October 1, 1997
Dear Fellow Shareholder:
I am writing to ask for your vote on an important matter that will affect your
investment in the John Hancock Limited-Term Government Fund.
You may be aware that in addition to your Fund, John Hancock Funds offers a
similar U.S. government income fund called the John Hancock Intermediate
Maturity Government Fund. The Intermediate Maturity Government Fund seeks
current income consistent with preservation of capital and maintenance of
liquidity, by investing primarily in bonds issued by the United States
government and its agencies.
After careful consideration, your Fund's Trustees have unanimously agreed that
merging your Fund into the John Hancock Intermediate Maturity Government Fund
will offer you a similar investment objective and strategy with lower operating
expenses. This proposed merger is detailed in the enclosed proxy statement and
summarized in the questions and answers on the following page. I suggest you
read both thoroughly prior to voting.
Your Vote Makes a Difference!
No matter what the size of your investment may be, your vote is critical. I urge
you to review the enclosed materials and to complete, sign and return the
enclosed proxy ballot to us immediately. Your prompt response will help avoid
the need for additional mailings at your Fund's expense. For your convenience,
we have provided a postage-paid envelope.
If you have any questions or need additional information, please contact your
investment professional or call your Customer Service Representative at
1-800-225-5291, Monday through Friday between 8:00 A.M. and 8:00 P.M. Eastern
Time. I thank you for your prompt vote on this matter.
Sincerely,
/s/ Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.
Chairman and CEO
<PAGE>
Q: What are the benefits of merging the Limited-Term Government Fund into the
Intermediate Maturity Government Fund?
A: Offering two similar U.S. government income funds has made it harder for both
your Fund and the Intermediate Maturity Government Fund to raise assets and
reduce expenses. Your Trustees firmly believe this merger will allow you to
continue investing for current income with preservation of capital at a lower
expense.
The Intermediate Maturity Government Fund's larger asset base after the merger
are expected to allow for lower operating expenses than your Fund has now.
Following the merger, annual fees are projected to be 1.10% for Class A
shareholders, down from 1.33%, and 1.85% for Class B shareholders, down from
2.03%. These projected lower expenses should keep more of your money invested,
which often helps to bolster an investment's total return over time.
Q: How does the Intermediate Maturity Government Fund's strategy compare with
that of the Limited-Term Government Fund?
A: The Intermediate Maturity Government Fund seeks a high level of current
income consistent with preservation of capital and maintenance of liquidity.
Your Fund seeks current income and security of principal. Both funds focus on
bonds with maturities of up to ten years issued by the U.S. government its
agencies. Your Fund is slightly more conservative, however, investing in short-
to medium-term securities, while the Intermediate Maturity Government Fund's
emphasis is on medium-term maturities ranging from three to ten years. Although
longer-term bonds can be more sensitive to interest rate changes than
shorter-term bonds, investing in medium-term bonds allows the Intermediate
Maturity Government Fund to seek higher current income than your Fund, while
still focusing on principal security.
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Q: How has the Intermediate Maturity Government Fund performed?
A: Although past performance does not necessarily guarantee future results, the
Intermediate Maturity Government Fund has been a steady performer since its
inception on December 31, 1991. The Fund's Class A shares have posted average
annual total returns of 4.15% over the past year, 4.69% over the past three
years, 3.96% over the past five years and 4.50% since inception on December 31,
1991 at public offering price as of June 30, 1997. For the same time periods,
the Fund's Class B shares have posted average annual total returns of 3.64%,
4.47%, 3.91% and 4.39% respectively.* To review the Intermediate Maturity
Government Fund in more detail, please refer to the John Hancock Income Funds
prospectus and the Intermediate Maturity Government Fund's most recent annual
and semiannual reports, all of which are enclosed.
Q: How do I vote?
A: Most shareholders typically vote by completing, signing and returning the
enclosed proxy card using the postage-paid envelope provided. If you prefer to
vote in person, you are cordially invited to attend a meeting of shareholders of
your Fund, which will be held at 9:00 A.M. on November 12, 1997 at our 101
Huntington Avenue headquarters in Boston, Massachusetts. If you vote now, you
will help avoid further solicitations at your Fund's expense.
Q: How will the merger happen?
A: If the merger is approved, your Limited-Term Government Fund shares will be
converted to Intermediate Maturity Government Fund shares, using the Funds' net
asset value share prices, excluding sales charges, at the close of trading on
December 5, 1997. This conversion will not affect the total dollar value of your
investment.
Q: Will the merger have tax consequences?
A: Although taxable dividends and capital gains will be paid prior to the
merger, the merger itself is a non-taxable event and does not need to be
reported on your 1997 tax return.
*Performance figures assume all distributions are reinvested and reflect a
maximum sales charge on Class A shares of 3% and the applicable contingent
deferred sales charge on Class B shares. The CDSC declines annually between
years 1-4 according to the following schedule: 3, 3, 2, 1% . No sales charge
will be assessed after the sixth year. The return and principal value of any
mutual fund investment will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
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JOHN HANCOCK LIMITED-TERM GOVERNMENT FUND
101 Huntington Avenue
Boston, MA 02199
NOTICE OF MEETING OF SHAREHOLDERS
SCHEDULED FOR NOVEMBER 12, 1997
This is the formal agenda for your fund's shareholder meeting. It tells you what
matters will be voted on and the time and place of the meeting, in case you want
to attend in person.
To the shareholders of John Hancock Limited-Term Government Fund:
A meeting of shareholders of your fund will be held at 101 Huntington Avenue,
Boston, Massachusetts on Wednesday, November 12, 1997 at 9:00 a.m., Eastern
Time, to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization between
your fund and John Hancock Intermediate Maturity Government Fund.
Under this Agreement your fund would transfer all of its assets to
Intermediate Maturity Government Fund in exchange for shares of
Intermediate Maturity Government Fund. These shares would be
distributed proportionately to you and the other shareholders of your
fund. Intermediate Maturity Government Fund would also assume your
fund's liabilities. Your board of trustees recommends that you vote
FOR this proposal.
2. Any other business that may properly come before the meeting,
Shareholders of record as of the close of business on September 17, 1997 are
entitled to vote at the meeting and any related follow-up meetings.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. If shareholders do not return their proxies in sufficient
numbers, your fund will incur the cost of extra solicitations, which is
indirectly borne by you and other shareholders.
By order of the board of trustees,
Susan S. Newton
Secretary
October 1, 1997
550PX 9/97
1
<PAGE>
PROXY STATEMENT OF
JOHN HANCOCK LIMITED-TERM GOVERNMENT FUND
PROSPECTUS FOR CLASS A AND CLASS B SHARES OF
JOHN HANCOCK INTERMEDIATE MATURITY GOVERNMENT FUND
(a series of John Hancock Bond Trust)
This proxy statement and prospectus contains the information you should know
before voting on the proposed reorganization of your fund into John Hancock
Intermediate Maturity Government Fund. Please read it carefully and retain it
for future reference.
How the Reorganization Will Work
o Your fund will transfer all of its assets to Intermediate Maturity
Government Fund. Intermediate Maturity Government Fund will assume
your fund's liabilities.
o Intermediate Maturity Government Fund will issue to your fund Class A
shares in an amount equal to the value of your fund's Class A shares.
These shares will be distributed to your fund's Class A shareholders in
proportion to their holdings on the reorganization date.
o Intermediate Maturity Government Fund will issue to your fund Class B
shares in an amount equal to the value of your fund's Class B shares.
These shares will be distributed to your fund's Class B shareholders in
proportion to their holdings on the reorganization date.
o The reorganization will be tax-free.
o Your fund will be liquidated and you will become a shareholder of
Intermediate Maturity Government Fund.
Shares of Intermediate Maturity Government Fund are not deposits or obligations
of, or guaranteed or endorsed by, any bank or other depository institution.
These shares are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.
Shares of Intermediate Maturity Government Fund have not been approved or
disapproved by the Securities and Exchange Commission. The Securities and
Exchange Commission has not passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
2
<PAGE>
Why Your Fund's Trustees are Recommending the Reorganization
The trustees of your fund believe that reorganizing your fund into a fund with
similar investment policies would enable the shareholders of your fund to
benefit from increased diversification, and from the portfolio manager's greater
flexibility in choosing investments. Therefore, the trustees recommend that your
fund's shareholders vote FOR the reorganization.
- --------------------------------------------------------------------------------
Investment Objectives
- --------------------------------------------------------------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------ -----------------------------
Investment Current income and security High level of current income
objective. of principal. consistent with preservation
of capital and maintenance
of liquidity.
- ------------------- ------------------------------ -----------------------------
- --------------------------------------------------------------------------------
Where to Get More Information
- --------------------------------------------------------------------------------
Prospectus of your fund and In the same envelope as this proxy
Intermediate Maturity Government Fund statement and prospectus.
dated 10/1/97. Incorporated by reference into this
proxy statement and prospectus.
- -----------------------------------------
Intermediate Maturity Government
Fund's annual report to shareholders.
- ----------------------------------------- --------------------------------------
Your fund's annual report to On file with the Securities and
shareholders. Exchange Commission ("SEC") or
available at no charge by calling us
at 1-800-225-5291. Incorporated by
reference into this proxy statement
and prospectus.
- -----------------------------------------
A statement of additional
information dated 10/1/97. It
contains additional information about
your fund and Intermediate Maturity
Government Fund.
- ----------------------------------------- --------------------------------------
To ask questions about this proxy Call our toll-free telephone
statement and prospectus. number: 1-800-225-5291
- ----------------------------------------- --------------------------------------
The date of this proxy statement and prospectus is October 1, 1997.
3
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TABLE OF CONTENTS
Page
INTRODUCTION 5
SUMMARY 5
INVESTMENT RISKS 17
PROPOSAL TO APPROVE AGREEMENT
AND PLAN OF REORGANIZATION 18
CAPITALIZATION 25
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 26
BOARDS' EVALUATION AND RECOMMENDATION 27
VOTING RIGHTS AND REQUIRED VOTE 27
INFORMATION CONCERNING THE MEETING 28
OWNERSHIP OF SHARES OF THE FUNDS 31
EXPERTS 32
AVAILABLE INFORMATION 32
EXHIBITS
A - Agreement and Plan of Reorganization between John Hancock
Limited-Term Government Fund and John Hancock Intermediate Maturity
Government Fund (attached to this document).
4
<PAGE>
INTRODUCTION
This proxy statement and prospectus is being used by the board of trustees of
your fund to solicit proxies to be voted at a special meeting of shareholders of
your fund. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, November 12, 1997 at 9:00 a.m., Eastern time. The
purpose of the meeting is to consider a proposal to approve an Agreement and
Plan of Reorganization providing for the reorganization of your fund into John
Hancock Intermediate Maturity Government Fund. This proxy statement and
prospectus is being mailed to your fund's shareholders on or about October 1,
1997.
Who is Eligible to Vote?
Shareholders of record on September 17, 1997 are entitled to attend and vote at
the meeting or any adjourned meeting. Each share is entitled to one vote. Shares
represented by properly executed proxies, unless revoked before or at the
meeting, will be voted according to shareholders' instructions. If you sign a
proxy, but do not fill in a vote, your shares will be voted to approve the
Agreement and Plan of Reorganization. If any other business comes before the
meeting, your shares will be voted at the discretion of the persons named as
proxies.
SUMMARY
The following is a summary of more complete information appearing later in this
proxy statement. You should read the entire proxy statement, Exhibit A and the
enclosed documents carefully because they contain details that are not in the
summary.
5
<PAGE>
Comparison of Limited-Term Government Fund to Intermediate Maturity Government
Fund
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------ -----------------------------
Business: Your fund is a diversified Intermediate Maturity Fund
open- end investment company is a diversified series of
organized as a John Hancock Bond Trust. The
Massachusetts business trust is an open-end
trust. investment company organized
as a Massachusetts business
trust.
- ------------------- ------------------------------ -----------------------------
Net assets as of $168.7 million. $29.2 million.
May 31, 1997:
- ------------------- ------------------------------ -----------------------------
Investment The Fund's investment The Fund's investment
adviser and adviser is John Hancock adviser is John Hancock
portfolio Advisers, Inc. Barry H. Advisers, Inc. Roger C.
managers: Evans, CFA, has been leader Hamilton has been leader of
of the fund's portfolio the fund's portfolio
management team since management team since
January 1995. He is a January 1992 (with the
senior vice president of the fund's previous adviser).
adviser. Mr. Evans has been He is a vice president of
in the investment business the adviser. Mr. Hamilton
since joining the adviser in joined the adviser in
1986. December 1994 and has been
in the investment business
since 1980.
- ------------------- ------------------------------ -----------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------ -----------------------------
Investment Current income and security High level of current
objective: of principal. The objective income, consistent with
cannot be changed without preservation of capital and
shareholder approval. maintenance of liquidity.
- ------------------- ------------------------------ -----------------------------
Primary At least 80% of assets in At least 80% of assets in
investments: securities that are issued, securities that are issued,
or guaranteed as to or guaranteed as to
principal and interest, by principal and interest, by
the U.S. Government, its the U.S. Government, its
agencies or agencies or
instrumentalities, Treasury instrumentalities. Treasury
securities and mortgage - securities and mortgage -
backed securities such as backed securities such as
Ginnie Maes and Fannie Maes Ginnie Maes and Fannie Maes
are included. Your fund's are included. The fund's
securities may be of any weighted average maturity
maturity, although a will typically be between
substantial portion three and ten years.
typically will have
maturities of ten years or
less.
- ------------------- ------------------------------ -----------------------------
Investments in For liquidity and For liquidity and
short-term debt flexibility, your fund may flexibility, Intermediate
securities: place up to 20% of total Maturity Fund may place up
assets in investment-grade to 20% of assets in
short-term securities. In high-quality short-term
abnormal market conditions, securities. In abnormal
it may invest more than 20% market conditions, it may
of assets in these invest more than 20% of
securities as a defensive assets in these securities
tactic. as a defensive tactic.
- ------------------- ------------------------------ -----------------------------
7
<PAGE>
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------ -----------------------------
Pay-in-kind, Your fund may not invest in Intermediate Maturity Fund
delayed and zero pay-in-kind, delayed or zero may invest without
coupon debt coupon debt securities. limitation in pay-in-kind,
securities: delayed and zero coupon debt
securities.
- ------------------- ------------------------------------------------------------
Illiquid Both funds may invest up to 15% of net assets in illiquid
securities: securities. This limitation does not apply to liquid Rule
144A securities, but does apply to other restricted
securities.
- ------------------- ------------------------------ -----------------------------
Asset-backed Your fund may not invest in Intermediate Maturity Fund
securities: asset-backed securities. may invest up to 35% of
assets in asset-backed
securities.
- ------------------- ------------------------------------------------------------
Mortgage-backed Both funds may purchase mortgage-backed securities. There
securities: are no limits on the amount of fund assets that may be
invested in these securities.
- ------------------- ------------------------------ -----------------------------
Structured Your fund may not invest in Intermediate Maturity Fund
Securities: structured securities. may invest in structured
securities which include
indexed and/or leveraged
mortgage-backed and other
debt securities. There is no
limit on the amount of fund
assets that may be invested
in these securities.
- ------------------- ------------------------------ -----------------------------
Swaps, Caps, Your fund may not invest in Intermediate Maturity Fund
Floors and swaps, caps, floors or may invest in swaps, caps,
Collars: collars. floors and collars which are
over-the-counter contracts
that involve the right or
obligation to receive or make
payments based on two
different income streams.
There is no limit on the
amount of fund assets that
may be invested in these
securities.
- ------------------- ------------------------------ -----------------------------
8
<PAGE>
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------------------------------------
Borrowing and Both funds may temporarily borrow from banks or through
reverse reverse repurchase agreements for extraordinary or
repurchase emergency purposes. These borrowings may not exceed 33.3%
agreements: of assets.
- ------------------- ------------------------------ -----------------------------
Covered Mortgage Your fund may not engage in Intermediate Maturity Fund
dollar roll covered mortgage dollar roll may engage in covered
transactions: transactions. mortgage dollar roll
transaction. There is no
limit on the amount of fund
assets that may engage in
these transactions.
- ------------------- ------------------------------------------------------------
Repurchase Both funds may invest without limitation in repurchase
agreements: agreements.
- ------------------- ------------------------------ -----------------------------
Securities Your fund may not lend Intermediate Maturity Fund
lending: securities may lend portfolio
securities representing up
to 33.3% of total assets.
- ------------------- ------------------------------------------------------------
Short-term Neither fund is subject to any limitations on short- term
trading: trading.
- ------------------- ------------------------------ -----------------------------
When-issued and Your fund may purchase Intermediate Maturity Fund
forward when-issued securities but may purchase when-issued
commitment not forward contracts. securities and purchase or
transactions: sell securities in forward
commitment transactions.
- ------------------- ------------------------------ -----------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
CLASSES OF SHARES
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------------------------------------
Class A shares: The Class A shares of both funds have the same
characteristics and fee structure except for Class A 12b-1
fees.
o Class A shares are offered with front-end sales charges
ranging from 2% to 3% of each fund's offering price,
depending on the amount invested.
o There is no front-end sales charge for investments of
$1 million or more, but there is a contingent deferred
sales charge ranging from 0.25% to 1.00% on shares sold
within one year of purchase.
o Investors can combine multiple purchases of Class A
shares to take advantage of breakpoints in the sales
charge schedule.
o Sales charges are waived for the categories of
investors listed in the funds' prospectus.
------------------------------------------------------------
o Class A shares are o Class A shares are
subject to a 12b-1 subject to a 12b-1
distribution fee equal distribution fee equal
to 0.30% annually of to 0.25% annually of
average net assets. average net assets.
- ------------------- ------------------------------------------------------------
Class B shares: The Class B shares of both funds have the same
characteristics and fee structure.
o Class B shares are offered without a front-end sales
charge, but are subject to a contingent deferred sales
charge (CDSC) if sold within four years after purchase.
The CDSC ranges from 1.00% to 3.00% depending on how
long they are held. No CDSC is imposed on shares held
more than four years.
o CDSCs are in certain circumstances as stated in the
funds' prospectus.
o Class B shares are subject to 12b-1 distribution and
service fees equal to 1.00% annually of average net
assets.
o Class B shares automatically convert to Class A shares
after five years.
- ------------------- ------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- --------------------------------------------------------------------------------
Both Limited-Term and Intermediate Maturity
- ------------------- ------------------------------------------------------------
Buying shares: The procedures for buying shares of both funds are
identical. Investors may buy shares at their public
offering price through a financial representative or the
funds' transfer agent, John Hancock Signature Services,
Inc. After September 17, 1997, investors will not be
allowed to open new accounts in your fund but can add to
existing accounts.
- ------------------- ------------------------------------------------------------
Minimum initial The funds have the same initial investment minimums, which
investments: are $1,000 for non-retirement accounts and $250 for
retirement accounts and group investments.
- ------------------- ------------------------------------------------------------
Exchanging shares: Shareholders of both funds may exchange their shares
at net asset value with no sales charge for shares of the
same class of any other John Hancock fund.
- ------------------- ------------------------------------------------------------
Selling shares: Shareholders of both funds may sell their shares by
submitting a proper written or telephone request to John
Hancock Signature Services, Inc.
- ------------------- ------------------------------------------------------------
Net asset value: All purchases, exchanges and sales of each fund's shares are
made at a price based on the next determined net asset value
per share (NAV) of the fund. Both funds' NAVs are determined
at the close of regular trading on the New York Stock
Exchange, which is normally 4:00 p.m. Eastern Time.
- ------------------- ------------------------------------------------------------
The Funds' Expenses
Shareholders of both funds pay various expenses, either directly or indirectly.
The first two expense tables appearing below show the expenses for the twelve
month period ended May 31, 1997, adjusted to reflect any changes. (The expenses
for Limited-Term Government Fund were annualized using the actual expenses for
the eleven months ended May 31, 1997.) Future expenses may be greater or less.
The examples contained in each expense table show what you would pay if you
invested $1,000 over the various time periods indicated. Each example assumes
that you reinvested all dividends and that the average annual return was 5%. The
examples are for comparison purposes only and are not a representation of either
fund's actual expenses or returns, either past or future.
11
<PAGE>
LIMITED-TERM GOVERNMENT FUND
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) Class A Class B
Management fee 0.60% 0.60%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.43% 0.43%
Total fund operating expenses 1.33% 2.03%
Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares 43 71 101 185
Class B shares
Assuming redemption 51 84 109 192
at end of period
Assuming no redemption 21 64 109 192
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the equivalent of the maximum permitted front-end sales charge.
12
<PAGE>
INTERMEDIATE MATURITY GOVERNMENT FUND
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) Class A Class B
Management fee 0.40% 0.40%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.70% 0.70%
Total fund operating expenses 1.35% 2.10%
Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares 43 71 102 188
Class B shares
Assuming redemption 51 86 113 197
at end of period
Assuming no redemption 21 66 113 197
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may pay more than the
equivalent of the maximum permitted fron-end sales charge.
Pro Forma Expense Table
The next expense table shows the hypothetical ("pro forma") expenses of
Intermediate Maturity Government Fund assuming that a reorganization with your
fund occurred on May 31, 1997. The expenses shown in the table for Intermediate
Maturity Government Fund are based on fees and expenses incurred during the
twelve months ended May 31, 1997. The expenses shown in the table for
Limited-Term Government Fund are based on annualized fees and expenses incurred
during the eleven months ended May 31, 1997. Intermediate Maturity Government
Fund's actual expenses after the reorganization may be greater or less than
those shown. The examples contained in each pro forma expense table show what
you would pay on a $1,000 investment if the reorganization had occurred on May
13
<PAGE>
31, 1997. Each example assumes that you reinvested all dividends and that the
average annual return was 5%. The pro forma examples are for comparison purposes
only and are not a representation of Intermediate Maturity Government Fund's
actual expenses or returns, either past or future.
INTERMEDIATE MATURITY GOVERNMENT FUND (PRO FORMA)
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) Class A Class B
Management fee 0.40% 0.40%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.45% 0.45%
Total fund operating expenses 1.10% 1.85%
Pro Forma Example
Share class Year 1 Year 3 Year 5 Year 10
Class A shares 41 64 89 160
Class B shares
Assuming redemption 49 78 100 170
at end of period
Assuming no redemption 19 58 100 170
(1) Except for investments of $1 million or more.
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the equivalent of the maximum permitted front-end sales charge.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time, on
December 5, 1997, but may occur on any later date before June 1, 1998.
Your fund will transfer all of its assets to Intermediate Maturity
Government Fund. Intermediate Maturity Government Fund will assume your
fund's liabilities. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
14
<PAGE>
o Intermediate Maturity Government Fund will issue Class A shares in an
amount equal to the aggregate net asset value of your fund's Class A
shares. These shares will immediately be distributed to your fund's
Class A shareholders in proportion to their holdings on the
reorganization date. As a result, Class A shareholders of your fund
will end up as Class A shareholders of Intermediate Maturity Government
Fund.
o Intermediate Maturity Government Fund will issue Class B shares in an
amount equal to the aggregate net asset value of your fund's Class B
shares. These shares will immediately be distributed to your fund's
Class B shareholders in proportion to their holdings on the
reorganization date. As a result, Class B shareholders of your fund
will end up as Class B shareholders of Intermediate Maturity Government
Fund.
o After the reorganization is over, your fund will be terminated.
o The reorganization will be tax-free and will not take place unless both
funds receive a satisfactory opinion concerning the tax consequences of
the reorganization from Hale and Dorr LLP, counsel to the funds.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of average daily net assets:
- --------------------------- --------------------------- ------------------------
Fund Asset Limited-Term Intermediate
Breakpoints Government Maturity
- --------------------------- --------------------------- ------------------------
First $250 million 0.60% 0.40%
- --------------------------- --------------------------- ------------------------
Next $250 million 0.55% 0.40%
- --------------------------- --------------------------- ------------------------
Over $500 million 0.50% 0.40%
- --------------------------- --------------------------- ------------------------
Thus, at all asset levels, the advisory fee rates paid by Intermediate Maturity
Government Fund are lower than the rates paid by your fund.
In addition, Intermediate Maturity Government Fund's current annual Class A and
Class B expense ratios (equal to 1.35% and 2.10%, respectively, of average net
assets) are only slightly higher than your fund's current expense ratios (equal
to 1.33% 2.03%, respectively, of average net assets). If the reorganization had
occurred on May 31, 1997, Intermediate Maturity Government Fund's pro forma
Class A and Class B expense ratios (equal to 1.10% and 1.85%, respectively, of
average net assets) would have been lower than your fund's current expense
ratios.
15
<PAGE>
The following diagram shows how the reorganization would be carried out.
Limited-Term Limited-Term Intermediate Maturity
Government Fund Government Government Fund
transfers assets & Fund's receives assets &
liabilities to assets and liabilities of Limited-
Intermediate Maturity liabilities Term Government
Government Fund Fund
Class A Class B Class B Class A
shareholders shareholders shareholders shareholders
Your fund receives Intermediate Maturity
Government Fund Class B shares and
distributes them to your fund's Class B shareholders
Your fund receives Intermediate Maturity
Government Fund Class A shares and
distributes them to your fund's Class A shareholders
[This diagram represents a graphical illustration of the transaction]
16
<PAGE>
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table indicates that the
risks affecting each fund are similar:
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------------------------------------
Risks of debt The value of the funds' portfolios will change in response
securities to movements of the bond market. As with any fund that
invests primarily in debt securities a rise in interest
rates typically causes the value of debt securities and
hence the value of the fund to fall. A fall in interest
rates typically causes the value of debt securities to rise.
The debt securities held by the funds are subject to the
risk that the issuer of a security will default or otherwise
fail to meet its obligations.
- ------------------- ------------------------------------------------------------
Risks of The funds' investments in restricted and illiquid
restricted and securities may be difficult or impossible to sell at a
illiquid desirable time or a fair price. Restricted and illiquid
securities securities also present a greater risk of inaccurate
valuation.
- ------------------- ------------------------------------------------------------
Risks of Unleveraged derivative instruments involve the risk that a
unleveraged rise in interest rates will cause the value of the
derivative instrument to fall. A fall in interest rates will
instruments typically cause the value of these instruments to rise.
including These instrument are also subject to the risk that the
asset-back and issuer will default or otherwise fail to meet its
mortgage-back obligations. In addition, mortgage-backed securities are
securities and subject to the risk that the life of the security will be
rights and extended beyond its expected prepayment time. This
warrants typically occurs during periods of rising interest rates
and often reduces the security's value. During periods of
falling interest rates unanticipated prepayments may occur
which also reduces the security's value. With respect to
rights and warrants, their value will change in response to
market movements.
- ------------------- ------------------------------------------------------------
17
<PAGE>
- ------------------- ------------------------------ -----------------------------
Limited-Term Intermediate Maturity
- ------------------- ------------------------------ -----------------------------
Risks of Limited-Term Government Fund Most derivative instruments
derivative may not utilize swaps, caps, involve leverage, which
instruments, floors and collars or invest increases market risks.
including swaps, in structured securities and Leverage magnifies gains and
caps, floors and is not subject to the risks losses on derivatives
collars and associated with those relative to changes in the
structured transactions. value of underlying assets.
securities If a derivative is used for
hedging purposes, changes in
the value of the derivative
may not match those of the
hedged asset. Over the
counter derivatives may be
illiquid or hard to value
accurately. In addition, the
other party may default on
its obligations. If markets
for underlying assets do not
move in the right direction,
a fund's performance may be
worse than if it had not used
derivatives.
- ------------------- ------------------------------ -----------------------------
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
The shareholders of your fund are being asked to approve an Agreement and Plan
of Reorganization, a copy of which is attached as Exhibit A. The Agreement
provides for a reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 5, 1997, but may occur on any later date before June 1,
1998. Your fund will transfer all of its assets to Intermediate
Maturity Government Fund and Intermediate Maturity Government Fund
will assume all of your fund's liabilities. This will result in the
addition of your fund's assets to Intermediate Maturity Government
18
<PAGE>
Fund's portfolio. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
o Intermediate Maturity Government Fund will issue to your fund Class A
shares in an amount equal to the aggregate net asset value of your
fund's Class A shares. As part of the liquidation of your fund,
these shares will immediately be distributed to Class A shareholders
of record of your fund in proportion to their holdings on the
reorganization date. As a result, Class A shareholders of your fund
will end up as Class A shareholders of Intermediate Maturity
Government Fund.
o Intermediate Maturity Government Fund will issue to your fund Class B
shares in an amount equal to the aggregate net asset value of your
fund's Class B shares. As part of the liquidation of your fund,
these shares will immediately be distributed to Class B shareholders
of record of your fund in proportion to their holdings on the
reorganization date. As a result, Class B shareholders of your fund
will end up as Class B shareholders of Intermediate Maturity
Government Fund.
o After the reorganization is over, the existence of your fund will be
terminated.
Reasons for the Proposed Reorganization
The board of trustees of your fund believes that the proposed reorganization
will be advantageous to the shareholders of your fund for several reasons. The
board of trustees considered the following matters, among others, in approving
the proposal.
First, that it is not advantageous to operate and market your fund separately
from Intermediate Maturity Government Fund because their investment objectives
and policies are substantially similar. By being offered simultaneously, each
fund hinders the other fund's potential for asset growth.
Second, that shareholders may be better served by a fund offering greater
diversification. To the extent that combining the funds' assets into a single
portfolio creates a larger asset base, Intermediate Maturity Government Fund's
investment portfolio can achieve greater diversification after the
reorganization than is currently possible for either fund. Greater
diversification is expected to benefit the shareholders of both funds because it
19
<PAGE>
may reduce the negative effect that the adverse performance of any one security
may have on the performance of the entire portfolio.
Third, that the Intermediate Maturity Government Fund shares received in the
reorganization will provide your fund's shareholders with substantially the same
investment advantages as they currently have at a comparable level of risk. The
board of trustees also considered the performance history of each fund.
Fourth, that a combined fund offers economies of scale that are expected to lead
to better control over expenses than is possible for your fund. Both funds incur
substantial costs for accounting, legal, transfer agency services, insurance,
and custodial and administrative services. The trustees expect that the
reorganization will result in a decrease in the expenses currently borne by
Limited-Term Government Fund shareholders.
Fifth, that Intermediate Maturity Government Fund affords its portfolio managers
greater flexibility to pursue a broader range of investment opportunities than
does your fund. While past performances cannot predict future results,
Intermediate Maturity Government Fund has performed better than your fund since
Intermediate Maturity Government Fund adopted more flexible investment policies
on September 22, 1995.
The board of trustees of Intermediate Maturity Government Fund considered that
the reorganization presents an excellent opportunity for Intermediate Maturity
Government Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that are normally associated with the
purchase of securities. This opportunity provides an economic benefit to
Intermediate Maturity Government Fund and its shareholders.
The boards of trustees of both funds also considered that the adviser and the
funds' distributor, John Hancock Funds, Inc., will also benefit from the
reorganization. For example, the adviser might realize time savings from a
consolidated portfolio management effort and from the need to prepare fewer
reports and regulatory filings as well as prospectus disclosure for one fund
instead of two. The trustees believe, however, that these savings will not
amount to a significant economic benefit.
Comparative Fees and Expense Ratios. As discussed above in the Summary, at all
asset levels the advisory fee rates paid by Intermediate Maturity Government
Fund are lower than the advisory rates paid by your fund.
20
<PAGE>
Intermediate Maturity Government Fund's current annual Class A and Class B
expense ratios (equal to 1.35% and 2.10%, respectively, of average net assets)
are only slightly higher than your fund's current expense ratios (equal to 1.33%
and 2.03%, respectively, of average net assets). If the reorganization had
occurred on May 31, 1997, Intermediate Maturity Government Fund's pro forma
Class A and Class B expense ratios (equal to 1.10% and 1.85%, respectively, of
average net assets) would have been lower than your fund's current expense
ratios.
Comparative Performance. The trustees also took into consideration the relative
performance of your fund and Intermediate Maturity Government Fund. As shown in
the table below, your fund has had better performance for some periods while
Intermediate Maturity Government Fund has had better performance for the most
recent periods.
- -------------------------------- ------------------------ ----------------------
Average Annual
Total Return Intermediate Maturity Limited-Term
(without including sales
charges)
----------- ------------ ----------- ----------
Class A Class B Class A Class B
- -------------------------------- ----------- ------------ ----------- ----------
1 year ended 5/31/97 7.50 6.76 5.74 5.13
- -------------------------------- ----------- ------------ ----------- ----------
3 years ended 5/31/97 5.49 4.80 5.27 4.57
- -------------------------------- ----------- ------------ ----------- ----------
5 years ended 5/31/97 4.58 3.89 5.05 3.66(a)
- -------------------------------- ----------- ------------ ----------- ----------
10 years ended 5/31/97 4.96(b) 4.28(b) 6.51
- -------------------------------- ----------- ------------ ----------- ----------
(a) Since commencement of operations on January 3, 1994
(b) Since commencement of operations on December 31, 1991
Although the Intermediate Maturity Government Fund's 5 and 10 year total returns
trail those of your fund, these figures reflect Intermediate Maturity Government
Fund operating under more restrictive investment policies. Since adopting more
flexible investment policies on September 22, 1995, Intermediate Maturity has
outperformed your fund. In fact, the gap between Intermediate Maturity
Government Fund's performance and your fund's performance has widened over the
last three years. For the three year period, the difference between Intermediate
Maturity Government Fund's total return and your fund's total return is 0.22%
for Class A shares. For the one year period, that difference has risen to 1.76%
for Class A shares.
21
<PAGE>
Unreimbursed Distribution and Shareholder Service Expenses
The boards of trustees of your fund and Intermediate Maturity Government Fund
have determined that, if the reorganization occurs, unreimbursed distribution
and shareholder service expenses incurred under your fund's Rule 12b-1 Plans
will be reimbursable expenses under Intermediate Maturity Government Fund's Rule
12b-1 Plans. The maximum amount payable annually under Intermediate Maturity
Government Fund's Rule 12b-1 Plans (0.25% and 1.00% of average daily net assets
attributable to Class A shares and Class B shares, respectively) will not
increase.
The following table shows the actual and pro forma unreimbursed distribution and
shareholder service expenses of both classes of your fund and Intermediate
Maturity Government Fund. The table shows both the dollar amount of these
expenses and the percentage of each class' average net assets that they
represent.
- ------------------------------- ------------------------- ----------------------
Unreimbursed
Distribution and Shareholder Intermediate Maturity
Service Expenses Limited-Term
------------ ------------ ------------ ---------
Class A Class B Class A Class B
- ------------------------------- ------------ ------------ ------------ ---------
Actual expenses as of May 31, $255,361 $185,390 $58,172 $403,120
1997 0.16% 1.77% 0.26% 6.25%
- ------------------------------- ------------------------- ------------ ---------
Pro forma combined expenses as $313,533 $588,510
of May 31, 1997 0.17% 3.47%
- ------------------------------- ------------------------- ------------ ---------
Thus, if the reorganization had taken place on May 31, 1997, the pro forma
combined unreimbursed expenses of Intermediate Maturity Government Fund's Class
A and Class B shares would have been higher than if no reorganization had
occurred. Intermediate Maturity Government Fund's assumption of your fund's
unreimbursed Rule 12b-1 expenses will have no immediate effect upon the payments
made under Intermediate Maturity Government Fund's Rule 12b-1 Plans. These
payments will continue to be 0.25% and 1.00% of average daily net assets
attributable to Class A and Class B shares, respectively.
John Hancock Funds, Inc. hopes to recover unreimbursed distribution and
shareholder service expenses for Class B shares over an extended period of time.
However, if Intermediate Maturity Government Fund's board terminates either
class' Rule 12b-1 Plan, that class will not be obligated to reimburse these
distribution and shareholder service expenses Accordingly, until they are paid
22
<PAGE>
or accrued, unreimbursed distribution and shareholder service expenses do not
and will not appear as an expense or liability in the financial statements of
either fund. In addition, unreimbursed expenses are not reflected in a fund's
net asset value or the formula for calculating Rule 12b-1 payments. The staff of
the SEC has not approved or disapproved the treatment of the unreimbursed
distribution and shareholder service expenses described in this proxy statement
Tax Status of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless both funds receive a satisfactory opinion from Hale and Dorr
LLP, counsel to the funds, substantially to the effect that:
o The reorganization described above will be a "reorganization" within
the meaning of Section 368(a)(1)(D) of the Internal Revenue Code of
1986 (the "Code"), and each fund will be "a party to a reorganization"
within the meaning of Section 368 of the Code;
o No gain or loss will be recognized by your fund upon (1) the transfer
of all of its assets to Intermediate Maturity Government Fund as
described above or (2) the distribution by your fund of Intermediate
Maturity Government Fund shares to your fund's shareholders;
o No gain or loss will be recognized by Intermediate Maturity Government
Fund upon the receipt of your fund's assets solely in exchange for the
issuance of Intermediate Maturity Government Fund shares and the
assumption of all of your fund's liabilities by Intermediate Maturity
Government Fund;
o The basis of the assets of your fund acquired by Intermediate Maturity
Government Fund will be the same as the basis of those assets in the
hands of your fund immediately before the transfer;
o The tax holding period of the assets of your fund in the hands of
Intermediate Maturity Government Fund will include your fund's tax
holding period for those assets;
o The shareholders of your fund will not recognize gain or loss upon the
exchange of all their shares of your fund solely for Intermediate
Maturity Government Fund shares as part of the reorganization;
o The basis of Intermediate Maturity Government Fund shares received by
your fund's shareholders in the reorganization will be the same as the
basis of the shares of your fund surrendered in exchange; and
23
<PAGE>
o The tax holding period of the Intermediate Maturity Government Fund
shares received by you will include the tax holding period of the
shares of your fund surrendered in the exchange, provided that the
shares of your fund were held as capital assets on the reorganization
date.
Additional Terms of Agreement and Plan of Reorganization
Surrender of Share Certificates. Shareholders of your fund whose shares are
represented by one or more share certificates should, before the reorganization
date, either surrender their certificates to your fund or deliver to your fund a
lost certificate affidavit, in the form and accompanied by the surety bonds that
your fund may require (collectively, an "Affidavit"). On the reorganization
date, all certificates that have not been surrendered will be canceled, will no
longer evidence ownership of your fund's shares and will evidence ownership of
Intermediate Maturity Government Fund shares. Shareholders may not redeem or
transfer Intermediate Maturity Government Fund shares received in the
reorganization until they have surrendered their Limited-Term Government Fund
share certificates or delivered an Affidavit. Intermediate Maturity Government
Fund will not issue share certificates in the reorganization.
Conditions to Closing the Reorganization. The obligation of your fund to
consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by Intermediate Maturity Government Fund
of all its obligations under the Agreement and the receipt of all consents,
orders and permits necessary to consummate the reorganization (see Agreement,
paragraph 6).
The obligation of Intermediate Maturity Government Fund to consummate the
reorganization is subject to the satisfaction of certain conditions, including
your fund's performance of all of its obligations under the Agreement, the
receipt of certain documents and financial statements from your fund and the
receipt of all consents, orders and permits necessary to consummate the
reorganization (see Agreement, paragraph 7).
The obligations of both funds are subject to the approval of the Agreement by
the necessary vote of the outstanding shares of your fund, in accordance with
the provisions of your fund's declaration of trust and by-laws. The funds'
obligations are also subject to the receipt of a favorable opinion of Hale and
Dorr LLP as to the federal income tax consequences of the reorganization. (see
Agreement, paragraph 8).
24
<PAGE>
Termination of Agreement. The board of trustees of either your fund or
Intermediate Maturity Government Fund may terminate the Agreement (even if the
shareholders of your fund have already approved it) at any time before the
reorganization date, if that board believes that proceeding with the
reorganization would no longer be advisable.
Expenses of the Reorganization. Intermediate Maturity Government Fund and your
fund will each be responsible for its own expenses incurred in connection with
entering into and carrying out the provisions of the Agreement, whether or not
the reorganization occurs. These expenses are estimated to be approximately
$180,024 in total.
CAPITALIZATION
The following table sets forth the capitalization of each fund as of May 31,
1997, and the pro forma combined capitalization of both funds as if the
reorganization had occurred on such date. The table reflects pro forma exchange
ratios of approximately 0.892160 Class A Intermediate Maturity Government Fund
shares being issued for each Class A share of your fund and approximately
0.892160 Class B Intermediate Maturity Government Fund shares being issued for
each Class B share of your fund. If the reorganization is consummated, the
actual exchange ratios on the reorganization date may vary from the exchange
ratios indicated due to changes in the market value of the portfolio securities
of both Intermediate Maturity Government Fund and your fund between May 31, 1997
and the reorganization date, changes in the amount of undistributed net
investment income and net realized capital gains of Intermediate Maturity
Government Fund and your fund during that period resulting from income and
distributions, and changes in the accrued liabilities of Intermediate Maturity
Government Fund and your fund during the same period.
MAY 31, 1997
Limited-Term Intermediate Pro Forma
Maturity
Net Assets $168,710,394 $29,205,883 $197,916,277
Net Asset Value Per Share
Class A $ 8.44 $ 9.46 $ 9.46
Class B $ 8.44 $ 9.46 $ 9.46
Shares Outstanding
Class A 18,745,924 2,405,279 19,129,646
Class B 1,243,215 681,925 1,791,072
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<PAGE>
It is impossible to predict how many Class A shares and Class B shares of
Intermediate Maturity Government Fund will actually be received and distributed
by your fund on the reorganization date. The table should not be relied upon to
determine the amount of Intermediate Maturity Government Fund shares that will
actually be received and distributed.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in the funds' combined prospectus you can find
additional information about the business of each fund.
- ---------------------------- ---------------------------------------------------
Type of Information Headings in Combined Prospectus
-------------------------- ------------------------
Limited-Term Government Intermediate
Maturity
- ---------------------------- ---------------------------------------------------
Organization Fund Details: Business Structure: How the Funds
and operation are Organized
- ---------------------------- ---------------------------------------------------
Investment objective and Goal and Strategy, Portfolio Securities, Risk
policies Factors; Fund Details: Business Structure:
Portfolio Trades, Investment Goals,
Diversification; More About Risk
- ---------------------------- ---------------------------------------------------
Portfolio Portfolio Management
management
- ---------------------------- ---------------------------------------------------
Investment adviser and Overview: The Management Firm; Fund Details:
distributor Business Structure: How the Funds are Organized,
Sales Compensation
- ---------------------------- ---------------------------------------------------
Expenses Investor Expenses
- ---------------------------- ---------------------------------------------------
Custodian and transfer Fund Details: Business Structure: How the Funds
agent are Organized
- ---------------------------- ---------------------------------------------------
Shares of beneficial Your Account: Choosing a Share Class
interest
- ---------------------------- ---------------------------------------------------
Purchase of shares Your Account: Choosing a Share Class, Sales Charge
Reductions and Waivers, Opening an Account, Buying
Shares; Transaction
Policies; Additional Investor Services
- ---------------------------- ---------------------------------------------------
Redemption Your Account: Selling Shares; How Sales Charges
or sale of shares are Calculated; Transaction Policies; Additional
Investor Services, Systematic Withdrawal Plan
- ---------------------------- ---------------------------------------------------
Dividends, Dividends and Account Policies
distributions and taxes
- ---------------------------- ---------------------------------------------------
26
<PAGE>
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees of your fund, including
the trustees who are not "interested persons" of either fund or the adviser
("independent trustees"), approved the reorganization. In particular, the
trustees determined that the reorganization was in the best interests of your
fund and that the interests of your fund's shareholders would not be diluted as
a result of the reorganization. Similarly, the board of trustees of Intermediate
Maturity Government Fund, including the independent trustees, approved the
reorganization. They also determined that the reorganization was in the best
interests of Intermediate Maturity Government Fund and that the interests of
Intermediate Maturity Government Fund's shareholders would not be diluted as a
result of the reorganization.
- --------------------------------------------------------------------------------
The trustees of your fund recommend that the shareholders of your fund vote for
the proposal to approve the agreement and plan of reorganization.
- --------------------------------------------------------------------------------
VOTING RIGHTS AND REQUIRED VOTE
Each share of your fund is entitled to one vote. Approval of the above proposal
requires the affirmative vote of a majority of the shares of your fund
outstanding and entitled to vote. For this purpose, a majority of the
outstanding shares of your fund means the vote of the lesser of
(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the fund.
Shares of your fund represented in person or by proxy, including shares which
abstain or do not vote with respect to the proposal, will be counted for
purposes of determining whether there is a quorum at the meeting. Accordingly,
an abstention from voting has the same effect as a vote against the proposal.
However, if a broker or nominee holding shares in "street name" indicates on the
proxy card that it does not have discretionary authority to vote on the
proposal, those shares will not be considered present and entitled to vote on
the proposal. Thus, a "broker non-vote" has no effect on the voting in
determining whether the proposal has been adopted in accordance with clause (1)
27
<PAGE>
above, if more than 50% of the outstanding shares (excluding the "broker
non-votes") are present or represented. However, for purposes of determining
whether the proposal has been adopted in accordance with clause (2) above, a
"broker non-vote" has the same effect as a vote against the proposal because
shares represented by a "broker non-vote" are considered to be outstanding
shares.
If the required approval of shareholders is not obtained, your fund will
continue to engage in business as a separate mutual fund and the board of
trustees will consider what further action may be appropriate.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax or in person by the trustees, officers and employees of your
fund; by personnel of your fund's investment adviser, John Hancock Advisers,
Inc. and its transfer agent, John Hancock Signature Services, Inc.; or by
broker-dealer firms. Signature Services, together with a third party
solicitation firm, has agreed to provide proxy solicitation services to your
fund at a cost of approximately $3,000.
Revoking Proxies
A Limited-Term Government Fund shareholder signing and returning a proxy has the
power to revoke it at any time before it is exercised:
o By filing a written notice of revocation with your fund's transfer
agent, John Hancock Signature Services, Inc., 1 John Hancock Way, Suite
1000, Boston, Massachusetts 02217-1000, or
o By returning a duly executed proxy with a later date before the time
of the meeting, or
o If a shareholder has executed a proxy but is present at the meeting and
wishes to vote in person, by notifying the secretary of your fund
(without complying with any formalities) at any time before it is
voted.
Being present at the meeting alone does not revoke a previously executed and
returned proxy.
28
<PAGE>
Outstanding Shares and Quorum
As of September 17, 1997, 18,146,959 Class A shares and 1,242,698 Class B shares
of beneficial interest of your fund were outstanding. Only shareholders of
record on September 17, 1997 (the "record date") are entitled to notice of and
to vote at the meeting. A majority of the outstanding shares of your fund that
are entitled to vote will be considered a quorum for the transaction of
business.
Other Business
Your fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If a quorum is not present in person or by proxy at the time any session of the
meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of your fund's shares at the session
of the Meeting to be adjourned. If an adjournment of the meeting is proposed
because there are not sufficient votes in favor of the proposal, the persons
named as proxies will vote those proxies favoring the proposal in favor of
adjournment, and will vote those proxies against the reorganization against
adjournment.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your fund may
also arrange to have votes recorded by telephone by officers and employees of
your fund or by personnel of the adviser or transfer agent. The telephone voting
procedure is designed to verify a shareholder's identity, to allow a shareholder
to authorize the voting of shares in accordance with the shareholder's
instructions and to confirm that the voting instructions have been properly
recorded. If these procedures were subject to a successful legal challenge,
these telephone votes would not be counted at the meeting. Your fund has not
obtained an opinion of counsel about telephone voting, but is currently not
aware of any challenge.
29
<PAGE>
o A shareholder will be called on a recorded line at the telephone number
in the fund's account records and will be asked to provide the
shareholder's social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies
to vote his or her shares at the meeting in accordance with the
shareholder's instructions.
o To ensure that the shareholder's instructions have been recorded
correctly, the shareholder will also receive a confirmation of the
voting instructions by mail.
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o If the shareholder decides after voting by telephone to attend the
meeting, the shareholder can revoke the proxy at that time and vote the
shares at the meeting.
30
<PAGE>
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of the fund, as of August 29, 1997, the following persons owned
of record or beneficially 5% or more of the outstanding Class A and Class B
shares of your fund and Intermediate Maturity Government Fund:
- ------------------------------------ ----------------------
Names and Addresses of Owners Limited-Term
of More Than 5% of Shares Fund
---------- -----------
Class A Class B
- ------------------------------------ ---------- -----------
MLPF & S for the Sole Benefit of its 20.41%
Customers
Attn Fund Administration
4800 Deer Lake Drive East
Jacksonville, FL 32246
- --------------------------------------------------------------
- --------------------------------------------------------------
Intermediate
Maturity Fund
---------- -----------
Class A Class B
- ------------------------------------ ---------- -----------
River Production Co. Inc. 7.17%
P.O. Box 909
Columbia, MA
- ------------------------------------ ---------- -----------
MLPF & S for the Sole Benefit of its 5.79% 22.12%
Customers
Attn Fund Administration
4800 Deer Lake Drive East
Jacksonville, FL 32246
- ------------------------------------ ---------- -----------
Northern Trust Co. TTEE 5.33%
FBO Adventist Health System/West
P.O. Box 92956
Chicago, IL 60675
- ------------------------------------ ---------- -----------
Ventura Estates 5.57%
915 Estates
Newbury Park CA 91320
- --------------------------------------------------------------
31
<PAGE>
As of August 29, 1997, the trustees and officers of your fund and Intermediate
Maturity Government Fund, each as a group, owned in the aggregate less than 1%
of the outstanding shares of their respective funds.
EXPERTS
The financial statements and the financial highlights of Limited-Term Government
Fund and Intermediate Maturity Government Fund, each as of May 31, 1997 and for
the periods then ended, are incorporated by reference into this proxy statement
and prospectus. These financial statements and financial highlights have been
independently audited by Ernst & Young LLP, as stated in their reports appearing
in the statement of additional information. These financial statements and
financial highlights have been included in reliance on their reports given on
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the funds can be inspected and copied
(at prescribed rates) at the public reference facilities of the SEC at 450 Fifth
Street, N.W., Washington, D.C., and at the following regional offices: Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois); and New York (7 World
Trade Center, Suite 1300, New York, New York). Copies of such material can also
be obtained by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies
of these documents may be viewed on-screen or downloaded from the SEC's Internet
site at http://www.sec.gov.
32
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this 1st day
of October, 1997, by and between John Hancock Intermediate Maturity Government
Fund (the "Acquiring Fund"), a series of John Hancock Bond Trust, a
Massachusetts business trust (the "Trust"), and John Hancock Limited Term
Government Fund (the "Acquired Fund"), a Massachusetts business trust, each with
their principal place of business at 101 Huntington Avenue, Boston,
Massachusetts 02199. The Acquiring Fund and the Acquired Fund are sometimes
referred to collectively herein as the "Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization will consist of the transfer of all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for the
issuance of Class A and Class B shares of beneficial interest of the Acquiring
Fund (the "Acquiring Fund Shares") to the Acquired Fund and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund, followed by
the distribution by the Acquired Fund, on or promptly after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in liquidation and termination of the Acquired Fund as provided
herein, all upon the terms and conditions set forth in this Agreement.
In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE
ACQUIRED FUND
1.1 The Acquired Fund will transfer all of its assets (consisting, without
limitation, of portfolio securities and instruments, dividends and interest
receivables, cash and other assets), as set forth in the statement of
assets and liabilities referred to in Paragraph 7.2 hereof (the "Statement
of Assets and Liabilities"), to the Acquiring Fund free and clear of all
liens and encumbrances, except as otherwise provided herein, in exchange
for (i) the assumption by the Acquiring Fund of the known and unknown
liabilities of the Acquired Fund, including the liabilities set forth in
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the Statement of Assets and Liabilities (the "Acquired Fund Liabilities"),
which shall be assigned and transferred to the Acquiring Fund by the
Acquired Fund and assumed by the Acquiring Fund, and (ii) delivery by the
Acquiring Fund to the Acquired Fund, for distribution pro rata by the
Acquired Fund to its shareholders in proportion to their respective
ownership of Class A and/or Class B shares of beneficial interest of the
Acquired Fund, as of the close of business on December 5, 1997 (the
"Closing Date"), of a number of the Acquiring Fund Shares having an
aggregate net asset value equal, in the case of each class of Acquiring
Fund Shares, to the value of the assets, less such liabilities (herein
referred to as the "net value of the assets") attributable to the
applicable class, assumed, assigned and delivered, all determined as
provided in Paragraph 2.1 hereof and as of a date and time as specified
therein. Such transactions shall take place at the closing provided for in
Paragraph 3.1 hereof (the "Closing"). All computations shall be provided by
Investors Bank & Trust Company (the "Custodian"), as custodian and pricing
agent for the Acquiring Fund and the Acquired Fund.
1.2 The Acquired Fund has provided the Acquiring Fund with a list of the
current securities holdings of the Acquired Fund as of the date of
execution of this Agreement. The Acquired Fund reserves the right to sell
any of these securities (except to the extent sales may be limited by
representations made in connection with issuance of the tax opinion
provided for in paragraph 8.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest.
1.3 The Acquiring Fund and the Acquired Fund shall each bear its own expenses
in connection with the transactions contemplated by this Agreement.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to shareholders of record (the "Acquired Fund shareholders"),
determined as of the close of regular trading on the New York Stock
Exchange on the Closing Date, the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund, to open accounts on the share records of the Acquiring
Fund in the names of the Acquired Fund shareholders and representing the
respective pro rata number and class of Acquiring Fund Shares due such
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shareholders. Acquired Fund shareholders who own Class A shares of the
Acquired Fund will receive Class A Acquiring Fund Shares and Acquired Fund
shareholders who own Class B shares of the Acquired Fund will receive Class
B Acquiring Fund Shares. The Acquiring Fund shall not issue certificates
representing Acquiring Fund Shares in connection with such exchange.
1.5 The Acquired Fund shareholders holding certificates representing their
ownership of shares of beneficial interest of the Acquired Fund shall
surrender such certificates or deliver an affidavit with respect to lost
certificates in such form and accompanied by such surety bonds as the
Acquired Fund may require (collectively, an "Affidavit"), to John Hancock
Signature Services, Inc. prior to the Closing Date. Any Acquired Fund share
certificate which remains outstanding on the Closing Date shall be deemed
to be canceled, shall no longer evidence ownership of shares of beneficial
interest of the Acquired Fund and shall evidence ownership of Acquiring
Fund Shares. Unless and until any such certificate shall be so surrendered
or an Affidavit relating thereto shall be delivered, dividends and other
distributions payable by the Acquiring Fund subsequent to the Liquidation
Date with respect to Acquiring Fund Shares shall be paid to the holder of
such certificate(s), but such shareholders may not redeem or transfer
Acquiring Fund Shares received in the Reorganization. The Acquiring Fund
will not issue share certificates in the Reorganization.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Acquiring Fund Shares are
to be issued and transferred.
1.7 The existence of the Acquired Fund shall be terminated as promptly as
practicable following the Liquidation Date.
1.8 Any reporting responsibility of the Acquired Fund, including, but not
limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission
(the "Commission"), any state securities commissions, and any federal,
state or local tax authorities or any other relevant regulatory authority,
is and shall remain the responsibility of the Acquired Fund.
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2. VALUATION
2.1 The net asset values of the Class A and Class B Acquiring Fund Shares and
the net values of the assets and liabilities of the Acquired Fund
attributable to its Class A and Class B shares to be transferred shall, in
each case, be determined as of the close of business (4:00 p.m. Boston
time) on the Closing Date. The net asset values of the Class A and Class B
Acquiring Fund Shares shall be computed by the Custodian in the manner set
forth in the Acquiring Fund's Declaration of Trust as amended and restated
(the "Declaration"), or By-Laws and the Acquiring Fund's then-current
prospectus and statement of additional information and shall be computed in
each case to not fewer than four decimal places. The net values of the
assets of the Acquired Fund attributable to its Class A and Class B shares
to be transferred shall be computed by the Custodian by calculating the
value of the assets of each class transferred by the Acquired Fund and by
subtracting therefrom the amount of the liabilities of each class assigned
and transferred to and assumed by the Acquiring Fund on the Closing Date,
said assets and liabilities to be valued in the manner set forth in the
Acquired Fund's then current prospectus and statement of additional
information and shall be computed in each case to not fewer than four
decimal places.
2.2 The number of shares of each class of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's
assets shall be determined by dividing the value of the Acquired Fund's
assets attributable to a class, less the liabilities attributable to that
class assumed by the Acquiring Fund, by the Acquiring Fund's net asset
value per share of the same class, all as determined in accordance with
Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Custodian in accordance with
its regular practice as pricing agent for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 5, 1997 or such other date on or before
June 30, 1998 as the parties may agree. The Closing shall be held as of
5:00 p.m. at the offices of the Trust and the Acquired Fund, 101 Huntington
Avenue, Boston, Massachusetts 02199, or at such other time and/or place as
the parties may agree.
3.2 Portfolio securities that are not held in book-entry form in the name of
the Custodian as record holder for the Acquired Fund shall be presented by
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the Acquired Fund to the Custodian for examination no later than three
business days preceding the Closing Date. Portfolio securities which are
not held in book-entry form shall be delivered by the Acquired Fund to the
Custodian for the account of the Acquiring Fund on the Closing Date, duly
endorsed in proper form for transfer, in such condition as to constitute
good delivery thereof in accordance with the custom of brokers, and shall
be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof. Portfolio securities
held of record by the Custodian in book-entry form on behalf of the
Acquired Fund shall be delivered to the Acquiring Fund by the Custodian by
recording the transfer of beneficial ownership thereof on its records. The
cash delivered shall be in the form of currency or by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian with
immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock Exchange shall
be closed to trading or trading thereon shall be restricted or (b) trading
or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored;
provided that if trading shall not be fully resumed and reporting restored
on or before June 30, 1998, this Agreement may be terminated by the
Acquiring Fund or by the Acquired Fund upon the giving of written notice to
the other party.
3.4 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding
and nonresident alien withholding status of the Acquired Fund shareholders
and the number of outstanding shares of each class of beneficial interest
of the Acquired Fund owned by each such shareholder, all as of the close of
business on the Closing Date, certified by its Treasurer, Secretary or
other authorized officer (the "Shareholder List"). The Acquiring Fund shall
issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
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4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents, warrants and covenants to the Acquiring Fund
as follows:
(a) The Acquired Fund is a business trust, duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and, subject to approval by the shareholders of the Acquired
Fund, to carry out the transactions contemplated by this Agreement.
The Acquired Fund is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to
qualify would subject it to any material liability or disability. The
Acquired Fund has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry on
its business as now being conducted;
(b) The Acquired Fund is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), is in full force and effect. The Acquired
Fund is a diversified investment company under the 1940 Act;
(c) The Acquired Fund is not, and the execution, delivery and performance
of its obligations under this Agreement will not result, in violation
of any provision of the Acquired Fund's Declaration of Trust, as
amended and restated (the "Acquired Fund's Declaration") or By-Laws or
of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund is a party or by which it is
bound;
(d) Except as otherwise disclosed in writing and accepted by the Acquiring
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Acquired Fund or any of the Acquired
Fund's properties or assets. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings, and the
Acquired Fund is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects the Acquired Fund's business or its
ability to consummate the transactions herein contemplated;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of
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securities entered into in the ordinary course of business and
consistent with its obligations under this Agreement) which will not
be terminated without liability to the Acquired Fund at or prior to
the Closing Date;
(f) The statement of assets and liabilities, including the schedule of
investments, of the Acquired Fund as of May 31, 1997 and the related
statement of operations for the year ended December 31, 1996 and the
period from January 1, 1997 to May 31, 1997 and the statement of
changes in net assets for the years ended December 31, 1995 and 1996
and the period from January 1, 1997 to May 31, 1997 (audited by Ernst
& Young LLP) (copies of which have been furnished to the Acquiring
Fund) present fairly in all material respects the financial condition
of the Acquired Fund as of May 31, 1997 and the results of its
operations for the period then ended in accordance with generally
accepted accounting principles consistently applied, and there were no
known actual or contingent liabilities of the Acquired Fund as of the
respective dates thereof not disclosed therein;
(g) Since May 31, 1997, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund;
(h) At the date hereof and by the Closing Date, all federal, state and
other tax returns and reports, including information returns and payee
statements, of the Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished, and all
federal, state and other taxes, interest and penalties shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such
return is currently under audit and no assessment has been asserted
with respect to such returns or reports;
(i) Each of the Acquired Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquired Fund will qualify as such as of the Closing Date with
respect to its taxable year ending on the Closing Date;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value. All issued and
outstanding shares of beneficial interest of the Acquired Fund are,
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and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Acquired Fund. All of
the issued and outstanding shares of beneficial interest of the
Acquired Fund will, at the time of Closing, be held by the persons and
in the amounts and classes set forth in the Shareholder List submitted
to the Acquiring Fund pursuant to Paragraph 3.4 hereof. The Acquired
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares of beneficial interest,
nor is there outstanding any security convertible into any of its
shares of beneficial interest;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant
to Paragraph 1.1 hereof, and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder, and upon delivery
and payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the
Securities Act of 1933, as amended (the "1933 Act");
(l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund, and this Agreement constitutes a valid and binding obligation of
the Acquired Fund enforceable in accordance with its terms, subject to
the approval of the Acquired Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable
thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in Paragraph 5.7
hereof (other than written information furnished by the Acquiring Fund
for inclusion therein, as covered by the Acquiring Fund's warranty in
Paragraph 4.2(m) hereof), on the effective date of the Registration
Statement, on the date of the meeting of the Acquired Fund
shareholders and on the Closing Date, shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading;
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(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of beneficial interest of the
Acquired Fund have been offered for sale and sold in conformity with
all applicable federal and state securities laws;
(q) The prospectus of the Acquired Fund, dated October 1, 1997 (the
"Acquired Fund Prospectus"), furnished to the Acquiring Fund, does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading.
4.2 The Trust on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts and
has the power to own all of its properties and assets and to carry out
the Agreement. Neither the Trust nor the Acquiring Fund is required to
qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material
liability or disability. The Trust has all necessary federal, state
and local authorizations to own all of its properties and assets and
to carry on its business as now being conducted;
(b) The Trust is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect. The
Acquiring Fund is a diversified series of the Trust;
(c) The prospectus (the "Acquiring Fund Prospectus") and statement of
additional information for Class A and Class B shares of the Acquiring
Fund, each dated March 1, 1997, as supplemented on July 15, 1997, and
any amendments or supplements thereto on or prior to the Closing Date,
and the Registration Statement on Form N-14 filed in connection with
this Agreement (the "Registration Statement") (other than written
information furnished by the Acquired Fund for inclusion therein, as
covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof)
will conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the
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Commission thereunder, the Acquiring Fund Prospectus does not include
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and the Registration Statement will not include any untrue
statement of material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(d) At the Closing Date, the Trust on behalf of the Acquiring Fund will
have good and marketable title to the assets of the Acquiring Fund;
(e) The Trust and the Acquiring Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not
result in a violation of any provisions of the Trust's Declaration, or
By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Trust or the Acquiring Fund is a party
or by which the Trust or the Acquiring Fund is bound;
(f) Except as otherwise disclosed in writing and accepted by the Acquired
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or threatened against the Trust or the Acquiring Fund or any
of the Acquiring Fund's properties or assets. The Trust knows of no
facts which might form the basis for the institution of such
proceedings, and neither the Trust nor the Acquiring Fund is a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects
the Acquiring Fund's business or its ability to consummate the
transactions herein contemplated;
(g) The statement of assets and liabilities, including the schedule of
investments, of the Acquiring Fund as of May 31, 1997 and the related
statement of operations for the year ended March 31, 1997 and the
period from April 1, 1997 to May 31, 1997, and the statement of
changes in net assets for the years ended March 31, 1996 and 1997 and
the period from April 1, 1997 to May 31, 1997 (audited by Ernst &
Young LLP) (copies of which have been furnished to the Acquired Fund),
present fairly in all material respects the financial condition of the
Acquiring Fund as of May 31, 1997 and the results of its operations
for the period then ended in accordance with generally accepted
accounting principles consistently applied, and there were no known
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actual or contingent liabilities of the Acquiring Fund as of the
respective dates thereof not disclosed therein;
(h) Since May 31, 1997, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of
business, or any incurrence by the Trust on behalf of the Acquiring
Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as disclosed to and accepted by the
Acquired Fund;
(i) Each of the Acquiring Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquiring Fund will qualify as such as of the Closing Date;
(j) The authorized capital of the Trust consists of an unlimited number of
shares of beneficial interest, no par value per share. All issued and
outstanding shares of beneficial interest of the Acquiring Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Trust. The Acquiring
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares of beneficial interest,
nor is there outstanding any security convertible into any of its
shares of beneficial interest;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust on
behalf of the Acquiring Fund, and this Agreement constitutes a valid
and binding obligation of the Acquiring Fund enforceable in accordance
with its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of beneficial
interest of the Acquiring Fund and will be fully paid and
nonassessable by the Trust;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and
other laws and regulations applicable thereto; and
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(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by the Agreement,
except for the registration of the Acquiring Fund Shares under the
1933 Act and the 1940 Act.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, the Acquired Fund
and the Trust on behalf of the Acquiring Fund, will operate their
respective businesses in the ordinary course between the date hereof and
the Closing Date, it being understood that such ordinary course of business
will include customary dividends and distributions and any other
distributions necessary or desirable to avoid federal income or excise
taxes.
5.2 The Acquired Fund will call a meeting of the Acquired Fund shareholders to
consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4 The Acquired Fund will provide such information within its possession or
reasonably obtainable as the Trust on behalf of the Acquiring Fund requests
concerning the beneficial ownership of the Acquired Fund's shares of
beneficial interest.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund each shall take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
5.6 The Acquired Fund shall furnish to the Trust on behalf of the Acquiring
Fund on the Closing Date the Statement of Assets and Liabilities of the
Acquired Fund as of the Closing Date, which statement shall be prepared in
accordance with generally accepted accounting principles consistently
applied and shall be certified by the Acquired Fund's Treasurer or
Assistant Treasurer. As promptly as practicable but in any case within 60
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days after the Closing Date, the Acquired Fund shall furnish to the
Acquiring Fund, in such form as is reasonably satisfactory to the Trust, a
statement of the earnings and profits of the Acquired Fund for federal
income tax purposes and of any capital loss carryovers and other items that
will be carried over to the Acquiring Fund as a result of Section 381 of
the Code, and which statement will be certified by the President of the
Acquired Fund.
5.7 The Trust on behalf of the Acquiring Fund will prepare and file with the
Commission the Registration Statement in compliance with the 1933 Act and
the 1940 Act in connection with the issuance of the Acquiring Fund Shares
as contemplated herein.
5.8 The Acquired Fund will prepare a Proxy Statement, to be included in the
Registration Statement in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act and the
rules and regulations thereunder (collectively, the "Acts") in connection
with the special meeting of shareholders of the Acquired Fund to consider
approval of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided for
herein shall be, at its election, subject to the performance by the Trust on
behalf of the Acquiring Fund of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the following
further conditions:
6.1 All representations and warranties of the Trust on behalf of the Acquiring
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date; and
6.2 The Trust on behalf of the Acquiring Fund shall have delivered to the
Acquired Fund a certificate executed in its name by the Trust's President
or Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to the effect that the representations and warranties of the Trust on
behalf of the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
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transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE ACQUIRING
FUND
The obligations of the Trust on behalf of the Acquiring Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Acquired Fund of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Trust on behalf of the
Acquiring Fund the Statement of Assets and Liabilities of the Acquired
Fund, together with a list of its portfolio securities showing the federal
income tax bases and holding periods of such securities, as of the Closing
Date, certified by the Treasurer or Assistant Treasurer of the Acquired
Fund;
7.3 The Acquired Fund shall have delivered to the Trust on behalf of the
Acquiring Fund on the Closing Date a certificate executed in the name of
the Acquired Fund by a President or Vice President and a Treasurer or
Assistant Treasurer of the Acquired Fund, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund in this
Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement,
and as to such other matters as the Trust on behalf of the Acquiring Fund
shall reasonably request; and
7.4 At or prior to the Closing Date, the Acquired Fund's investment adviser, or
an affiliate thereof, shall have made all payments, or applied all credits,
to the Acquired Fund required by any applicable contractual expense
limitation.
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8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND AND THE
TRUST ON BEHALF OF THE ACQUIRING FUND
The obligations hereunder of the Trust on behalf of the Acquiring Fund and the
Acquired Fund are each subject to the further conditions that on or before the
Closing Date:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
beneficial interest of the Acquired Fund in accordance with the provisions
of the Acquired Fund's Declaration and By-Laws, and certified copies of the
resolutions evidencing such approval by the Acquired Fund's shareholders
shall have been delivered by the Acquired Fund to the Trust on behalf of
the Acquiring Fund;
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain changes or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and their "no-action" positions) deemed necessary by the
Acquired Fund or the Trust to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto
may waive any such conditions for itself;
8.4 The Registration Statement shall have become effective under the 1933 Act
and the 1940 Act and no stop orders suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act or the 1940 Act;
8.5 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends
paid under Section 561 of the Code, all of its investment company taxable
income (as defined in Section 852(b)(2) of the Code determined without
regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on
A-15
<PAGE>
the Closing Date, all of the excess of (i) its interest income excludable
from gross income under Section 103(a) of the Code over (ii) its deductions
disallowed under Sections 265 and 171(a)(2) of the Code for its taxable
year ending on the Closing Date, and all of its net capital gain (as such
term is used in Sections 852(b)(3)(A) and (C) of the Code), after reduction
by any available capital loss carryforward, for its taxable year ending on
the Closing Date; and
8.6 The parties shall have received an opinion of Hale and Dorr LLP,
satisfactory to the Acquired Fund and the Trust on behalf of the Acquiring
Fund, substantially to the effect that for federal income tax purposes:
(a) The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund
Shares to the Acquired Fund and the assumption of all of the Acquired
Fund Liabilities by the Acquiring Fund, followed by the distribution
by the Acquired Fund, in liquidation of the Acquired Fund, of
Acquiring Fund Shares to the shareholders of the Acquired Fund in
exchange for their shares of beneficial interest of the Acquired Fund
and the termination of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
the Acquired Fund and the Acquiring Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund upon (i) the
transfer of all of its assets to the Acquiring Fund solely in exchange
for the issuance of Acquiring Fund Shares to the Acquired Fund and the
assumption of all of the Acquired Fund Liabilities by the Acquiring
Fund; and (ii) the distribution by the Acquired Fund of such Acquiring
Fund Shares to the shareholders of the Acquired Fund;
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
issuance of the Acquiring Fund Shares to the Acquired Fund and the
assumption of all of the Acquired Fund Liabilities by the Acquiring
Fund;
(d) The basis of the assets of the Acquired Fund acquired by the Acquiring
Fund will be, in each instance, the same as the basis of those assets
in the hands of the Acquired Fund immediately prior to the transfer;
A-16
<PAGE>
(e) The tax holding period of the assets of the Acquired Fund in the hands
of the Acquiring Fund will, in each instance, include the Acquired
Fund's tax holding period for those assets;
(f) The shareholders of the Acquired Fund will not recognize gain or loss
upon the exchange of all of their shares of beneficial interest of the
Acquired Fund solely for Acquiring Fund Shares as part of the
transaction;
(g) The basis of the Acquiring Fund Shares received by the Acquired Fund
shareholders in the transaction will be the same as the basis of the
shares of beneficial interest of the Acquired Fund surrendered in
exchange therefor; and
(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax
holding period for the shares of the Acquired Fund surrendered in
exchange therefor, provided that the Acquired Fund shares were held as
capital assets on the date of the exchange.
The Trust on behalf of the Acquiring Fund and the Acquired Fund agree to make
and provide representations which are reasonably necessary to enable Hale and
Dorr LLP to deliver an opinion substantially as set forth in this Paragraph 8.6.
Notwithstanding anything herein to the contrary, neither the Acquired Fund nor
the Trust may waive the conditions set forth in this Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust on behalf of the Acquiring Fund and the Acquired Fund each
represent and warrant to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions
provided for herein.
9.2 The Acquiring Fund and the Acquired Fund shall each be liable solely for
its own expenses incurred in connection with entering into and carrying out
the provisions of this Agreement whether or not the transactions
contemplated hereby are consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of the Acquiring Fund and the Acquired Fund agree that
neither party has made any representation, warranty or covenant not set
A-17
<PAGE>
forth herein or referred to in Paragraph 4 hereof and that this Agreement
constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust on
behalf of the Acquiring Fund and the Acquired Fund. In addition, either
party may at its option terminate this Agreement at or prior to the Closing
Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or
prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Trust's Board of Trustees if circumstances should
develop that, in the good faith opinion of such Board, make proceeding
with the Agreement not in the best interests of the Acquiring Fund's
shareholders; or
(d) by resolution of the Acquired Fund's Board of Trustees if
circumstances should develop that, in the good faith opinion of such
Board, make proceeding with the Agreement not in the best interests of
the Acquired Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust, the Acquiring Fund, or the Acquired Fund,
or the Trustees or officers of the Trust or the Acquired Fund, but each
party shall bear the expenses incurred by it incidental to the preparation
and carrying out of this Agreement.
A-18
<PAGE>
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Trust and the Acquired
Fund. However, following the meeting of shareholders of the Acquired Fund held
pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions regarding the method for determining the
number of Acquiring Fund Shares to be received by the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval; provided that nothing contained in this Article 12 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at 101 Huntington Avenue, Boston, Massachusetts 02199, Attention:
President, and, in either case, with copies to Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109, Attention: Pamela J. Wilson, Esq.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the prior written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
A-19
<PAGE>
14.5 All persons dealing with the Trust or the Acquired Fund must look solely to
the property of the Trust or the Acquired Fund, respectively, for the
enforcement of any claims against the Trust or the Acquired Fund as the
Trustees, officers, agents and shareholders of the Trust or the Acquired
Fund assume no personal liability for obligations entered into on behalf of
the Trust or the Acquired Fund, respectively. None of the other series of
the Trust shall be responsible for any obligations assumed by on or behalf
of the Acquiring Fund under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
JOHN HANCOCK BOND TRUST on behalf of
JOHN HANCOCK INTERMEDIATE MATURITY GOVERNMENT FUND
By:
- ----------------------------------------
Anne C. Hodsdon
President
JOHN HANCOCK LIMITED TERM GOVERNMENT FUND
By:
- ----------------------------------------
Susan S. Newton
Vice President and Secretary
A-20
220PX 9/97
<PAGE>
JOHN HANCOCK
Income Funds
[GRAPHIC]
- --------------------------------------------------------------------------------
Prospectus
October 1, 1997
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank 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.
Government Income Fund
High Yield Bond Fund
Intermediate Maturity
Government Fund
Limited-Term Government Fund
Sovereign Bond Fund
Sovereign U.S. Government
Income Fund
Strategic Income Fund
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
- --------------------------------------------------------------------------------
A fund-by-fund look at goals, Government Income Fund 4
strategies, risks, expenses
and financial history. High Yield Bond Fund 6
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 Your account
for opening, maintaining Choosing a share class 18
and closing an account How sales charges are calculated 18
in any 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
- --------------------------------------------------------------------------------
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 $22 billion in assets.
Fund Information Key
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip art] 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.
[Clip art] Risk factors The major risk factors associated with the fund.
[Clip art] Portfolio management The individual or group designated by the
investment adviser to handle the fund's day-to-day management.
[Clip art] Expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
[Clip art] 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
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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
[Clip art] 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
high-quality 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
[Clip art] 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
[Clip art] 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
[Clip art] 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 0.63% 0.63%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.25% 0.25%
Total fund operating expenses 1.13% 1.88%
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 $89 $122 $200
Assuming no redemption $19 $59 $102 $200
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>
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class B
year-by-year total investment return (%) 2.40(6) 10.22 3.71 14.38 8.81 9.86 (6.42) 14.49 3.84 2.02(6)
(scale varies from fund to fund) seven
months
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 10/94(1) 10/95(2) 10/96 5/97(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.85 $8.75 $9.32 $9.07
Net investment income (loss) 0.06 0.72 0.65(4) 0.37(4)
Net realized and unrealized gain (loss) on investments (0.10) 0.57 (0.25) (0.14)
Total from investment operations (0.04) 1.29 0.40 0.23
Less distributions:
Dividends from net investment income (0.06) (0.72) (0.65) (0.37)
Net asset value, end of period $8.75 $9.32 $9.07 $8.93
Total investment return at net asset value(5) (%) (0.45)(6) 15.3 4.49 2.57(6)
Total adjusted investment return at net asset value(5) (%) (0.46)(6) 15.28
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 223 470,569 396,323 359,758
Ratio of expenses to average net assets(7) (%) 0.12(6) 1.19 1.17 1.13(8)
Ratio of net investment income (loss) to average net assets(7) (%) 0.71(6) 7.38 7.10 7.06(8)
Portfolio turnover rate (%) 92 102(9) 106 129
Debt outstanding at end of period (000s omitted)(10) ($) 0.0 -- -- --
Average daily amount of debt outstanding during the period (000s omitted)(10) ($) 349 N/A N/A N/A
Average monthly number of shares outstanding during the period (000s omitted) 28,696 N/A N/A N/A
Average daily amount of debt outstanding per share during the period(10) ($) 0.01 N/A N/A N/A
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/88(1) 10/89 10/90 10/91 10/92 10/93
- --------------------------------------------------------------------------------------------------------------------------------
<S> <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
Net investment income (loss) 0.69(4) 0.98 0.88 0.89 0.80 0.70
Net realized and unrealized gain (loss) on investments (0.45) (0.01) (0.54) 0.40 0.03 0.24
Total from investment operations 0.24 0.97 0.34 1.29 0.83 0.94
Less distributions
Dividends from net investment income (0.64) (1.00) (0.95) (0.87) (0.79) (0.72)
Distributions from net realized gain on investments sold (0.17) -- -- -- -- --
Total distributions (0.81) (1.00) (0.95) (0.87) (0.79) (0.72)
Net asset value, end of period $10.01 $9.98 $9.37 $9.79 $9.83 $10.05
Total investment return at net asset value(5) (%) 2.40(6) 10.22 3.71 14.38 8.81(7) 9.86(7)
Total adjusted investment return at net asset value(5,11) (%) 1.02(6) 9.40 3.67 -- 8.66 9.85
Ratios and supplemental data
Net assets end of period (000s omitted) ($) 6,966 26,568 64,707 129,014 225,540 293,413
Ratio of expenses to average net assets (%) 1.38(6) 2.00 2.00 2.00 2.00(7) 2.00(7)
Ratio of adjusted expenses to average net assets(12) (%) 2.76(6) 2.82 2.04 -- -- --
Ratio of net investment income (loss) to
average net assets (%) 6.34(6) 9.64 9.22 9.09 8.03(7) 7.06(7)
Ratio of adjusted net investment income (loss) to
average net assets(12) (%) 4.96(6) 8.82 9.18 -- -- --
Portfolio turnover rate (%) 174 151 83 162 112 138
Fee reduction per share ($) 0.15 0.08 0.004 -- -- --
Debt outstanding at end of period (000s omitted)(10) ($) -- -- -- -- 0 0
Average daily amount of debt outstanding during the
period (000s omitted)(10) ($) -- -- -- -- 6,484 503
Average monthly number of shares outstanding during
the period (000s omitted) -- -- -- -- 18,572 26,378
Average daily amount of debt outstanding per share
during the period(10) ($) -- -- -- -- 0.35 0.02
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/94 10/95(2) 10/96 5/97(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.05 $8.75 $9.32 $9.08
Net investment income (loss) 0.65 0.65 0.58(4) 0.33(4)
Net realized and unrealized gain (loss) on investments (1.28) 0.57 (0.24) (0.15)
Total from investment operations (0.63) 1.22 0.34 0.18
Less distributions
Dividends from net investment income (0.65) (0.65) (0.58) (0.33)
Distributions from net realized gain on investments sold (0.02) -- -- --
Total distributions (0.67) (0.65) (0.58) (0.33)
Net asset value, end of period $8.75 $9.32 $9.08 $8.93
Total investment return at net asset value(5) (%) (6.42)(7) 14.49(7) 3.84 2.02(6)
Total adjusted investment return at net asset value(5,11) (%) (6.43) 14.47 -- --
Ratios and supplemental data
Net assets end of period (000s omitted) ($) 241,061 226,954 178,124 153,390
Ratio of expenses to average net assets (%) 1.93(7) 1.89(7) 1.90 1.87(8)
Ratio of adjusted expenses to average net assets(12) (%) -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) 6.98(7) 7.26(7) 6.37 6.32(8)
Ratio of adjusted net investment income (loss) to
average net assets(12) (%) -- -- -- --
Portfolio turnover rate (%) 92 102(9) 106 129
Fee reduction per share ($) -- -- -- --
Debt outstanding at end of period (000s omitted)(10) ($) 0 -- -- --
Average daily amount of debt outstanding during the
period (000s omitted)(10) ($) 349 N/A N/A N/A
Average monthly number of shares outstanding during
the period (000s omitted) 28,696 N/A N/A N/A
Average daily amount of debt outstanding per share
during the period(10) ($) 0.01 N/A N/A N/A
</TABLE>
(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) Effective May 31, 1997, the fiscal year end changed from October 31 to May
31.
(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) 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.
(8) Annualized.
(9) Portfolio turnover rate excludes merger activity.
(10) Debt outstanding consists of reverse repurchase agreements entered into
during the year.
(11) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(12) Unreimbursed, without fee reduction.
GOVERNMENT INCOME FUND 5
<PAGE>
High Yield Bond Fund
REGISTRANT NAME: JOHN HANCOCK BOND TRUST
TICKER SYMBOL CLASS A: JHHBX CLASS B: TSHYX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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
[Clip art] Under normal circumstances, the fund invests at least 65% of assets
in bonds rated lower than BBB/Baa and their unrated equivalents. Up to 30% 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
[Clip art] Investors should expect greater fluctuations in share price, yield
and total return compared with 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 with 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
[Clip art] Arthur N. Calavritinos, CFA, leader of the fund's portfolio
management team since July 1995, is a vice president of the adviser. He joined
John Hancock Funds in 1988 and has been in the investment business since 1987.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[Clip art] 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 0.54% 0.54%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.25% 0.25%
Total fund operating expenses 1.04% 1.79%
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 $77 $100 $166
Class B shares
Assuming redemption
at end of period $68 $86 $117 $191
Assuming no redemption $18 $56 $97 $191
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>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class B
year-by-year total investment return (%) (0.10)(6) 9.77 (4.51) (8.04) 34.21 11.56 21.76 (1.33) 7.97 15.24 10.06(6)
(scale varies from fund to fund) seven
months
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 10/93(1) 10/94 10/95(2) 10/96 5/97(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.10 $8.23 $7.33 $7.20 $7.55
Net investment income (loss) 0.33 0.80(4) 0.72 0.76(4) 0.45
Net realized and unrealized gain (loss) on investments 0.09 (0.83) (0.12) 0.35 0.32
Total from investment operations 0.42 (0.03) 0.60 1.11 0.77
Less distributions:
Dividends from net investment income (0.29) (0.82) (0.73) (0.76) (0.45)
Distributions from net realized gain on investments sold -- (0.05) -- -- --
Total distributions (0.29) (0.87) (0.73) (0.76) (0.45)
Net asset value, end of period $8.23 $7.33 $7.20 $7.55 $7.87
Total investment return at net asset value(5) (%) 4.96(6) (0.59) 8.83 16.06 10.54(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 2,344 11,696 26,452 52,792 97,925
Ratio of expenses to average net assets (%) 0.91(7) 1.16 1.16 1.10 1.05(7)
Ratio of net investment income (loss) to average net assets (%) 12.89(7) 10.14 10.23 10.31 10.19(7)
Portfolio turnover rate (%) 204 153 98 113 78
Average Brokerage Commission Rate(8)($) -- -- -- N/A 0.0583
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/87(1) 10/88 10/89 10/90 10/91 10/92
- ------------------------------------------------------------------------------------------------------------------------------
<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(4) 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 $7.43
Total investment return at net asset value(5) (%) (0.10)(5) 9.77 (4.51) (8.04) 34.21 11.56
Total adjusted investment return at net asset value(5,9) (%) (0.41)(5) 9.01 (4.82) (8.07) -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 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(10) (%) 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(10) (%) (0.22)(6) 10.21 11.92 14.56 -- --
Portfolio turnover rate (%) 0 60 100 96 93 206
Fee reduction per share ($) 0.03 0.07 0.03 0.002 -- --
Average Brokerage Commission Rate(8)($) -- -- -- -- -- --
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/93 10/94 10/95(2) 10/96 5/97(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $7.43 $8.23 $7.33 $7.20 $7.55
Net investment income (loss) 0.80 0.74(4) 0.67 0.70(4) 0.42
Net realized and unrealized gain (loss) on investments 0.75 (0.83) (0.13) 0.35 0.32
Total from investment operations 1.55 (0.09) 0.54 1.05 0.74
Less distributions:
Dividends from net investment income (0.75) (0.76) (0.67) (0.70) (0.42)
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) (0.42)
Net asset value, end of period $8.23 $7.33 $7.20 $7.55 $7.87
Total investment return at net asset value(5) (%) 21.76 (1.33) 7.97 15.24 10.06(6)
Total adjusted investment return at net asset value(5,9) (%) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 154,214 160,739 180,586 242,944 379,024
Ratio of expenses to average net assets (%) 2.08 1.91 1.89 1.82 1.80(7)
Ratio of adjusted expenses to average net assets(10) (%) -- -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 10.07 9.39 9.42 9.49 9.45(7)
Ratio of adjusted net investment income (loss) to average
net assets(10) (%) -- -- -- -- --
Portfolio turnover rate (%) 204 153 98 113 78
Fee reduction per share ($) -- -- -- -- --
Average Brokerage Commission Rate(8)($) -- -- -- N/A 0.0583
</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) Effective May 31, 1997, the fiscal year changed from October 31 to May 31.
(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) Annualized.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(9) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(10) 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
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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
[Clip art] 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.
The fund may invest up to 20% 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 20% of assets in
high-quality 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
[Clip art] 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
[Clip art] 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
[Clip art] 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%
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.
(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) 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
1.27% for each class and total fund operating expenses would be 1.92% for
Class A and 2.67% for Class B.
8 INTERMEDIATE MATURITY GOVERNMENT FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class A
year-by-year total investment return (%) 1.96(7) 6.08 2.51 3.98 5.60 4.56 2.13(7)
(scale varies from fund to fund) two
months
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 3/92(1) 3/93 3/94 3/95(2) 3/96 3/97 5/97(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $9.37
Net investment income (loss) 0.17 0.58 0.41 0.49 0.62 0.67 0.11(4)
Net realized and unrealized gain (loss) on investments 0.03 0.02 (0.16) (0.11) (0.08) (0.25) 0.09
Total from investment operations 0.20 0.60 0.25 0.38 0.54 0.42 0.20
Less distributions:
Dividends from net investment income (0.17) (0.58) (0.41) (0.48) (0.64) (0.66) (0.11)
Distributions from net realized gain on investments sold -- -- -- -- -- (0.08) --
Total distributions (0.17) (0.58) (0.41) (0.48) (0.64) (0.74) (0.11)
Net asset value, end of period $10.03 $10.05 $9.89 $9.79 $9.69 $9.37 $9.46
Total investment return at net asset value(5) (%) 1.96(7) 6.08 2.51 3.98 5.60 4.56 2.13(7)
Total adjusted investment return at net asset value(5,6) (%) 1.68(7) 5.53 2.27 3.43 4.83 4.19 1.93(7)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 13,775 33,273 24,310 12,950 29,024 22,043 22,755
Ratio of expenses to average net assets(8) (%) 0.50(9) 0.50 0.75 0.80 0.75 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 1.12 1.92(9)
Ratio of net investment income (loss) to average
net assets (%) 6.47(9) 5.47 4.09 4.91 6.49 6.99 7.07(9)
Ratio of adjusted net investment income (loss) to average
assets(10) (%) 5.35(9) 4.92 3.85 4.36 5.79 6.62 5.90(9)
Fee reduction per share(4) ($) 0.11 0.06 0.02 0.05 0.07 0.04 0.02
Portfolio turnover rate (%) 1 186 244 341 423(11) 427 77
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 3/92(1) 3/93 3/94 3/95(2) 3/96 3/97 5/97(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $9.37
Net investment income (loss) 0.15 0.51 0.34 0.43 0.57 0.60 0.10(4)
Net realized and unrealized gain (loss) on investments 0.03 0.02 (0.16) (0.11) (0.10) (0.24) 0.09
Total from investment operations 0.18 0.53 0.18 0.32 0.47 0.36 0.19
Less distributions:
Dividends from net investment income (0.15) (0.51) (0.34) (0.42) (0.57) (0.60) (0.10)
Distribution from net realized gain on investments sold -- -- -- -- -- (0.08) --
Total distributions (0.15) (0.51) (0.34) (0.42) (0.57) (0.68) (0.10)
Net asset value, end of period $10.03 $10.05 $9.89 $9.79 $9.69 $9.37 $9.46
Total investment return at net asset value(5) (%) 1.80(7) 5.40 1.85 3.33 4.92 3.84 2.01(7)
Total adjusted investment return at net asset value(5,6) 1.52(7) 4.85 1.61 2.78 4.15 3.47 1.81(7)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,630 13,753 11,626 9,506 8,532 6,779 6,451
Ratio of expenses to average net assets(8) (%) 1.15(9) 1.15 1.40 1.45 1.40 1.43 1.50(9)
Ratio of adjusted expenses to average net
assets(8,10) (%) 2.27(9) 1.70 1.64 2.00 2.10 1.80 2.67(9)
Ratio of net investment income (loss) to average
net assets (%) 5.85(9) 4.82 3.44 4.26 5.80 6.30 6.04(9)
Ratio of adjusted net investment income (loss) to
average assets(10) (%) 4.73(9) 4.27 3.20 3.71 5.10 5.93 4.87(9)
Fee reduction per share(4) ($) 0.11 0.06 0.02 0.05 0.07 0.04 0.02
Portfolio turnover rate (%) 1 186 244 341 423(11) 427 77
</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) Effective May 31, 1997, the fiscal year end changed from March 31 to May
31.
(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) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(7) Not annualized.
(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.
(11) Portfolio turnover rate excludes merger activity.
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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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 0.44% 0.44%
Total fund operating expenses 1.34% 2.04%
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 $43 $71 $101 $186
Class B shares
Assuming redemption
at end of period $51 $84 $110 $195
Assuming no redemption $21 $64 $110 $195
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
[Clip art] The figures below have been audited
by the fund's independent auditors, Ernst & Young LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class A
year-by-year total investment return (%) (0.49) 5.67 11.59 7.75 12.54 4.19 7.13 (1.31) 11.23 3.45 1.64(4)
(scale varies from fund to fund) five
months
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 12/87 12/88 12/89 12/90 12/91 12/92
- ----------------------------------------------------------------------------------------------------------------------------
<S> <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
Net investment income (loss) 0.78 0.77 0.79 0.74 0.67 0.54
Net realized and unrealized gain (loss) on investments (0.83) (0.28) 0.18 (0.11) 0.36 (0.18)
Total from investment operations (0.05) 0.49 0.97 0.63 1.03 0.36
Less distributions:
Dividends from net investment income (0.83) (0.76) (0.80) (0.75) (0.67) (0.54)
Distributions from net realized gain on investments sold -- -- -- -- -- (0.02)
Total distributions (0.83) (0.76) (0.80) (0.75) (0.67) (0.56)
Net asset value, end of period $8.83 $8.56 $8.73 $8.61 $8.97 $8.77
Total investment return at net asset value(3) (%) (0.49) 5.67 11.59 7.75 12.54 4.19
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 202,924 192,315 179,065 176,329 211,322 259,170
Ratio of expenses to average net assets (%) 0.97 1.02 1.01 1.53 1.44 1.55
Ratio of net investment income (loss) to average net assets (%) 8.52 8.71 8.98 8.56 7.72 6.13
Portfolio turnover rate (%) 7 12 26 75 134 185
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 12/93 12/94 12/95 12/96 5/97(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.77 $8.80 $8.31 $8.73 $8.52
Net investment income (loss) 0.48 0.38(2) 0.50(2) 0.50(2) 0.22(2)
Net realized and unrealized gain (loss) on investments 0.14 (0.49) 0.42 (0.21) (0.08)
Total from investment operations 0.62 (0.11) 0.92 0.29 0.14
Less distributions:
Dividends from net investment income (0.48) (0.38) (0.50) (0.50) (0.22)
Distributions from net realized gain on investments sold (0.11) -- -- -- --
Total distributions (0.59) (0.38) (0.50) (0.50) (0.22)
Net asset value, end of period $8.80 $8.31 $8.73 $8.52 $8.44
Total investment return at net asset value(3) (%) 7.13 (1.31) 11.23 3.45 1.64(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 262,903 218,846 198,681 175,995 158,218
Ratio of expenses to average net assets (%) 1.51 1.41 1.36 1.37 1.34(5)
Ratio of net investment income (loss) to average net assets (%) 5.34 4.39 5.76 5.81 6.23(5)
Portfolio turnover rate (%) 175 155 105 166 142
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Class B - year ended: 12/94(6) 12/95 12/96 5/97(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.77 $8.31 $8.73 $8.52
Net investment income (loss) 0.30(2) 0.45(2) 0.44(2) 0.19(2)
Net realized and unrealized gain (loss) on investment (0.46) 0.42 (0.21) (0.08)
Total from investment operations (0.16) 0.87 0.23 0.11
Less distributions:
Dividends from net investment income (0.30) (0.45) (0.44) (0.19)
Net asset value, end of period $8.31 $8.73 $8.52 $8.44
Total investment return at net asset value(3) (%) (1.84)(4) 10.60 2.72 1.34(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 7,111 10,765 10,472 10,493
Ratio of expenses to average net assets (%) 2.12(5) 1.93 2.08 2.04(5)
Ratio of net investment income (loss) to average net assets (%) 3.70(5) 5.21 5.10 5.53(5)
Portfolio turnover rate (%) 155 105 166 142
</TABLE>
(1) Effective May 31, 1997, the fiscal year end changed from December 31 to
May 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Class B shares commenced operations on January 3, 1994.
LIMITED-TERM GOVERNMENT FUND 11
<PAGE>
Sovereign Bond Fund
REGISTRANT NAME: JOHN HANCOCK SOVEREIGN BOND FUND
TICKER SYMBOL CLASS A: JHNBX CLASS B: JHBBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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 0.31% 0.31%
Total fund operating expenses 1.11% 1.81%
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 $78 $103 $173
Class B shares
Assuming redemption
at end of period $69 $87 $118 $194
Assuming no redemption $19 $57 $98 $194
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
[Clip art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class A
year-by-year total investment return (%) 1.58 9.82 12.13 6.71 16.59 8.08 11.80 (2.75) 19.40 4.11 2.22(3)
(scale varies from fund to fund) five
months
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 12/87 12/88 12/89 12/90 12/91 12/92
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $15.31
Net investment income (loss) 1.40 1.44 1.43 1.32 1.29 1.20
Net realized and unrealized gain (loss) on
investments and financial futures contracts (1.17) (0.06) 0.27 (0.40) 0.98 (0.01)
Total from investment operations 0.23 1.38 1.70 0.92 2.27 1.19
Less distributions:
Dividends from net investment income (1.53) (1.40) (1.44) (1.35) (1.29) (1.21)
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) (1.21)
Net asset value, end of period $14.53 $14.51 $14.77 $14.33 $15.31 $15.29
Total investment return at net asset value(2) (%) 1.58 9.82 12.13 6.71 16.59 8.08
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,095,208 1,103,691 1,110,394 1,103,391 1,249,980 1,386,260
Ratio of expenses to average net assets (%) 0.82 0.82 0.80 1.31 1.27 1.44
Ratio of net investment income (loss) to
average net assets (%) 9.32 9.77 9.68 9.18 8.81 7.89
Portfolio turnover rate (%) 159 66 64 92 90 87
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Class A - year ended: 12/93 12/94 12/95 12/96 5/97(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.29 $15.53 $13.90 $15.40 $14.90
Net investment income (loss) 1.14 1.12 1.12 1.09 0.44
Net realized and unrealized gain (loss) on
investments and financial futures contracts 0.62 (1.55) 1.50 (0.50) (0.12)
Total from investment operations 1.76 (0.43) 2.62 0.59 0.32
Less distributions:
Dividends from net investment income (1.14) (1.12) (1.12) (1.09) (0.44)
Distributions from net realized gain on
investments sold and financial futures contracts (0.38) (0.08) -- -- --
Distributions from capital paid-in -- -- -- -- --
Total distributions (1.52) (1.20) (1.12) (1.09) (0.44)
Net asset value, end of period $15.53 $13.90 $15.40 $14.90 $14.78
Total investment return at net asset value(2) (%) 11.80 (2.75) 19.40 4.11 2.22(3)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,505,754 1,326,058 1,535,204 1,416,116 1,361,924
Ratio of expenses to average net assets (%) 1.41 1.26 1.13 1.14 1.11(4)
Ratio of net investment income (loss) to
average net assets (%) 7.18 7.74 7.58 7.32 7.38(4)
Portfolio turnover rate (%) 107 85 103(5) 123 58
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 12/93(6) 12/94 12/95 12/96 5/97(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.90 $15.52 $13.90 $15.40 $14.90
Net investment income (loss) 0.11 1.04 1.02 0.98 0.40
Net realized and unrealized gain (loss) on investments and
financial futures contracts -- (1.54) 1.50 (0.50) (0.12)
Total from investment operations 0.11 (0.50) 2.52 0.48 0.28
Less distributions:
Dividends from net investment income (0.11) (1.04) (1.02) (0.98) (0.40)
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) (0.40)
Net asset value, end of period $15.52 $13.90 $15.40 $14.90 $14.78
Total investment return at net asset value(2) (%) 0.90(3) (3.13) 18.66 3.38 1.93(3)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,125 40,299 98,739 134,112 132,885
Ratio of expenses to average net assets (%) 1.63(4) 1.78 1.75 1.84 1.81(4)
Ratio of net investment income (loss) to average net assets (%) 0.57(4) 7.30 6.87 6.62 6.68(4)
Portfolio turnover rate (%) 107 85 103(5) 123 58
</TABLE>
(1) Effective May 31, 1997, the fiscal year end changed from December 31 to
May 31.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Not annualized.
(4) Annualized.
(5) Portfolio turnover excludes merger activity.
(6) Class B shares commenced operations on November 23, 1993.
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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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 0.37% 0.37%
Total fund operating expenses 1.17% 1.87%
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 $106 $181
Class B shares
Assuming redemption
at end of period $69 $89 $121 $201
Assuming no redemption $19 $59 $101 $201
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 INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[Clip art] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class B
year-by-year total investment return (%) 2.61(5) 3.70(5) 11.53 11.52 6.24 14.46 7.58 12.66 (7.05) 15.27 3.33 1.61(5)
(scale varies from fund to fund) seven
months
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 10/92(1) 10/93 10/94 10/95 10/96 5/97(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $9.75
Net investment income (loss) 0.64 0.68(3) 0.65 0.65 0.64(3) 0.37(3)
Net realized and unrealized gain (loss) on investments and
financial futures contracts (0.22) 0.61 (1.34) 0.77 (0.26) (0.19)
Total from investment operations 0.42 1.29 (0.69) 1.42 0.38 0.18
Less distributions:
Dividends from net investment income (0.64) (0.68) (0.65) (0.65) (0.64) (0.36)
Distributions from net realized gain on investments sold -- (0.01) (0.31) -- -- --
Distributions from capital paid-in -- -- -- -- -- (0.01)
Total distributions (0.64) (0.69) (0.96) (0.65) (0.64) (0.37)
Net asset value, end of period $10.29 $10.89 $9.24 $10.01 $9.75 $9.56
Total investment return at net asset value(4) (%) 5.33(5) 12.89 (6.66) 15.90 4.02 1.92(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 350,907 375,416 315,372 370,966 330,162 302,589
Ratio of expenses to average net assets (%) 1.06(6) 1.30 1.23 1.17 1.15 1.17(6)
Ratio of net investment income (loss) to average net assets (%) 7.11(6) 6.47 6.62 6.76 6.58 6.69(6)
Portfolio turnover rate (%) 140 273 127 94 143 88
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/87(7) 10/87(8) 10/88 10/89 10/90 10/91 10/92
- -----------------------------------------------------------------------------------------------------------------------------------
<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) -- -- --
Distributions from capital paid-in -- -- -- -- -- -- --
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 $10.28
Total investment return at net asset value(4) (%) 2.61(5) 3.70(5) 11.53 11.52 6.24 14.46 7.58
Total adjusted investment return at
net asset value(4,9) (%) -- 3.65(5) 11.47 11.29 6.23 -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 164,001 170,030 161,163 144,756 133,778 164,347 197,032
Ratio of expenses to average net assets (%) 1.26(6) 1.24(6) 1.29 1.35 1.54 1.51 1.55
Ratio of adjusted expenses to
average net assets(10) (%) -- 1.32(6) 1.35 1.58 1.55 -- --
Ratio of net investment income (loss) to
average net assets (%) 7.56(6) 7.94(6) 8.09 8.34 8.54 8.53 7.35
Ratio of adjusted net investment income
(loss) to average net assets(10) (%) -- 7.86(6) 8.03 8.11 8.53 -- --
Portfolio turnover rate (%) 108 83 79 45 63 62 140
Fee reduction per share ($) -- 0.01 0.01 0.02 0.01 -- --
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Class B - year ended: 10/93 10/94 10/95 10/96 5/97(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.28 $10.88 $9.23 $10.00 $9.74
Net investment income (loss) 0.66(3) 0.61 0.60 0.58(3) 0.33(3)
Net realized and unrealized gain (loss) on
investments and financial futures contracts 0.61 (1.34) 0.77 (0.26) (0.18)
Total from investment operations 1.27 (0.73) 1.37 0.32 0.15
Less distributions:
Dividends from net investment income (0.66) (0.61) (0.60) (0.58) (0.32)
Distributions from net realized gain on
investments sold (0.01) (0.31) -- -- --
Distributions from capital paid-in -- -- -- -- (0.01)
Total distributions (0.67) (0.92) (0.60) (0.58) (0.33)
Net asset value, end of period $10.88 $9.23 $10.00 $9.74 $9.56
Total investment return at net asset value(4) (%) 12.66 (7.05) 15.27 3.33 1.61(5)
Total adjusted investment return at
net asset value(4,9) (%) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 244,133 196,899 130,824 112,228 96,349
Ratio of expenses to average net assets (%) 1.51 1.64 1.72 1.82 1.86(6)
Ratio of adjusted expenses to
average net assets(10) (%) -- -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) 6.23 6.19 6.24 5.91 5.99(6)
Ratio of adjusted net investment income
(loss) to average net assets(10) (%) -- -- -- -- --
Portfolio turnover rate (%) 273 127 94 143 88
Fee reduction per share ($) -- -- -- -- --
</TABLE>
(1) Class A shares commenced operations on January 3, 1992.
(2) Effective May 31, 1997, the fiscal year end changed from December 31 to
May 31.
(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) For the period June 5, 1986 (commencement of operations) to March 31,
1987.
(8) For the period April 1, 1987 to October 31, 1987.
(9) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(10) Unreimbursed, without fee reduction.
SOVEREIGN U.S. GOVERNMENT INCOME FUND 15
<PAGE>
Strategic Income Fund
REGISTRANT NAME: JOHN HANCOCK STRATEGIC SERIES
TICKER SYMBOL CLASS A: JHFIX CLASS B: STIBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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
[Clip art] 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 0.43% 0.43%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.27% 0.27%
Total fund operating expenses 1.00% 1.70%
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 $75 $98 $162
Class B shares
Assuming redemption
at end of period $67 $84 $112 $182
Assuming no redemption $17 $54 $92 $182
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
[Clip art] The figures below have been audited by the fund's independent
auditors, Price Waterhouse LLP.
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volatility, as indicated by Class A
year-by-year total investment return (%) 6.89 9.72 (7.36) 12.31 19.92 6.81 4.54 9.33 11.37 12.99
(scale varies from fund to fund)
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class A - year ended: 5/88 5/89 5/90 5/91 5/92 5/93
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.71 $9.24 $8.98 $7.33 $7.20 $7.78
Net investment income (loss) 1.13 1.12 1.04 0.93 0.80 0.71
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.47) (0.26) (1.65) (0.13) 0.52 (0.22)
Total from investment operations 0.66 0.86 (0.61) 0.80 1.32 0.49
Less distributions:
Dividends from net investment income (1.13) (1.12) (1.04) (0.93) (0.74)(2) (0.72)
Distributions in excess of net investment income -- -- -- -- -- --
Distributions from capital paid-in -- -- -- -- -- --
Total distributions (1.13) (1.12) (1.04) (0.93) (0.74) (0.72)
Net asset value, end of period $9.24 $8.98 $7.33 $7.20 $7.78 $7.55
Total investment return at net asset value(3) (%) 6.89 9.72 (7.36) 12.31 19.92 6.81
Total adjusted investment return at
net asset value(3,4) (%) 6.49 9.58 (7.45) -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 67,140 95,430 80,890 79,272 153,568 262,137
Ratio of expenses to average net assets (%) 1.09 1.33 1.53 1.75 1.69 1.58
Ratio of adjusted expenses to average net assets(5) (%) 1.49 1.47 1.62 -- -- --
Ratio of net investment income (loss) to
average net assets(5) (%) 12.07 12.28 12.60 13.46 10.64 9.63
Ratio of adjusted net investment income (loss) to
average net assets (%) 11.67 12.14 12.51 -- -- --
Portfolio turnover rate (%) 67 125 81 60 80 97
Fee reduction per share ($) 0.04 0.01 0.01 -- -- --
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Class A - year ended: 5/94 5/95 5/96 5/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $7.55 $7.17 $7.15 $7.27
Net investment income (loss) 0.68 0.64 0.66(1) 0.64(1)
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.33) (0.02) 0.12 0.27
Total from investment operations 0.35 0.62 0.78 0.91
Less distributions:
Dividends from net investment income (0.58)(2) (0.55) (0.66) (0.64)
Distributions in excess of net investment income (0.05) -- -- --
Distributions from capital paid-in (0.10) (0.09) -- --
Total distributions (0.73) (0.64) (0.66) (0.64)
Net asset value, end of period $7.17 $7.15 $7.27 $7.54
Total investment return at net asset value(3) (%) 4.54 9.33 11.37 12.99
Total adjusted investment return at
net asset value(3,4) (%) -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 335,261 327,876 369,127 416,916
Ratio of expenses to average net assets (%) 1.32 1.09 1.03 1.00
Ratio of adjusted expenses to average net assets(5) (%) -- -- -- --
Ratio of net investment income (loss) to
average net assets(5) (%) 8.71 9.24 9.13 8.61
Ratio of adjusted net investment income (loss) to
average net assets (%) -- -- -- --
Portfolio turnover rate (%) 91 55 78 132
Fee reduction per share ($) -- -- -- --
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Class B - year ended: 5/94(6) 5/95 5/96 5/97
- --------------------------------------------------------------------------------------------------------------------
<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(1) 0.61(1) 0.59
Net realized and unrealized gain (loss) on investments,
foreign currency transactions and financial futures contracts (0.41) (0.02) 0.12 0.27
Total from investment operations (0.01) 0.58 0.73 0.86
Less distributions:
Dividends from net investment income (0.32) (0.52) (0.61) (0.59)
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) (0.59)
Net asset value, end of period $7.17 $7.15 $7.27 $7.54
Total investment return at net asset value(3) (%) (0.22)(7) 8.58 10.61 12.21
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 77,691 134,527 206,751 328,487
Ratio of expenses to average net assets (%) 1.91(8) 1.76 1.73 1.70
Ratio of net investment income (loss) to average net assets (%) 8.12(8) 8.55 8.42 7.90
Portfolio turnover rate (%) 91 55 78 132
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) 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.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Class B shares commenced operations on October 4, 1993.
(7) Not annualized.
(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;
described below. There are all your money goes to work
several ways to reduce these for you right away.
charges, also described
below. o Higher annual expenses than
Class A shares.
o Lower annual expenses than
Class 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 Government o Government Income
o Limited-Term Government o High Yield Bond
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 privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, 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 current shareholders of Limited-Term Government Fund making additional
investments in the fund with 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
o fee-based clients of selling brokers who placed at least $2 billion
in John Hancock Funds: $500
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 purchase, exchange or sale
of shares.
20 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clip art] o Make out a check for the o Make out a check for the
investment amount, payable investment amount payable to
to "John Hancock Signature "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 to slip is available, include a
Signature Services (address note specifying the fund
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
[Clip art] 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
[Clip art] o Deliver your completed o Instruct your bank to wire
application to your the amount of your
financial representative, or investment to:
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 the charge a fee to wire funds.
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
[Clip art] See "By wire" and "By exchange." o Verify that your bank or
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, Suite 1000
Boston, MA 02217-1000
Phone number
1-800-225-5291
Or contact your financial representative
for instructions and assistance.
- ---------------------------------------------
To open or add to an account using the Monthly Automatic Accumulation
Program, see "Additional investor services."
YOUR ACCOUNT 21
<PAGE>
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clip art] 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
[Clip art] 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)
[Clip art] 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
[Clip art] 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
[Clip art] o Government Income, o Request checkwriting on
Limited-Term Government, your account application.
Sovereign U.S. Government
and Strategic Income Funds o Verify that the shares to
only. be sold were purchased more
than 10 days earlier or
o Any account with were 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, Suite 1000
Boston, MA 02217-1000
Phone number
1-800-225-5291
Or contact your financial representative
for instructions and assistance.
----------------------------------------
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
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.
- --------------------------------------------------------------------------------
Seller Requirements for written requests
[Clip art]
- --------------------------------------------------------------------------------
Owners of individual, joint, o Letter of instruction.
sole proprietorship, UGMA/UTMA
(custodial accounts for minors) o On the letter, the signatures and
or general partner accounts. 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 o Letter of instruction.
association accounts.
o Corporate resolution, certified
within the past twelve months.
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 accounts. o Letter of instruction.
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 twelve 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.
- --------------------------------------------------------------------------------
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, 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.
24 YOUR ACCOUNT
<PAGE>
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.
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, SIMPLE plans, 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").
[The following information was represented as a flow chart in the printed
material.]
---------------------
Shareholders
---------------------
Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Markets the funds and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
-------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
-------------------------------------------------
Asset management
-------------------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and
investment activities.
-------------------------------------------------
-------------------------------------------------
Custodian
Investors Bank & Trust Co.
200 Clarendon Street
Boston, MA 02116
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating each fund's NAV.
-------------------------------------------------
-------------------------------------------------
Trustees
Supervise the funds' activities.
-------------------------------------------------
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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 $10,894,166 6.53%
High Yield Bond $8,666,437 2.80%
Intermediate Maturity Gov. $402,344 6.06%
Limited-Term Government $187,913 1.84%
Sovereign Bond $3,985,198 3.07%
Sovereign U.S. Gov. Income $5,472,842 5.27%
Strategic Income $5,684,848 2.12%
(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>
- --------------------------------------------------------------------------------
Class A investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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%
</TABLE>
- --------------------------------------------------------------------------------
Class B investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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>
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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 effect 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/semiannual 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
o 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 o (1) -- -- 25 -- o (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 * 20 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. -- -- -- -- -- -- o
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. * * -- -- o * o
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. * * * -- * * *
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. o o o -- o o o
</TABLE>
- --------------------------------------------------------------------------------
Analysis of funds with 5% or more in junk bonds(1)
- --------------------------------------------------------------------------------
<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 2.1% 31.4% 26.1%
AA/Aa 0.3% 8.6% 7.0%
A/A 0.1% 19.3% 0.0%
BBB/Baa 0.2% 13.1% 3.3%
- ---------------------------------------------------------------------------------------------
Junk Bonds
BB/Ba 8.2% 14.0% 12.2%
B/B 67.2% 8.4% 40.8%
CCC/Caa 6.3% 0.0% 1.6%
CC/Ca 0.0% 0.0% 0.0%
C/C 0.0% 0.0% 0.0%
D 0.2% 0.0% 0.3%
% of portfolio in bonds 84.6% 94.8% 91.3%
</TABLE>
|_| Rated by Standard & Poor's or Moody's |_| Rated by the adviser
(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
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
income funds:
ANNUAL/SEMIANNUAL 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/ semiannual 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/semiannual report or the SAI,
please write or call:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
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 10/97
<PAGE>
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE YOUR FUND THE EXPENSE OF ADDITIONAL MAILINGS
JOHN HANCOCK LIMITED-TERM GOVERNMENT FUND
101 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02199
SPECIAL MEETING OF SHAREHOLDERS - NOVEMBER 12, 1997
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward J.
Boudreau, Jr., Susan S. Newton and James B. Little, with full power of
substitution in each, to vote all the shares of beneficial interest of John
Hancock Limited-Term Government Fund ("Limited-Term Government Fund") which the
undersigned is (are) entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of Limited-Term Government Fund to be held at 101 Huntington
Avenue, Boston, Massachusetts, on November 12, 1997 at 9:00 a.m., Boston time,
and at any adjournment(s) of the Meeting. All powers may be exercised by a
majority of all proxy holders or substitutes voting or acting, or, if only one
votes and acts, then by that one. Receipt of the Proxy Statement dated September
22, 1997 is hereby acknowledged. If not revoked, this proxy shall be voted for
the proposal:
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date __________________, 1997
NOTE: Signature(s) should agree
with name(s) printed herein. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
-----------------------------------
Signature(s)
<PAGE>
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE YOUR FUND THE EXPENSE
OF ADDITIONAL MAILINGS.
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS
MADE BELOW. AS TO ANY OTHER MATTER, THE PROXY OR PROXIES SHALL VOTE IN
ACCORDANCE WITH THEIR BEST JUDGEMENT. PLEASE VOTE BY FILLING IN THE APPROPRIATE
BOX BELOW, AS SHOWN, USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
(1) To approve an Agreement and Plan of Reorganization between Limited-Term
Government Fund and John Hancock Intermediate Maturity Government Fund.
Under this Agreement, Limited Term Government Fund would transfer all of
its assets to Intermediate Maturity Government Fund in exchange for shares
of Intermediate Maturity Government Fund. These shares will be distributed
proportionately to you and the other shareholders of Limited-Term
Government Fund. Intermediate Maturity Government Fund will also assume
Limited-Term Government Fund's liabilities.
---- ---- ----
FOR |____| AGAINST |____| ABSTAIN |____|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
