% (1.83%)(4) (19.03%) (24.68%) 65.07% (0.57%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $41,951 $38,694 $21,109 $14,717 $32,554 $23,127
Ratio of Expenses to Average
Net Assets 1.97% 2.21%(5) 2.06% 2.46% 2.37% 2.06%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.15%) (0.83%)(5) (0.49%) 0.22% (0.77%) (0.81%)
Portfolio Turnover Rate 73% 15% 118% 230% 174% 258%
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 each class. 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.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED OCTOBER 31,
AUGUST 31, PERIOD ENDED -------------------------------------------------------
1996 OCTOBER 31, 1996(1) 1997 1998 1999 2000
------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $13.96 $14.49 $14.20 $11.32 $8.47 $13.89
------------- ------------- ---------- ---------- ---------- ----------
Net Investment Loss(2) (0.13) (0.04) (0.18) (0.04) (0.17) (0.25)
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 0.66 (0.25) (2.59) (2.81) 5.59 0.09
------------- ------------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.53 (0.29) (2.77) (2.85) 5.42 (0.16)
------------- ------------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net
Investment Income -- -- -- -- -- (0.29)
Distributions in Excess of
Net Investment Income -- -- -- -- -- (0.01)
Dividends from Net Realized
Gain on Investments Sold
and Foreign Currency Transactions -- -- (0.11) -- -- --
------------- ------------- ---------- ---------- ---------- ----------
Total Distributions -- -- (0.11) -- -- (0.30)
------------- ------------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $14.49 $14.20 $11.32 $8.47 $13.89 $13.43
============= ============= ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 3.80% (2.00%)(4) (19.67%) (25.18%) 63.99% (1.30%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $32,342 $30,147 $17,320 $13,166 $36,828 $29,101
Ratio of Expenses to Average
Net Assets 2.64% 2.90%(5) 2.76% 3.16% 3.07% 2.77%
Ratio of Net Investment Loss
to Average Net Assets (0.86%) (1.52%)(5) (1.19%) (0.48%) (1.47%) (1.51%)
Portfolio Turnover Rate 73% 15% 118% 230% 174% 258%
<CAPTION>
Financial Highlights (continued)
------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
OCTOBER 31, 1999(6) OCTOBER 31, 2000
---------------- ----------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $9.09 $13.89
------------- -------------
Net Investment Loss(2) (0.13) (0.24)
Net Realized and Unrealized
Gain on Investments and
Foreign Currency
Transactions 4.93 0.08
------------- -------------
Total from Investment Operations 4.80 (0.16)
------------- -------------
Less Distributions:
Dividends from Net
Investment Income -- (0.29)
Distributions in Excess of
Net Investment Income -- (0.01)
------------- -------------
Total Distributions -- (0.30)
------------- -------------
Net Asset Value, End of
Period $13.89 $13.43
============= =============
Total Investment Return at
Net Asset Value(3) 52.81%(4) (1.30%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $955 $953
Ratio of Expenses to Average
Net Assets 3.14%(5) 2.77%
Ratio of Net Investment Loss
to Average Net Assets (1.76%)(5) (1.48%)
Portfolio Turnover Rate 174%(4) 258%
(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.
(6) Class C shares began operations on March 1, 1999.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
-----------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Pacific Basin Equities Fund on October 31, 2000. It's divided
into four main categories: common stocks, warrants, preferred stocks and
short-term investments. The common stocks, warrants and preferred stocks
are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- --------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Australia (10.05%)
Broken Hill Proprietary Co., Ltd. (Diversified
Operations) 72,500 $702,753
FH Faulding & Co., Ltd. (Medical) 92,665 489,936
Gradipore Ltd.* (Medical) 11,451 30,568
Lend Lease Corp. Ltd. (Real Estate Operations) 49,472 579,166
National Australia Bank Ltd. (Banks - Foreign) 48,840 678,475
News Corp. Ltd. (The) (Media) 95,097 994,744
Onesteel (Steel) 18,125 8,643
ResMed, Inc.* (Medical) 189,800 509,623
Telstra Corp., Ltd.* (Telecommunications) 209,740 687,102
Westpac Banking Corp. Ltd. (Banks - Foreign) 96,975 662,217
------------
5,343,227
------------
China (1.35%)
Shandong International Power Development Co.,
Ltd. (Utilities) 4,138,000 647,309
Sinopec Zhenhai Refining and Chemical Co., Ltd.
(Oil & Gas) 490,000 68,483
------------
715,792
------------
Hong Kong (17.04%)
Amoy Properties Ltd. (Real Estate Operations) 21,000 19,118
Asia Satellite Telecommunications Holdings Ltd.
(Telecommunications) 115,000 232,979
Cheung Kong Holdings Ltd. (Real Estate
Operations) 54,000 597,192
China Mobile Ltd.* (Telecommunications) 174,000 1,115,527
China Unicom Ltd.* (Telecommunications) 140,000 280,933
Dah Sing Financial Group (Finance) 93,200 400,333
Giordano International Ltd. (Retail) 568,000 333,197
Guoco Group Ltd. (Finance) 187,000 467,560
Hongkong Land Holdings Ltd. (Real Estate
Operations) 340,000 629,000
HSBC Holdings Plc (Banks - Foreign) 87,200 1,213,130
Hutchison Whampoa Ltd. (Diversified Operations) 157,300 1,956,417
JCG Holdings Ltd. (Finance) 502,000 267,124
Legend Holdings Ltd. (Computers) 378,000 319,887
Li & Fung Ltd. (Consumer Products - Misc.) 112,000 208,232
Next Media Ltd.* (Media) 2,600,000 131,684
Swire Pacific Ltd. (Diversified Operations) 100,000 616,746
Television Broadcasts Ltd. (Media) 50,000 273,753
------------
9,062,812
------------
Indonesia (0.18%)
PT Ramayana Lestari Sentosa Tbk (Retail) 200,000 96,154
------------
Japan (39.51%)
Air Liquide Japan, Ltd. (Chemicals) 74,000 351,299
Air Water, Inc. (Chemicals) 100,000 304,266
Amano Corp. (Manufacturing) 67,000 634,908
Asahi Denka Kogyo K.K. (Chemicals) 60,000 391,514
Asahi Glass Co., Ltd. (Glass Products) 95,000 975,118
Chubu Electric Power Co., Inc. (Utilities) 80,000 1,319,709
Daibiru Corp. (Real Estate Operations) 130,000 994,822
Daito Trust Construction Co., Ltd. (Real Estate
Operations) 48,000 809,421
Fujisawa Pharmaceutical Co., Ltd (Medical) 7,000 220,043
JGC Corp. (Engineering/R&D Services) 254,000 1,585,245
Jusco Co., Ltd. (Retail) 10,000 187,875
Kanto Natural Gas Co., Ltd. (Oil & Gas) 66,000 312,716
Kao Corp. (Cosmetics & Personal Care) 19,000 569,399
Katokichi Co., Ltd. (Food) 30,000 866,059
Kirin Brewery Co., Ltd. (Beverages) 30,000 312,881
Maeda Corp. (Building) 123,000 455,409
Matsushita Electric Industrial Co., Ltd.
(Electronics) 11,000 319,571
Max Co., Ltd. (Machinery) 40,000 399,945
Nichias Corp. (Building) 80,000 226,550
Nippon Meat Packers, Inc. (Food) 82,000 1,040,077
Nippon Mitsubishi Oil Corp. (Oil & Gas) 54,000 290,501
Nippon Shokubai Co., Ltd. (Chemicals) 120,000 542,180
Q.P. Corp. (Food) 22,000 185,492
Sekisui House, Ltd. (Building) 48,000 507,648
Shiseido Co., Ltd. (Cosmetics & Personal Care) 67,000 865,784
Sumitomo Realty & Development Co., Ltd.
(Real Estate Operations) 472,000 2,707,895
Sumitomo Trust & Banking Co., Ltd.
(Banks -- Foreign) 60,000 461,898
Terumo Corp. (Medical) 17,000 481,419
Tokyu Corp. (Transport) 440,000 2,274,298
Toyota Motor Corp. (Automobile/Trucks) 7,500 299,684
York-Benimaru Co., Ltd. (Retail) 5,000 120,973
------------
21,014,599
------------
Malaysia (3.24%)
Malayan Banking Berhad (Banks - Foreign) 146,000 584,000
Mesiniaga Berhad (Computers) 53,000 103,211
Resorts World Berhad (Leisure) 355,000 621,250
Technology Resources Industries Berhad*
(Telecommunications) 513,000 415,800
------------
1,724,261
------------
New Zealand (1.33%)
Fletcher Challenge Energy (Oil & Gas) 216,200 707,396
------------
Philippine Islands (0.22%)
La Tondena Distillers, Inc. (Beverages) 125,000 70,870
Manila Electric Co. (Utilities) 54,000 44,340
------------
115,210
------------
Singapore (8.72%)
DBS Group Holdings Ltd. (Banks - Foreign) 89,000 1,048,967
Keppel Land Ltd. (Real Estate Operations) 369,000 550,464
Keppel TatLee Bank Ltd. (Banks - Foreign) 231,000 394,579
Pacific Century Regional Developments Ltd.*
(Real Estate Operations) 420,000 322,838
SembCorp Industries Ltd. (Engineering/R&D
Services) 256,000 246,336
Singapore Press Holdings Ltd.
(Printing - Commercial) 17,000 242,954
Singapore Technologies Engineering Ltd.
(Engineering/R&D Services) 619,000 997,421
United Overseas Bank Ltd. (Banks - Foreign) 98,000 725,389
Wing Tai Holdings Ltd. (Real Estate Operations) 143,000 110,733
------------
4,639,681
------------
South Korea (7.10%)
Halla Climate Control Co. (Automobile/Trucks) 23,000 543,912
Hite Brewery Co. (Beverages) 12,170 544,574
Hyundai Motor Co., Ltd. (Automobile/Trucks) 51,500 588,571
Korea Electric Power Corp. (Utilities) 11,660 260,364
Pohang Iron & Steel Co., Ltd. (Steel) 4,000 232,440
Samsung Electronics Co. (Electronics) 4,000 501,099
S-Oil Corp. (Oil & Gas) 44,320 1,102,643
------------
3,773,603
------------
Taiwan (6.37%)
China Steel Corp. (Steel) 660,000 382,105
Compal Electronics, Inc. (Computers) 212,000 323,579
Compeq Manufacturing Co., Ltd.* (Computers) 52,000 196,409
D-Link Corp. (Computers) 46,350 61,417
Hon Hai Precision Industry Co., Ltd.
(Electronics) 127,700 668,152
President Chain Store Corp. (Retail) 145,120 413,345
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 190,200 577,077
United Microelectronics Corp.* (Electronics) 200,000 352,941
Via Technologies, Inc.* (Electronics) 14,000 100,557
Winbond Electronics Corp.* (Electronics) 180,000 174,427
Winbond Electronics Corp., Global
Depositary Receipts* (Computers) (R) 14,385 136,657
------------
3,386,666
------------
TOTAL COMMON STOCKS
(Cost $51,197,248) (95.11%) 50,579,401
------------
WARRANTS
Malaysia (0.13%)
AMMB Holdings Berhad* (Finance) 194,000 71,474
------------
TOTAL WARRANTS
(Cost $82,552) (0.13%) 71,474
------------
PREFERRED STOCKS
Australia (0.00%)
News Corp. Ltd. (The) (Media) 3 27
------------
TOTAL PREFERRED STOCKS
(Cost $34) (0.00%) 27
------------
TOTAL COMMON STOCKS, WARRANTS
AND PREFERRED STOCKS
(Cost $51,279,834) (95.24%) 50,650,902
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.98%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 6.000% and 9.125%, due
02-15-26 and 05-15-18) - Note A 6.56% $3,709 $3,709,000
------------
NUMBER OF SHARES
----------------
Cash Equivalents (13.50%)
Navigator Securities Lending Prime
Portfolio** 7,179,760 7,179,760
--------- ------------
TOTAL SHORT-TERM INVESTMENTS (20.48%) 10,888,760
--------- ------------
TOTAL INVESTMENTS (115.72%) 61,539,662
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (15.72%) (8,358,934)
--------- ------------
TOTAL NET ASSETS (100.00%) $53,180,728
========= ============
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A security amounted to $136,657 as of October 31,
2000.
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.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration
October 31, 2000 (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, 2000,
assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
------------------- -------------
<S> <C>
Automobile/Trucks 2.69%
Banks - Foreign 10.85
Beverages 1.74
Building 2.24
Chemicals 2.99
Computers 2.15
Consumer Products - Misc. 0.39
Cosmetics & Personal Care 2.70
Diversified Operations 6.16
Electronics 5.06
Engineering/R&D Services 5.32
Finance 2.27
Food 3.93
Glass Products 1.83
Leisure 1.17
Machinery 0.75
Manufacturing 1.19
Media 2.63
Medical 3.26
Oil & Gas 4.67
Printing - Commercial 0.46
Real Estate Operations 13.77
Retail 2.16
Steel 1.17
Telecommunications 5.14
Transport 4.28
Utilities 4.27
Short-Term Investments 20.48
-------
TOTAL INVESTMENTS 115.72%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Pacific Basin Equities Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Pacific Basin Equities Fund (the "Fund") is a diversified
series of John Hancock World Fund, an open-end management investment
company, registered under the Investment Company Act of 1940. The
investment objective of the Fund is to 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.
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.
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, resulting from changes in the
exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to foreign
taxes, which are accrued, as applicable. In addition, the Fund accrues
for foreign repatriation taxes on unrealized gains, as applicable.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net 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 are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative sizes of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The average daily loan balance during the
period for which loans were outstanding amounted to $2,117,500. The
weighted average interest rate was 6.71%. Interest expense includes
$18,634 paid under the line of credit. There was no outstanding
borrowing under the line of credit on October 31, 2000.
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, 2000, the Fund loaned securities having a
market value of $6,774,059 collateralized by cash in the amount of
$7,179,760. The cash collateral was invested in a short-term
instrument.
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 the
potential inability of 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.
The Fund had no open forward foreign currency exchange contracts at
October 31, 2000.
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.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all dividends and 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.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a quartely management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.80% of the first $200,000,000 of the Fund's average daily net asset
value and (b) 0.70% of the Fund's average daily net asset value in
excess of $200,000,000. The Adviser had subadvisory agreements with John
Hancock Advisers International Limited ("JHAI") and with Indosuez Asia
Advisers Limited ("IAAL"), under which both subadvisers provided the
Fund with investment management services and advice. As of March 1,
2000, the Adviser terminated its contract with JHAI so that currently
IAAL is the Fund's sole subadviser. The Fund is not responsible for the
payment of the subadvisers' fees.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. 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 makes 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $49,891 with regard to sales of Class A shares. Of this
amount, $7,770 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $14,647 was paid as
sales commissions to unrelated broker-dealers and $27,474 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $9,906 with regard to sales of Class C shares. Of this
amount, $8,739 was paid as sales commissions to unrelated broker-dealers
and $1,167 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 CDSCs are paid to
JH Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection with
the sale of Class B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $158,898 for Class B shares
and $1,174 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended October 31, 2000, aggregated $198,902,426 and
$216,836,299, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $62,977,916. Gross
unrealized appreciation and depreciation of investments aggregated
$3,499,870 and $4,938,124, respectively, resulting in net unrealized
depreciation of $1,438,254.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized gain on investments of
$11,393,683, a decrease in accumulated net investment loss of $2,359,951
and an increase in capital paid-in of $9,033,732. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary difference, as of October 31, 2000. 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 net operating loss, 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 and the Fund's use of the tax accounting practice
known as equalization. The calculation of net investment income (loss)
per share in the financial highlights excludes these adjustments.
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, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October
31, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 2000
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, 2000.
1.69% of the distributions qualify for the dividends received deduction
available to corporations.
The Fund designated distributions to shareholders of $6,239,532 as
long-term capital gain dividends.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January of 2001. This will reflect the tax character of all
distributions for the calendar year 2000.
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
Pacific Basin Equities Fund. It is not authorized for distribution to
prospective investors unless it is preceded or accompanied by the current
prospectus, which details charges, investment objectives and operating
policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
5800A 10/00
12/00
The latest report from your
Fund's management team
ANNUAL REPORT
European
Equity Fund
OCTOBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
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
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years,
the financial markets have brought investors back down to earth in 2000.
Rising interest rates and oil prices, the prospects of a slowing economy
and earnings fears all caught up with pricey growth stocks -- technology
in particular. A dramatic plunge in the spring and again in the fall
caused the major indexes to end October in negative territory for the
year to date. The tech-heavy NASDAQ Composite Index was hardest hit,
returning -17.19% year to date through October.
But there is a silver lining. Investors have finally turned their
attention to broader swaths of the market, including old economy stocks
in sectors like financials, health care and energy, that combined both
strong fundamentals and more attractive valuation levels. Since April,
less expensive value stocks have outperformed growth stocks.
Bonds also began to make a comeback as the year progressed and investors
grew more confident that the series of Fed rate hikes might be coming to
an end. Pockets of strength have emerged there, including municipal
bonds and longer-maturity Treasury bonds. The 30-year bond, for
instance, returned 13.53% year to date through October.
The market's shifts in leadership so far this year highlight one of the
key investment tenets that we can't emphasize enough: investing should
be a marathon, not a sprint. If your portfolio is diversified and you
have an up-to-date financial plan crafted with an investment
professional to meet your goals, it becomes easier to ride out the
market's short-term ups and downs. It could also provide you with a
greater chance of success over time.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY ALESSANDRA GAUDIO FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
European Equity Fund
Solid performance undermined by the decline of the euro
Currency problems undermined European equity market returns for
dollar-based investors during John Hancock European Equity Fund's fiscal
year ended October 31, 2000. While the Morgan Stanley Capital
International (MSCI) Europe Index returned more than 20% in euro terms
during the year ended October 31, 2000, it barely eked out a return of
1.05% when translated back into dollars. The culprit was the steady
decline of the euro, which kept tumbling to new lows in spite of the
intervention of the European Central Bank (ECB).
The ECB steadily increased base short-term interest rates to prop up the
euro, but its efforts were generally for naught. The ECB's rate hikes
also were an attempt to keep the level of inflation at or below 2% in
the euro zone. The central banks of the United Kingdom and Denmark
responded in kind, raising their base rates as well. For the most part,
higher borrowing costs did not deter corporate earnings growth in
Europe, where the median corporate profit growth rate was about 16%.
Strong consumer spending spurred by low unemployment was credited for
both sustained economic growth as well as positive corporate earnings
reports.
Performance
Against this backdrop, John Hancock European Equity Fund's Class A,
Class B and Class C shares returned -1.61%, -2.35% and -2.35%,
respectively, at net asset value for the year ended October 31, 2000.
For another comparison, the average European region fund returned
12.53%, according to Lipper Inc.1 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.
"...investors
gravitated to
the relative
safety offered
by sectors
such as utili-
ties and phar-
maceuticals."
The Fund's performance shortfall was a result of the timing of our moves
during the market's rapid attraction to and then equally rapid pull away
from the technology, media and telecommunications -- "TMT" -- stocks
before and after the second quarter of 2000. We were too late increasing
the Fund's TMT holdings before those sectors surged dramatically in late
1999 and early 2000, and too slow cutting them back when they fell
precipitously in the second quarter. The Fund also suffered from an
underweighting relative to the MSCI Europe Index in the solidly
performing pharmaceutical sector, a factor that also affected the Fund's
underperformance relative to its peers. In addition, some of the funds
in this Lipper group have more of a regional concentration than we do.
[Table at top left-hand column entitled "Top Five Stock Holdings." The
first listing is Vodafone AirTouch 5.1%, the second is BP Amoco 3.6%,
the third Royal Dutch Petroleum 2.7%, the fourth Allianz 2.5% and the
fifth Nokia 2.5%. A note below the table reads "As a percentage of net
assets on October 31, 2000."]
Fund's
technology,
telecom and
media
weightings
hampered
performance.
A distinct shift in the markets
For most of the first half of the Fund's fiscal year, the European
markets -- like the U.S. market -- were propelled by the stellar
performance of the TMT sectors. That changed in March, when both the
tech-heavy NASDAQ Composite Index in the U.S. and TMT stocks in the
European markets began a descent. From that point and through much of
the remainder of the Fund's fiscal year, investors gravitated to the
relative safety offered by sectors such as utilities and
pharmaceuticals. Utilities become attractive in times of uncertainty
because they are stable and offer high dividend income, and
pharmaceutical firms because they provide steady, albeit unspectacular
growth. While we also moved to insulate the Fund in like manner, the
decline in TMT stocks was so fast we were not able to respond as quickly
as we would have liked. As far as pharmaceuticals were concerned, we
maintained an underweight position because we felt that their prices
were too high and their growth not appealing enough to warrant a
significant investment. That decision proved to be a negative in the
short run, as many in the market ignored these stocks' high prices in
favor of their relative safety.
[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 Adecco followed by an up arrow with the phrase "Employment company
benefits from strong economy and demand." The second listing is Ahold
followed by an up arrow with phrase "Food retailer reduces costs;
successfully promotes products." The third listing is Credit Suisse
Group followed by a down arrow with the phrase "Concern over loans to
TMT companies." A note below the table reads "See 'Schedule of
Investments,' Investment holdings are subject to change."]
Where the Fund stands now
The Fund currently maintains an overweight position relative to the MSCI
Europe Index in several sectors, including energy, consumer nondurables,
insurance, software and services and media. Amid the market's turnaround
in the second quarter, we reduced the Fund's TMT exposure, but
particularly worked to sell off a significant amount of
telecommunications holdings. The industry was hit hard by the
after-effects of auctions for new wireless licenses in the United
Kingdom, which went for much higher prices than anticipated. This
occurred in an extremely competitive industry where many of the players
were already carrying significant amounts of debt. It's for this reason
that we remain generally negative on the sector. However, we continue to
favor technology, due to sustained demand, and media, because of strong
advertising growth resulting from Europe's prosperous economy. Despite
the difficulties encountered by many technology stocks, Fund holding
Alcatel, a French telecom equipment manufacturer, performed very well
because of its superior product line and significantly beneficial
contracts in the U.S.
Consumer nondurables -- food, personal products and household goods --
attracted our attention because of their steady growth rates. Among the
Fund's top-performing positions was Ahold, the Dutch food retailer,
which was rewarded for its expansion into the Northeast U.S., as well as
for cost reduction, promotional skill and high-quality management.
Consistently high energy prices helped sustain our interest in energy
companies and kept names like BP Amoco, Royal Dutch Petroleum and Total
Fina as some of our top holdings. We also like insurance because the
sector is less dependent on the economic cycle. Skandia, the Swedish
insurance company, continued to thrive due to its success selling mutual
funds for retirement accounts.
[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, 2000." The chart is scaled in increments of 5% with -5% at
the bottom and 15% at the top. The first bar represents the -1.61% total
return for John Hancock European Equity Fund Class A. The second bar
represents the -2.35% total return for John Hancock European Equity Fund
Class B. The third bar represents the -2.35% total return for John
Hancock European Equity Fund Class C. The fourth bar represents the
12.53% 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."]
On the underweight side are the pharmaceutical and bank stocks. We were
concerned that this latter sector would be buffeted by increased
competition as well as by cross-border Internet banking that provoked
uncertainty about many banks' prospects. In addition, banks, as lenders,
have been exposed to the problems encountered by highly leveraged
telecom firms, one reason we witnessed a drop in the stock price of Fund
holding Credit Suisse Group. In the end, the bank sector performed
rather well. However, even though we were underweight in that area, the
stocks we selected for the Fund performed better than the bank stocks
included in the MSCI Europe Index.
"We anticipate
maintaining
investments
in technol-
ogy, media
and soft-
ware..."
Outlook
There is a climate of uncertainty in Europe at the present time, due to
rising oil prices, questions related to the euro and some profit
warnings. As a result, we are cautious about prospects for European
equity prices in the near term, even though there is no major concern
about most companies' core fundamentals. Once these recent uncertainties
dissipate, we will be ready to adopt a more positive view. We anticipate
maintaining investments in technology, media and software, while
avoiding bank stocks and reducing our energy positions because we
anticipate they will come off their highs. It's also possible that
investments in German companies may become more attractive, because that
country appears to be on the verge of a sustained economic recovery. In
addition, significant reforms are looming to allow banks and insurance
companies to liquidate large holdings in industrial equities without
paying capital gains taxes. The market has already begun to anticipate
the beneficial effects of this development, one that we expect to take
advantage of as well.
-----------------------------------------------------------------------
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.
A LOOK AT PERFORMANCE
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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 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 October 31, 2000
SINCE
ONE INCEPTION
YEAR (3/2/98)
------ ---------
Cumulative Total Returns (6.55%) 4.27%
Average Annual Total Returns(1) (6.55%) 1.58%
CLASS B
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (6/1/98)
------ ---------
Cumulative Total Returns (7.23%) (5.37%)
Average Annual Total Returns(1) (7.23%) (2.26%)
CLASS C
For the period ended October 31, 2000
SINCE
ONE INCEPTION
YEAR (3/1/99)
------ ---------
Cumulative Total Returns (4.28%) 0.47%
Average Annual Total Returns(1) (4.28%) 0.28%
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 1.90% on
Class A shares and 2.60% on Class B and Class C shares, 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 (6.95%) and 1.18% for Class A shares, (7.63%) and
(2.80%) for Class B shares and (4.68%) and (0.09%) for Class C shares.
WHAT HAPPENED TO A $10,000 INVESTMENT...
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 $11,915 as of October
31, 2000. 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 $10,980 as of
October 31, 2000. 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 $10,431 as of October 31, 2000.
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 $10,687 as of October
31, 2000. 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 $9,756 as of October 31,
2000. 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 $9,463 as of October 31, 2000.
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 $10,720 as of October
31, 2000. 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 $10,150 as of
October 31, 2000. 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 $10,049 as of October 31, 2000.
*No contingent deferred sales charge applicable.
<TABLE>
<CAPTION>
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,
2000. 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, 2000
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks and
warrants (cost - $24,447,301) $27,344,672
Short-term investments
(cost - $3,631,786) - Note A 3,631,786
-----------------
30,976,458
Cash 879
Foreign currency, at value
(cost - $1,238) 1,238
Receivable for investments sold 868,543
Receivable for shares sold 213,390
Dividends receivable 5,788
Interest receivable 81
Other assets 25,389
-----------------
Total Assets 32,091,766
--------------------------------------------------------------
Liabilities:
Payable for investments purchased 570,354
Payable for shares repurchased 28,582
Payable for foreign currency exchange
contracts purchased 679
Payable for foreign currency exchange
contracts sold 112
Payable for securities on loan --
Note A 3,188,786
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 25,267
Accounts payable and accrued expenses 58,653
-----------------
Total Liabilities 3,872,433
--------------------------------------------------------------
Net Assets:
Capital paid-in 27,868,983
Accumulated net realized loss on
investments, financial futures
contracts and foreign currency
transactions (2,391,689)
Net unrealized appreciation of
investments and foreign currency
transactions 2,893,259
Accumulated net investment loss (151,220)
-----------------
Net Assets $28,219,333
==============================================================
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 - $12,944,637/1,179,395 $10.98
==============================================================
Class B - $14,775,794/1,368,548 $10.80
==============================================================
Class C - $498,902/46,216 $10.80
==============================================================
Maximum Offering Price Per Share:
Class A* - ($10.98/95%) $11.56
==============================================================
Class C - ($10.80/99%) $10.91
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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, 2000
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $65,836) $401,807
Interest (including income on
securities loaned of $16,281) 60,426
-----------------
462,233
-----------------
Expenses:
Investment management fee - Note B 301,771
Distribution and service fee - Note B
Class A 46,280
Class B 177,074
Class C 3,959
Transfer agent fee - Note B 134,926
Custodian fee 132,418
Registration and filing fees 48,086
Auditing fee 20,500
Printing 17,430
Accounting and legal services fee - Note B 6,357
Interest expense 2,873
Miscellaneous 2,374
Trustees' fees 2,062
Legal fees 302
-----------------
Total Expenses 896,412
--------------------------------------------------------------
Less Expense Reduction - Note B (132,448)
--------------------------------------------------------------
Net Expenses 763,964
--------------------------------------------------------------
Net Investment Loss (301,731)
--------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures Contracts
and Foreign Currency Transactions:
Net realized gain on investments sold 484,610
Net realized loss on financial futures
contracts (29,430)
Net realized loss on foreign currency
transactions (155,075)
Change in net unrealized appreciation
(depreciation) of investments (270,810)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (3,483)
-----------------
Net Realized and Unrealized Gain on
Investments, Financial Futures
Contracts and Foreign Currency
Transactions 25,812
--------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations ($275,919)
==============================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss ($228,019) ($301,731)
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions (1,420,471) 300,105
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 4,249,574 (274,293)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 2,601,084 (275,919)
----------------- -----------------
From Fund Share Transactions - Net: * (1,040,151) (1,059,975)
----------------- -----------------
Net Assets:
Beginning of period 27,994,294 29,555,227
----------------- -----------------
End of period (including
accumulated net investment loss
of $76,181 and $151,220,
respectively) $29,555,227 $28,219,333
================= =================
<CAPTION>
*Analysis of Fund Share Transactions:
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1999 2000
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,184,807 $12,972,731 3,234,189 $39,537,649
Less shares repurchased (1,104,630) (12,013,213) (3,341,631) (41,147,006)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 80,177 $959,518 (107,442) ($1,609,357)
================= ================= ================= =================
CLASS B
Shares sold 955,152 $10,400,345 1,012,078 $12,546,089
Less shares repurchased (1,177,076) (12,586,150) (1,000,017) (12,357,855)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (221,924) ($2,185,805) 12,061 $188,234
================= ================= ================= =================
CLASS C **
Shares sold 18,445 $195,641 172,501 $1,982,769
Less shares repurchased (897) (9,505) (143,833) (1,621,621)
----------------- ----------------- ----------------- -----------------
Net increase 17,548 $186,136 28,668 $361,148
================= ================= ================= =================
** 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, and any
increase or decrease in money shareholders invested in the Fund. The
footnote illustrates the number of Fund shares sold, reinvested and
redeemed during the last two periods, along with the corresponding
dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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:
-----------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -------------------------------
1998(1) 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $10.07 $11.16
------------- ------------- -------------
Net Investment Income
(Loss)(2) 0.01 (0.04) (0.06)
Net Realized and Unrealized
Gain (Loss) on Investments,
Financial Futures Contracts
and Foreign Currency
Transactions 0.06 1.13 (0.12)(3)
------------- ------------- -------------
Total From Investment Operations 0.07 1.09 (0.18)
------------- ------------- -------------
Net Asset Value, End of
Period $10.07 $11.16 $10.98
============= ============= =============
Total Investment Return at
Net Asset Value(4) 0.70%(5) 10.82% (1.61%)
Total Adjusted Investment
Return at Net Asset
Value(4,6) (0.24%)(5) 10.49% (2.01%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $12,147 $14,365 $12,945
Ratio of Expenses to Average
Net Assets 1.90%(7) 1.90% 1.90%
Ratio of Adjusted Expenses
to Average Net Assets(8) 3.31%(7) 2.23% 2.30%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.16%(7) (0.38%) (0.52%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(8) (1.25%)(7) (0.71%) (0.92%)
Portfolio Turnover Rate 31% 64% 97%
Fee Reduction Per Share(2) $0.10 $0.04 $0.05
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 each class. It
shows how the Fund's net asset value for a share has changed since the
end of the previous period. Additionally, important rela tionships
between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -------------------------------
1998(1) 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $11.07 $10.04 $11.06
------------- ------------- -------------
Net Investment Loss(2) (0.04) (0.12) (0.15)
Net Realized and Unrealized
Gain (Loss) on Investments,
Financial Futures Contracts
and Foreign Currency
Transactions (0.99) 1.14 (0.11)(3)
------------- ------------- -------------
Total From Investment Operations (1.03) 1.02 (0.26)
------------- ------------- -------------
Net Asset Value, End of
Period $10.04 $11.06 $10.80
============= ============= =============
Total Investment Return at
Net Asset Value(4) (9.30%)(5) 10.16% (2.35%)
Total Adjusted Investment
Return at Net Asset
Value(4,6) (9.89%)(5) 9.83% (2.75%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $15,847 $14,997 $14,776
Ratio of Expenses to Average
Net Assets 2.60%(7) 2.60% 2.60%
Ratio of Adjusted Expenses
to Average Net Assets(8) 4.01%(7) 2.93% 3.00%
Ratio of Net Investment Loss
to Average Net Assets (1.12%)(7) (1.08%) (1.23%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(8) (2.53%)(7) (1.41%) (1.63%)
Portfolio Turnover Rate 31% 64% 97%
Fee Reduction Per Share(2) $0.06 $0.04 $0.05
See notes to financial statements.
<CAPTION>
Financial Highlights (continued)
-----------------------------------------------------------------
PERIOD ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999(1) 2000
------------- -------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.64 $11.06
------------- -------------
Net Investment Loss(2) (0.07) (0.13)
Net Realized and Unrealized
Gain (Loss) on Investments,
Financial Futures Contracts
and Foreign Currency
Transactions 0.49 (0.13)(3)
------------- -------------
Total From Investment Operations 0.42 (0.26)
------------- -------------
Net Asset Value, End of
Period $11.06 $10.80
============= =============
Total Investment Return at
Net Asset Value(4) 3.95%(5) (2.35%)
Total Adjusted Investment
Return at Net Asset
Value(4,6) 3.73%(5) (2.75%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $194 $499
Ratio of Expenses to Average
Net Assets 2.60%(7) 2.60%
Ratio of Adjusted Expenses
to Average Net Assets(8) 2.93%(7) 3.00%
Ratio of Net Investment Loss
to Average Net Assets (1.17%)(7) (1.16%)
Ratio of Adjusted Net
Investment Loss to Average
Net Assets(8) (1.50%)(7) (1.56%)
Portfolio Turnover Rate 64% 97%
Fee Reduction Per Share(2) $0.03 $0.05
(1) Class A, Class B and Class C shares began operations on March 2,
1998, June 1, 1998 and March 1, 1999, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) 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.
(4) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(5) Not annualized.
(6) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
October 31, 2000
--------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the European Equity Fund on October 31, 2000. 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.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
------------------- ---------- ------------
<S> <C> <C> <C>
COMMON STOCKS
Finland (2.45%)
Nokia Oyj (Telecommunications) 16,806 $691,544
------------
France (19.80%)
Alcatel SA (Telecommunications) 9,002 549,251
Aventis SA (Medical) 1,560 112,524
Axa SA (Insurance) 1,054 139,530
Bouygues SA (Building) 5,543 282,228
Cap Gemini SA (Computers) 2,130 339,814
Carrefour SA (Retail) 5,177 347,502
Etablissements Economiques du Casino
Guichard-Perrachon SA (Retail) 2,395 209,134
France Telecom SA (Telecommunications) 2,095 219,027
Lagardere SCA (Diversified Operations) 3,090 175,424
L'Oreal SA (Cosmetics & Personal Care) 3,906 298,317
Pinault-Printemps-Redoute SA (Retail) 2,200 392,613
Renault SA (Automobile / Trucks) 4,978 247,546
Rexel SA (Electronics) 1,970 137,083
Sanofi-Synthelabo SA (Medical) 1,500 78,920
Schneider Electric SA (Machinery) 1,850 120,491
Societe Generale (Banks - Foreign) 4,283 243,152
STMicroelectronics NV (Electronics) 7,415 374,082
Thomson Multimedia SA* (Electronics) 4,612 211,342
Total Fina Elf SA (Oil & Gas) 4,822 689,903
Vivendi SA (Diversified Operations) 5,850 420,477
------------
5,588,360
------------
Germany (5.85%)
Allianz AG (Insurance) 2,100 712,022
Deutsche Bank AG (Banks - Foreign) 1,776 145,406
Deutsche Telekom AG (Telecommunications) 3,693 138,674
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance) 905 284,538
Siemens AG (Diversified Operations) 2,906 370,028
------------
1,650,668
------------
Ireland (1.19%)
CRH Plc (Building) 13,000 199,676
Elan Corp. Plc,* American Depositary Receipts
(Medical) 2,600 135,038
------------
334,714
------------
Italy (7.77%)
Assicurazioni Generali SpA (Insurance) 13,925 457,899
Banca Fideuram SpA (Finance) 15,213 233,925
Banca Intesa SpA (Banks - Foreign) 35,000 145,238
Banca Nazionale del Lavoro (Banks - Foreign) 41,188 133,517
Eni SpA (Oil & Gas) 23,475 127,095
Riunione Adriatica di Sicurta SpA (Insurance) 22,459 294,838
San Paolo-IMI SpA (Banks - Foreign) 16,198 262,542
Telecom Italia Mobile SpA (Telecommunications) 35,663 303,242
Telecom Italia SpA (Telecommunications) 20,130 233,174
------------
2,191,470
------------
Netherlands (12.84%)
Aegon NV (Insurance) 8,020 318,510
Akzo Nobel NV (Chemicals) 5,400 245,848
Fortis (NL) NV (Insurance) 11,152 340,689
ING Groep NV (Banks - Foreign) 5,942 408,030
Koninklijke Ahold NV (Retail) 13,316 386,798
Koninklijke Numico NV (Food) 5,443 254,503
Koninklijke (Royal) Philips Electronics NV
(Electronics) 4,690 184,311
Royal Dutch Petroleum Co. (Oil & Gas) 12,834 761,168
TNT Post Group NV (Transport) 6,794 143,904
Unilever NV (Food) 2,771 138,972
VNU NV (Media) 6,009 283,008
Wolters Kluwer NV (Media) 7,000 157,534
------------
3,623,275
------------
Norway (0.84%)
Tomra Systems ASA (Machinery) 5,870 235,964
------------
Spain (3.78%)
Banco Bilbao Vizcaya Argentaria SA (Banks - Foreign) 22,105 294,505
Banco Santander Central Hispano SA (Banks - Foreign) 13,486 130,693
Repsol-YPF, SA (Oil & Gas) 8,641 137,269
Telefonica Publicidad e Informacion, SA
(Advertising) 18,000 122,198
Telefonica SA* (Telecommunications) 20,071 382,715
------------
1,067,380
------------
Sweden (5.03%)
Ericsson (LM) Telefonaktiebolaget AB
(Telecommunications) 43,100 573,672
Nordic Baltic Holding AB (Banks - Foreign) 54,800 413,879
Skandia Forsakrings AB (Insurance) 25,440 431,540
------------
1,419,091
------------
Switzerland (5.52%)
Adecco SA (Business Services - Misc.) 317 219,198
Compagnie Financiere Richemont AG (Retail) 62 172,452
Credit Suisse Group (Banks - Foreign) 1,655 310,266
Novartis AG (Medical) 300 455,107
Roche Holding AG (Medical) 44 401,914
------------
1,558,937
------------
United Kingdom (29.14%)
Baltimore Technologies Plc* (Computers) 12,500 96,216
Barclays Plc (Banks - Foreign) 4,995 142,921
Bookham Technology Plc* (Electronics) 2,500 82,305
BP Amoco Plc (Oil & Gas) 121,209 1,027,949
British Telecommunications Plc
(Telecommunications) 13,648 160,005
Cable & Wireless Plc (Telecommunications) 20,676 292,498
Capita Group Plc (Business Services - Misc.) 16,199 123,396
Carlton Communications Plc (Media) 13,338 107,408
Centrica Plc (Utilities) 130,054 447,223
COLT Telecom Group Plc* (Telecommunications) 5,540 176,842
Energis Plc* (Telecommunications) 20,000 171,067
Freeserve Plc* (Computers) 55,000 131,275
Glaxo Wellcome Plc (Medical) 23,107 665,177
HSBC Holdings Plc (Banks - Foreign) 44,102 628,379
Marconi Plc (Telecommunications) 13,729 173,305
New Dixons Group Plc (Electronics) 45,715 135,977
Pearson Plc (Media) 15,545 417,042
Reckitt Benckiser Plc (Soap & Cleaning
Preparations) 15,800 207,700
Royal Bank of Scotland Group Plc (Banks - Foreign) 11,968 268,636
SEMA Group Plc (Computers) 20,212 255,141
SmithKline Beecham Plc (Medical) 37,632 485,959
Standard Chartered Plc (Banks - Foreign) 10,000 144,224
Tesco Plc (Retail) 75,200 286,690
Vodafone AirTouch Plc (Telecommunications) 344,410 1,432,951
Zeneca Group Plc (Medical) 3,500 163,928
------------
8,224,214
------------
TOTAL COMMON STOCKS
(Cost $23,748,009) (94.21%) 26,585,617
------ ------------
PREFERRED STOCKS
Germany (2.68%)
Fresenius AG (Medical) 915 225,953
MLP AG (Finance) 810 109,635
SAP AG (Computers) 2,094 422,048
------------
757,636
------------
TOTAL PREFERRED STOCKS
(Cost $698,458) (2.68%) 757,636
------ ------------
WARRANTS
Germany (0.01%)
Muenchener Rueckversicherungs-Gesellschaft AG*
(Insurance) 16 1,419
------------
TOTAL WARRANTS
(Cost $834) (0.01%) 1,419
------ ------------
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS
(Cost $24,447,301) (96.90%) 27,344,672
------ ------------
INTEREST PAR VALUE MARKET
RATE (000s OMITTED) VALUE
---------- ------------ ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.57%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 10-31-00, due
11-01-00 (Secured by U.S. Treasury
Bonds, 6.000% and 9.125%, due
05-15-18 and 02-15-26) - Note A 6.56% $443 $443,000
------------
NUMBER OF SHARES
----------------
Cash Equivalents (11.30%)
Navigator Securities Lending Prime
Portfolio** 3,188,786 3,188,786
------------
TOTAL SHORT-TERM INVESTMENTS (12.87%) 3,631,786
--------- ------------
TOTAL INVESTMENTS (109.77%) 30,976,458
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (9.77%) (2,757,125)
--------- ------------
TOTAL NET ASSETS (100.00%) $28,219,333
========= ============
* 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.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Concentration
October 31, 2000 (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,
2000, assigned to the various investment categories.
MARKET VALUE
OF SECURITIES
AS A PERCENTAGE
INVESTMENT CATEGORIES OF NET ASSETS
--------------------- ---------------
<S> <C>
Advertising 0.43%
Automobile / Trucks 0.88
Banks -- Foreign 13.01
Building 1.71
Business Services -- Misc. 1.21
Chemicals 0.87
Computers 4.41
Cosmetics & Personal Care 1.06
Diversified Operations 3.42
Electronics 3.99
Finance 1.22
Food 1.39
Insurance 10.57
Machinery 1.26
Media 3.42
Medical 9.65
Oil & Gas 9.72
Retail 6.36
Soap & Cleaning Preparations 0.74
Telecommunications 19.49
Transport 0.51
Utilities 1.58
Short-term investments 12.87
-------
TOTAL INVESTMENTS 109.77%
=======
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- European Equity Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock European Equity Fund (the "Fund") is a diversified series
of John Hancock World Fund (the "Trust"), an open-end management
investment company, registered under the Investment Company Act of 1940.
The Fund's investment objective is to achieve long-term capital
appreciation.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights 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.
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.
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, resulting from changes in the
exchange rate.
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.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are determined at the fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Distribution and service fees, if any, are
calculated daily at the class level based on the appropriate net assets
of each class and the specific expense rate(s) applicable to each class.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund will be allocated in such a manner as deemed equitable,
taking into consideration, among other things, the nature and type of
expense and the relative sizes of the funds.
BANK BORROWINGS The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Fund has entered into a syndicated line of credit
agreement with various banks. This agreement enables the Fund to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing.
In addition, a commitment fee is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity under
the line of credit during the year ended October 31, 2000.
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, 2000, the Fund loaned securities having a
market value of $3,083,484 collateralized by cash in the amount of
$3,188,786. The cash collateral was invested in a short-term instrument.
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 the
potential inability of 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.
The Fund had the following open forward foreign currency exchange
contracts at October 31, 2000:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION
CURRENCY COVERED BY CONTRACT DATE (DEPRECIATION)
-------- ------------------- ---------- ------------
BUYS
Euro Currency 155,132 NOV 2000 ($437)
Pound Sterling 324,136 NOV 2000 (242)
-----------
($679)
===========
SELLS
Pound Sterling 171,679 NOV 2000 ($112)
===========
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, known as "variation
margin," to and from the broker 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. 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. The Fund had no open financial futures contracts at October
31, 2000.
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 $2,057,027 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 gain distributions will
be made. The carryforwards expire as follows: October 31, 2006 --
$822,658 and October 31, 2007 -- $1,234,369.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Fund identifies the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Fund records all dividends and 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.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.90% of the first $500,000,000 of the Fund's average daily net asset
value, and (b) 0.70% of the Fund's average daily net asset value in
excess of $500,000,000. The Adviser has a subadvisory agreement with
Indocam International Investment Services. The Fund is not responsible
for the payment of the subadvisory fees.
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, at least until February 28, 2001.
Accordingly, the reduction in the Fund's expenses amounted to $132,448
for the year ended October 31, 2000. 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. 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 makes 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. Up to 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.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $31,625 with regard to sales of Class A shares. Of this
amount, $5,067 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $15,696 was paid as
sales commissions to unrelated broker-dealers and $10,862 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. Effective May 1, 2000, all Class
C shares retail purchases are assessed a 1.00% up-front sales charge.
During the year ended October 31, 2000, JH Funds received net up-front
sales charges of $4,813 with regard to sales of Class C shares. Of this
amount, $4,297 was paid as sales commissions to unrelated broker-dealers
and $516 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares 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 CDSCs are paid to
JH Funds and are used in whole or in part to defray its expenses for
providing distribution related services to the Fund in connection with
the sale of Class B and Class C shares. For the year ended October 31,
2000, CDSCs received by JH Funds amounted to $89,990 for Class B and $44
for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
The Fund pays monthly 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 Adviser owns 150,000 shares of beneficial interest of the Fund. Mr.
Stephen L. Brown and Ms. Maureen R. Ford are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt
of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock
funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended October 31, 2000, aggregated $30,694,619 and
$32,743,502, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended October 31, 2000.
The cost of investments owned at October 31, 2000 (including short-term
investments) for federal income tax purposes was $28,484,688. Gross
unrealized appreciation and depreciation of investments aggregated
$3,962,871 and $1,471,101, respectively, resulting in net unrealized
appreciation of $2,491,770.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 2000, the Fund has reclassified
amounts to reflect a decrease in net realized loss on investments of
$124,361, a decrease in accumulated net investment loss of $226,692 and
a decrease in capital paid-in of $351,053. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary difference, as of October 31, 2000. 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, passive foreign
investment companies and net realized gain/loss on foreign currency
transactions, in computation of distributable income and capital gains
under federal tax rules versus generally accepted accounting principles.
The calculation of net investment income (loss) per share in the
financial highlights excludes these adjustments.
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, 2000, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and 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, 2000, by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8 , 2000
NOTES
John Hancock Funds -- European Equity Fund
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John Hancock Funds, Inc.
Member NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
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PAID
Randolph, MA
Permit No. 75
This report is for the information of the shareholders of the John Hancock
European Equity Fund. It is not authorized for distribution to prospective
investors unless it is preceded or accompanied by the current prospectus,
which details charges, investment objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]
9200A 10/00
12/00
