JOHN HANCOCK
Income Funds
[Logo]
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Prospectus Government Income Fund
May 1, 1997*
High Yield Bond Fund
This prospectus gives vital
information about these funds. Intermediate Maturity
For your own benefit and Government Fund
protection, please read it before
you invest, and keep it on hand Limited-Term Government Fund
for future reference.
Sovereign Bond Fund
Please note that these funds:
o are not bank deposits Sovereign U.S. Government Income Fund
o are not federally insured
o are not endorsed by any bank Strategic Income Fund
or government agency
o are not guaranteed to achieve
their goal(s)
Some of these funds may invest up
to 100% in junk bonds; read risk
information carefully.
Like all mutual fund shares,
these securities have not been
approved or disapproved by the
Securities and Exchange
Commission or any state
securities commission, nor has
the Securities and Exchange
Commission or any state
securities commission passed upon
the accuracy or adequacy of this
prospectus. Any representation to
the contrary is a criminal
offense.
*March 1, 1997 for all funds
except Limited-Term Government
Fund and Sovereign Bond Fund.
[Logo]JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
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A fund-by-fund look at goals, Government Income Fund 4
strategies, risks, expenses High Yield Bond Fund 6
and financial history. Intermediate Maturity Government Fund 8
Limited-Term Government Fund 10
Sovereign Bond Fund 12
Sovereign U.S. Government Income Fund 14
Strategic Income Fund 16
Policies and instructions for Your account
opening, maintaining and Choosing a share class 18
closing an account in any How sales charges are calculated 18
income fund. Sales charge reductions and waivers 19
Opening an account 20
Buying shares 21
Selling shares 22
Transaction policies 24
Dividends and account policies 24
Additional investor services 25
Details that apply to the Fund details
income funds as a group. Business structure 26
Sales compensation 27
More about risk 29
For more information back cover
<PAGE>
Overview
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GOAL OF THE INCOME FUNDS
John Hancock income funds seek current income without sacrificing total return.
Some of the funds also invest for stability of principal. Each fund has its own
strategy and its own risk/reward profile. Because you could lose money by
investing in these funds, be sure to read all risk disclosure carefully before
investing.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
o are seeking a regular stream of income
o are seeking higher potential returns than money market funds and are willing
to accept moderate risk of volatility
o want to diversify their portfolios
o are seeking a mutual fund for the income portion of an asset allocation
portfolio
o are retired or nearing retirement
Income funds may NOT be appropriate if you:
o are investing for maximum return over a long time horizon
o require absolute stability of your principal
THE MANAGEMENT FIRM
All John Hancock income funds are managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Mutual Life Insurance Company and manages more than $20 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clipart] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clipart] Portfolio securities The primary types of securities in which the fund
invests. Secondary investments are described in "More about risk" at the end of
the prospectus.
[Clipart] Risk factors The major risk factors associated with the fund.
[Clipart] Portfolio management The individual or group designated by the
investment adviser to handle the fund's day-to-day management.
[Clipart] Expenses The overall costs borne by an investor in the fund, including
sales charges and annual expenses.
[Clipart] Financial highlights A table showing the fund's financial performance
for up to ten years, by share class. A bar chart showing total return allows you
to compare the fund's historical risk level to those of other funds.
<PAGE>
Government Income Fund
REGISTRANT NAME: JOHN HANCOCK BOND TRUST
TICKER SYMBOL CLASS A: JHGIX CLASS B: TSGIX
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GOAL AND STRATEGY
[Clipart] The fund seeks to earn a high level of current income consistent with
preservation of capital. To pursue this goal, the fund invests primarily in U.S.
Government and agency securities of any maturity, as described below. Stability
of share price is a secondary goal.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 80% of assets in
securities that are issued, or guaranteed as to principal and interest, by the
U.S. Government, its agencies or instrumentalities. These may include
Treasuries, mortgage-backed securities such as Ginnie Maes, Freddie Macs and
Fannie Maes, and repurchase agreements and forward commitments involving these
securities.
For liquidity and flexibility, the fund may place up to 20% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk investments, including asset-backed securities,
U.S. dollar-denominated foreign government securities and derivative and
leveraged investments, and may engage in other investment practices. Investments
in asset-backed and foreign government securities must be in the two highest and
four highest rating categories, respectively, or if unrated, be of comparable
quality. Up to 10% of assets may be invested in foreign government bonds rated
BB/Ba or B (junk bonds).
RISK FACTORS
[Clipart] As with most income funds, the value of your investment will fluctuate
with changes in interest rates. Typically, a rise in interest rates causes a
decline in the market value of debt securities (including U.S. Government and
mortgage-backed securities). To the extent that the fund invests in
mortgage-backed securities, it may also be subject to extension and prepayment
risks. These risks are defined in "More about risk" starting on page 29. Other
factors may affect the market price and yield of the fund's securities,
including investor demand and domestic and worldwide economic conditions.
The U.S. Government does not guarantee the market value or the current yield of
government securities, nor does the government's guarantee in any way extend to
the fund itself. Please read "More about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[Clipart] Barry H. Evans, CFA, leader of the fund's portfolio management team
since January 1995, is a senior vice president of the adviser. He has been in
the investment business since joining John Hancock Funds in 1986.
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INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
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Shareholder transaction expenses Class A Class B
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Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
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Annual fund operating expenses (as a % of average net assets)
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Management fee 0.63% 0.63%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.30% 0.30%
Total fund operating expenses 1.18% 1.93%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
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Share class Year 1 Year 3 Year 5 Year 10
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Class A shares $56 $81 $107 $182
Class B shares
Assuming redemption
at end of period $70 $91 $124 $206
Assuming no redemption $20 $61 $104 $206
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
4 GOVERNMENT INCOME FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1988(1) 1989 1990 1991 1992 1993 1994(1) 1995(2) 1996
2.40(6) 10.22 3.71 14.38 8.81 9.86 (6.42) 14.49 3.84
<TABLE>
<CAPTION>
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Class A - year ended October 31, 1994(1) 1995(2) 1996
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<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.85 $ 8.75 $ 9.32
Net investment income (loss) 0.06 0.72 0.65(3)
Net realized and unrealized gain (loss) on investments (0.10) 0.57 (0.25)
Total from investment operations (0.04) 1.29 0.40
Less distributions:
Dividends from net investment income (0.06) (0.72) (0.65)
Net asset value, end of period $ 8.75 $ 9.32 $ 9.07
Total investment return at net asset value(4,5) (%) (0.45)(6) 15.32 4.49
Total adjusted investment return at net asset value(4) (%) (0.46)(6) 15.28 --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 223 470,569 396,323
Ratio of expenses to average net assets(5) (%) 0.12(6) 1.19 1.17
Ratio of net investment income (loss) to average net assets(5) (%) 0.71(6) 7.38 7.10
Portfolio turnover rate (%) 92 102 106
Debt outstanding at end of period (000s omitted)(7) ($) -- -- --
Average daily amount of debt outstanding during the period (000s omitted)(7) ($) 349 N/A N/A
Average monthly number of shares outstanding during the period (000s omitted) 28,696 N/A N/A
Average daily amount of debt outstanding per share during the period(7) ($) 0.01 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended October 31, 1988(1) 1989 1990 1991 1992 1993 1994
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<S> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.58 $ 10.01 $ 9.98 $ 9.37 $ 9.79 $ 9.83 $ 10.05
Net investment income (loss) 0.69(3) 0.98 0.88 0.89 0.80 0.70 0.65
Net realized and unrealized gain (loss) on
investments (0.45) (0.01) (0.54) 0.40 0.03 0.24 (1.28)
Total from investment operations 0.24 0.97 0.34 1.29 0.83 0.94 (0.63)
Less distributions
Dividends from net investment income (0.64) (1.00) (0.95) (0.87) (0.79) (0.72) (0.65)
Distributions from net realized gain on
investments sold (0.17) -- -- -- -- -- (0.02)
Total distributions (0.81) (1.00) (0.95) (0.87) (0.79) (0.72) (0.67)
Net asset value, end of period $10.01 $ 9.98 $ 9.37 $ 9.79 $ 9.83 $ 10.05 $ 8.75
Total investment return at net asset value(4,5) (%) 2.40(6) 10.22 3.71 14.38 8.81 9.86 (6.42)
Total adjusted investment return at net asset
value(4) (%) 1.02(6) 9.40 3.67 -- 8.66 9.85 (6.43)
Ratios and supplemental data
Net assets end of period (000s omitted) ($) 6,966 26,568 64,707 129,014 225,540 293,413 241,061
Ratio of expenses to average net assets (%) 1.38(6) 2.00 2.00 2.00 2.00(5) 2.00(5) 1.93(5)
Ratio of adjusted expenses to average net assets (%) 2.76(6) 2.82 2.04 -- -- -- --
Ratio of net investment income (loss) to average net
assets(5) (%) 6.34(6) 9.64 9.22 9.09 8.03 7.06 6.98
Ratio of adjusted net investment income (loss) to
average net assets (%) 4.96(6) 8.82 9.18 -- -- -- --
Portfolio turnover rate (%) 174 151 83 162 112 138 92
Fee reduction per share ($) 0.15 0.08 0.004 -- -- -- --
Debt outstanding at end of period (000s omitted)(7) ($) -- -- -- -- 0 0 0
Average daily amount of debt outstanding during the
period (000s omitted)(7) ($) -- -- -- -- 6,484 503 349
Average monthly number of shares outstanding during
the period (000s omitted) -- -- -- -- 18,572 26,378 28,696
Average daily amount of debt outstanding per share
during the period(7) ($) -- -- -- -- 0.35 0.02 0.01
</TABLE>
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Class B - year ended October 31, 1995(2) 1996
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Per share operating performance
Net asset value, beginning of period $ 8.75 $ 9.32
Net investment income (loss) 0.65 0.58(3)
Net realized and unrealized gain (loss) on
investments 0.57 (0.24)
Total from investment operations 1.22 0.34
Less distributions
Dividends from net investment income (0.65) (0.58)
Distributions from net realized gain on
investments sold -- --
Total distributions (0.65) (0.58)
Net asset value, end of period $ 9.32 $ 9.08
Total investment return at net asset value(4,5) (%) 14.49 3.84
Total adjusted investment return at net asset
value(4) (%) 14.47 --
Ratios and supplemental data
Net assets end of period (000s omitted) ($) 226,954 178,124
Ratio of expenses to average net assets (%) 1.89(5) 1.90
Ratio of adjusted expenses to average net assets (%) -- --
Ratio of net investment income (loss) to average net
assets(5) (%) 7.26 6.37
Ratio of adjusted net investment income (loss) to
average net assets (%) -- --
Portfolio turnover rate (%) 102 106
Fee reduction per share ($) -- --
Debt outstanding at end of period (000s omitted)(7) ($) -- --
Average daily amount of debt outstanding during the
period (000s omitted)(7) ($) N/A N/A
Average monthly number of shares outstanding during
the period (000s omitted) N/A N/A
Average daily amount of debt outstanding per share
during the period(7) ($) N/A N/A
(1) Class A and Class B shares commenced operations on September 30, 1994 and
February 23, 1988, respectively.
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Excludes interest expense, which equals 0.04% for Class A for the year
ended October 31, 1995 and 0.15%, 0.01%, 0.01% and 0.02% for Class B for
the years ended October 31, 1992, 1993, 1994 and 1995, respectively.
(6) Not annualized.
(7) Debt outstanding consists of reverse repurchase agreements entered into
during the year.
GOVERNMENT INCOME FUND 5
<PAGE>
High Yield Bond Fund
REGISTRANT NAME: JOHN HANCOCK BOND TRUST
TICKER SYMBOL CLASS A: JHHBX CLASS B: TSHYX
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GOAL AND STRATEGY
[Clipart] The fund seeks to maximize current income without assuming undue risk.
To pursue this goal, the fund invests primarily in junk bonds, i.e. lower-rated,
higher-yielding debt securities.
Because the performance of junk bonds has historically been influenced by
economic conditions, the fund may rotate securities selection by business sector
according to the economic outlook. The fund also seeks capital appreciation, but
only when consistent with its primary goal.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 65% of assets in
bonds rated lower than BBB/Baa and their unrated equivalents. Up to 10% of
assets may be invested in bonds rated CC/Ca. Up to 40% of assets may be invested
in the securities of issuers in the electric utility and telephone industries.
For all other industries, the limitation is 25% of assets.
Types of bonds include, but are not limited to, domestic and foreign corporate
bonds, debentures, notes, convertible securities, preferred stocks, municipal
obligations and government obligations.
The fund may also invest up to 20% of net assets in U.S. or foreign equities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk investments, including restricted securities, and
may engage in other investment practices.
RISK FACTORS
[Clipart] Investors should expect greater fluctuations in share price, yield and
total return compared to less aggressive bond funds. These fluctuations, whether
positive or negative, may be sharp and unanticipated.
Issuers of junk bonds are typically in weak financial health and their ability
to pay interest and principal is uncertain. Compared to issuers of
investment-grade bonds, they are more likely to encounter financial difficulties
and to be materially affected by these difficulties when they do encounter them.
Junk bond markets may react strongly to adverse news about an issuer or the
economy, or to the perception or expectation of adverse news. Before you invest,
please read "More about risk" starting on page 29.
PORTFOLIO MANAGEMENT
[Clipart] Arthur N. Calavritinos, CFA, leader of the fund's portfolio management
team since July 1995, is a second vice president of the adviser. He joined John
Hancock Funds in 1988 and has been in the investment business since 1987.
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INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
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Annual fund operating expenses (as a % of average net assets)
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Management fee 0.56% 0.56%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.29% 0.29%
Total fund operating expenses 1.10% 1.85%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
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Share class Year 1 Year 3 Year 5 Year 10
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Class A shares $56 $78 $103 $173
Class B shares
Assuming redemption
at end of period $69 $88 $120 $197
Assuming no redemption $19 $58 $100 $197
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
6 HIGH YIELD BOND FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1987(1) 1988 1989 1990 1991 1992 1993(1) 1994 1995(2) 1996
(0.10)(5) 9.77 (4.51) (8.04) 34.21 11.56 21.76 (1.33) 7.97 15.24
<TABLE>
<CAPTION>
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Class A - year ended October 31, 1993(1) 1994 1995(2) 1996
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<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.10 $ 8.23 $ 7.33 $ 7.20
Net investment income (loss) 0.33 0.80(3) 0.72 0.76(3)
Net realized and unrealized gain (loss) on investments 0.09 (0.83) (0.12) 0.35
Total from investment operations 0.42 (0.03) 0.60 1.11
Less distributions:
Dividends from net investment income (0.29) (0.82) (0.73) (0.76)
Distributions from net realized gain on investments sold -- (0.05) -- --
Total distributions (0.29) (0.87) (0.73) (0.76)
Net asset value, end of period $ 8.23 $ 7.33 $ 7.20 $ 7.55
Total investment return at net asset value(4) (%) 4.96(5) (0.59) 8.83 16.06
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 2,344 11,696 26,452 52,792
Ratio of expenses to average net assets (%) 0.91(6) 1.16 1.16 1.10
Ratio of net investment income (loss) to average net assets (%) 12.89(6) 10.14 10.23 10.31
Portfolio turnover rate (%) 204 153 98 113
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended October 31, 1987(1) 1988 1989 1990 1991 1992
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<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 9.95 $ 9.94 $ 9.70 $ 8.14 $ 6.45 $ 7.44
Net investment income (loss) 0.01 1.07(3) 1.16 1.09 0.98 0.87
Net realized and unrealized gain (loss)
on investments (0.02) (0.14) (1.55) (1.68) 1.06 (0.04)
Total from investment operations (0.01) 0.93 (0.39) (0.59) 2.04 0.83
Less distributions:
Dividends from net investment income -- (1.17) (1.14) (1.09) (0.98) (0.84)
Distributions from net realized gain on
investments sold -- -- -- -- -- --
Distributions from capital paid-in -- -- (0.03) (0.01) (0.07) --
Total distributions -- (1.17) (1.17) (1.10) (1.05) (0.84)
Net asset value, end of period $ 9.94 $ 9.70 $ 8.14 $ 6.45 $ 7.44 $ 7.43
Total investment return at net asset
value(4) (%) (0.10)(5) 9.77 (4.51) (8.04) 34.21 11.56
Total adjusted investment return at net
asset value(4,7) (%) (0.41)(5) 9.01 (4.82) (8.07) -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 110 20,852 33,964 37,097 72,023 98,560
Ratio of expenses to average net assets (%) 0.03(6) 2.00 2.20 2.22 2.24 2.25
Ratio of adjusted expenses to average net assets(8) (%) 0.34(6) 2.76 2.51 2.25 -- --
Ratio of net investment income (loss) to average net assets (%) 0.09(6) 10.97 12.23 14.59 13.73 11.09
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (0.22)(6) 10.21 11.92 14.56 -- --
Portfolio turnover rate (%) 0 60 100 96 93 206
Fee reduction per share ($) 0.03 0.07 0.03 0.002 -- --
<CAPTION>
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Class B - year ended October 31, 1993 1994 1995(2) 1996
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Per share operating performance
Net asset value, beginning of period $ 7.43 $ 8.23 $ 7.33 $ 7.20
Net investment income (loss) 0.80 0.74(3) 0.67 0.70(3)
Net realized and unrealized gain (loss)
on investments 0.75 (0.83) (0.13) 0.35
Total from investment operations 1.55 (0.09) 0.54 1.05
Less distributions:
Dividends from net investment income (0.75) (0.76) (0.67) (0.70)
Distributions from net realized gain on
investments sold -- (0.05) -- --
Distributions from capital paid-in -- -- -- --
Total distributions (0.75) (0.81) (0.67) (0.70)
Net asset value, end of period $ 8.23 $ 7.33 $ 7.20 $ 7.55
Total investment return at net asset
value(4) (%) 21.76 (1.33) 7.97 15.24
Total adjusted investment return at net
asset value(4,7) (%) -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 154,214 160,739 180,586 242,944
Ratio of expenses to average net assets (%) 2.08 1.91 1.89 1.82
Ratio of adjusted expenses to average net assets(8) (%) -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 10.07 9.39 9.42 9.49
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) -- -- -- --
Portfolio turnover rate (%) 204 153 98 113
Fee reduction per share ($) -- -- -- --
</TABLE>
(1) Class A and Class B shares commenced operations on June 30, 1993 and
October 26, 1987, respectively.
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) Annualized.
(7) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Unreimbursed, without fee reduction.
HIGH YIELD BOND FUND 7
<PAGE>
Intermediate Maturity Government Fund
REGISTRANT NAME: JOHN HANCOCK BOND TRUST
TICKER SYMBOL CLASS A: TAUSX CLASS B: TSUSX
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GOAL AND STRATEGY
[Clipart] The fund seeks to earn a high level of current income consistent with
preservation of capital and maintenance of liquidity. To pursue this goal, the
fund invests primarily in U.S. Government securities of any maturity, as
described below. The fund's weighted average maturity will typically be between
three and ten years.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 65% of assets
in securities that are issued, or guaranteed as to principal and interest, by
the U.S. Government, its agencies or instrumentalities. These may include
Treasuries and mortgage-backed securities such as Ginnie Maes and Fannie Maes.
The fund may invest up to 35% in asset-backed securities or corporate debt
securities rated AAA/Aaa and their unrated equivalents. For liquidity and
flexibility, the fund may place up to 35% of assets in investment-grade
short-term securities. In abnormal market conditions, it may invest more assets
in these securities as a defensive tactic. The fund also may invest in certain
higher-risk investments, including derivative and leveraged investments, and may
engage in other investment practices.
RISK FACTORS
[Clipart] As with most income funds, the value of your investment will fluctuate
with changes in interest rates. Typically, a rise in interest rates causes a
decline in the market value of debt securities (including U.S. Government and
mortgage-backed securities). To the extent that the fund invests in
mortgage-backed securities, it may also be subject to extension and prepayment
risks. These risks are defined in "More about risk" starting on page 29. Other
factors may affect the market price and yield of the fund's securities,
including investor demand and domestic and worldwide economic conditions.
The U.S. Government does not guarantee the market value or the current yield of
government securities, nor does the government's guarantee in any way extend to
the fund itself. Please read "More about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[Clipart] Roger C. Hamilton, leader of the fund's portfolio management team
since January 1992 (with the fund's previous adviser), is a vice president of
the adviser. He joined John Hancock Funds in December 1994 and has been in the
investment business since 1980.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 3.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 3.00%
Redemption fee(2) none none
Exchange fee none none
- --------------------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management fee (after expense limitation)(3) 0.00% 0.00%
12b-1 fee 0.25% 1.00%
Other expenses (after limitation)(3) 0.50% 0.50%
Total fund operating expenses
(after limitation)(3) 0.75% 1.50%
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $37 $53 $70 $120
Class B shares
Assuming redemption
at end of period $45 $67 $82 $131
Assuming no redemption $15 $47 $82 $131
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(3) Reflects the adviser's temporary agreement to limit expenses (except for
12b-1 and other class-specific expenses). Without this limitation,
management fees would be 0.40% for each class, other expenses would be
0.72% for each class and total fund operating expenses would be 1.37% for
Class A and 2.02% for Class B.
8 INTERMEDIATE MATURITY GOVERNMENT FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1992(4) 1993 1994 1995(2) 1996 1996(6)
1.96(4) 6.08 2.51 5.60 3.98 2.03(4)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended March 31, 1992(1) 1993 1994 1995(2) 1996 1996(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 10.00 $ 10.03 $ 10.05 $ 9.89 $ 9.79 $ 9.69
Net investment income (loss) 0.17 0.58 0.41 0.49 0.62 0.40(4)
Net realized and unrealized gain (loss) on investments 0.03 0.02 (0.16) (0.11) (0.08) (0.21)
Total from investment operations 0.20 0.60 0.25 0.38 0.54 0.19
Less distributions:
Dividends from net investment income (0.17) (0.58) (0.41) (0.48) (0.64) (0.34)
Net asset value, end of period $ 10.03 $ 10.05 $ 9.89 $ 9.79 $ 9.69 $ 9.54
Total investment return at net asset value(5,7)(%) 1.96(6) 6.08 2.51 3.98 5.60 2.03(6)
Total adjusted investment return at net asset value(4,7)(%) 1.68(6) 5.53 2.27 3.43 4.83 1.87(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 13,775 33,273 24,310 12,950 29,024 25,856
Ratio of expenses to average net assets(5)(%) 0.50(9) 0.50 0.75 0.80 0.75 0.75(9)
Ratio of adjusted expenses to average net assets(8,10)(%) 1.62(9) 1.05 0.99 1.35 1.45 1.07(9)
Ratio of net investment income (loss) to average assets(10)(%)
assets (%) 6.47(9) 5.47 4.09 4.91 6.49 7.05(9)
Ratio of adjusted net investment income (loss) to average
assets(8) (%) 5.35(9) 4.92 3.85 4.36 5.79 6.73(9)
Portfolio turnover rate (%) 1 186 244 341 423 115
Fee reduction per share ($) 0.11 0.06 0.02 0.05 0.07 0.02(4)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class B - year ended March 31, 1992(1) 1993 1994 1995(2) 1996 1996(9)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.00 $ 10.03 $ 10.05 $ 9.89 $ 9.79 $ 9.69
Net investment income (loss) 0.15 0.51 0.34 0.43 0.57 0.31(9)
Net realized and unrealized gain (loss) on investments 0.03 0.02 (0.16) (0.11) (0.10) (0.15)
Total from investment operations 0.18 0.53 0.18 0.32 0.47 0.16
Less distributions:
Dividends from net investment income (0.15) (0.51) (0.34) (0.42) (0.57) (0.31)
Net asset value, end of period $10.03 $ 10.05 $ 9.89 $ 9.79 $ 9.69 $ 9.54
Total investment return at net asset value(3) (%) 1.80(6) 5.40 1.85 3.33 4.92 1.69(9)
Total adjusted investment return at net asset value(5,7) 1.52(6) 4.85 1.61 2.78 4.15 1.53(9)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,630 13,753 11,626 9,506 8,532 7,118
Ratio of expenses to average net assets(6) (%) 1.15(9) 1.15 1.40 1.45 1.40 1.40(9)
Ratio of adjusted expenses to average net assets (%) 2.27(9) 1.70 1.64 2.00 2.10 1.72(9)
Ratio of net investment income (loss) to average net assets
assets (10)(%) 5.85(9) 4.82 3.44 4.26 5.80 6.39(9)
Ratio of adjusted net investment income (loss) to average
assets(10) (%) 4.73(9) 4.27 3.20 3.71 5.10 6.07(9)
Portfolio turnover rate (%) 1 186 244 341 423 115
Fee reduction per share ($) 0.11 0.06 0.02 0.05 0.07 0.02
</TABLE>
(1) Class A and Class B shares commenced operations on December 31, 1991.
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Six months ended September 30, 1996. (Unaudited.)
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Beginning on December 31, 1991 (commencement of operations) through March
31, 1995, the expenses used in the ratios represented the expenses of the
fund plus expenses incurred indirectly from the Adjustable U.S. Government
fund (the "Portfolio"), the mutual fund in which the fund invested all of
its assets. The expenses used in the ratios for the fiscal year ended March
31, 1996 include the expenses of the Portfolio through September 22, 1995.
(9) Annualized.
(10) Unreimbursed, without fee reduction.
INTERMEDIATE MATURITY GOVERNMENT FUND 9
<PAGE>
Limited-Term Government Fund
REGISTRANT NAME: JOHN HANCOCK LIMITED-TERM GOVERNMENT FUND
TICKER SYMBOL CLASS A: JHNLX CLASS B: JHLBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] The fund seeks to provide current income and security of principal. To
pursue this goal, the fund invests primarily in U.S. Government and agency
securities, as described below. The fund's securities may be of any maturity,
although a substantial portion typically will have maturities of ten years or
less.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 80% of assets in
securities that are issued, or guaranteed as to principal and interest, by the
U.S. Government, its agencies or instrumentalities. These may include Treasuries
and mortgage-backed securities such as Ginnie Maes and Fannie Maes.
For liquidity and flexibility, the fund may place up to 20% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk investments, and may engage in other investment
practices.
RISK FACTORS
[Clipart] in seeking to maintain a relatively stable share price, the fund may
sacrifice opportunities for higher yields. At the same time, its share price
will fluctuate to some extent with changes in interest rates. Typically, a rise
in interest rates causes a decline in the market value of debt securities
(including U.S. Government and mortgage-backed securities). To the extent that
the fund invests in mortgage-backed securities, it may also be subject to
extension and prepayment risks. These risks are defined in "More about risk"
starting on page 29. Other factors may affect the market price and yield of the
fund's securities, including investor demand and domestic and worldwide economic
conditions. The U.S. Government does not guarantee the market value or the
current yield of government securities, nor does the government's guarantee in
any way extend to the fund itself. Please read "More about risk" carefully
before investing.
PORTFOLIO MANAGEMENT
[Clipart] Barry H. Evans, CFA, leader of the fund's portfolio management team
since January 1995, is a senior vice president of the adviser. He has been in
the investment business since joining John Hancock Funds in 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 3.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 3.00%
Redemption fee(2) none none
Exchange fee none none
- --------------------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management fee 0.60% 0.60%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.47% 0.47%
Total fund operating expenses 1.37% 2.07%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $44 $72 $103 $190
Class B shares
Assuming redemption
at end of period $51 $85 $111 $198
Assuming no redemption $21 $65 $111 $198
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
10 LIMITED-TERM GOVERNMENT FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
(0.49) 5.67 11.59 7.75 12.54 4.19 7.13 (1.31) 11.23 3.45
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Class A - year ended December 31, 1987 1988 1989 1990 1991 1992 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 9.71 $ 8.83 $ 8.56 $ 8.73 $ 8.61 $ 8.97 $ 8.77
Net investment income (loss) 0.78 0.77 0.79 0.74 0.67 0.54 0.48
Net realized and unrealized gain (loss)
on investments (0.83) (0.28) 0.18 (0.11) 0.36 (0.18) 0.14
Total from investment operations (0.05) 0.49 0.97 0.63 1.03 0.36 0.62
Less distributions:
Dividends from net investment income (0.83) (0.76) (0.80) (0.75) (0.67) (0.54) (0.48)
Distributions from net realized gain
on investments sold -- -- -- -- -- (0.02) (0.11)
Total distributions (0.83) (0.76) (0.80) (0.75) (0.67) (0.56) (0.59)
Net asset value, end of period $ 8.83 $ 8.56 $ 8.73 $ 8.61 $ 8.97 $ 8.77 $ 8.80
Total investment return at net asset
value(2) (%) (0.49) 5.67 11.59 7.75 12.54 4.19 7.13
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 202,924 192,315 179,065 176,329 211,322 259,170 262,903
Ratio of expenses to average net assets (%) 0.97 1.02 1.01 1.53 1.44 1.55 1.51
Ratio of net investment income (loss) to
average net assets (%) 8.52 8.71 8.98 8.56 7.72 6.13 5.34
Portfolio turnover rate (%) 7 12 26 75 134 185 175
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Class A - year ended December 31, 1994 1995 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.80 $ 8.31 $8.73
Net investment income (loss) 0.38(1) 0.50(1) 0.50(1)
Net realized and unrealized gain (loss)
on investments (0.49) 0.42 (0.21)
Total from investment operations (0.11) 0.92 0.29
Less distributions:
Dividends from net investment income (0.38) (0.50) (0.50)
Distributions from net realized gain
on investments sold -- -- --
Total distributions (0.38) (0.50) (0.50)
Net asset value, end of period $ 8.31 $ 8.73 $8.52
Total investment return at net asset
value(2) (%) (1.31) 11.23 3.45
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 218,846 198,681 175,995
Ratio of expenses to average net assets (%) 1.41 1.36 1.37
Ratio of net investment income (loss) to
average net assets (%) 4.39 5.76 5.81
Portfolio turnover rate (%) 155 105 166
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Class B - year ended December 31, 1994(3) 1995 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 8.77 $ 8.31 $8.73
Net investment income (loss) 0.30(1) 0.45(1) 0.44(1)
Net realized and unrealized gain (loss) on investment (0.46) 0.42 (0.21)
Total from investment operations (0.16) 0.87 0.23
Less distributions:
Dividends from net investment income (0.30) (0.45) (0.44)
Net asset value, end of period $ 8.31 $ 8.73 $8.52
Total investment return at net asset value(2) (%) (1.84)(4) 10.60 2.72
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 7,111 10,765 10,472
Ratio of expenses to average net assets (%) 2.12(5) 1.93 2.08
Ratio of net investment income (loss) to average
net assets (%) 3.70(5) 5.21 5.10
Portfolio turnover rate (%) 155 105 166
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Class B shares commenced operations on January 3, 1994.
(4) Not annualized.
(5) Annualized.
LIMITED-TERM GOVERNMENT FUND 11
<PAGE>
Sovereign Bond Fund
REGISTRANT NAME: SOVEREIGN BOND FUND
TICKER SYMBOL CLASS A: JHNBX CLASS B: JHBBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] The fund seeks to generate a high level of current income consistent
with prudent investment risk. To pursue this goal, the fund invests in a
diversified portfolio of marketable debt securities. These securities are
primarily investment grade, although up to 25% of them may be junk bonds rated
as low as CC/Ca and their unrated equivalents. The fund does not concentrate its
investments in any particular industry.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 65% of assets in
corporate and government bonds and debentures. Typically, at least
three-quarters of these debt securities (excluding commercial paper) will be:
o securities of any type of issuer that are rated among the four highest
Moody's or S&P rating categories and their unrated equivalents
o U.S. Government and agency securities
The fund may invest up to 25% of assets in U.S. dollar-denominated foreign
securities.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk investments, including asset-backed securities and
derivatives and leveraged investments, and may engage in other investment
practices.
RISK FACTORS
[Clipart] Investors should expect fluctuations in share price, yield and total
return, particularly with changes in interest rates. Typically, a rise in
interest rates causes a decline in the market value of debt securities. To the
extent that it invests in certain securities, the fund may be affected by
additional risks:
o junk bonds: above-average credit, market and other risks
o foreign securities: currency, information, natural event and political risks
o mortgage-backed securities: extension and prepayment risks
These risks are defined in "More about risk" starting on page 29. The longer the
fund's average weighted maturity, the more it is likely to be affected by a
change in interest rates. Please read "More about risk" carefully before
investing.
PORTFOLIO MANAGEMENT
[Clipart] James K. Ho, CFA, leader of the fund's portfolio management team since
March 1988, is an executive vice president of the adviser. He joined John
Hancock Funds in 1985 and has been in the investment business since 1977.
INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past fiscal year, adjusted to
reflect any changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
- --------------------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management fee 0.50% 0.50%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.33% 0.33%
Total fund operating expenses 1.13% 1.83%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $56 $79 $104 $176
Class B shares
Assuming redemption
at end of period $69 $88 $119 $196
Assuming no redemption $19 $58 $ 99 $196
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
12 SOVEREIGN BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
1.58 9.82 12.13 6.71 16.59 8.08 11.80 (2.75) 19.40 4.11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Class A - year ended December 31, 1987 1988 1989 1990 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 15.89 $ 14.53 $ 14.51 $ 14.77 $ 14.33
Net investment income (loss) 1.40 1.44 1.43 1.32 1.29
Net realized and unrealized gain (loss) on
investments and financial futures contracts (1.17) (0.06) 0.27 (0.40) 0.98
Total from investment operations 0.23 1.38 1.70 0.92 2.27
Less distributions:
Dividends from net investment income (1.53) (1.40) (1.44) (1.35) (1.29)
Distributions from net realized gain on
investments sold and financial futures contracts (0.06) -- -- -- --
Distributions from capital paid-in -- -- -- (0.01) --
Total distributions (1.59) (1.40) (1.44) (1.36) (1.29)
Net asset value, end of period $ 14.53 $ 14.51 $ 14.77 $ 14.33 $ 15.31
Total investment return at net asset value(1) (%) 1.58 9.82 12.13 6.71 16.59
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,095,208 1,103,691 1,110,394 1,103,391 1,249,980
Ratio of expenses to average net assets (%) 0.82 0.82 0.80 1.31 1.27
Ratio of net investment income (loss) to
average net assets (%) 9.32 9.77 9.68 9.18 8.81
Portfolio turnover rate (%) 159 66 64 92 90
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended December 31, 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 15.31 $ 15.29 $ 15.53 $ 13.90 $ 15.40
Net investment income (loss) 1.20 1.14 1.12 1.12 1.09
Net realized and unrealized gain (loss) on
investments and financial futures contracts (0.01) 0.62 (1.55) 1.50 (0.50)
Total from investment operations 1.19 1.76 (0.43) 2.62 0.59
Less distributions:
Dividends from net investment income (1.21) (1.14) (1.12) (1.12) (1.09)
Distributions from net realized gain on
investments sold and financial futures contracts -- (0.38) (0.08) -- --
Distributions from capital paid-in -- -- -- -- --
Total distributions (1.21) (1.52) (1.20) (1.12) (1.09)
Net asset value, end of period $ 15.29 $ 15.53 $ 13.90 $ 15.40 14.90
Total investment return at net asset value(1) (%) 8.08 11.80 (2.75) 19.40 4.11
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,386,260 1,505,754 1,326,058 1,535,204 1,416,116
Ratio of expenses to average net assets (%) 1.44 1.41 1.26 1.13 1.14
Ratio of net investment income (loss) to
average net assets (%) 7.89 7.18 7.74 7.58 7.32
Portfolio turnover rate (%) 87 107 85 103(3) 123
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended December 31, 1993(2) 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.90 $ 15.52 $ 13.90 $15.40
Net investment income (loss) 0.11 1.04 1.02 0.98
Net realized and unrealized gain (loss) on investments and
financial futures contracts -- (1.54) 1.50 (0.50)
Total from investment operations 0.11 (0.50) 2.52 0.48
Less distributions:
Dividends from net investment income (0.11) (1.04) (1.02) (0.98)
Distributions from net realized gain on investments sold
and financial futures contracts (0.38) (0.08) -- --
Total distributions (0.49) (1.12) (1.02) (0.98)
Net asset value, end of period $15.52 $ 13.90 $ 15.40 $14.90
Total investment return at net asset value(1) (%) 0.90(4) (3.13) 18.66 3.38
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,125 40,299 98,739 134,112
Ratio of expenses to average net assets (%) 1.63(5) 1.78 1.75 1.84
Ratio of net investment income (loss) to average net assets (%) 0.57(5) 7.30 6.87 6.62
Portfolio turnover rate (%) 107 85 103(3) 123
</TABLE>
(1) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(2) Portfolio turnover excludes merger activity
(3) Class B shares commenced operations on November 23, 1993.
(4) Not annualized.
(5) Annualized.
SOVEREIGN BOND FUND 13
<PAGE>
Sovereign U.S. Government Income Fund
REGISTRANT NAME: JOHN HANCOCK STRATEGIC SERIES
TICKER SYMBOL CLASS A: JHSGX CLASS B: FGOPX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] The fund seeks to provide as high a level of income as is consistent
with long-term total return. To pursue this goal, the fund invests in U.S.
Government and agency securities, as described below.
PORTFOLIO SECURITIES
[Clipart] Under normal circumstances, the fund invests at least 65% of assets in
securities that are issued, or guaranteed as to principal and interest, by the
U.S. Government, its agencies or instrumentalities. These may include Treasuries
and mortgage-backed securities such as Ginnie Maes and Fannie Maes.
For liquidity and flexibility, the fund may place up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk investments, including derivative and leveraged
investments, and may engage in other investment practices.
RISK FACTORS
[Clipart] As with most income investments, the value of your investment will
fluctuate with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of debt securities (including U.S.
Government and mortgage-backed securities). To the extent that the fund invests
in mortgage-backed securities, it may also be subject to extension and
prepayment risks. These risks are defined in "More about risk" starting on page
29. Other factors may affect the market price and yield of the fund's
securities, including investor demand and economic conditions.
The U.S. Government does not guarantee the market value or the current yield of
government securities, nor does the government's guarantee in any way extend to
the fund itself. Please read "More about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[Clipart] Barry H. Evans, CFA, leader of the fund's portfolio management team
since January 1995, is a senior vice president of the adviser. He has been in
the investment business since joining John Hancock Funds in 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
- --------------------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management fee 0.50% 0.50%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.35% 0.35%
Total fund operating expenses 1.15% 1.85%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $56 $80 $105 $178
Class B shares
Assuming redemption
at end of period $69 $88 $120 $198
Assuming no redemption $19 $58 $100 $198
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
14 SOVEREIGN U.S. GOVERNMENT FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1987(6) 1987(7) 1988 1989 1990 1991 1992 1993 1994 1995 1996
2.61 3.70 11.53 11.52 6.24 14.46 7.58 12.66 (7.05) 15.27 3.33
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended October 31, 1992(1) 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 10.51 $ 10.29 $ 10.89 $ 9.24 $ 10.01
Net investment income (loss) 0.64 0.68(2) 0.65 0.65 0.64(2)
Net realized and unrealized gain (loss) on investments and
financial futures contracts (0.22) 0.61 (1.34) 0.77 (0.26)
Total from investment operations 0.42 1.29 (0.69) 1.42 0.38
Less distributions:
Dividends from net investment income (0.64) (0.68) (0.65) (0.65) (0.64)
Distributions from net realized gain on investments sold -- (0.01) (0.31) -- --
Total distributions (0.64) (0.69) (0.96) (0.65) (0.64)
Net asset value, end of period $ 10.29 $ 10.89 $ 9.24 $ 10.01 $ 9.75
Total investment return at net asset value(3) (%) 5.33(4) 12.89 (6.66) 15.90 4.02
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 350,907 375,416 315,372 370,966 330,162
Ratio of expenses to average net assets (%) 1.06(5) 1.30 1.23 1.17 1.15
Ratio of net investment income (loss) to average net assets (%) 7.11(5) 6.47 6.62 6.76 6.58
Portfolio turnover rate (%) 140 273 127 94 143
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, 1987(6) 1987(7) 1988 1989 1990 1991 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 10.00 $ 10.28 $ 9.45 $ 9.73 $ 10.01 $ 9.83 $ 10.29
Net investment income (loss) 0.56 0.48 0.78 0.81 0.85 0.85 0.76
Net realized and unrealized gain (loss) on
investments and financial futures contracts 0.36 (0.75) 0.28 0.25 (0.25) 0.51 --
Total from investment operations 0.92 (0.27) 1.06 1.06 0.60 1.36 0.76
Less distributions:
Dividends from net investment income (0.57) (0.48) (0.77) (0.77) (0.78) (0.90) (0.77)
Distributions from net realized gain on
investments sold (0.07) (0.08) (0.01) (0.01) -- -- --
Total distributions (0.64) (0.56) (0.78) (0.78) (0.78) (0.90) (0.77)
Net asset value, end of period $ 10.28 $ 9.45 $ 9.73 $ 10.01 $ 9.83 $ 10.29 $ 10.28
Total investment return at net asset value(3) (%) 2.61(5) 3.70(3) 11.53 11.52 6.24 14.46 7.58
Total adjusted investment return at
net asset value(3,8) (%) -- 3.65(4) 11.47 11.29 6.23 -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 164,001 170,030 161,163 144,756 133,778 164,347 197,032
Ratio of expenses to average net assets (%) 1.26(5) 1.24(5) 1.29 1.35 1.54 1.51 1.55
Ratio of adjusted expenses to
average net assets(9) (%) -- 1.32(5) 1.35 1.58 1.55 -- --
Ratio of net investment income (loss) to
average net assets (%) 7.56(5) 7.94(5) 8.09 8.34 8.54 8.53 7.35
Ratio of adjusted net investment income
(loss) to average net assets(9) (%) -- 7.86(5) 8.03 8.11 8.53 -- --
Portfolio turnover rate (%) 108(5) 83(5) 79 45 63 62 140
Fee reduction per share ($) -- 0.01 0.01 0.02 0.01 -- --
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 10.28 $ 10.88 $ 9.23 $ 10.00
Net investment income (loss) 0.66(2) 0.61 0.60 0.58(2)
Net realized and unrealized gain (loss) on
investments and financial futures contracts 0.61 (1.34) 0.77 (0.26)
Total from investment operations 1.27 (0.73) 1.37 0.32
Less distributions:
Dividends from net investment income (0.66) (0.61) (0.60) (0.58)
Distributions from net realized gain on
investments sold (0.01) (0.31) -- --
Total distributions (0.67) (0.92) (0.60) (0.58)
Net asset value, end of period $ 10.88 $ 9.23 $ 10.00 $ 9.74
Total investment return at net asset value(3) (%) 12.66 (7.05) 15.27 3.33
Total adjusted investment return at
net asset value(3,8) (%) -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 244,133 196,899 130,824 112,228
Ratio of expenses to average net assets (%) 1.51 1.64 1.72 1.82
Ratio of adjusted expenses to
average net assets(9) (%) -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) 6.23 6.19 6.24 5.91
Ratio of adjusted net investment income
(loss) to average net assets(9) (%) -- -- -- --
Portfolio turnover rate (%) 273 127 94 143
Fee reduction per share ($) -- -- -- --
</TABLE>
(1) Class A shares commenced operations on January 3, 1992.
(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) For the period June 5, 1986 (commencement of operations) to March 31, 1987.
(7) For the period April 1, 1987 to October 31, 1987.
(8) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(9) Unreimbursed, without fee reduction.
SOVEREIGN U.S. GOVERNMENT FUND 15
<PAGE>
Strategic Income Fund
REGISTRANT NAME: JOHN HANCOCK STRATEGIC SERIES
TICKER SYMBOL CLASS A: JHFIX CLASS B: STIBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clipart] The fund seeks a high level of current income. To pursue this goal,
the fund invests primarily in three sectors:
o foreign government and corporate debt securities
o U.S. Government and agency securities
o junk bonds rated as low as CC/Ca and their unrated equivalents.
Under normal circumstances, the fund's assets will be invested in all three
sectors. However, the weighting of assets among sectors will be adjusted to
reflect current or anticipated market behavior, and the fund may invest up to
100% of assets in any sector.
PORTFOLIO SECURITIES
[Clipart] The fund may invest in debt securities of all maturities and types,
including bonds, debentures, notes, preferred stock, mortgage-backed and
asset-backed securities and others. The fund may also invest up to 10% of net
assets in U.S. or foreign equities.
For liquidity and flexibility, the fund may invest in investment-grade
short-term securities. In abnormal market conditions, it may invest more assets
in these securities as a defensive tactic. The fund also may invest in certain
higher-risk investments, including derivative and leveraged investments, and may
engage in other investment practices.
RISK FACTORS
[Clipart] Investors should expect fluctuations in share price, yield and total
return that are above-average for bond funds. Typically, a rise in interest
rates causes a decline in the market value of debt securities. The longer the
fund's average weighted maturity, the more it is likely to be affected by a
change in interest rates. To the extent that the fund invests in mortgage-backed
securities, it may also be subject to extension and prepayment risks. These
risks are defined in "More about risk" starting on page 29. Foreign securities
carry additional risks, including currency, information, natural event and
political risks. Issuers of junk bonds are typically in weak financial health,
and their ability to pay interest and principal is uncertain, especially in an
adverse economy. Junk bond markets may react strongly to adverse news about an
issuer or the economy, or to the perception or expectation of adverse news.
Please read "More about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[Clipart] Frederick L. Cavanaugh, Jr., leader of the fund's portfolio management
team since 1986, is a senior vice president of the adviser. He joined John
Hancock Funds in 1986 and has been in the investment business since 1973.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clipart] Fund investors pay various expenses, either directly or indirectly.
The figures below show the expenses for the past year, adjusted to reflect any
changes. Future expenses may be greater or less.
- --------------------------------------------------------------------------------
Shareholder transaction expenses Class A Class B
- --------------------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
- --------------------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management fee 0.45% 0.45%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.28% 0.28%
Total fund operating expenses 1.03% 1.73%
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $55 $76 $99 $165
Class B shares
Assuming redemption
at end of period $68 $84 $114 $186
Assuming no redemption $18 $54 $94 $186
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
16 STRATEGIC INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clipart] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1996(8)
4.81(6) 6.89 9.72 (7.36) 12.31 19.92 6.81 4.54 9.33 11.37 8.90(6)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - year ended May 31, 1987(1) 1988 1989 1990 1991 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 10.00 $ 9.71 $ 9.24 $ 8.98 $ 7.33 $ 7.20
Net investment income (loss) 0.79 1.13 1.12 1.04 0.93 0.80
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.29) (0.47) (0.26) (1.65) (0.13) 0.52
Total from investment operations 0.50 0.66 0.86 (0.61) 0.80 1.32
Less distributions:
Dividends from net investment income (0.79) (1.13) (1.12) (1.04) (0.93) (0.74)(4)
Distributions in excess of net investment income -- -- -- -- -- --
Distributions from capital paid-in -- -- -- -- -- --
Total distributions (0.79) (1.13) (1.12) (1.04) (0.93) (0.74)
Net asset value, end of period $ 9.71 $ 9.24 $ 8.98 $ 7.33 $ 7.20 $ 7.78
Total investment return at net asset value(3) (%) 4.81(6) 6.89 9.72 (7.36) 12.31 19.92
Total adjusted investment return at
net asset value(5,7) (%) 3.64(6) 6.49 9.58 (7.45) -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 30,260 67,140 95,430 80,890 79,272 153,568
Ratio of expenses to average net assets (%) 1.00(4) 1.09 1.33 1.53 1.75 1.69
Ratio of adjusted expenses to average net assets (%) 2.17(4) 1.49 1.47 1.62 -- --
Ratio of net investment income (loss) to
average net assets (%) 10.87(8) 12.07 12.28 12.60 13.46 10.64
Ratio of adjusted net investment income (loss) to
average net assets (%) 9.70(8) 11.67 12.14 12.51 -- --
Portfolio turnover rate (%) 207 67 125 81 60 80
Fee reduction per share ($) 0.09 0.04 0.01 0.01 -- --
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - year ended May 31, 1993 1994 1995 1996 1996(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $ 7.78 $ 7.55 $ 7.17 $ 7.15 $ 7.27
Net investment income (loss) 0.71 0.68 0.64 0.66(3) 0.32(3)
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.22) (0.33) (0.02) 0.12 0.31
Total from investment operations 0.49 0.35 0.62 0.78 0.63
Less distributions:
Dividends from net investment income (0.72) (0.58)(4) (0.55) (0.66) (0.32)
Distributions in excess of net investment income -- (0.05) -- -- --
Distributions from capital paid-in -- (0.10) (0.09) -- --
Total distributions (0.72) (0.73) (0.64) (0.66) (0.32)
Net asset value, end of period $ 7.55 $ 7.17 $ 7.15 $ 7.27 $ 7.58
Total investment return at net asset value(3) (%) 6.81 4.54 9.33 11.37 8.90(5)
Total adjusted investment return at
net asset value(5,7) (%) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 262,137 335,261 327,876 369,127 400,738
Ratio of expenses to average net assets (%) 1.58 1.32 1.09 1.03 1.01(8)
Ratio of adjusted expenses to average net assets (%) -- -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) 9.63 8.71 9.24 9.13 8.73(8)
Ratio of adjusted net investment income (loss) to
average net assets (%) -- -- -- -- --
Portfolio turnover rate (%) 97 91 55 78 77
Fee reduction per share ($) -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class B - year ended May 31, 1994(1) 1995 1996 1996(8)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 7.58 $ 7.17 $ 7.15 $ 7.27
Net investment income (loss) 0.40 0.60(3) 0.61(3) 0.29(3)
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.41) (0.02) 0.12 0.31
Total from investment operations (0.01) 0.58 0.73 0.60
Less distributions:
Dividends from net investment income (0.32) (0.52) (0.61) (0.29)
Distributions in excess of net investment income (0.03) -- -- --
Distributions from capital paid-in (0.05) (0.08) -- --
Total distributions (0.40) (0.60) (0.61) (0.29)
Net asset value, end of period $ 7.17 $ 7.15 $ 7.27 $ 7.58
Total investment return at net asset value(5) (%) (0.22)(6) 8.58 10.61 8.50(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 77,691 134,527 206,751 275,432
Ratio of expenses to average net assets (%) 1.91(7) 1.76 1.73 1.71(7)
Ratio of net investment income (loss) to average net assets (%) 8.12(7) 8.55 8.42 8.02(7)
Portfolio turnover rate (%) 91 55 78 77
</TABLE>
(1) Class A and Class B shares commenced operations on August 18, 1986 and
October 4, 1993, respectively.
(2) Six months ended November 30, 1996. (Unaudited.)
(3) Based on the average of the shares outstanding at the end of each month.
(4) The dividend policy of the fund was changed, effective August 1, 1991, from
one that utilized daily dividend declarations to one that declares
dividends monthly. Additionally, the dividend policy of the fund was
changed, effective October 1, 1993, from one that declared dividends
monthly to daily dividend declarations.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Annualized.
STRATEGIC INCOME FUND 17
<PAGE>
Your account
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock income funds offer two classes of shares, Class A and Class B.
Each class has its own cost structure, allowing you to choose the one that best
meets your requirements. Your financial representative can help you decide.
- --------------------------------------------------------------------------------
Class A Class B
- --------------------------------------------------------------------------------
o Front-end sales charges, as o No front-end sales charge; all
described below. There are your money goes to work for you
several ways to reduce these right away.
charges, also described below.
o Higher annual expenses than
o Lower annual expenses than Class Class A shares.
B shares.
o A deferred sales charge, as
described below.
o Automatic conversion to Class A
shares after either five years
(Group 1) or eight years (Group 2)
(see below), thus reducing future
annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Use the table below to find out which group the fund is in, then consult the
sales charge information for that group.
- --------------------------------------------------------------------------------
Group 1 Group 2
- --------------------------------------------------------------------------------
o Intermediate Maturity o Government Income
Government
o High Yield Bond
o Limited-Term Government
o Sovereign Bond
o Sovereign U.S. Government Income
o Strategic Income
Class A Sales charges are as follows:
- --------------------------------------------------------------------------------
Class A sales charges - Group 1
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $99,999 3.00% 3.09%
$100,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
- --------------------------------------------------------------------------------
Class A sales charges - Group 2
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $99,999 4.50% 4.71%
$100,000 - $249,999 3.75% 3.90%
$250,000 - $499,999 2.75% 2.83%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
Investments of $1 million or more Class A shares are available with no front-end
sales charge. However, there is a contingent deferred sales charge (CDSC) on any
shares sold within one year of purchase, as follows:
- --------------------------------------------------------------------------------
CDSC on $1 million+ investments (Groups 1 and 2)
- --------------------------------------------------------------------------------
Your investment CDSC on shares being sold
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the LAST day of that month.
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
18 YOUR ACCOUNT
<PAGE>
Class B Shares are offered at their net asset value per share, without any
initial sales charge. However, you may be charged a contingent deferred sales
charge (CDSC) on shares you sell within a certain time after you bought them, as
described in the table below. There is no CDSC on shares acquired through
reinvestment of dividends. The CDSC is based on the original purchase cost or
the current market value of the shares being sold, whichever is less. The longer
the time between the purchase and the sale of shares, the lower the rate of the
CDSC:
- --------------------------------------------------------------------------------
Class B deferred charges
- --------------------------------------------------------------------------------
Years after CDSC on Group 1 CDSC on Group 2
purchase shares being sold shares being sold
1st year 3.00% 5.00%
2nd year 2.00% 4.00%
3rd year 2.00% 3.00%
4th year 1.00% 3.00%
5th year None 2.00%
6th year None 1.00%
After 6 years None None
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the FIRST day of that month.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
o Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services to add these options (see
the back cover of this prospectus).
Group Investment Program A group may be treated as a single purchaser under the
accumulation and combination priviliges. Each investor has an individual
account, but for sales charge purposes the group's investments are lumped
together, making the investors potentially eligible for reduced sales charges.
There is no charge, no obligation to invest (although initial aggregate
investments must be at least $250), and individual investors may terminate their
accounts at any time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify or consult the SAI (see the back cover of this prospectus).
CDSC waivers As long as Signature Services is notified at the time you sell, the
CDSC for either share class will generally be waived in the following cases: o
to make payments through certain systematic withdrawal plans
o to make certain distributions from a retirement plan
o because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI.
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
YOUR ACCOUNT 19
<PAGE>
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o government entities that are prohibited from paying mutual fund sales charges
o financial institutions or common trust funds investing $1 million or more for
non-discretionary accounts
o selling brokers and their employees and sales representatives
o financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds
o individuals transferring assets to a John Hancock fund from an employee
benefit plan that has John Hancock funds
o members of an approved affinity group financial services program
o certain insurance company contract holders (one-year CDSC usually applies)
o participants in certain retirement plans with at least 100 members (one-year
CDSC applies)
o in the case of Limited-Term Government Fund, anyone investing the proceeds
from any non-John Hancock mutual fund, as long as that fund had sales charges
and the investor paid them; investors must supply a copy of the redemption
check or confirmation statement, and must remain invested in Limited-Term
Government Fund for at least 15 days
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI.
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest at
least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges later.
5 Make your initial investment using the table on the next page. You and your
financial representative can initiate any puchase, exchange or sale of
shares.
20 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clipart] o Make out a check for the o Make out a check for the
investment amount, payable investment amount payable
to "John Hancock Signature to "John Hancock Signature
Services, Inc." Services, Inc."
o Deliver the check and your o Fill out the detachable
completed application to investment slip from an
your financial account statement. If no
representative, or mail slip is available, include
to Signature Services a note specifying the fund
(address below). name, your share class,
your account number and the
name(s) in which the
account is registered.
o Deliver the check and your
investment slip or note to
your financial
representative, or mail
to Signature Services
(address below).
By exchange
[Clipart] o Call your financial o Call your financial
representative or Signature representative or Signature
Services to request an Services to request an exchange.
exchange.
By wire
[Clipart] o Deliver your completed o Instruct your bank to wire
application to your the amount of your
financial representative, investment to:
or mail it to Signature First Signature Bank & Trust
Services. Account # 900000260
Routing # 211475000
o Obtain your account number Specify the fund name, your
by calling your financial share class, your account
representative or Signature number and the name(s) in
Services. which the account is
registered. Your bank may
o Instruct your bank to wire charge a fee to wire funds.
the amount of your
investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name,
your choice of share class,
the new account number and
the name(s) in which the
account is registered. Your
bank may charge a fee to
wire funds.
By phone
[Clipart] See "By wire" and o Verify that your bank or
"By exchange." credit union is a member of
the Automated Clearing
House (ACH) system.
o Complete the
"Invest-By-Phone" and "Bank
Information" sections on
your account application.
o Call Signature Services to
verify that these features
are in place on your
account.
o Tell the Signature Services
representative the fund
name, your share class,
your account number, the
name(s) in which the
account is registered and
the amount of your
investment.
- ------------------------------------------
Address
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
Phone To open or add to an account using
1-800-225-5291 the Monthly Automatic Accumulation
Program, see "Additional investor
Or contact your financial representative services."
for instructions and assistance.
- ------------------------------------------
YOUR ACCOUNT 21
<PAGE>
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clipart] o Accounts of any type. o Write a letter of
instruction or complete a
o Sales of any amount. stock power indicating the
fund name, your share
class, your account number,
the name(s) in which the
account is registered and
the dollar value or number
of shares you wish to sell.
o Include all signatures and
any additional documents
that may be required (see
next page).
o Mail the materials to
Signature Services.
o A check will be mailed to
the name(s) and address in
which the account is
registered, or otherwise
according to your letter of
instruction.
By phone
[Clipart] o Most accounts. o For automated service 24
hours a day using your
o Sales of up to $100,000. touch-tone phone, call the
EASI-Line at
1-800-338-8080.
o To place your order with a
representative at John
Hancock Funds, call
Signature Services between
8 A.M. and 4 P.M. Eastern
Time on most business days.
By wire or electronic funds transfer (EFT)
[Clipart] o Requests by letter to sell o Fill out the "Telephone
any amount (accounts of any Redemption" section of your
type). new account application.
o Requests by phone to sell o To verify that the
up to $100,000 (accounts telephone redemption
with telephone redemption privilege is in place on an
privileges). account, or to request the
forms to add it to an
existing account, call
Signature Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee will
be deducted from your
account.
o Amounts of less than $1,000
may be sent by EFT or by
check. Funds from EFT
transactions are generally
available by the second
business day. Your bank may
charge a fee for this
service.
By exchange
[Clipart] o Accounts of any type. o Obtain a current prospectus
for the fund into which you
o Sales of any amount. are exchanging by calling
your financial
representative or Signature
Services.
o Call your financial
representative or Signature
Services to request an
exchange.
By check
[Clipart] o Government Income, o Request checkwriting on your
Limited-Term Government, account application.
Sovereign U.S. Government
and Strategic Income Funds o Verify that the shares to be
only. sold were purchased more than
10 days earlier or were
o Any account with purchased by wire.
checkwriting privileges.
o Write a check for any
o Sales of over $100. amount over $100.
------------------------------------------
Address
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
Phone
1-800-225-5291
To sell shares through a systematic
withdrawal plan, see "Additional Or contact your financial representative
investor services." for instructions and assistance.
------------------------------------------
22 YOUR ACCOUNT
<PAGE>
Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution o a credit union
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
[Clipart]
- --------------------------------------------------------------------------------
Seller Requirements for written requests
- --------------------------------------------------------------------------------
Owners of individual, joint, sole o Letter of instruction.
proprietorship, UGMA/UTMA
(custodial accounts for minors) or o On the letter, the signatures
general partner accounts. and titles of all persons
authorized to sign for the
account, exactly as the account
is registered.
o Signature guarantee if
applicable (see above).
Owners of corporate or association o Letter of instruction.
accounts.
o Corporate resolution, certified
within the past two years.
o On the letter and the
resolution, the signature of the
person(s) authorized to sign for
the account.
o Signature guarantee if
applicable (see above).
Owners or trustees of trust o Letter of instruction.
accounts.
o On the letter, the signature(s)
of the trustee(s).
o If the names of all trustees are
not registered on the account,
please also provide a copy of
the trust document certified
within the past six months.
o Signature guarantee if
applicable (see above).
Joint tenancy shareholders whose o Letter of instruction signed by
co-tenants are deceased. surviving tenant.
o Copy of death certificate.
o Signature guarantee if
applicable (see above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing
executor.
o Signature guarantee if
applicable (see above).
Administrators, conservators, o Call 1-800-225-5291 for
guardians and other sellers or instructions.
account types not listed above.
YOUR ACCOUNT 23
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
Valuation of shares The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
Buy and sell prices When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
Execution of requests Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after your request is accepted by
Signature Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Signature Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or other taxpayer ID number and other relevant
information. If appropriate measures are taken, Signature Services is not
responsible for any losses that may occur to any account due to an unauthorized
telephone call. Also for your protection, telephone transactions are not
permitted on accounts whose names or addresses have changed within the past 30
days. Proceeds from telephone transactions can only be mailed to the address of
record.
Exchanges You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical. Class B shares
will continue to age from the original date and will retain the same CDSC rate
as they had before the exchange, except that the rate will change to the new
fund's rate if that rate is higher. A CDSC rate that has increased will drop
again with a future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Signature Services. Certificated
shares can only be sold by returning the certificates to Signature Services,
along with a letter of instruction or a stock power and a signature guarantee.
Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
Eligibility by state You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The funds generally declare dividends daily and pay them monthly.
Short- and long-term capital gains, if any, are distributed annually, typically
after the end of a fund's fiscal year. Your dividends begin accruing the day
after payment is received by the fund and continue through the day your shares
are actually sold.
Dividend reinvestments Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively,
24 YOUR ACCOUNT
<PAGE>
you can choose to have a check for your dividends mailed to you. However, if the
check is not deliverable, your dividends will be reinvested.
Taxability of dividends As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income. Some dividends paid in January may be
taxable as if they had been paid the previous December.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Signature Services,
Inc." Deliver your check and application to your financial representative or
Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
Retirement plans John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, 401(k) plans, 403(b) plans (including TSAs) and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund (except tax-free income funds) with a low minimum investment
of $250 or, for some group plans, no minimum investment at all. To find out
more, call Signature Services at 1-800-225-5291.
YOUR ACCOUNT 25
<PAGE>
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
How the funds are organized Each John Hancock income fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a board of trustees, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests. At a mutual fund's inception, the initial
shareholder (typically the adviser) appoints the fund's board. Thereafter, the
board and the shareholders determine the board's membership. The boards of the
John Hancock income funds may include individuals who are affiliated with the
investment adviser. However, the majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
<TABLE>
<S><C><C>
------------------
Shareholders
-------------------
----------------------------------
Financial services firms and
their representatives
Distribution Advise current and prospective
and shareholder shareholders on their fund
services invesments, often in the context
of an overall financial plan.
------------------------------------
--------------------------------- -------------------------------------
Principal distributor Transfer agent
John Hancock Funds, Inc. John Hancock Signature Services, Inc.
101 Huntington Avenue 1 John Hancock Way, Suite 1000
Boston, MA 02199-7603 Boston, MA 02217-1000
Markets the funds and distributes Handles shareholder services, includ-
shares through selling brokers, ing record-keeping and statements,
financial planners and other distribution of dividends and pro-
financial representatives. cessing of buy and sell requests.
--------------------------------- -------------------------------------
- --------------------------- -----------------------------------
Investment adviser Custodian
John Hancock Advisers, Inc. Investors Bank & Trust Co.
101 Huntington Avenue 89 South Street
Boston, MA 02199-7603 Boston, MA 02111 Asset
Management
Manages the funds' Holds the funds' assets, settles
business and invest- all portfolio trades and collects
ment activites. most of the valuation data required
- --------------------------- for calculating each fund's NAV.
-----------------------------------
--------------------------------
Trustees
Supervise the funds' activities.
--------------------------------
</TABLE>
26 FUND DETAILS
<PAGE>
Accounting compensation The funds compensate the adviser for performing tax and
financial management services. Annual compensation is not expected to exceed
0.02% of each fund's average net assets.
Portfolio trades In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
Investment goals Except for Government Income Fund, High Yield Bond Fund and
Intermediate Maturity Government Fund, each fund's investment goal is
fundamental and may only be changed with shareholder approval.
Diversification All of the income funds are diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation that authorizes annual fees of this type). The 12b-1 fee
rates vary by fund and by share class, according to Rule 12b-1 plans adopted by
the funds. The sales charges and 12b-1 fees paid by investors are detailed in
the fund-by-fund information. The portions of these expenses that are reallowed
to financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
- --------------------------------------------------------------------------------
Class B unreimbursed distribution expenses(1)
- --------------------------------------------------------------------------------
Unreimbursed As a % of
Fund expenses net assets
Government Income $ 9,835,482 4.85%
High Yield Bond $ 7,642,995 3.83%
Intermediate Maturity Gov. $ 253,107 2.30%
Limited-Term Government $ 191,883 1.93%
Sovereign Bond $ 3,897,654 3.40%
Sovereign U.S. Gov. Income $ 5,553,890 4.58%
Strategic Income $ 5,169,665 3.18%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
Initial compensation Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives the first
year's service fee at this time.
Annual compensation Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
FUND DETAILS 27
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A investments
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum
Sales charge reallowance First year Maximum
paid by investors or commission service fee total compensation(1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Group 1 funds
Up to $99,999 3.00% 2.26% 0.25% 2.50%
$100,000 - $499,999 2.50% 2.01% 0.25% 2.25%
$500,000 - $999,999 2.00% 1.51% 0.25% 1.75%
Group 2 funds
Up to $99,999 4.50% 3.76% 0.25% 4.00%
$100,000 - $249,999 3.75% 3.01% 0.25% 3.25%
$250,000 - $499,999 2.75% 2.06% 0.25% 2.30%
$500,000 - $999,999 2.00% 1.51% 0.25% 1.75%
Regular investments of $1 million
or more (Groups 1 and 2)
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum
reallowance First year Maximum
or commission service fee total compensation
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
Group 1 funds
All amounts 2.25% 0.25% 2.50%
Group 2 funds
All amounts 3.75% 0.25% 4.00%
</TABLE>
(1) Reallowance/commission percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members that take advantage of the sales charge
waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
28 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's principal securities and
investment practices. You may find the most concise description of each fund's
risk profile in the fund-by-fund information.
The funds are permitted to utilize -- within limits established by the trustees
- -- certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that a fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief descriptions of these
securities and investment practices, along with the risks associated with them.
The funds follow certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that a John Hancock income fund
will earn income or show a positive total return over any period of time --
days, months or years.
- --------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks.
Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency-denominated investments, and may widen any losses.
Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.
Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
o Hedged When a derivative (a security whose value is based on another security
or index) is used as a hedge against an opposite position that the fund also
holds, any loss generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging can reduce or
eliminate losses, it can also reduce or eliminate gains.
o Speculative To the extent that a derivative is not used as a hedge, the fund
is directly exposed to the risks of that derivative. Gains or losses from
speculative positions in a derivative may be substantially greater than the
derivative's original cost.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative affect on fund management or
performance.
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. Market risk may affect a single issuer, an
industry, a sector of the bond market or the market as a whole. Common to all
stocks and bonds and the mutual funds that invest in them.
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
Prepayment risk The risk that unanticipated prepayments may occur, reducing the
value of mortgage-backed securities.
Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
FUND DETAILS 29
<PAGE>
- --------------------------------------------------------------------------------
Higher-risk securities and practices
- --------------------------------------------------------------------------------
This table shows each fund's investment limitations as a percentage of portfolio
assets. In each case the principal types of risk are listed (see previous page
for definitions). Numbers in this table show allowable usage only; for actual
usage, consult the fund's annual/semi-annual reports.
10 Percent of total assets (italic type)
10 Percent of net assets (roman type)
* No policy limitation on usage; fund may be using currently
@ Permitted, but has not typically been used
- -- Not permitted
<TABLE>
<CAPTION>
Intermediate Sovereign
Government High Yield Maturity Limited-Term Sovereign U.S. Gov't Strategic
Income Bond Gov't Government Bond Income Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment practices
Borrowing; reverse repurchase agreements
The borrowing of money from banks
or through reverse repurchase agreements.
Leverage, credit risks. 33.3 33.3 33.3 33.3 33.3 33.3 33
Covered mortgage dollar roll transactions
The sale of mortgage-backed securities
with the commitment to buy back similar
securities at a future date. Credit, interest
rate,leverage, market, opportunity risks. * * * * * * *
Repurchase agreements The purchase of a
security that must later be sold back to
the issuer at the same price plus interest.
Credit risk. * * * * * * *
Securities lending The lending of securities
to financial institutions, which provide
cash or government securities as collateral.
Credit risk. 30 30 33.3 33.3 33.3 30 33.3
Short-term trading Selling a security soon
after purchase. A portfolio engaging in
short-term trading will have higher turnover
and transaction expenses. Market risk. * * * * * * *
When-issued securities and forward commitments
The purchase or sale of securities for delivery
at a future date; market value may change before
delivery. Market, opportunity, leverage risks. * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Conventional securities
Brady bonds Dollar-denominated securities issued
to refinance foreign government bank loans and
other debt. Credit, interest rate, market,
political risks. 10 @ (1) -- -- 25 -- @ (1)
Foreign debt securities Debt securities issued
by foreign governments or companies. Credit,
currency, interest rate, market, political risks. 20 * (1) -- -- 25 -- * (1)
In-kind, delayed and zero coupon debt securities
Securities offering non-cash or delayed-cash
payment. Their prices are typically more volatile
than those of conventional debt securities.
Credit, interest rate, market risks. * * * * * * *
Restricted and illiquid securities Securities
not traded on the open market. May include
illiquid Rule 144A securities. Liquidity,
valuation, market risks. 10 10 15 15 15 15 15
- ------------------------------------------------------------------------------------------------------------------------------------
Unleveraged derivative securities
Asset-backed securities Securities backed by
unsecured debt, such as credit card debt;
these securities are often guaranteed or
over-collateralized to enhance their credit
quality. Credit, interest rate risks. 20 * 35 20 * 35 *
Mortgage-backed securities Securities backed
by pools of mortgages, including passthrough
certificates, PACs, TACs and other senior
classes of collateralized mortgage obligations
(CMOs). Credit, extension, prepayment, interest
rate risks. * * * * * * *
Participation interests Securities representing
an interest in another security or in bank loans.
Credit, interest rate, liquidity, valuation
risks. -- 10(2) -- -- 15(2) -- 15(2)
Rights and warrants Securities offering the
right, or involving the promise, to buy or
sell certain securities at a future date.
Market risk. 5 5 5 5 5 -- 5
</TABLE>
(1) No more than 25% of the fund`s assets will be invested in government
securities of any one foreign country.
(2) Part of the 10% or 15% limitation on illiquid securities.
30 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
Higher-risk securities and practices (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Sovereign
Government High Yield Maturity Limited-Term Sovereign U.S. Gov't Strategic
Income Bond Gov't Government Bond Income Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leveraged derivative securities
Currency contracts Contracts involving the
right or obligation to buy or sell a
given amount of foreign currency at a
specified price and future date.
o Hedged. Currency, hedged leverage,
correlation, liquidity, opportunity risks. -- * -- -- -- -- *
o Speculative. Currency, speculative
leverage, liquidity risks. -- -- -- -- -- -- @
Financial futures and options; securities
and index options Contracts involving the
right or obligation to deliver or receive
assets or money depending on the performance
of one or more assets or an economic index.
o Futures and related options. Interest
rate, currency, market, hedged or
speculative leverage, correlation,
liquidity, opportunity risks. * * * * * * *
o Options on securities and indices. Interest
rate, currency, market, hedged or speculative
leverage, correlation, liquidity, credit,
opportunity risks. * * * * @ * @
Structured securities Indexed and/or leveraged
mortgage-backed and other debt securities,
including principal-only and interest-only
securities, leveraged floating rate securities,
and others. These securities tend to be highly
sensitive to interest rate movements and their
performance may not correlate to such movements
in a conventional fashion. Credit, interest
rate, extension, prepayment, market, speculative
leverage, liquidity, valuation risks. * 10 10 10 10 10 *
Swaps, caps, floors, collars OTC contracts
involving the right or obligation to receive
or make payments based on two different income
streams. Correlation, credit, currency, interest
rate, hedged or speculative leverage, liquidity,
valuation risks. @ @ @ @ @ @ @
</TABLE>
- --------------------------------------------------------------------------------
Analysis of funds with 5% or more in junk bonds(1)
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
<TABLE>
<CAPTION>
Quality rating
(S&P/Moody's)(2) High Yield Bond Fund Sovereign Bond Fund Strategic Income Fund
<S> <C> <C> <C>
Investment-Grade Bonds
AAA/Aaa 0.9% 41.8% 22.6%
AA/Aa 0.4% 9.4% 10.7%
A/A 0.2% 14.2% 0.6%
BBB/Baa 3.8% 13.0% 2.2%
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Junk Bonds
BB/Ba 10.5% 11.7% 10.8%
B/B 64.4% 7.5% 42%
CCC/Caa 6.1% 0.0% 0.9%
CC/Ca 0.4% 0.0% 0.0%
C/C 0.0% 0.0% 0.0%
D 0.4% 0.0% 0.2%
% of portfolio in bonds 87.1% 97.6% 90.0%
</TABLE>
(1) Average weighted quality distribution for the most recent fiscal year.
(2) In cases where the S&P and Moody's ratings for a given bond issue do not
agree, the issue has been counted in the higher category.
FUND DETAILS 31
<PAGE>
For more information
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Two documents are available that offer further information on John Hancock
income funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or the SAI,
please write or call:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA02217-1000
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
Internet: www.jhancock.com/funds
[Logo]JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue
Boston, Massachusetts 02199-7603
John Hancock(R) (C) 1996 John Hancock Funds, Inc.
Financial Services INCPN 5/97
