FILE NO. 2-75807
FILE NO. 811-3392
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 27 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 30 (X)
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JOHN HANCOCK TECHNOLOGY SERIES, INC.
JOHN HANCOCK SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, (617) 375-1700
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SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on (date) pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
(X) on December 2, 1996 pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, The Registrant
has registered an indefinite number of securities under the Securities Act of
1933. The Registrant filed the notice required by Rule 24f-2 for the most recent
fiscal year of John Hancock Global Technology Fund on or about February 26,
1996. The Registrant has filed the notice required by Rule 24f-2 for the most
recent fiscal year of John Hancock Emerging Growth Fund on or about December 26,
1995.
<PAGE>
John Hancock Series Trust
John Hancock Series Trust, a Massachusetts Business Trust, hereby assumes the
reorganization statement of John Hancock Technology Series, Inc., a Maryland
Corporation.
<PAGE>
<TABLE>
<CAPTION>
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Overview; Investor Expenses; *
3 Financial Highlights *
4 Overview; Goal and Strategy; Portfolio *
Securities; Risk Factors; Business
Structure; More About Risk
5 Overview; Business Structure; *
Manager/Subadviser; Investor Expenses
6 Choosing a Share Class; Buying Shares; *
Selling Shares; Transaction Policies;
Dividends and Account Policies;
Additional Investor Services
7 Choosing a Share Class; How Sales Charges *
are Calculated; Sales Charge Deductions
and Waivers; Opening an Account; Buying
Shares; Transaction Policies; Additional
Investor Services
8 Selling Shares; Transaction Policies; *
Dividends and Account Policies
9 Not Applicable *
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives and Policies;
Certain Investment Practices;
Investment Restrictions
14 * Those Responsible for Management
15 * Those Responsible for Management
16 * Investment Advisory; Subadvisory
and Other Services; Distribution
Contract; Transfer Agent Services;
Custody of Portfolio; Independent
Auditors
17 * Brokerage Allocation
18 * Description of Fund's Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE>
JOHN HANCOCK INTERNATIONAL/GLOBAL FUNDS PROSPECTUS SUPPLEMENT
Effective December 2, 1996, for John Hancock Global Technology Fund, the
Registrant name is John Hancock Series Trust and the date of the John Hancock
International/Global Funds Prospectus is December 2, 1996.
<TABLE>
<CAPTION>
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Class A - year ended December 31, 1986 1987 1988 1989 1990
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<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $13.57 $13.80 $13.98 $15.31 $16.93
Net investment income (loss) 0.14 0.15 0.15 0.10 (0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.25 0.26 1.32 2.43 (3.09)
Total from investment operations 0.39 0.41 1.47 2.53 (3.13)
Less distributions:
Dividends from net investment income (0.16) (0.23) (0.14) (0.13) --
Distributions from net realized gain on investments
and foreign currency transactions -- -- -- (0.78) (1.36)
Total distributions (0.16) (0.23) (0.14) (0.91) (1.36)
Net asset value, end of period $13.80 $13.98 $15.31 $16.93 $12.44
Total investment return at net asset value(2) (%) 2.89 2.84 10.48 16.61 (18.46)
Total adjusted investment return at net asset value(2,3) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 56,927 44,224 38,594 40,341 28,864
Ratio of expenses to average net assets (%) 1.75 1.63 1.75 1.90 2.36
Ratio of adjusted expenses to average net assets(4) (%) -- -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 0.77 0.75 0.89 0.60 (0.28)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- -- -- -- --
Portfolio turnover rate (%) 6 9 12 30 38
Fee reduction per share ($) -- -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
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Class A - year ended December 31, (continued) 1991 1992 1993 1994 1995 1996(9)
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<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $12.44 $15.60 $14.94 $17.45 $17.84 $24.51
Net investment income (loss) 0.05 (0.15) (0.21) (0.22)(1) (0.22)(1) (0.09)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 4.11 1.00 4.92 1.87 8.53 0.77
Total from investment operations 4.16 0.85 4.71 1.65 8.31 0.68
Less distributions:
Dividends from net investment income (0.04) -- -- -- -- --
Distributions from net realized gain on investments
and foreign currency transactions (0.96) (1.51) (2.20) (1.26) (1.64) --
Total distributions (1.00) (1.51) (2.20) (1.26) (1.64) --
Net asset value, end of period $15.60 $14.94 $17.45 $17.84 $24.51 $25.19
Total investment return at net asset value(2) (%) 33.05 5.70 32.06 9.62 46.53 2.78(8)
Total adjusted investment return at net asset value(2,3) -- 5.53 -- -- 46.41 2.74(8)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 31,580 32,094 41,749 52,193 155,001 161,681
Ratio of expenses to average net assets (%) 2.32 2.05 2.10 2.16 1.67 1.55(7)
Ratio of adjusted expenses to average net assets(4) (%) -- 2.22 -- -- 1.79 1.62(7)
Ratio of net investment income (loss) to average net assets (%) 0.34 (0.88) (1.49) (1.25) (0.89) (0.74)(7)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- (1.05) -- -- (1.01) (0.81)(7)
Portfolio turnover rate (%) 67 76 86 67 70 34
Fee reduction per share -- 0.03 -- -- 0.03(1) 0.01
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A 0.07
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended December 31, 1994(6) 1995 1996(9)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.24 $17.68 $24.08
Net investment income (loss) (0.35)(1) (0.39)(1) (0.16)
Net realized and unrealized gain (loss) on investments 2.05 8.43 0.75
Total from investment operations 1.70 8.04 0.59
Less distributions:
Distributions from net realized gain on investments sold (1.26) (1.64) --
Net asset value, end of period $17.68 $24.08 $24.67
Total investment return at net asset value(2) (%) 10.02 45.42 2.45(8)
Total adjusted investment return at net asset value(2,3) -- 45.30 2.41(8)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 9,324 35,754 47,564
Ratio of expenses to average net assets (%) 2.90(7) 2.41 2.25(7)
Ratio of adjusted expenses to average net assets(4) (%) -- 2.53 2.32(7)
Ratio of net investment income (loss) to average net assets (%) (1.98)(7) (1.62) (1.43)(7)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- (1.74) (1.50)(7)
Portfolio turnover rate (%) 67 70 34
Fee reduction per share ($) -- 0.03(1) 0.01
Average brokerage commission rate(5)($) N/A N/A 0.07
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) Class B shares commenced operations on January 3, 1994.
(7) Annualized.
(8) Not annualized.
(9) Six months ended June 30, 1996. (Unaudited)
December 2, 1996
<PAGE>
JOHN HANCOCK
International/
Global Funds
[LOGO]
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Prospectus
August 30, 1996
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)
Short-Term Strategic Income Fund may invest up to 67% 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.
Growth
Global Fund
Global Marketplace Fund
Global Rx Fund
Global Technology Fund
International Fund
Pacific Basin Equities Fund
Income
Short-Term Strategic Income Fund
World Bond Fund
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
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A fund-by-fund look at goals, strategies, risks, expenses and financial history.
[LOGO] Growth
Global Fund 4
Global Marketplace Fund 6
Global Rx Fund 8
Global Technology Fund 10
International Fund 12
Pacific Basin Equities Fund 14
[LOGO] Income
Short-Term Strategic Income Fund 16
World Bond Fund 18
Policies and instructions for opening, maintaining and closing an account in any
international/global fund.
Your account
Choosing a share class 20
How sales charges are calculated 20
Sales charge reductions and waivers 21
Opening an account 22
Buying shares 23
Selling shares 24
Transaction policies 26
Dividends and account policies 26
Additional investor services 27
Details that apply to the international/global funds as a group.
Fund details
Business structure 28
Sales compensation 29
More about risk 31
For more information back cover
<PAGE>
Overview
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GOAL OF THE INTERNATIONAL/GLOBAL FUNDS
John Hancock international/global funds invest in foreign and U.S. securities.
Most of the funds invest primarily in stocks and seek long-term growth of
capital. Two funds invest primarily in bonds and seek current income or maximum
total return. Each fund employs its own strategy and has 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 to diversify a portfolio of domestic investments
o are seeking access to markets that can be less accessible to individual
investors
o are seeking funds for the growth or income portion of an asset allocation
portfolio
o are investing for goals that are many years in the future
International/global funds may NOT be appropriate if you:
o are investing with a shorter time horizon in mind
o are uncomfortable with an investment whose value may vary substantially
o want to limit your exposure to foreign securities
THE MANAGEMENT FIRM
All John Hancock international/global 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
$19 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[LOGO] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[LOGO] 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.
[LOGO] Risk factors The major risk factors associated with the fund.
[LOGO] Portfolio management The individual or group (including subadvisers, if
any) designated by the investment adviser to handle the fund's
day-to-day management.
[LOGO] Expenses The overall costs borne by an investor in the fund, including
sales charges and annual expenses.
[LOGO] 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>
Global Fund
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: JHGAX
CLASS B: FGLOX
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GOAL AND STRATEGY
[LOGO] The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in common stocks of foreign and U.S. companies. The fund
maintains a diversified portfolio of company and government securities from
around the world. Under normal circumstances, the fund expects to invest in the
securities markets of at least three countries at any one time, potentially
including the U.S.
The fund does not maintain a fixed allocation of assets, either with respect to
securities type or to geography.
PORTFOLIO SECURITIES
[LOGO] Under normal circumstances, the fund invests at least 65% of assets in
common stocks and convertible securities, but may invest in virtually any type
of security, foreign or domestic, including preferred and convertible
securities, warrants and investment-grade debt securities. Not counting
short-term securities, the fund generally expects that no more than 5% of assets
will be invested in debt 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 up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements.
Because it invests internationally, the fund carries additional risks, including
currency, information, natural event and political risks. These risks, which may
make the fund more volatile than a comparable domestic growth fund, are defined
in "More about risk" starting on page 31. The risks of international investing
are higher in emerging markets such as those of Latin America, Southeast Asia
and Eastern Europe.
To the extent that the fund utilizes higher-risk securities and practices, it
takes on further risks that could adversely affect its performance. Please read
"More about risk" carefully before investing.
MANAGEMENT/SUBADVISER
[LOGO] John L.F. Wills, leader of the fund's portfolio management team, is a
vice president of the adviser and managing director of the subadviser, John
Hancock Advisers International. He joined John Hancock Funds in 1987 and has
been in the investment business since 1969.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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) 5.00% 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(3) 0.96% 0.96%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.61% 0.61%
Total fund operating expenses 1.87% 2.57%
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 $68 $106 $146 $258
Class B shares
Assuming redemption
at end of period $76 $110 $157 $273
Assuming no redemption $26 $80 $137 $273
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) Includes a subadviser fee equal to 0.70% of the fund's net assets.
(4) 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 GROWTH - GLOBAL FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1987 (8) 35.42(5)
1987 (9) (16.97)(5)
1988 7.05
1989 30.22
1990 (10.42)
1991 14.04
1992 (3.85)
1993 34.95
1994 7.97
1995 (1.01)
1996(2) 11.71(5)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Class A - year ended October 31, 1992(1) 1993 1994 1995 1996(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $11.31 $10.55 $14.30 $14.16 $12.67
Net investment income (loss) (0.04)(3) (0.10)(3) (0.07)(3) (0.03)(3) (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.72) 3.85 1.24 (0.13) 1.48
Total from investment operations (0.76) 3.75 1.17 (0.16) 1.44
Less distributions:
Distributions from net realized gain on investments
sold and foreign currency transactions -- -- (1.31) (1.33) (0.88)
Net asset value, end of period $10.55 $14.30 $14.16 $12.67 $13.23
Total investment return at net asset value(4) (%) (6.72)(5) 35.55 8.64 (0.37) 12.07(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 76,980 90,787 100,973 93,597 99,606
Ratio of expenses to average net assets (%) 2.47(6) 2.12 1.98 1.87 1.89(6)
Ratio of net investment income (loss) to average
net assets (%) (0.60)(6) (0.86) (0.54) (0.23) (0.69)(6)
Portfolio turnover rate (%) 69 108 61 60 40
Average brokerage commission rate(7) ($) N/A N/A N/A N/A 0.02
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended October 31, 1987(8) 1987(9) 1988 1989 1990 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.60 $13.00 $10.42 $10.67 $13.58 $9.94
Net investment income (loss) 0.08 (0.05) 0.01 (0.10) (0.02) (0.01)(3)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 3.32 (2.08) 0.69 3.25 (1.12) 1.35
Total from investment operations 3.40 (2.13) 0.70 3.15 (1.14) 1.34
Less distributions:
Distributions from net
investment income -- (0.12) -- (0.01) -- --
Distributions from net realized
gain on investments sold and
foreign currency transactions -- (0.33) (0.45) (0.23) (2.50) (0.36)
Total distributions -- (0.45) (0.45) (0.24) (2.50) (0.36)
Net asset value, end of period $13.00 $10.42 $10.67 $13.58 $9.94 $10.92
Total investment return at
net asset value(4)(%) 35.42(5) (16.97)(5) 7.05 30.22 (10.42) 14.04
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) 62,264 50,883 34,380 35,596 33,281 28,686
Ratio of expenses to average
net assets (%) 2.38(6) 2.56(6) 2.55 2.30 2.46 2.60
Ratio of net investment income
(loss) to average net assets (%) 0.99(6) (0.78)(6) 0.09 (0.47) (0.59) (0.12)
Portfolio turnover rate (%) 91 81 142 138 58 106
Average brokerage commission
rate(7) ($) N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended October 31, (continued) 1992 1993 1994 1995 1996(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.92 $10.50 $14.17 $13.93 $12.36
Net investment income (loss) (0.12)(3) (0.15)(3) (0.15)(3) (0.11)(3) (0.08)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (0.30) 3.82 1.22 (0.13) 1.44
Total from investment operations (0.42) 3.67 1.07 (0.24) 1.36
Less distributions:
Distributions from net
investment income -- -- -- -- --
Distributions from net realized
gain on investments sold and
foreign currency transactions -- -- (1.31) (1.33) (0.88)
Total distributions -- -- (1.31) (1.33) (0.88)
Net asset value, end of period $10.50 $14.17 $13.93 $12.36 $12.84
Total investment return at
net asset value(4)(%) (3.85) 34.95 7.97 (1.01) 11.71(5)
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) 11,475 19,340 31,822 24,570 27,201
Ratio of expenses to average
net assets (%) 2.68 2.49 2.59 2.57 2.55(6)
Ratio of net investment income
(loss) to average net assets (%) (1.03) (1.25) (1.12) (0.89) (1.35)(6)
Portfolio turnover rate (%) 69 108 61 60 40
Average brokerage commission
rate(7) ($) N/A N/A N/A N/A 0.02
</TABLE>
(1) Class A shares commenced operations on January 3, 1992.
(2) Six months ended April 30, 1996. (Unaudited.)
(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) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(8) For the period September 2, 1986 (commencement of operations) to May 31,
1987.
(9) For the period June 1, 1987 to October 31, 1987.
GROWTH - GLOBAL FUND 5
<PAGE>
Global Marketplace Fund
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHMBX
CLASS B: JHMBX
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GOAL AND STRATEGY
[LOGO] The fund seeks long-term capital appreciation. To pursue this goal, the
fund invests primarily in foreign and U.S. stocks of companies that merchandise
goods and services to consumers or to consumer companies. The fund seeks
companies of any size that appear to possess a competitive advantage, such as a
unique product or distribution method, new technologies or innovative marketing
or sales methods. Under normal circumstances, the fund invests at least 65% of
assets in these companies, and expects to invest in the securities markets of at
least three countries at any one time, potentially including the U.S.
PORTFOLIO SECURITIES
[LOGO] The fund invests primarily in the common stocks of U.S. and foreign
companies. It also may invest in warrants, preferred stocks and convertible
securities.
For liquidity and flexibility, the fund may invest up to 35% of assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Because the fund concentrates on a single
sector (consumer businesses), its performance may be disproportionately affected
by a few key factors, such as economic conditions and consumer confidence
levels.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31.
To the extent that the fund invests in smaller capitalization companies or
emerging markets, or utilizes higher-risk securities and practices, it takes on
further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[LOGO] Bernice S. Behar, leader of the fund's portfolio management team since
the fund's inception in September 1994, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] Fund investors pay various expenses, either directly or indirectly. The
figures below are based on Class A expenses for the past year, adjusted to
reflect any changes. No Class B shares were issued or outstanding during the
last fiscal year. 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) 5.00% 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 (after expense limitation)(3) 0.00% 0.00%
12b-1 fee(4) 0.30% 1.00%
Other expenses (after limitation)(3) 1.20% 1.20%
Total fund operating expenses (after limitation)(3) 1.50% 2.20%
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 $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $72 $99 $138 $236
Assuming no redemption $22 $69 $118 $236
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 transfer agent expenses). Without this limitation, management
fees would be 0.80% for each class, other expenses would be 7.92% for each
class and total fund operating expenses would be 9.02% for Class A and
9.72% for Class B.
(4) 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 GROWTH - GLOBAL MARKETPLACE FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1995(1) 35.61(5)
1996(2) 17.84(5)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class A - year ended August 31, 1995(1) 1996(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $11.49
Net investment income (loss) 0.01(3) (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 3.01 2.10
Total from investment operations 3.02 2.05
Less distributions:
Dividends from net investment income (0.01) --
Distributions in excess of net investment income (0.02) --
Total distributions (0.03) --
Net asset value, end of period $11.49 $13.54
Total investment return at net asset value(4) (%) 35.61(5) 17.84(5)
Total adjusted investment return at net asset value(4,6) (%) 28.69(5) 11.37(5)
Ratios and supplemental data
Net assets, end of period (000s omitted)($) 712 1,022
Ratio of expenses to average net assets (%) 1.50(7) 1.50(7)
Ratio of adjusted expenses to average net assets(8) (%) 9.00(7) 14.48(7)
Ratio of net investment income (loss) to average net assets(%) 0.06(7) (0.88)(7)
Ratio of adjusted net investment income (loss) to average net assets(8)(%) (7.44)(7) (13.86)(7)
Portfolio turnover rate (%) 63 86
Fee reduction per share($) 0.65(3) 0.74
Average brokerage commission rate(9)($) N/A 0.00(10)
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class B - year ended August 31, 1996(11)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Per share operating performance
Net asset value, beginning of period $11.95
Net investment income (loss) (0.02)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.60
Total from investment operations 1.58
Net asset value, end of period $13.53
Total investment return at net asset value(4) (%) 13.22(5)
Total adjusted investment return at net asset value(4,6) (%) 11.94(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) $218
Ratio of expenses to average net assets (%) 2.20(7)
Ratio of adjusted expenses to average net assets(8) (%) 15.18(7)
Ratio of net investment income (loss) to average net assets (%) (1.18)(7)
Ratio of adjusted net investment income (loss) to average net assets(8) (%) (14.16)(7)
Portfolio turnover rate (%) 86
Fee reduction per share ($) 0.74(3)
Average brokerage commission rate(9) ($) 0.00(10)
</TABLE>
(1) Class A shares commenced operations September 29, 1994.
(2) Six months ended February 29, 1996. (Unaudited.)
(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) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(10) Less than one cent per share.
(11) For the period January 22, 1996 (commencement of operations) to February
29, 1996. (Unaudited.)
GROWTH - GLOBAL MARKETPLACE FUND 7
<PAGE>
Global Rx Fund
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHGRX
CLASS B: JHRBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in stocks of foreign and U.S. health care companies. The fund
defines health care companies as those deriving at least half of their gross
revenues, or committing at least half of their gross assets, to health
care-related activities. Under normal circumstances, the fund will invest at
least 65% of assets in these companies, including small- and medium-sized
companies. The fund expects to invest in the securities markets of at least
three countries at any one time, potentially including the U.S. Because the fund
is non-diversified, it may invest more than 5% of assets in securities of a
single issuer.
The fund has an independent advisory board composed of scientific and medical
experts to provide advice and consultation on health care developments.
PORTFOLIO SECURITIES
[LOGO] The fund invests primarily in foreign and domestic common stocks, and may
invest in warrants, preferred stocks and convertible debt 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 up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Because the fund concentrates on a single
sector (health care), and because this sector has historically been volatile,
investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31.
To the extent that the fund invests in smaller capitalization companies or
utilizes higher-risk securities and practices, it takes on further risks that
could adversely affect its performance. Please read "More about risk" carefully
before investing.
PORTFOLIO MANAGEMENT
[LOGO] Linda I. Miller, leader of the fund's portfolio management team since
January 1996, is a vice president of the adviser. She joined John Hancock Funds
in November 1995 and has been in the investment business with a focus on the
health care industry since 1980.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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) 5.00% 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 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 1.50% 1.50%
Total fund operating expenses 2.60% 3.30%
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 $75 $127 $181 $329
Class B shares
Assuming redemption
at end of period $83 $132 $192 $344
Assuming no redemption $33 $102 $172 $344
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.
8 GROWTH - GLOBAL RX FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1992(1) 33.40(5)
1993 0.30
1994 23.39
1995 30.89
1996(2) 22.16(5)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Class A - year ended August 31, 1992(1) 1993 1994 1995 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.00 $13.34 $13.38 $16.51 $21.61
Net investment income (loss) (0.03) (0.23) (0.32) (0.36)(3) (0.12)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 3.37 0.27 3.45 5.46 4.89
Total from investment operations 3.34 0.04 3.13 5.10 4.77
Less distributions:
Distributions from net realized gain on investments sold and
foreign currency transactions -- -- -- -- (0.14)
Net asset value, end of period $13.34 $13.38 $16.51 $21.61 $26.24
Total investment return at net asset value(4) (%) 33.40(5) 0.30 23.39 30.89 22.16(5)
Total adjusted investment return at net asset value (4,6) (%) 32.11(5) 0.04 -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 14,702 15,647 18,643 24,394 34,719
Ratio of expenses to average net assets (%) 1.98(7) 2.50 2.55 2.56 2.14(7)
Ratio of adjusted expenses to average net assets(8) (%) 3.39(7) 2.76 -- -- --
Ratio of net investment income (loss) to average net assets (%) (0.51)(7) (1.67) (2.01) (1.99) (1.08)(7)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (1.92)(7) (1.93) -- -- --
Portfolio turnover rate (%) 48 93 52 38 12
Fee reduction per share ($) 0.085 0.035 -- -- --
Average brokerage commission rate(9) ($) N/A N/A N/A N/A 0.00(10)
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Class B - year ended August 31, 1994(1) 1995 1996(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.29 $16.46 $21.35
Net investment income (loss) (0.17)(3) (0.55)(3) (0.19)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.66) 5.44 4.81
Total from investment operations (0.83) 4.89 4.62
Less distributions:
Distributions from net realized gain on investments sold and
foreign currency transactions -- -- (0.14)
Net asset value, end of period $16.46 $21.35 $25.83
Total investment return at net asset value(4) (%) (4.80)(5) 29.71 21.73(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,071 6,333 22,185
Ratio of expenses to average net assets (%) 3.34(7) 3.45 2.79(7)
Ratio of net investment income (loss) to average net assets (%) (2.65)(7) (2.91) (1.65)(7)
Portfolio turnover rate (%) 52 38 12
Average brokerage commission rate(9) ($) N/A N/A 0.00(10)
</TABLE>
(1) Class A and Class B shares commenced operations on October 1, 1991 and
March 7, 1994, respectively.
(2) Six months ended February 29, 1996. (Unaudited.)
(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) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(10) Less than one cent per share.
GROWTH - GLOBAL RX FUND 9
<PAGE>
Global Technology Fund
REGISTRANT NAME: JOHN HANCOCK TECHNOLOGY SERIES, INC. TICKER SYMBOL
CLASS A: NTTFX
CLASS B: FGTBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in stocks of foreign and U.S. companies that rely extensively
on technology in their product development or operations. Under normal
circumstances, the fund will invest at least 65% of assets in these companies,
and expects to invest in the securities markets of at least three countries at
any one time, potentially including the U.S. Income is a secondary goal.
PORTFOLIO SECURITIES
[LOGO] The fund invests primarily in foreign and domestic common stocks, and may
invest in warrants, preferred stocks and convertible debt securities. The fund
may invest up to 10% of assets in debt securities of any maturity. These may
include securities rated as low as CC/Ca and their unrated equivalents. Bonds
rated lower than BBB/Baa are considered junk bonds.
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 up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, including restricted securities, and
may engage in other investment practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Because the fund concentrates on a single
sector (technology), and because this sector has historically been volatile,
investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31. The risks of international
investing are higher in emerging markets such as those of Latin America, Asia
and Eastern Europe. To the extent that the fund invests in smaller
capitalization companies or junk bonds, it further increases the chances for
fluctuations in share price and total return. Please read "More about risk"
carefully before investing.
MANAGEMENT/SUBADVISER
[LOGO] Barry J. Gordon and Marc H. Klee lead the fund's management team, as they
have since the fund's inception in 1983. They are principals of American Fund
Advisors, Inc. (AFA), which was the fund's adviser until 1991. Since 1991, AFA
has been the fund's subadviser.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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) 5.00% 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 (net of reduction)(3) 0.82% 0.82%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.55% 0.55%
Total fund operating expenses (net of reduction) 1.67% 2.37%
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 $66 $100 $136 $238
Class B shares
Assuming redemption
at end of period $74 $104 $147 $253
Assuming no redemption $24 $74 $127 $253
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) Includes a subadviser fee that will not exceed 0.40% of the fund's net
assets.
(4) 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 GROWTH - GLOBAL TECHNOLOGY FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1986 2.89
1987 2.84
1988 10.48
1989 16.61
1990 (18.46)
1991 33.05
1992 5.70
1993 32.06
1994 9.62
1995 46.53
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - year ended December 31, 1986 1987 1988 1989 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $13.57 $13.80 $13.98 $15.31 $16.93
Net investment income (loss) 0.14 0.15 0.15 0.10 (0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.25 0.26 1.32 2.43 (3.09)
Total from investment operations 0.39 0.41 1.47 2.53 (3.13)
Less distributions:
Dividends from net investment income (0.16) (0.23) (0.14) (0.13) --
Distributions from net realized gain on investments
and foreign currency transactions -- -- -- (0.78) (1.36)
Total distributions (0.16) (0.23) (0.14) (0.91) (1.36)
Net asset value, end of period $13.80 $13.98 $15.31 $16.93 $12.44
Total investment return at net asset value(2) (%) 2.89 2.84 10.48 16.61 (18.46)
Total adjusted investment return at net asset value(2,3) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 56,927 44,224 38,594 40,341 28,864
Ratio of expenses to average net assets (%) 1.75 1.63 1.75 1.90 2.36
Ratio of adjusted expenses to average net assets(4) (%) -- -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 0.77 0.75 0.89 0.60 (0.28)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- -- -- -- --
Portfolio turnover rate (%) 6 9 12 30 38
Fee reduction per share ($) -- -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - year ended December 31, (continued) 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $12.44 $15.60 $14.94 $17.45 $17.84
Net investment income (loss) 0.05 (0.15) (0.21) (0.22)(1) (0.22)(1)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 4.11 1.00 4.92 1.87 8.53
Total from investment operations 4.16 0.85 4.71 1.65 8.31
Less distributions:
Dividends from net investment income (0.04) -- -- -- --
Distributions from net realized gain on investments
and foreign currency transactions (0.96) (1.51) (2.20) (1.26) (1.64)
Total distributions (1.00) (1.51) (2.20) (1.26) (1.64)
Net asset value, end of period $15.60 $14.94 $17.45 $17.84 $24.51
Total investment return at net asset value(2) (%) 33.05 5.70 32.06 9.62 46.53
Total adjusted investment return at net asset value(2,3) -- 5.53 -- -- 46.41
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 31,580 32,094 41,749 52,193 155,001
Ratio of expenses to average net assets (%) 2.32 2.05 2.10 2.16 1.67
Ratio of adjusted expenses to average net assets(4) (%) -- 2.22 -- -- 1.79
Ratio of net investment income (loss) to average net assets (%) 0.34 (0.88) (1.49) (1.25) (0.89)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- (1.05) -- -- (1.01)
Portfolio turnover rate (%) 67 76 86 67 70
Fee reduction per share -- 0.03 -- -- 0.03(1)
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Class B - year ended December 31, 1994(6) 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.24 $17.68
Net investment income (loss) (0.35)(1) (0.39)(1)
Net realized and unrealized gain (loss) on investments 2.05 8.43
Total from investment operations 1.70 8.04
Less distributions:
Distributions from net realized gain on investments sold (1.26) (1.64)
Net asset value, end of period $17.68 $24.08
Total investment return at net asset value(2) (%) 10.02 45.42
Total adjusted investment return at net asset value(2,3) -- 45.30
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 9,324 35,754
Ratio of expenses to average net assets (%) 2.90(7) 2.41
Ratio of adjusted expenses to average net assets(4) (%) -- 2.53
Ratio of net investment income (loss) to average net assets (%) (1.98)(7) (1.62)
Ratio of adjusted net investment income (loss) to
average net assets(4) (%) -- (1.74)
Portfolio turnover rate (%) 67 70
Fee reduction per share ($) -- 0.03(1)
Average brokerage commission rate(5)($) N/A N/A
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) Class B shares commenced operations on January 3, 1994.
(7) Annualized.
GROWTH - GLOBAL TECHNOLOGY FUND 11
<PAGE>
International Fund
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: FINAX
CLASS B: FINBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in stocks of foreign companies. Under normal circumstances,
the fund will invest at least 65% of assets in these companies. The fund
maintains a diversified portfolio of company and government securities from
around the world, and generally expects that at any one time it will invest in
the securities markets of at least three non-U.S. countries.
The fund does not maintain a fixed allocation of assets, either with respect to
securities type or to geography. The fund looks for companies of any size whose
earnings show strong growth or that appear to be undervalued.
PORTFOLIO SECURITIES
[LOGO] Under normal circumstances, the fund invests primarily in common stocks
and other equity securities, but may invest in almost any type of security,
foreign or domestic, including preferred and convertible securities, warrants
and investment-grade debt 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 up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements.
Because it invests internationally, the fund carries additional risks, including
currency, information, natural event and political risks. These risks, which may
make the fund more volatile than a comparable domestic growth fund, are defined
in "More about risk" starting on page 31. The risks of international investing
are higher in emerging markets such as those of Latin America, Asia and Eastern
Europe.
To the extent that the fund invests in smaller capitalization companies or
utilizes higher-risk securities and practices, it takes on further risks that
could adversely affect its performance. Please read "More about risk" carefully
before investing.
MANAGEMENT/SUBADVISER
[LOGO] John L.F. Wills, leader of the fund's portfolio management team, is a
vice president of the adviser and managing director of the subadviser, John
Hancock Advisers International. He joined John Hancock Funds in 1987 and has
been in the investment business since 1969.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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) 5.00% 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 (after expense limitation)(3,4) 0.00% 0.00%
12b-1 fee(5) 0.30% 1.00%
Other expenses (after limitation)(3) 1.42% 1.42%
Total fund operating expenses (after limitation)(3) 1.72% 2.42%
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 $67 $101 $139 $243
Class B shares
Assuming redemption
at end of period $75 $105 $149 $258
Assuming no redemption $25 $75 $129 $258
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 transfer agent expenses). Without this limitation, management
fees would be 1.00% for each class, other expenses would be 3.58% for each
class and total fund operating expenses would be 4.88% for Class A and
5.58% for Class B.
(4) Includes a subadviser fee equal to 0.70% of the fund's net assets.
(5) 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 GROWTH - INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1994(1) 1.77(5)
1995 (4.96)
1996(2) 9.09(5)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Class A - year ended October 31, 1994(1) 1995 1996(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $8.65 $8.14
Net investment income (loss) 0.07(3) 0.04 0.02(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.08 (0.47) 0.72
Total from investment operations 0.15 (0.43) 0.74
Less distributions:
Dividends from net investment income -- (0.03) --
Distributions from net realized gain on investments
sold and foreign currency transactions -- (0.05) --
Total distributions -- (0.08) --
Net asset value, end of period $8.65 $8.14 $8.88
Total investment return at net asset value(4) (%) 1.77(5) (4.96) 9.09(5)
Total adjusted investment return at net asset value(4,6) (%) (0.52)(5) (8.12) 8.37(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,426 4,215 6,076
Ratio of expenses to average net assets (%) 1.50(7) 1.64 1.69(7)
Ratio of adjusted expenses to average net assets(8) (%) 3.79(7) 4.80 3.12(7)
Ratio of net investment income (loss) to average net assets (%) 1.02(7) 0.56 0.40(7)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (1.27)(7) (2.60) (1.03)(7)
Portfolio turnover rate (%) 50 69 34
Fee reduction per share ($) 0.16(3) 0.25 0.07(3)
Average brokerage commission rate(9) ($) N/A N/A 0.00(10)
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, 1994(1) 1995 1996(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $8.61 $8.05
Net investment income (loss) 0.02(3) (0.03) (0.01)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.09 (0.48) 0.72
Total from investment operations 0.11 (0.51) 0.71
Less distributions:
Distributions from net realized gain on investments
sold and foreign currency transactions -- (0.05) --
Net asset value, end of period $8.61 $8.05 $8.76
Total investment return at net asset value(4) (%) 1.29(5) (5.89) 8.82(5)
Total adjusted investment return at net asset value(4,6) (%) (1.00)(5) (9.05) 8.10(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 3,948 3,990 8,192
Ratio of expenses to average net assets (%) 2.22(7) 2.52 2.39(7)
Ratio of adjusted expenses to average net assets(8) (%) 4.51(7) 5.68 3.82(7)
Ratio of net investment income (loss) to average net assets (%) 0.31(7) (0.37) (0.25)(7)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (1.98)(7) (3.53) (1.68)(7)
Portfolio turnover rate (%) 50 69 34
Fee reduction per share ($) 0.16(3) 0.25 0.07(3)
Average brokerage commission rate(9) ($) N/A N/A 0.00(10)
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1994.
(2) Six months ended April 30, 1996. (Unaudited.)
(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) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(10) Less than one cent per share.
GROWTH - INTERNATIONAL FUND 13
<PAGE>
Pacific Basin Equities Fund
REGISTRANT NAME: JOHN HANCOCK WORLD FUND TICKER SYMBOL CLASS A: JHWPX
CLASS B: FPBBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks long-term growth of capital. To pursue this goal, the fund
invests primarily in a diversified portfolio of stocks of companies located in
countries bordering the Pacific Ocean. Under normal circumstances, the fund will
invest at least 65% of assets in these companies, with the balance invested in
equities of companies not in the Pacific Basin countries and in investment-grade
debt securities of U.S., Japanese, Australian and New Zealand issuers.
The fund does not maintain a fixed allocation of assets. The fund may at times
invest less than 65% of assets in Pacific Basin equities.
PORTFOLIO SECURITIES
[LOGO] Under normal circumstances, the fund invests primarily in common stocks
and other equity securities, but may invest in virtually any type of security,
foreign or domestic, including preferred and convertible securities, warrants
and investment-grade debt 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 up to 100% in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO] As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Because the fund concentrates on one region,
investors should expect above-average volatility.
Also, because the fund invests internationally, it carries additional risks,
including currency, information, natural event and political risks. These risks,
which may make the fund more volatile than a comparable domestic growth fund,
are defined in "More about risk" starting on page 31. The risks of international
investing are higher in emerging markets, a category that includes many Pacific
Basin countries.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
MANAGEMENT/SUBADVISERS
[LOGO] The fund's management is carried out jointly by the adviser's
international equities portfolio management team and two subadvisers, Indosuez
Asia Advisers Limited and John Hancock Advisers International. Indosuez is
majority owned by Caisse Nationale de Credit Agricole, a French banking
institution.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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) 5.00% 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(3) 0.80% 0.80%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.97% 0.97%
Total fund operating expenses 2.07% 2.77%
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 $70 $112 $156 $278
Class B shares
Assuming redemption
at end of period $78 $116 $166 $293
Assuming no redemption $28 $86 $146 $293
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) Includes a subadviser fee equal to 0.35% of the fund's net assets.
(4) 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 GROWTH - PACIFIC BASIN EQUITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class A year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1988(1) (3.61)(6)
1989 18.06
1990 (0.44)
1991 (2.15)
1992 (1.99)
1993 49.61
1994 22.82
1995 (7.65)
1996(2) 7.80(6)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended August 31, 1988(1) 1989 1990 1991 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.00 $9.61 $11.10 $10.34 $9.05
Net investment income (loss) 0.01 (0.02) (0.04) (0.01) (0.07)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.37) 1.75 0.11 (0.33) (0.11)
Total from investment operations (0.36) 1.73 0.07 (0.34) (0.18)
Less distributions:
Dividends from net investment income (0.03) (0.01) -- -- --
Distributions from net realized gain on investments sold
and foreign currency transactions -- (0.23) (0.83) (0.95) --
Total distributions (0.03) (0.24) (0.83) (0.95) --
Net asset value, end of period $9.61 $11.10 $10.34 $9.05 $8.87
Total investment return at net asset value(5) (%) (3.61)(6) 18.06 (0.44) (2.15) (1.99)
Total adjusted investment return at net asset value(5,7) (%) (8.05)(6) 15.12 (2.86) (5.19) (5.57)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,771 5,116 4,578 4,065 3,222
Ratio of expenses to average net assets (%) 1.75(8) 1.75 2.45 2.75 2.73
Ratio of adjusted expenses to average net assets(9) (%) 6.19(8) 4.69 4.89 5.79 6.31
Ratio of net investment income (loss) to average net assets (%) 0.04(8) (0.15) (0.28) (0.06) (0.82)
Ratio of adjusted net investment income (loss) to average
net assets(9) (%) (4.40)(8) (3.09) (2.70) (3.10) (4.40)
Portfolio turnover rate (%) 148 227 154 151 179
Fee reduction per share ($) 1.15 0.39 0.31 0.24 0.31(3)
Average brokerage commission rate(10) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended August 31, (continued) 1993 1994 1995 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.87 $13.27 $15.88 $14.11
Net investment income (loss) (0.11)(3) (0.10)(3) 0.02(3,4) (0.02)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 4.51 3.12 (1.24) 1.12
Total from investment operations 4.40 3.02 (1.22) 1.10
Less distributions:
Dividends from net investment income -- -- -- --
Distributions from net realized gain on investments sold
and foreign currency transactions -- (0.41) (0.55) --
Total distributions -- (0.41) (0.55) --
Net asset value, end of period $13.27 $15.88 $14.11 $15.21
Total investment return at net asset value(5) (%) 49.61 22.82 (7.65) 7.80(6)
Total adjusted investment return at net asset value(5,7) (%) 48.31 -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 14,568 50,261 37,417 43,051
Ratio of expenses to average net assets (%) 2.94 2.43 2.05 2.12(8)
Ratio of adjusted expenses to average net assets(9) (%) 4.24 -- -- --
Ratio of net investment income (loss) to average net assets (%) (0.98) (0.66) 0.13(4) (0.30)(8)
Ratio of adjusted net investment income (loss) to average
net assets(9) (%) (2.28) -- -- --
Portfolio turnover rate (%) 171 68 48 26
Fee reduction per share ($) 0.14(3) -- -- --
Average brokerage commission rate(10) ($) N/A N/A N/A 0.01
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended August 31, 1994(1) 1995 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.11 $15.84 $13.96
Net investment income (loss) (0.09)(3) (0.09)(3) (0.08)(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.82 (1.24) 1.12
Total from investment operations 0.73 (1.33) 1.04
Less distributions:
Distributions from net realized gain on investments sold
and foreign currency transactions -- (0.55) --
Net asset value, end of period $15.84 $13.96 $15.00
Total investment return at net asset value(5) (%) (4.83)(6) (8.38) 7.45(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 9,480 14,368 30,399
Ratio of expenses to average net assets (%) 3.00(8) 2.77 2.84(8)
Ratio of net investment income (loss) to average net assets (%) (1.40)(8) (0.66) (1.09)(8)
Portfolio turnover rate (%) 68 48 26
Average brokerage commission rate(10) ($) N/A N/A 0.01
</TABLE>
(1) Class A and Class B shares commenced operations on September 8, 1987 and
March 7, 1994, respectively.
(2) Six months ended February 29, 1996. (Unaudited.)
(3) Based on the average of the shares outstanding at the end of each month.
(4) May not accord to amounts shown elsewhere in the financial statements due
to the timing of sales and repurchases of fund shares in relation to
fluctuating market values of the investments of the fund.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Annualized.
(9) Unreimbursed, without fee reduction.
(10) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
GROWTH - PACIFIC BASIN EQUITIES FUND 15
<PAGE>
Short-Term Strategic Income Fund
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: JHSAX
CLASS B: FRSWX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks a high level of current income. To pursue this goal, the
fund invests primarily in debt securities issued or guaranteed by:
o foreign governments and companies including those in emerging markets
o the U.S. Government, its agencies or instrumentalities
o U.S. companies
Under normal circumstances, the fund will invest assets in all three of these
sectors, but may invest up to 100% in any one sector. The fund maintains an
average portfolio maturity of three years or less.
PORTFOLIO SECURITIES
[LOGO] The fund may invest in all types of debt securities. The fund's U.S.
Government securities may include mortgage-backed securities. The fund may
invest up to 67% of assets in securities rated as low as B and their unrated
equivalents. Bonds rated lower than BBB/Baa are considered junk bonds. However,
the fund maintains an average portfolio quality rating of A, which is an
investment-grade rating.
Because the fund is non-diversified, it may invest more than 5% of assets in
securities of a single issuer, but no more than 25% of assets in the securities
of any one foreign government. The fund also may invest in certain other
investments, including derivatives, and may engage in other investment
practices.
RISK FACTORS
[LOGO] The value of your investment in the fund will fluctuate with changes in
currency exchange rates as well as interest rates. Typically, a rise in interest
rates causes a decline in the market value of fixed income securities.
International investing, particularly in emerging markets, carries additional
risks, including currency information, natural event and political risks. Junk
bonds may carry above-average credit and market risks and mortgage-backed
securities may carry extension and prepayment risks. These risks are defined in
"More about risk" starting on page 31.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[LOGO] Anthony A. Goodchild, Lawrence J. Daly and Janet L. Clay lead the
portfolio management team. Messrs. Goodchild and Daly are senior vice presidents
and joined John Hancock Funds in July 1994, having been in the investment
business since 1968 and 1972, respectively. Ms. Clay, a second vice president,
joined John Hancock Funds in August 1995 and has been in the investment business
since 1990.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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 0.65% 0.65%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.42% 0.42%
Total fund operating expenses 1.37% 2.07%
Example The table below shows what you would pay
if you invested $1,000 over the various time frames indicated. The example
assumes you reinvested all dividends and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $44 $72 $103 $190
Class B shares
Assuming redemption
at end of period $51 $85 $111 $198
Assuming no redemption $21 $65 $111 $198
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
16 INCOME - SHORT-TERM STRATEGIC INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1991(1) 8.85(5)
1992 0.64
1993 5.98
1994 1.93
1995 7.97
1996(2) 3.77(6)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - year ended October 31, 1992(1) 1993 1994 1995 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.86 $9.32 $9.12 $8.47 $8.41
Net investment income (loss) 0.65 0.83(3) 0.76(3) 0.77(3) 0.33(3)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.55) (0.20) (0.53) (0.06) 0.01
Total from investment operations 0.10 0.63 0.23 0.71 0.34
Less distributions:
Dividends from net investment income (0.64) (0.83) (0.62) (0.61) (0.34)
Distributions in excess of net investment income -- -- (0.04) -- --
Distributions in excess of net realized gain on investments sold -- -- (0.12) -- --
Distributions from capital paid-in -- -- (0.10) (0.16) --
Total distributions (0.64) (0.83) (0.88) (0.77) (0.34)
Net asset value, end of period $9.32 $9.12 $8.47 $8.41 $8.41
Total investment return at net asset value(4) (%) 1.16(5) 6.78 2.64 8.75 4.10(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 20,468 11,130 13,091 16,997 34,290
Ratio of expenses to average net assets (%) 1.37(5) 1.21 1.26 1.33 1.40(5)
Ratio of net investment income (loss) to average net assets (%) 8.09(5) 8.59 8.71 9.13 8.05(5)
Portfolio turnover rate (%) 86 306 150 147 39
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, 1991(1) 1992 1993 1994 1995 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.00 $10.01 $9.31 $9.11 $8.46 $8.40
Net investment income (loss) 0.76 0.87 0.75(3) 0.70(3) 0.70(3) 0.31(3)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions 0.01 (0.80) (0.20) (0.53) (0.06) 0.00
Total from investment operations 0.77 0.07 0.55 0.17 0.64 0.31
Less distributions:
Dividends from net investment income (0.76) (0.77) (0.75) (0.56) (0.56) (0.31)
Distributions in excess of net investment income -- -- -- (0.04) -- --
Distributions in excess of net realized gain
on investments sold -- -- -- (0.12) -- --
Distributions from capital paid-in -- -- -- (0.10) (0.14) --
Total distributions (0.76) (0.77) (0.75) (0.82) (0.70) (0.31)
Net asset value, end of period $10.01 $9.31 $9.11 $8.46 $8.40 $8.40
Total investment return at net asset value(4) (%) 8.85(5) 0.64 5.98 1.93 7.97 3.77(6)
Total adjusted investment return at net asset value(4,7) (%) 8.81(5) -- -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 218,562 236,059 142,873 98,390 84,601 64,684
Ratio of expenses to average net assets (%) 1.89(5) 2.07 2.01 1.99 2.07 2.06(5)
Ratio of adjusted expenses to average net assets(8) (%) 1.93(5) -- -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 8.72(5) 8.69 7.81 8.00 8.40 7.44(5)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) 8.68(5) -- -- -- -- --
Portfolio turnover rate (%) 22 86 306 150 147 39
Fee reduction per share ($) 0.0039 -- -- -- -- --
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1992 and
December 28,1990, respectively.
(2) Six months ended April 30, 1996. (Unaudited.)
(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) Annualized.
(6) Not annualized.
(7) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Unreimbursed, without fee reduction.
INCOME - SHORT-TERM STRATEGIC INCOME FUND 17
<PAGE>
World Bond Fund
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: FGLAX
CLASS B: FGLIX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO] The fund seeks a high total investment return -- a combination of current
income and capital appreciation. To pursue this goal, the fund invests at least
65% of assets in debt securities issued or guaranteed by:
o foreign governments and companies including those in emerging markets
o multinational organizations such as the World Bank
o the U.S. Government, its agencies or instrumentalities
Under normal circumstances, the fund expects to invest in the securities markets
of at least three countries at any one time, potentially including the U.S. The
fund does not maintain a fixed allocation of assets.
PORTFOLIO SECURITIES
[LOGO] The fund may invest in all types of debt securities of any maturity,
including preferred and convertible securities. Less than 35% of assets may be
invested in junk bonds rated as low as CCC/Caa, or equivalent.
Because the fund is non-diversified, it may invest more than 5% of assets in
securities of a single issuer, but no more than 25% of assets in the securities
of any one foreign government.
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 other investments, including derivatives, and may engage in
other investment practices.
RISK FACTORS
[LOGO] As with most bond funds, the value of your investment in the fund will
fluctuate with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed income securities.
International investing, particularly in emerging markets, carries additional
risks, including currency, information, natural event and political risks. Junk
bonds may carry above-average credit and market risks and mortgage-backed
securities may carry extension and prepayment risks. These risks are defined in
"More about risk" starting on page 31.
To the extent that the fund utilizes higher-risk securities practices, it takes
on further risks that could adversely affect its performance. Please read "More
about risk" carefully before investing.
PORTFOLIO MANAGEMENT
[LOGO] Anthony A. Goodchild, Lawrence J. Daly and Janet L. Clay lead the
portfolio management team. Messrs. Goodchild and Daly are senior vice presidents
and joined John Hancock Funds in July 1994, having been in the investment
business since 1968 and 1972, respectively. Ms. Clay, a second vice president,
joined John Hancock Funds in August 1995 and has been in the investment business
since 1990.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[LOGO] 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 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.43% 0.43%
Total fund operating expenses 1.48% 2.18%
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 $59 $90 $122 $214
Class B shares
Assuming redemption
at end of period $72 $98 $137 $234
Assuming no redemption $22 $68 $117 $234
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.
18 INCOME - WORLD BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO] The figures below have been audited by the fund's independent auditors,
Price Waterhouse LLP.
Volatility, as indicated by Class B year-by-year total investment return (%)
[The following table was presented as a graph in the printed document]
Total
Investment
Return
At Net
Year Asset Value(4)
---- -----------
1987(7) 65.96(5)
1987(8) 1.59(5)
1988 20.09
1989 5.47
1990 11.84
1991 10.44
1992 1.72
1993 6.77
1994 (1.88)
1995 11.51
1996(2) 0.30(6)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Class A - year ended October 31, 1992(1) 1993 1994 1995 1996(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.57 $9.76 $9.62 $8.85 $9.30
Net investment income (loss) 0.64 0.76 0.64(3) 0.57(3) 0.25(3)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.74) (0.10) (0.78) 0.48 (0.19)
Total from investment operations (0.10) 0.66 (0.14) 1.05 0.06
Less distributions:
Dividends from net investment income (0.71) (0.38) (0.11) (0.59) (0.25)
Distributions in excess of net investment income -- (0.04) -- -- --
Distributions from capital paid-in -- (0.38) (0.52) (0.01) --
Total distributions (0.71) (0.80) (0.63) (0.60) (0.25)
Net asset value, end of period $9.76 $9.62 $8.85 $9.30 $9.11
Total investment return at net asset value(4) (%) (0.88)(5) 7.14 (1.30) 12.25 0.63(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 12,880 12,882 8,949 35,334 31,336
Ratio of expenses to average net assets (%) 1.41(5) 1.46 1.59 1.48 1.56(5)
Ratio of net investment income (loss) to average
net assets (%) 7.64(5) 7.89 7.00 6.43 5.38(5)
Portfolio turnover rate (%) 476 363 174 263 141
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, 1987(7) 1987(8) 1988 1989 1990 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.60 $10.79 $10.32 $10.98 $10.21 $10.38
Net investment income (loss) 0.31 0.25 0.67 0.83 0.85 0.90
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.29 (0.18) 1.31 (0.27) 0.28 0.13
Total from investment operations 1.60 0.07 1.98 0.56 1.13 1.03
Less distributions:
Dividends from net investment income (0.26) (0.28) (0.68) (0.84) (0.85) (0.73)
Distributions from net realized gain on investments (0.15) (0.26) (0.64) (0.49) -- (0.24)
Distributions in excess of net investment income -- -- -- -- -- --
Distributions from capital paid-in -- -- -- -- (0.11) --
Total distributions (0.41) (0.54) (1.32) (1.33) (0.96) (0.97)
Net asset value, end of period $10.79 $10.32 $10.98 $10.21 $10.38 $10.44
Total investment return at net asset value(4) (%) 65.96(5) 1.59(5) 20.09 5.47 11.84 10.44
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 18,253 58,658 174,833 255,214 186,524 192,687
Ratio of expenses to average net assets (%) 2.41(5) 2.19(5) 1.74 1.75 1.82 1.90
Ratio of net investment income (loss) to average
net assets (%) 8.69(5) 6.32(5) 6.04 8.07 8.67 8.74
Portfolio turnover rate (%) 140(5) 152(5) 364 333 186 159
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class B - year ended October 31, (continued) 1992 1993 1994 1995 1996(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $10.44 $9.74 $9.62 $8.85 $9.30
Net investment income (loss) 0.78 0.72 0.59(3) 0.55(3) 0.22(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.59) (0.09) (0.78) 0.44 (0.19)
Total from investment operations 0.19 0.63 (0.19) 0.99 0.03
Less distributions:
Dividends from net investment income (0.89) (0.33) (0.06) (0.53) (0.22)
Distributions from net realized gain on investments -- -- -- -- --
Distributions in excess of net investment income -- (0.04) -- -- --
Distributions from capital paid-in -- (0.38) (0.52) (0.01) --
Total distributions (0.89) (0.75) (0.58) (0.54) (0.22)
Net asset value, end of period $9.74 $9.62 $8.85 $9.30 $9.11
Total investment return at net asset value(4) (%) 1.72 6.77 (1.88) 11.51 0.30(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 199,102 197,166 114,656 65,600 53,963
Ratio of expenses to average net assets (%) 1.91 1.91 2.17 2.16 2.22(5)
Ratio of net investment income (loss) to average
net assets (%) 7.59 7.45 6.41 6.03 4.72(5)
Portfolio turnover rate (%) 476 363 174 263 141
</TABLE>
(1) Class A shares commenced operations on January 3, 1992.
(2) Six months ended April 30, 1996. (Unaudited.)
(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) Annualized.
(6) Not annualized.
(7) For the period December 17, 1986 (commencement of operations) to May 31,
1987.
(8) For the period June 1, 1987 to October 31, 1987.
INCOME - WORLD BOND FUND 19
<PAGE>
Your account
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock international/global 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
several ways to reduce work for you right away.
these charges, also o Higher annual expenses
described below. than Class A shares.
o Lower annual expenses o A deferred sales charge, as
than Class B shares. described below.
o Automatic conversion to
Class A shares after eight
years (five years for Short-
Term Strategic Income
Fund), 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
Class A Sales charges are as follows:
- --------------------------------------------------------------------------------
Class A sales charges - Short-Term Strategic Income
- --------------------------------------------------------------------------------
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 - World Bond
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Class A sales charges - growth funds
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$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 (all funds)
- --------------------------------------------------------------------------------
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.
20 YOUR ACCOUNT
<PAGE>
Class B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is 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 Short-Term CDSC on all
purchase Strategic Income other fund shares
shares being sold 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 Investor Services to add these options (see the
back cover of this prospectus).
Group Investment Program Allows established groups of four or more investors to
invest as a group. Each investor has an individual account, but for sales charge
purposes the group's investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Investor Services to find
out how to qualify.
CDSC waivers As long as Investor 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 Investor Services, or consult the SAI (see the back
cover of this prospectus).
Reinstatement privilege If you sell shares of a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. 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 Investor Services.
YOUR ACCOUNT 21
<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 growth 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 clients of AFA, when their funds are transferred directly to Global
Technology Fund from accounts managed by AFA
o certain former shareholders of John Hancock National Aviation & Technology
Fund and Nova Fund (applies to Global Technology Fund only).
To utilize: if you think you may be eligible for a sales charge waiver, contact
Investor Services or consult the SAI.
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
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 can
initiate any purchase, exchange or sale of shares through your financial
representative.
22 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account
By check
[LOGO]
o Make out a check for the investment amount, payable to "John Hancock
Investor Services Corporation."
o Deliver the check and your completed application to your financial
representative, or mail them to Investor Services (address below).
By exchange
[LOGO]
o Call your financial representative or Investor Services to request an
exchange.
By wire
[LOGO]
o Deliver your completed application to your financial representative, or
mail it to Investor Services.
o Obtain your account number by calling your financial representative or
Investor Services.
o Instruct your bank to wire the amount of your investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class, the new account number
and the name(s) in which the account is registered. Your bank may charge a
fee to wire funds.
By phone
[LOGO]
See "By wire" and "By exchange."
Adding to an account
By check
[LOGO]
o Make out a check for the investment amount payable to "John Hancock
Investor Services Corporation."
o Fill out the detachable investment slip from an account statement. If no
slip is available, include a note specifying the fund 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 them to Investor Services (address below).
By exchange
[LOGO]
o Call Investor Services to request an exchange.
By wire
[LOGO]
o Instruct your bank to wire the amount of your investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your share class, your account number and the
name(s) in which the account is registered. Your bank may charge a fee to
wire funds.
By phone
[LOGO]
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 Investor Services to verify that these features are in place on your
account.
o Tell the Investor 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 Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
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 23
<PAGE>
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for
- --------------------------------------------------------------------------------
By letter
- --------------------------------------------------------------------------------
[LOGO]
o Accounts of any type.
o Sales of any amount.
- --------------------------------------------------------------------------------
By phone
- --------------------------------------------------------------------------------
[LOGO]
o Most accounts.
o Sales of up to $100,000.
- --------------------------------------------------------------------------------
By wire or electronic funds transfer (EFT)
- --------------------------------------------------------------------------------
[LOGO]
o Requests by letter to sell any amount (accounts of any type).
o Requests by phone to sell up to $100,000 (accounts with telephone
redemption privileges).
- --------------------------------------------------------------------------------
By exchange
- --------------------------------------------------------------------------------
[LOGO]
o Accounts of any type.
o Sales of any amount.
- --------------------------------------------------------------------------------
By check
- --------------------------------------------------------------------------------
[LOGO]
o Short-Term Strategic Income Fund only.
o Any account with checkwriting privileges.
o Sales of over $100.
To sell some or all of your shares
- --------------------------------------------------------------------------------
By letter
- --------------------------------------------------------------------------------
[LOGO]
o Write a letter of instruction or complete a 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 Investor 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
- --------------------------------------------------------------------------------
[LOGO]
o For automated service 24 hours a day using your 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
Investor Services between 8 A.M. and 4 P.M. on most business days.
- --------------------------------------------------------------------------------
By wire or electronic funds transfer (EFT)
- --------------------------------------------------------------------------------
[LOGO]
o Fill out the "Telephone Redemption" section of your new account
application.
o To verify that the telephone redemption privilege is in place on an
account, or to request the forms to add it to an existing account, call
Investor 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
- --------------------------------------------------------------------------------
[LOGO]
o Obtain a current prospectus for the fund into which you are exchanging by
calling your financial representative or Investor Services.
o Call Investor Services to request an exchange.
- --------------------------------------------------------------------------------
By check
- --------------------------------------------------------------------------------
[LOGO]
o Request checkwriting on your account application.
o Verify that the shares to be sold were purchased more than 15 days earlier
or were purchased by wire.
o Write a check for any amount over $100.
- --------------------------------------------------------------------------------
Address
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
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."
24 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
- --------------------------------------------------------------------------------
[LOGO]
Owners of individual, joint, sole o Letter of instruction.
proprietorship, UGMA/UTMA
(custodial accounts for minors) or o On the letter, the signatures and
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 association o Letter of instruction.
accounts.
o Corporate resolution, certified
within the past 90 days.
o On the letter and the resolution,
the signature of the person(s)
authorized to sign for the account.
o Signature guarantee if applicable
(see above).
Owners or trustees of trust o Letter of instruction.
accounts.
o On the letter, the signature(s) of
the trustee(s).
o If the names of all trustees are not
registered on the account, please
also provide a copy of the trust
document certified within the past
60 days.
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 25
<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
Investor 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, Investor 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 not taken, Investor Services is
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.
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 that of the new fund if the new fund's 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 change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Investor Services. Certificated
shares can only be sold by returning the certificates to Investor 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 calendar days after
the purchase.
Foreign currencies Purchases must be made in U.S. dollars. Purchases in foreign
currencies must be converted, which may result in a fee and delayed execution.
Eligibility by state You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
26 YOUR ACCOUNT
<PAGE>
Dividends The income funds generally declare income dividends daily and pay them
monthly. These income dividends begin accruing the day after payment is received
by the fund and continue through the day your shares are actually sold. The
growth funds pay income dividends, if any, annually. All funds distribute
capital gains, if any, annually.
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.
Taxability of dividends As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive from the growth funds.
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, Investor 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 Investor Services
Corporation." Deliver your check and application to your financial
representative or Investor Services.
Systematic withdrawal plan This plan may be used for routine bill payment 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 Investor Services.
Retirement plans John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, SARSEPs, 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 with a low minimum investment of $250 or, for
some group plans, no minimum investment at all. To find out more, call Investor
Services at 1-800-225-5291.
YOUR ACCOUNT 27
<PAGE>
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
How the funds are organized Each John Hancock international/global fund is an
open-end management investment company or a series of such a company.
Each fund is supervised by a board of trustees or a board of directors, 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 international/global
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 table was presented as a flow chart in the printed document]
--------------------------------------
Shareholders
--------------------------------------
--------------------------------------
Financial service firms and
their representatives
Distribution and
shareholder services
Advise current and prospective
shareholders on their fund investments,
often in the context of an overall
financial plan.
--------------------------------------
--------------------------- -----------------------------
Principle distributor Transfer agent
John Hancock Funds, Inc. John Hancock Investor
101 Huntington Avenue Services Corporation
Boston, MA 02199-7603 P.O. Box 9116
Boston, MA 02205-9116
Markets the funds and
distributes shares through Handles shareholder services,
selling brokers, financial including record-keeping and
planners and other financial statements, distribution of
representatives. dividends and processing of
buy and sell requests
--------------------------- -----------------------------
<TABLE>
<CAPTION>
Asset management
- ------------------------------- ----------------------------- -------------------------------------
<S> <C> <C>
Subadvisers Investment Adviser Custodians
American Fund Advisers, Inc. John Hancock Advisers, Inc. Investors Bank & Trust Co.
1415 Kellum Place 101 Huntington Avenue 89 South Street
Garden City, NY 11530 Boston, MA 02199-7603 Boston, MA 02111
John Hancock Advisers Manages the funds' business State Street Bank and Trust Company
International Limited and investment activities. 225 Franklin Street
34 Dover Street Boston, MA 02110
London, UK W1X3Ra
Hold the funds' assets, settle
Indosuez Asia Advisers Limited all portfolio trades and
One Exchange Square collect most of the valuation
Hong Kong data required for calculating
each fund's NAV.
Provide portfolio management
to certain funds.
- ------------------------------- ----------------------------- -------------------------------------
</TABLE>
--------------------------------
Trustees/Directors
Supervise the funds' activities.
--------------------------------
28 FUND DETAILS
<PAGE>
Accounting compensation The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 will not 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 Global Rx Fund, International Fund and World Bond
Fund, each fund's investment goal is fundamental and may only be changed with
shareholder approval.
Diversification Except for Global Rx Fund, Short-Term Strategic Income Fund and
World Bond Fund, all of the international/global 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 fund in assets ("12b-1" refers to the
federal securities regulation authorizing 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' respective boards. 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
Global $ 750,008 2.74%
Global Marketplace $ N/A N/A
Global Rx $ 205,352 6.09%
Global Technology $ 987,619 4.34%
International $ 358,785 9.76%
Pacific Basin Equities $ 749,799 6.06%
Short-Term Strategic Income $ 2,610,556 2.93%
World Bond $ 4,753,035 5.13%
(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. Firms affiliated
with John Hancock, which include Tucker Anthony, Sutro & Company and John
Hancock Distributors, may receive an additional fee of up to 0.05% a year of
their total eligible net assets.
To compensate for continuing services, John Hancock Funds will pay Merrill
Lynch, Pierce, Fenner & Smith, Inc. an annual fee equal to 0.15% of the value of
Class A shares held by its customers for more than four years.
FUND DETAILS 29
- --------------------------------------------------------------------------------
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>
Short-Term Strategic Income Fund
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%
World Bond Fund
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%
Growth funds
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
Regular investments of
$1 million or more (all funds)
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 and more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class B investments
- --------------------------------------------------------------------------------
Maximum
reallowance First year Maximum
or commission service fee total compensation
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
Short-Term Strategic Income Fund
All amounts 2.25% 0.25% 2.50%
All other 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 fund commission
payments when there is no initial sales charge.
30 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's
primary 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 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 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 the performance of a John
Hancock international/global fund will be positive over any period of time --
days, months or years. However, international markets have performed better over
the past two decades than domestic markets.
- --------------------------------------------------------------------------------
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).
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.
Information risk The risk that key information about a security or market is
inaccurate or unavailable.
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 which
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. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy 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 directly attributable to government or
political actions of any sort. These actions may range from changes in tax or
trade statutes to expropriation, 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 31
<PAGE>
- --------------------------------------------------------------------------------
Higher-risk securities and practices
- --------------------------------------------------------------------------------
This table shows each fund's investment limitations as a percentage of portfolio
assets. In each case the principal types of risk are listed (see previous page
for definitions). Numbers in this table show allowable usage only; for actual
usage, consult the fund's annual/semi-annual reports.
[The following symbols have been modified from those presented in the
printed document in order to facilitate understanding of the EDGAR table]
* 10 Percent of total assets
+ 10 Percent of net assets
o No policy limitation on usage;
fund may be using currently
oo Permitted, but has not
typically been used
- -- Not permitted
<TABLE>
<CAPTION>
Pacific Short-Term
Global Global Global Basin Strategic World
Global Marketplace Rx Technology International Equities Income Bond
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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. 10* 33.3* 33.3* 10+ 33.3* 33.3* 10* 10+
Currency trading The direct
trading or holding of foreign
currencies as an asset.
Currency risk. o o o o o o o o
Repurchase agreements The
purchase of a security that
must later be sold back to the
issuer at the same price plus
interest. Credit risk. o o o o o o o o
Securities lending The lending
of securities to financial
institutions, which provide
cash or government securities
as collateral. Credit risk. 10* 33.3* 33.3* 33.3* 33.3* 33.3* 30* 30*
Short sales The selling of
securities which have been
borrowed on the expectation
that the market price will
drop.
o Hedged. Hedged leverage,
market, correlation,
liquidity, opportunity
risks. -- oo oo -- oo oo -- --
o Speculative. Speculative
leverage, market,
liquidity risks. -- oo oo -- oo -- -- --
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. o o o o o o o o
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. o o o o o o o o
- ---------------------------------------------------------------------------------------------------------------------------------
Conventional securities
Foreign debt securities Debt
securities issued by foreign
governments or companies.
Credit, currency, interest
rate, market, political risks. 5* 35(1)* 35(1)* 10(2)+ 35(1)* 35(1)* o(1) o(1)
Non-investment-grade debt
securities Debt securities
rated below BBB/Baa are
considered junk bonds. Credit,
market, interest rate,
liquidity, valuation,
information risks. -- -- 35* 10(2)+ -- -- 67* 35*
Restricted and illiquid
securities Securities not
traded on the open market. May
include illiquid Rule 144A
securities. Liquidity,
valuation, market risks. 15+ 15+ 15+ 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. oo oo oo oo oo oo o o
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. oo oo oo oo oo oo o o
Participation interests
Securities representing an
interest in another security
or in bank loans. Credit,
interest rate, liquidity,
valuation risks. -- -- -- 10(2)+ -- -- 15(3)+ 15(3)+
</TABLE>
32 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
Pacific Short-Term
Global Global Global Basin Strategic World
Global Marketplace Rx Technology International Equities Income Bond
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 o o o o o o o
o Speculative. Currency,
speculative leverage,
liquidity risks. oo oo oo oo oo oo oo oo
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 o o oo o oo o o
o Options on securities and
indices. Interest rate,
currency, market, hedged
or speculative leverage,
correlation, liquidity,
credit, opportunity
risks. 5(4)* oo oo 5(4)* oo oo 5(4)* 5(4)*
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 these movements in a
conventional fashion. Credit,
interest rate, extension,
prepayment, market,
speculative leverage,
liquidity, valuation risks. o o o 10(2)+ o oo o o
</TABLE>
(1) No more than 25% of the fund`s assets will be invested in securities of any
one foreign government.
(2) Included in the 10% limitation on debt securities.
(3) Included in the 15% limitation on illiquid securities.
(4) Applies to purchased options only.
- --------------------------------------------------------------------------------
Analysis of funds with 5% or more in junk bonds(1)
- --------------------------------------------------------------------------------
Quality rating Short-Term Strategic
(S&P/Moody's)(2) Income Fund
Investment Grade Bonds
AAA/Aaa 43.3%
AA/Aa 10.6%
A/A 8.4%
BBB/Baa 1.7%
- --------------------------------------------------------------------------------
Junk Bonds
BB/Ba 8.4%
B/B 13.5%
CCC/Caa 5.3%
CC/Ca 0.0%
C/C 0.0%
% of portfolio in bonds 91.2%
o Rated by S&P or Moody's o Rated by the adviser
(1) Data as of fund's last fiscal year end.
(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 33
<PAGE>
For more information
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
international/global funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or SAI, please
write or call:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, MA 02205-9116
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue,
Boston, Massachusetts 02199-7603
[LOGO]
(C) 1996 John Hancock Funds, Inc.
<PAGE>
JOHN HANCOCK
GROWTH
FUNDS
[John Hancock's graphic logo. A
circle, diamond, triangle and a
cube.]
- --------------------------------------------------------------------------------
PROSPECTUS
JULY 1, 1996
DECEMBER 2, 1996 for Emerging Growth Fund
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:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or
government agency
- - are not guaranteed to achieve
their goal(s)
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.
DISCIPLINED GROWTH FUND
DISCOVERY FUND
EMERGING GROWTH FUND
GROWTH FUND
REGIONAL BANK FUND
SPECIAL EQUITIES FUND
SPECIAL OPPORTUNITIES FUND
[John Hancock's graphic logo. A circle, diamond, triangle and a cube.]
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
A fund-by-fund look at goals, DISCIPLINED GROWTH FUND 4
strategies, risks, expenses and
financial history. DISCOVERY FUND 6
EMERGING GROWTH FUND 8
GROWTH FUND 10
REGIONAL BANK FUND 12
SPECIAL EQUITIES FUND 14
SPECIAL OPPORTUNITIES FUND 16
Policies and instructions for Your account
opening, maintaining and closing
an account in any growth fund. Choosing a share class 18
How sales charges are calculated 18
Sales charge reductions and waivers 19
Opening an account 19
Buying shares 20
Selling shares 21
Transaction policies 23
Dividends and account policies 23
Additional investor services 24
Details that apply to the growth FUND DETAILS
funds as a group.
Business structure 25
Sales compensation 26
More about risk 28
FOR MORE INFORMATION BACK COVER
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[A graphic image of a bullseye with an arrow in the middle of it.] GOAL AND
STRATEGY The fund's particular investment goals and the strategies it intends
to use in pursuing those goals.
[A graphic image of a black folder that contains a couple sheets of paper.]
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.
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] RISK FACTORS The major risk factors associated with the fund.
[A graphic image of a generic person.] PORTFOLIO MANAGEMENT The individual or
group (including subadvisers, if any) designated by the investment adviser to
handle the fund's day-to-day management.
[A graphic image of a percent symbol.] EXPENSES The overall costs borne by an
investor in the fund, including sales charges and annual expenses.
[A graphic image of a dollar sign.] 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.
GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in common
stocks. Each fund employs its own strategy and has 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:
* have longer time horizons
* are willing to accept higher short-term risk along with higher potential
long-term returns
* want to diversify their portfolios
* are seeking funds for the growth portion of an asset allocation portfolio
* are investing for retirement or other goals that are many years in the
future
Growth funds may NOT be appropriate if you:
* are investing with a shorter time horizon in mind
* are uncomfortable with an investment that will go up and down in value
THE MANAGEMENT FIRM
All John Hancock growth 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 $19 billion in assets.
<PAGE>
DISCIPLINED GROWTH FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A: SVAAX CLASS B: FEQVX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
established, growing companies that have demonstrated superior earnings growth
and stability. Under normal circumstances, the fund will invest at least 65% of
assets in these companies, without concentration in any one industry. The fund
also looks for the following characteristics:
* predictability of earnings
* a low level of debt
* seasoned management
* a strong market position
Many of the fund's investments are in medium or large capitalization companies.
The fund invests for income as a secondary goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities.
The fund expects any foreign investments to remain below 10% of assets.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund also may invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
higher-risk securities, it takes on additional risks that could adversely
affect its performance. Before you invest, please read "More about risk"
starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] John F. Snyder III and Jere E. Estes are
the leaders of the fund's portfolio management team. Mr. Snyder is an executive
vice president of the adviser and has been a team member since July 1992. He
has been an investment manager since 1971. Mr. Estes has been a part of the
fund's management team since joining John Hancock in July 1992. He has been in
the investment business since 1967.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] 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.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% 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 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.45% 2.15%
</TABLE>
<TABLE>
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%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $94 $125 $215
Class B shares
Assuming redemption
at end of period $72 $97 $135 $231
Assuming no redemption $22 $67 $115 $231
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.
</TABLE>
4 DISCIPLINED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
Financial highlights
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR GRAPH]
<CAPTION>
======================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.81 $ 10.99 $ 12.39 $ 12.02
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2)
Net realized and unrealized gain (loss) on investments (0.06) 1.34 0.07 1.29
Total from investment operations 0.00 1.42 0.17 1.37
Less distributions:
Dividends from net investment income (0.07) (0.02) (0.10) (0.10)
Distributions from net realized gain on investments sold (1.74) -- (0.44) (0.52)
Distributions from capital paid-in (0.01) -- -- --
Total distributions (1.82) (0.02) (0.54) (0.62)
Net asset value, end of period $10.99 $ 12.39 $ 12.02 $ 12.77
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 0.19(4) 12.97 1.35 12.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 1,771 23,372 23,292 27,692
Ratio of expenses to average net assets(%) 1.73(5) 1.60 1.53 1.46
Ratio of net investment income (loss) to average net assets(%) 0.62(5) 0.64 0.83 0.69
Portfolio turnover rate(%) 246 71 60 65
Average brokerage commission rate(6)($) N/A N/A N/A N/A
</TABLE>
<TABLE>
=========================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991 1992
=========================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71
Net investment income (loss) 0.06 0.13 0.19 0.18 0.07 0.01(2)
Net realized and unrealized gain (loss) on investments (1.70) 2.05 1.25 (2.00) 2.67 1.05
Total from investment operations (1.64) 2.18 1.44 (1.82) 2.74 1.06
Less distributions:
Dividends from net investment income (0.02) (0.09) (0.12) (0.20) (0.20) (0.03)
Distributions from net realized gain on investments sold -- (0.14) (0.09) (0.28) (0.05) (1.76)
Distributions from capital paid-in -- -- -- -- -- (0.01)
Total distributions (0.02) (0.23) (0.21) (0.48) (0.25) (1.80)
Net asset value, end of period $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71 $ 10.97
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) (16.44)(4) 26.69 14.27 (16.46) 30.21 7.22
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 14,016 14,927 23,813 17,714 21,826 23,525
Ratio of expenses to average net assets(%) 2.56(5,7) 2.61(7) 2.30 2.13 2.24 2.27
Ratio of net investment income (loss) to average net assets(%) 0.93(5,7) 1.46(7) 1.75 1.64 0.66 0.10
Portfolio turnover rate(%) 40(5) 54 94 165 217 246
Average brokerage commission rate(6)($) N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
======================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993 1994 1995
======================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.97 $ 12.31 $ 11.95
Net investment income (loss) 0.02(2) 0.03 0.01(2)
Net realized and unrealized gain (loss) on investments 1.33 0.07 1.28
Total from investment operations 1.35 0.10 1.29
Less distributions:
Dividends from net investment income (0.01) (0.02) (0.03)
Distributions from net realized gain on investments sold -- (0.44) (0.52)
Distributions from capital paid-in -- -- --
Total distributions (0.01) (0.46) (0.55)
Net asset value, end of period $ 12.31 $ 11.95 $ 12.69
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 12.34 0.78 11.51
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 93,853 94,431 86,178
Ratio of expenses to average net assets(%) 2.09 2.10 2.11
Ratio of net investment income (loss) to average net assets(%) 0.17 0.25 0.06
Portfolio turnover rate(%) 71 60 65
Average brokerage commission rate(6)($) N/A N/A N/A
(1) Class A and Class B shares commenced operations on January 3, 1992 and
April 22, 1987, respectively.
(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) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(7) Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $0.01 for the fiscal year ended
October 31, 1987.
</TABLE>
DISCIPLINED GROWTH FUND 5
<PAGE>
DISCOVERY FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST III TICKER SYMBOL CLASS A: FRDAX CLASS B: FRDIX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
companies that appear to offer superior growth prospects. Under normal
circumstances, the fund will invest at least 65% of assets in these companies.
The fund looks for companies, including small- and medium-sized companies, that
have broad market opportunities and consistent or accelerating earnings growth.
These companies may:
- - occupy a profitable market niche
- - have products or technologies that are new, unique or proprietary
- - are in an industry that has a favorable long-term growth outlook
- - have a capable management team with a significant equity stake
These companies may be in a relatively early stage of development, but will
usually have established a record of profitability and a strong financial
position. The fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in common stocks of U.S. companies and may also invest
in warrants, preferred stocks and investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may invest up to 25% of assets in foreign securities, which carry
additional risks. The fund also may invest in certain higher-risk securities,
and may engage in other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
small and medium-sized company stocks, foreign securities and other higher-risk
securities, it takes on additional risks that could adversely affect its
performance. The fund may experience higher volatility than many other types of
growth funds. Before you invest, please read "More about risk" starting on page
28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since March 1994, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
<TABLE>
INVESTOR EXPENSES
[A graphic image of a percent symbol.] 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.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% 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 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.80% 0.80%
Total fund operating expenses 1.85% 2.55%
</TABLE>
<TABLE>
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%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $68 $105 $145 $256
Class B shares
Assuming redemption
at end of period $76 $109 $155 $271
Assuming no redemption $26 $ 79 $135 $271
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.
</TABLE>
6 DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below for the period ended July
31, 1992, were audited by the fund's former independent auditors, Price
Waterhouse LLP. Figures for subsequent years have been audited by the fund's
current independent auditors, Ernst & Young LLP.
Volatility, as indicated by Class B
year-by-year total investment return (%) [BAR GRAPH]
<CAPTION>
============================================================================================================================
CLASS A - YEAR ENDED JULY 31, 1992(1) 1993 1994 1995 1996(2)
============================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.40 $ 8.95 $ 10.81 $ 8.56 $ 12.95
Net investment income (loss) (0.05) (0.16) (0.16)(3) (0.10)(3) (0.10)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.40) 2.15 (0.43) 4.83 0.55
Total from investment operations (0.45) 1.99 (0.59) 4.66 0.45
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.95 $ 10.81 $ 8.56 $ 12.95 $ 13.27
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) (4.79)(5) 22.33 (6.45) 55.80 3.52(5)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,866 4,692 3,226 5,075 6,583
Ratio of expenses to average net assets (%) 1.78(6) 2.17 2.01 2.10 1.74(6)
Ratio of net investment income (loss) to average net assets (%) (1.20)(6) (1.61) (1.64) (1.73) (1.51)(6)
Portfolio turnover rate (%) 138 148 108 118 73
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
<CAPTION>
===========================================================================================================================
CLASS B - YEAR ENDED JULY 31, 992(1) 1993 1994 1995 1996(2)
===========================================================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.00 $ 8.87 $ 10.65 $ 8.34 $ 12.54
Net investment income (loss) (0.11) (0.23) (0.22)(3) (0.22)(3) (30.14)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.98 2.14 (0.43) 4.69 0.53
Total from investment operations 0.87 1.91 (0.65) 4.47 0.39
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.87 $ 10.65 $ 8.34 $ 12.54 $ 12.80
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 10.88(5) 21.63 (7.18) 54.97 3.15(5)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) ($) 34,636 38,672 26,537 31,645 34,452
Ratio of expenses to average net assets (%) 2.56(6) 2.86 2.62 2.70 2.43(6)
Ratio of net investment income (loss) to average net assets (%) (1.56)(6) (2.26) (2.24) (2.34) (2.20)(6)
Portfolio turnover rate (%) 138 148 108 118 73
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
(1) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(2) Six months ended January 31, 1996. (Unaudited.)
(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) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
DISCOVERY FUND 7
<PAGE>
EMERGING GROWTH FUND
<TABLE>
<S><C>
REGISTRANT NAME: JOHN HANCOCK SERIES TRUST TICKER SYMBOL CLASS A: TAEMX CLASS B: TSEGX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
emerging companies (market capitalization of less than $1 billion). Under
normal circumstances, the fund will invest at least 80% of assets in a
diversified portfolio of these companies. The fund looks for companies that
show rapid growth but are not yet widely recognized. The fund also may invest
in established companies that, because of new management, products or
opportunities, offer the possibility of accelerating earnings. The fund does
not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. and foreign emerging growth
companies, although it may invest up to 20% of assets in other types of
companies. The fund may also invest in warrants, preferred stocks and
investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 20% of net assets in
cash or 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 securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Stocks of emerging growth companies carry
higher risks than stocks of larger companies. This is because emerging growth
companies:
- - may be in the early stages of development
- - may be dependent on a small number of products or services
- - may lack substantial capital reserves
- - do not have proven track records
In addition, stocks of emerging companies are often traded in low volumes,
which can increase market and liquidity risks. Before you invest, please read
"More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since April 1996, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment
business since 1986.
- --------------------------------------------------------------------------------
<TABLE>
INVESTOR EXPENSES
[A graphic image of a percent symbol.] 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.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% 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 0.75% 0.75%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.40% 2.15%
</TABLE>
<TABLE>
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%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $92 $123 $210
Class B shares
Assuming redemption
at end of period $72 $97 $135 $229
Assuming no redemption $22 $67 $115 $229
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.
</TABLE>
8 EMERGING GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR CHART]
<CAPTION>
====================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1991(1) 1992 1993 1994 1995(2) 1996(8)
====================================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.12 $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09
Net investment income (loss)(3) (0.03) (0.20) (0.16) (0.18) (0.25) (0.15)
Net realized and unrealized gain (loss) on investments 1.17 1.60 5.45 1.11 9.52 6.02
Total from investment operations 1.14 1.40 5.29 0.93 9.27 5.87
Less distributions:
Distributions from net realized gain on investments sold -- (0.06) -- -- -- --
Net asset value, end of period $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09 $ 41.96
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 6.29 7.32 25.68 3.59 34.56 16.26(9)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 38,859 46,137 81,263 131,053 179,481 221,059
Ratio of expenses to average net assets (%) 0.33 1.67 1.40 1.44 1.38 1.30(10)
Ratio of net investment income (loss) to average net assets (%) (0.15) (1.03) (0.70) (0.71) (0.83) (0.79)(10)
Portfolio turnover rate (%) 66 48 29 25 23 14
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A 0.06
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991 1992
=============================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.89 $ 7.89 $ 10.54 $ 12.76 $ 11.06 $ 19.22
Net investment income (loss)(3) (0.0021) 0.09 (0.08) (0.22) (0.30) (0.38)
Net realized and unrealized gain (loss) on investments 0.0021 2.56 2.83 (1.26) 8.46 1.56
Total from investment operations 0.0000 2.65 2.75 (1.48) 8.16 1.18
Less distributions:
Dividends from net investment income -- -- (0.04) -- -- --
Distributions from net realized gain on investments sold -- -- (0.49) (0.22) -- (0.06)
Total distributions -- -- (0.53) (0.22) -- (0.06)
Net asset value, end of period $ 7.89 $10.54 $ 12.76 $ 11.06 $ 19.22 $ 20.34
Total investment return at net asset value(4) (%) 0.00 33.59 27.40 (11.82) 73.78 6.19
TOTAL ADJUSTED INVESTMENT RETURN AT NET ASSET VALUE(4,6) (%) (0.41) 31.00 27.37 -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 79 3,232 7,877 11,668 52,743 86,923
Ratio of expenses to average net assets (%) 0.03 3.05 3.48 3.11 2.85 2.64
Ratio of adjusted expenses to average net assets(7) (%) 0.44 5.64 3.51 -- -- --
Ratio of net investment income (loss) to average net assets (%) (0.03) 0.81 (0.67) (1.64) (1.83) (1.99)
Ratio of adjusted net investment income (loss) to average net assets(7)(%) (0.44) (1.78) (0.70) -- -- --
Portfolio turnover rate (%) 0 252 90 82 66 48
Fee reduction per share ($) 0.03 0.29 0.004 -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993 1994 1995(2) 1996(8)
====================================================================================================================================
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C>
Net asset value, beginning of period $ 20.34 $ 25.33 $ 26.04 $ 34.79
Net investment income (loss)(3) (0.36) (0.36) (0.45) (0.27)
Net realized and unrealized gain (loss) on investments 5.35 1.07 9.20 5.80
Total from investment operations 4.99 0.71 8.75 5.53
Less distributions:
Dividends from net investment income -- -- -- --
Distributions from net realized gain on investments sold -- -- -- --
Total distributions -- -- -- --
Net asset value, end of period $ 25.33 $ 26.04 $ 34.79 $ 40.32
Total investment return at net asset value(4) (%) 24.53 2.80 33.60 15.90(9)
Total adjusted investment return at net asset value(4,6) (%) -- -- -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 219,484 283,435 393,478 468,427
Ratio of expenses to average net assets (%) 2.28 2.19 2.11 2.00(10)
Ratio of adjusted expenses to average net assets(7) (%) -- --
Ratio of net investment income (loss) to average net assets (%) (1.58) (1.46) (1.55) (1.49)(10)
Ratio of adjusted net investment income (loss) to average net assets(7)(%) -- -- -- --
Portfolio turnover rate (%) 29 25 23 14
Fee reduction per share ($) -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A 0.06
(1) Class A and Class B shares commenced operations on August 22, 1991 and
October 26, 1987, respectively. (Not annualized.)
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the adviser during the periods shown.
(7) Unreimbursed, without fee reduction.
(8) Six months ended April 30, 1996. (Unaudited)
(9) Not Annualized.
(10) Annualized.
</TABLE>
EMERGING GROWTH FUND 9
<PAGE>
GROWTH FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II
TICKER SYMBOL CLASS A: JHNGX CLASS B: JHGBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
stocks that are diversified with regard to industries and issuers. The fund
favors stocks of companies whose operating earnings and revenues have grown
more than twice as fast as the gross domestic product (GDP) over the past five
years, although not all stocks in the fund's portfolio will meet this
criterion.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
portfolio invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and convertible debt securities.
For liquidity and flexibility, the fund may invest up to 35% of net assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. The fund may
also invest in certain higher-risk securities, and may engage in other
investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. To the extent that the fund invests in
higher-risk securities, it takes on additional risks that could adversely
affect its performance. Before you invest, please read "More about risk"
starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since August 1995, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] 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) 5.00% 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 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.50% 2.20%
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 $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $72 $99 $138 $236
Assuming no redemption $22 $69 $118 $236
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 GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A YEAR-BY-YEAR [BAR GRAPHIC]
TOTAL INVESTMENT RETURN (%)
<CAPTION>
==============================================================================================================================
CLASS A - YEAR ENDED DECEMBER 31, 1986 1987 1988 1989 1990
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.50 $ 14.03 $ 12.34 $ 13.33 $ 15.18
Net investment income (loss) 0.11 0.22 0.23 0.28 0.16
Net realized and unrealized gain (loss) on investments 1.79 0.64 1.16 3.81 (1.47)
Total from investment operations 1.90 0.86 1.39 4.09 (1.31)
Less distributions:
Dividends from net investment income (0.17) (0.28) (0.23) (0.29) (0.16)
Distributions from net realized gain on investments sold (2.20) (2.27) (0.17) (1.95) (0.78)
Total distributions (2.37) (2.55) (0.40) (2.24) (0.94)
Net asset value, end of period $ 14.03 $ 12.34 $ 13.33 $ 15.18 $ 12.93
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2)(%) 13.83 6.03 11.23 30.96 (8.34)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 87,468 86,426 101,497 105.014 102,416
Ratio of expenses to average net assets(%) 1.03 1.00 1.06 0.96 1.46
Ratio of net investment income (loss) to average net assets(%) 0.77 1.41 1.76 1.73 1.12
Portfolio turnover rate (%) 62 68 47 61 102
Average brokerage commission rate(4)($) N/A N/A N/A N/A N/A
<CAPTION>
==============================================================================================================================
CLASS A - YEAR ENDED DECEMBER 31, 1991 1992 1993 1994 1995
==============================================================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.93 $ 17.48 $ 17.32 $ 17.40 $ 15.89
Net investment income (loss) 0.04 (0.06) (0.11) (0.10) (0.09)(1)
Net realized and unrealized gain (loss) on investments 5.36 1.10 2.33 (1.21) 4.40
Total from investment operations 5.40 1.04 2.22 (1.31) 4.31
Less distributions:
Dividends from net investment income (0.04) -- -- -- --
Distributions from net realized gain on investments sold (0.81) (1.20) (2.14) (0.20) (0.69)
Total distributions (0.85) (1.20) (2.14) (0.20) (0.69)
Net asset value, end of period $ 17,48 $ 17.32 $ 17.40 $ 15.89 $ 19.51
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2)(%) 41.68 6.06 13.03 (7.50) 27.17
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 145,287 153,057 162,937 146,466 241,700
Ratio of expenses to average net assets(%) 1.44 1.60 1.56 1.65 1.48
Ratio of net investment income (loss) to average net assets(%) 0.27 (0.36) (0.67) (0.64) (0.46)
Portfolio turnover rate (%) 82 71 68 52 68(3)
Average brokerage commission rate(4)($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
======================================================================================================================
CLASS B - YEAR ENDED DECEMBER 31, 1994(5) 1995
======================================================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $17.16 $15.83
Net investment income (loss) (0.20)(1) (0.26)(1)
Net realized and unrealized gain (loss) on investments (0.93) 4.73
Total from investment operations (1.13) 4.11
Less distributions:
Distributions from net realized gain on investments sold (0.20) (0.69)
Net asset value, end of period $15,83 $19.25
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) (6.56)(6) 26.01
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,807 15,913
Ratio of expenses to average net assets (%) 2.38(7) 2.31
Ratio of net investment income (loss) to average net assets (%) (1.25)(7) (1.39)
Portfolio turnover rate (%) 52 68(3)
Average brokerage commission rate(4) ($) N/A N/A
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Excludes merger activity.
(4) Per portfolio share traded. Required for fiscal years that began
September 1, 1995 or later.
(5) Class B shares commenced operations on January 3, 1994.
(6) Not annualized.
(7) Annualized.
</TABLE>
GROWTH FUND 11
<PAGE>
REGIONAL BANK FUND
<TABLE>
<S> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A: FRBAX CLASS B: FRBFX
- ----------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
regional banks and lending institutions, including:
- commercial and industrial banks
- savings and loan associations
- bank holding companies
These financial institutions provide full-service banking, have primarily
domestic assets and are typically based outside of New York City and Chicago.
They may or may not be members of the Federal Reserve, and their deposits may or
may not be FDIC-insured. Under normal circumstances, the fund will invest at
least 65% of assets in these companies; it may invest up to 35% of assets in
other financial services companies, including lending companies and money center
banks. Because regional banks typically pay regular dividends, moderate income
is an investment goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities, as well as foreign stocks.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may also invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Because the fund concentrates in a
single industry, its performance is largely dependent on the industry's
performance, which may differ in direction and degree from that of the overall
stock market. Falling interest rates or deteriorating economic conditions can
adversely affect the performance of bank stocks, while rising interest rates
will cause a decline in the value of any debt securities the fund holds. Before
you invest, please read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] James K. Schmidt joined John Hancock in
1985 and has served as the fund's portfolio manager since its inception that
year. A senior vice president of the adviser, he has been in the investment
business since 1974.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] 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.
<CAPTION>
================================================================================
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% 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
================================================================================
<CAPTION>
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.78% 0.78%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.31% 0.31%
Total fund operating expenses 1.39% 2.09%
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%.
<CAPTION>
=======================================================================================
Share class Year 1 Year 3 Year 5 Year 10
=======================================================================================
Class A shares $63 $92 $122 $209
- ---------------------------------------------------------------------------------------
Class B shares
- ---------------------------------------------------------------------------------------
Assuming redemption
at end of period $71 $95 $132 $224
- ---------------------------------------------------------------------------------------
Assuming no redemption $21 $65 $112 $224
- ---------------------------------------------------------------------------------------
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.
</TABLE>
12 REGIONAL BANK FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.]
The figures below have been audited by the fund's independent auditors, Price
Waterhouse LLP.
Volatility, as indicated by Class B [Bar Graph]
year-by-year total investment return (%)
<TABLE>
<CAPTION>
======================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
======================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.47 $ 17.47 $ 21.62 $ 21.52
Net investment income (loss) 0.21 0.26(2) 0.39(2) 0.52(2)
Net realized and unrealized gain (loss) on investments 3.98 5.84 0.91 5.92
Total from investment operations 4.19 6.10 1.30 6.44
Less distributions:
Dividends from net investment income (0.19) (0.26) (0.34) (0.48)
Distributions from net realized gain on investments sold -- (1.69) (1.06) (0.34)
Total distributions (0.19) (1.95) (1.40) (0.82)
Net asset value, end of period $ 17.47 $ 21.62 $ 21.52 $ 27.14
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 31.26(4) 37.45 6.44 31.00
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 31,306 94,158 216,978 486,631
Ratio of expenses to average net assets (%) 1.41(5) 1.35 1.34 1.39
Ratio of net investment income to average net assets (%) 1.64(5) 1.29 1.78 2.23
Portfolio turnover rate (%) 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(7) 1987(8) 1988 1989 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.51 $ 12.68 $ 10.02 $ 11.89 $ 13.00
Net investment income (loss) 0.20 0.05 0.16 0.20 0.30
Net realized and unrealized gain (loss) on investment 1.74 (2.17) 3.12 2.02 (4.19)
Total from investment operations 1.94 (2.12) 3.28 2.22 (3.89)
Less distributions:
Dividends from net investment income (0.26) (0.04) (0.15) (0.16) (0.19)
Distributions from net realized gain on investments sold (1.51) (0.50) (1.26) (0.95) (0.76)
Distributions from capital paid-in -- -- -- -- (0.03)
Total distributions (1.77) (0.54) (1.41) (1.11) (0.98)
Net asset value, end of period $ 12.68 $ 10.02 $ 11.89 $ 13.00 $ 8.13
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 17.44 (17.36)(4) 36.89 20.46 (32.29)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 54,626 38,721 50,965 81,167 38,992
Ratio of expenses to average net assets (%) 1.48 2.47(5) 2.17 1.99 1.99
Ratio of net investment income (loss) to average net assets (%) 1.62 0.73(5) 1.50 1.67 2.51
Portfolio turnover rate (%) 89 58(5) 87 85 56
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A
<CAPTION>
====================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.13 $ 13.76 $ 17.44 $ 21.56 $ 21.43
Net investment income (loss) 0.29 0.18 0.15(2) 0.23(2) 0.36(2)
Net realized and unrealized gain (loss) on investment 5.68 4.56 5.83 0.91 5.89
Total from investment operations 5.97 4.74 5.98 1.14 6.25
Less distributions:
Dividends from net investment income (0.34) (0.28) (0.17) (0.21) (0.32)
Distributions from net realized gain on investments sold -- (0.78) (1.69) (1.06) (0.34)
Distributions from capital paid-in -- -- -- -- --
Total distributions (0.34) (1.06) (1.86) (1.27) (0.66)
Net asset value, end of period $ 13.76 $ 17.44 $ 21.56 $ 21.43 $ 27.02
Total investment return at net asset value(3) (%) 75.35 37.20 36.71 5.69 30.11
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 52,098 56,016 171,808 522,207 1,236
Ratio of expenses to average net assets (%) 2.04 1.96 1.88 2.06 2.09
Ratio of net investment income (loss) to average net assets (%) 2.65 1.21 0.76 1.07 1.53
Portfolio turnover rate (%) 75 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A
(1) Class A shares commenced operations on January 3, 1992.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(7) Year ended March 31, 1987.
(8) For the period April 1, 1987 to October 31, 1987.
</TABLE>
REGIONAL BANK FUND 13
<PAGE>
SPECIAL EQUITIES FUND
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND TICKER SYMBOL CLASS A: JHNSX CLASS B: SPQBX
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
small-capitalization companies and companies in situations offering unusual or
non-recurring opportunities. Under normal circumstances, the fund will invest
at least 65% of assets in a diversified portfolio of these companies. The fund
looks for companies that dominate an emerging industry or hold a growing market
share in a fragmented industry, and that have demonstrated annual earnings and
revenue growth of at least 25%, self-financing capabilities and strong
management. The fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. and foreign companies. It
may also invest in warrants, preferred stocks and investment-grade convertible
debt securities. For liquidity and flexibility, the fund may place up to 35% of
assets in cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest more than 35% in these securities as a defensive
tactic. The fund also may invest in certain higher-risk securities, and may
engage in other investment practices.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. Stocks of small-capitalization and
special-situation companies carry higher risks than stocks of larger companies.
This is because these companies:
- may lack proven track records
- may be dependent on a small
number of products or services
- may be undercapitalized
- may have highly priced stocks
that are sensitive to adverse news
In addition, stocks of these companies are often traded in low volumes, which
can increase market and liquidity risks. Before you invest, please read "More
about risk" starting on page 28.
MANAGEMENT/SUBADVISER
[A graphic image of a generic person.] Michael P. DiCarlo is responsible for
the fund's day-to-day investment management. He has served as the fund's
portfolio manager since January 1988, and has been in the investment business
since 1984. He is currently one of three principals in DFS Advisors, LLC, which
was founded in 1996 and serves as subadviser to the fund.
This fund will be closed to new investors at the end of the day its total assets
reach $2.5 billion. Further investments will be limited to existing accounts.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] 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.
<CAPTION>
================================================================================
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% 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
================================================================================
<CAPTION>
================================================================================
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
================================================================================
Management fee(3) 0.82% 0.82%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.38% 0.40%
Total fund operating expenses 1.50% 2.22%
</TABLE>
<TABLE>
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%.
<CAPTION>
=======================================================================================
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
=======================================================================================
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $73 $99 $139 $237
Assuming no redemption $23 $69 $119 $237
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) Includes a subadviser fee equal to 0.25% of the fund's net assets.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
14 SPECIAL EQUITIES FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A [Bar Graph]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
==================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1986(7) 1987(8) 1988 1989 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 5.21 $ 6.08 $ 4.30 $ 4.89 $ 6.38
Net investment income (loss) (0.03) (0.03) 0.04 0.01 (0.12)
Net realized and unrealized gain (loss) on investments 0.93 (1.26) 0.55 1.53 (1.27)
Total from investment operations 0.90 (1.29) 0.59 1.54 (1.39)
Less distributions:
Dividends from net investment income (0.02) -- -- (0.05) (0.02)
Distributions from net realized gain on investments sold (0.01) (0.45) -- -- --
Distributions from capital paid-in -- (0.04) -- -- --
Total distributions (0.03) (0.49) -- (0.05) (0.02)
Net asset value, end of period $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(1,2) (%) 17.38 (28.68) 13.72 31.82 (21.89)
Total adjusted investment return at net asset value (2,3) 15.41 (29.41) 12.28 30.75 (22.21)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 13,780 10,637 11,714 12,285 8,166
Ratio of expenses to average net assets (%) 1.50 1.50 1.50 1.50 2.63
Ratio of adjusted expenses to average net assets (4) (%) 3.47 2.23 2.94 2.57 2.95
Ratio of net investment income (loss) to average net assets (%) (0.57) (0.57) 0.82 0.47 (1.58)
Ratio of adjusted net investment income (loss) to average
Portfolio turnover rate (%) 64 93 91 115 113
Fee reduction per share 0.09 0.04 0.07 0.03 0.02
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
<CAPTION>
====================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11
Net investment income (loss) 0.10 0.19(1) 0.20(1) 0.21(1) 0.18(1)
Net realized and unrealized gain (loss) on investments 4.84 2.14 5.43 0.19 6.22
Total from investment operations 4.74 1.95 5.23 (0.02) 6.04
Less distributions:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain on investments sold -- (0.67) (0.09) -- --
Distributions from capital paid-in -- -- -- -- --
Total distributions -- (0.67) (0.09) -- --
Net asset value, end of period $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(1,2) (%) 95.37 20.25 47.83 (0.12) 37.49
Total adjusted investment return at net asset value (2,3) 95.33 -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 19,713 44,665 296,793 310,625 555,655
Ratio of expenses to average net assets (%) 2.75 2.24 1.84 1.62 1.48
Ratio of adjusted expenses to average net assets (4) (%) (2.21) (1.91) (1.49) (1.40) (0.97)
Ratio of net investment income (loss) to average net assets (%) 2.79 -- -- -- --
Ratio of adjusted net investment income (loss) to average
net assets(4)(%) (2.12) (1.91) (1.49) (1.40) (0.97)
Portfolio turnover rate (%) (2.16) -- -- -- --
Fee reduction per share 0.09 0.04 0.07 0.03 0.02
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993(6) 1994 1995
==========================================================================================================
<S> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $ 12.30 $ 16.08 $ 15.97
Net investment income (loss) 0.18(1) 0.30(1) 0.31(1)
Net realized and unrealized gain (loss) on investments 3.96 0.19 6.15
Total from investment operations 3.78 (0.11) 5.84
Net asset value, end of period $ 16.08 $ 15.97 $ 21.81
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 30.73(7) (0.68) 36.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 158,281 191,979 454,934
Ratio of expenses to average net assets (%) 2.34(8) 2.25 2.20
Ratio of net investment income to average net assets (%) (2.03)(8) (2.02) (1.69)
Portfolio turnover rate (%) 33 66 82
Average brokerage commission rate(5) ($) N/A N/A N/A
- -------------
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) An estimated total return calculation which does not take into
consideration fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(6) Class B shares commenced operations on March 1, 1993.
(7) Not annualized.
(8) Annualized.
SPECIAL EQUITIES FUND 15
</TABLE>
<PAGE>
SPECIAL OPPORTUNITIES FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: SPOAX CLASS B:SPOBX
- --------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
those economic sectors that appear to have a higher than average earning
potential.
Under normal circumstances, at least 90% of the fund's equity securities will be
invested within five or fewer sectors (e.g., financial serv ices, energy,
technology). At times, the fund may focus on a single sector. The fund first
determines the inclusion and weighting of sectors, using macroeconomic as well
as other factors, then selects portfolio securities by seeking the most
attractive companies. The fund may add or drop sectors. Because the fund may
invest more than 5% of assets in a single issuer, it is classified as a
non-diversified fund.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in common stocks of U.S. and foreign companies of any
size. It may also invest in warrants, preferred stocks, convertible debt
securities, U.S. Government securities and corporate bonds rated at least
BBB/Baa, or equivalent. The fund also may invest in certain higher-risk
securities, and may engage in other investment practices.
For liquidity and flexibility, the fund may place up to 10% of net assets in
cash or investment-grade short-term securities. In abnormal market conditions,
it may invest more than 10% in these securities as a defensive tactic.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
in response to stock market movements. By focusing on a relatively small number
of sectors or issuers, the fund runs the risk that any factor influencing those
sectors or issuers will have a major effect on performance. The fund may invest
in companies with smaller market capitalizations, which represent higher
near-term risks than larger capitalization companies. These factors make the
fund likely to experience higher volatility than most other types of growth
funds. Before you invest, please read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Kevin R. Baker is leader of the portfolio
management team for the fund. A second vice president of the adviser, he has
been a member of the management team since joining the adviser in January 1994.
He has been in the investment business since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] 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) 5.00% 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 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.49% 0.49%
Total fund operating expenses 1.59% 2.29%
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 $65 $ 98 $132 $229
Class B shares
Assuming redemption
at end of period $73 $102 $143 $245
Assuming no redemption $23 $ 72 $123 $245
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 SPECIAL OPPORTUNITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [BAR GRAPH]
<TABLE>
<CAPTION>
============================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1994(1) 1995
============================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.93
Net investment income (loss) (0.03)(2) (0.07)(2)
Net realized and unrealized gain (loss) on investments (0.54) 1.46
Total from investment operations (0.57) 1.39
Net asset value, end of period $ 7.93 $ 9.32
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) (6.71) 17.53
Total adjusted investment return at net asset value(3,4)(%) (6.83) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 92,325 101,562
Ratio of expenses to average net assets (%) 1.50 1.59
Ratio of adjusted expenses to average net assets(5)(%) 1.62 --
Ratio of net investment income (loss) to average net assets (%) (0.41) (0.87)
Ratio of adjusted net investment (loss) to average net assets(5)(%) (0.53) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6)($) N/A N/A
============================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1994(1) 1995
============================================================================================
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.87
Net investment income (loss) (0.09)(2) (0.13)(2)
Net realized and unrealized gain (loss) on investments (0.54) 1.45
Total from investment operations (0.63) 1.32
Net asset value, end of period $ 7.87 $ 9.19
Total investment return at net asset value(3)(%) (7.41)(4) 16.77
Total adjusted investment return at net asset value(3,4)(%) (7.53) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)($) 131,983 137,363
Ratio of expenses to average net assets (%) 2.22 2.30
Ratio of adjusted expenses to average net assets(5)(%) 2.34 --
Ratio of net investment income (loss) to average net assets (%) (1.13) (1.55)
Ratio of adjusted net investment (loss) to average net assets(5)(%) (1.25) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6) ($) N/A N/A
- --------------
(1) Class A and B shares commenced operations on November 1, 1993.
(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) An estimated total return calculation which does not take into consideration fee
reductions by the adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995
or later.
</TABLE>
SPECIAL OPPORTUNITIES FUND 17
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock growth 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
================================================================================
- - Front-end sales charge, - No front-end sales charge; all of
as described below. There your monet goes to work for you
are several ways to right away.
reduce these charges,
also described below. - Higher annual expenses than class
A shares.
- - Lower annual expenses
than Class B shares. - A deferred sales charge on shares
you sell within six years of
purchase, as described below.
- Automatic conversion to Class A
shares after eight years, 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.
Special Equities Fund offers Class C shares, which have their own expense
structure and are available to financial institutions only. Call Investor
Services for more information (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
<TABLE>
CLASS A Sales charges are as follows:
<CAPTION>
================================================================================
CLASS A SALES CHARGES
================================================================================
<CAPTION>
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
<S> <C> <C>
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
</TABLE>
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+ INVESTMENT
================================================================================
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.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a contingent deferred sales charge
(CDSC) on shares you sell within six years of buying them. 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 PURCHASE CDSC ON SHARES BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th years 3.00%
5th year 2.00%
6th year 1.00%
After 6 years 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.
18 YOUR ACCOUNT
<PAGE>
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares in John Hancock funds to take advantage
of the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
- - 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.
- - 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.
- - Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section on your application, or contact
your financial representative or Investor Services to add these options to an
existing account.
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each has an individual account, but for sales charge
purposes, their investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Investor Services to find
out how to qualify.
CDSC WAIVERS In general, the CDSC for either share class may be waived on
shares you sell for the following reasons:
- - to make payments through certain systematic withdrawal plans
- - to make certain distributions from a retirement plan
- - because of shareholder death or disability
To utilize: contact your financial representative or Investor Services, or
consult the SAI (see the back cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. 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 Investor Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
- - government entities that are prohibited from paying mutual fund sales
charges
- - financial institutions or common trust funds investing $1 million or more
for non-discretionary accounts
- - selling brokers and their employees and sales representatives
- - financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
- - fund trustees and other individuals who are affiliated with these or other
John Hancock funds
- - individuals transferring assets to a John Hancock growth fund from an
employee benefit plan that has John Hancock funds
- - members of an approved affinity group financial services program
- - certain insurance company contract holders (one-year CDSC usually applies)
- - participants in certain plans with at least 100 members (one-year CDSC
applies)
To utilize: if you think you may be eligible for a sales charge waiver,
contact Investor 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 growth funds are as follows:
- non-retirement account: $1,000
- retirement account: $250
- group investments: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
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 can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 19
<PAGE>
<TABLE>
====================================================================================================================================
BUYING SHARES
====================================================================================================================================
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY CHECK
[A graphic image of a blank check.]
- Make out a check for the investment amount, payable - Make out a check for the investment amount payable
to "John Hancock Investor Services Corporation." to "John Hancock Investor Services Corporation."
- Deliver the check and your completed application - Fill out the detachable investment lip from an account
to your financial representative, or mail them to Investor statement. If no slip is available, include a note specifying
Services (address on next page). the fund name, your share class, your account number,
and the name(s) in which the account is registered.
- Deliver the check and your investment slip or note to
your financial representative, or mail them to Investor
Services (address on next page).
BY EXCHANGE
[A graphic image of a white arrow outlined in black that points
to the right above a black that points to the left.]
- Call your financial representative or Investor Services to - Call Investor Services to request an exchange.
request an exchange.
BY WIRE
[A graphic image of a jagged white arrow outlined in black that
points upwards at a 45 degree angle.]
- Deliver your completed application to your financial repre- - Instruct your bank to wire the amount of your
sentative, or mail it to Investor Services. investment to:
First Signature Bank & Trust
- Obtain your account number by calling your financial Account # 900000260
representative or Investor Services. Routing # 211475000
Specify the fund name, your share class, your account
- Instruct your bank to wire the amount of your number and the name(s) in which the account is regis-
investment to: tered. Your bank may charge a fee to wire funds.
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
[A graphic image of a telephone.]
See "By wire" and "By exchange." - Verify that your bank or credit union is a member of
the Automated Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and "Bank Information"
sections on you account application.
- Call Investor Services to verify that these features are in
place on your account.
- Tell the Investor 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.
To open or add to an account using the Monthly Automatic Accumulation Program, see "Additional investor services."
</TABLE>
20 YOUR ACCOUNT
<PAGE>
<TABLE>
===============================================================================================================================
SELLING SHARES
===============================================================================================================================
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY LETTER
[A graphic image of the back of an envelope.]
- Accounts of any type. - Write a letter of instruction or complete a stock power
indicating the fund name, your share class, your account
- Sales of any amount. number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
- Include all signatures and any additional documents
that may be required (see next page).
- Mail the materials to Investor Services.
- 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
[A graphic image of a telephone.]
- Most accounts. - For automated service 24 hours a day using your
touch-tone phone, call the John Hancock Funds
- Sales of up to $100,000. EASI-Line at 1-800-338-8080.
- To place your order with a representative at John Han-
cock Funds, call Investor Services between 8 a.m. and
4 p.m. on most business days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[A graphic image of a jagged white arrow outlined in black
that points upwards at a 45 degree angle.]
- Requests by letter to sell any amount (accounts of - Fill out the "Telephone Redemption" section of your
any type). new account application.
- Requests by phone to sell up to $100,000 (accounts - To verify that the telephone redemption privilege is in
with telephone redemption privileges). place on an account, or to request the forms to add it
to an existing account, call Investor Services.
- Amounts of $1,000 or more will be wired on the next
business day. A $4 fee will be deducted from your
account.
- Amounts of less than $1,000 may be sent by EFT or by
check. Funds from EFT transactions are generally avail-
able by the second business day. Your bank may charge
a fee for this service.
BY EXCHANGE
[A graphic image of a white arrow outlined in black that
points to the right above a black that points to the left.]
- Accounts of any type. - Obtain a current prospectus for the fund into which
you are exchanging by calling your financial representa-
- Sales of any amount. tive or Investor Services.
- Call Investor Services to request an exchange.
</TABLE>
- --------------------------------------------------------------------------------
Address
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
Phone
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."
YOUR ACCOUNT 21
<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:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - 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:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency A notary public cannot provide a
signature guarantee.
A notary public CANNOT provide a signature guarantee.
<TABLE>
====================================================================================================== [A graphic image of the
back of an envelope.]
<CAPTION>
SELLER REQUIREMENTS FOR WRITTEN REQUESTS
======================================================================================================
<S> <C>
Owners of individual, joint, or sole propriertorship, UGMA/UTMA - Letter of instruction.
(custodial accounts for minors) or general partner accounts. - On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the
account is registered.
- Signature garuntee if applicable (see above)
Owners of corporate or association accounts. - Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- On the letter and the resolution, the signature of the
person(s) authorized to sign for the account.
- Signature garuntee if applicable (see above).
Owners or Trustees of trust accounts - Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- 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 60 days.
- Signature garuntee if applicable (see above)
Joint tenancy shareholders whose co-tenants are deceased - Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- Signature garuntee if applicable (see above).
Adsministrators, conservatore, guardians and other sellers or - Call 1-800-225-5291 for instructions.
account types not listed above.
</TABLE>
22 YOUR ACCOUNT
<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 - Friday. Buy and sell requests are executed
at the next NAV to be calculated after your request is accepted by Investor
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, Investor Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or taxpayer ID number and other relevant information. If
these measures are not taken, Investor Services is 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.
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 that of the new fund if the new fund's 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 change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Investor Services. Certificated
shares can only be sold by returning the certificates to Investor 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 calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - After every transaction (except a dividend reinvestment) that affects your
account balance.
- - After any changes of name or address of the registered owner(s).
- - 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 distribute most or all of their net earnings in
the form of dividends. Any capital gains are distributed annually. Most of the
funds do not typically pay income dividends, with the exception of Disciplined
Growth Fund and Regional Bank Fund, which typically pay income dividends
semi-annually and quarterly, respectively.
YOUR ACCOUNT 23
<PAGE>
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.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
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, Investor 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:
- - Complete the appropriate parts of your Account Application.
- - If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Investor Services
Corporation." Deliver your check and application to your financial
representative or Investor Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - 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).
- - 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.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, SARSEPs, 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 with a low minimum investment of $250 or, for
some group plans, no minimum investment at all. To find out more, call Investor
Services at 1-800-225-5291.
24 YOUR ACCOUNT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock growth 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 which 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 comp any if the board believes that 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 growth 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").
[A flow chart that contains 8 rectangular-shaped boxes and illustrates the
hierarchy of how the funds are organized. Within the flowchart, there are 5
tiers. The tiers are connected by shaded lines.
Shareholders represent the first tier. There is a shaded vertical arrow on the
left-hand side of the page. The arrow has arrowheads on both ends and is
contained within two horizontal, shaded lines. This is meant to highlight tiers
two and three which focus on Distribution and Shareholder Services.
Financial Services Firms and their Representatives are shown on the second
tier. Principal Distributor and Transfer Agent are shown on the third tier.
A shaded vertical arrow on the right-hand side of the page denotes those
entities involved in the Asset Management. The arrow has arrowheads on both
ends and is contained within two horizontal, shaded lines. This fourth tier
includes the Subadvisor, Investment Advisor and the Custodian.
The fifth tier contains the Trustees/Directors.]
FUND DETAILS 25
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 will not 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 Discovery Fund, Special Opportunities Fund
and Emerging Growth Fund, each fund's investment goal is fundamental and may
only be changed with shareholder approval.
DIVERSIFICATION Except for Special Opportunities Fund, all growth 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 fund's in assets ("12b-1" refers to the
federal securities regulation authorizing 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.
- -------------------------------------------------------------------------------
<TABLE>
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Disciplined Growth $ 3,620,687 3.99%
Discovery $ 552,329 1.75%
Emerging Growth $ 9,697,401 3.02%
Growth $ 165,787 2.01%
Regional Bank $41,492,867 5.90%
Special Equities $15,131,619 5.42%
Special Opportunities $ 6,051,842 4.49%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
</TABLE>
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. Firms affiliated
with John Hancock, which include Tucker Anthony, Sutro & Company and John
Hancock Distributors, may receive an additional fee of up to 0.05% a year of
their total eligible net assets.
26 FUND DETAILS
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A INVESTMENTS
<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>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
REGULAR INVESTMENTS OF
$1 MILLION OR MORE
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 and more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B INVESTMENTS
MAXIMUM
REALLOWANCE MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
All amounts 3.75% 0.25% 4.00%
(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 fund commission
payments when there is no initial sales charge.
</TABLE>
FUND DETAILS 27
<PAGE>
- --------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's primary 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 a fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following page are brief descriptions of these
securities and 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 the performance of a John
Hancock growth fund will be positive over any period of time -- days, months or
years. However, stock funds as a category have historically performed better
over the long term than bond or money market funds.
- --------------------------------------------------------------------------------
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.
INFORMATION RISK The risk that key information about a security or market is
inaccurate or unavailable.
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.
* HEDGED When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position which
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.
* 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. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy 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 other investments.
POLITICAL RISK The risk of losses directly attributable to government or
political actions of any sort. These actions may range from changes in tax or
trade statutes to expropriation, governmental collapse and war.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
28 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
HIGHER-RISK SECURITIES AND PRACTICES
- --------------------------------------------------------------------------------
<TABLE>
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).
10 Percent of total assets (italic type)
<CAPTION>
10 Percent of net assets (roman type)
* No policy limitation on usage; fund may be
using currently
@ Permitted, but has not typically been used DISCIPLINED EMERGING REGIONAL SPECIAL SPECIAL
- -- Not permitted GROWTH DISCOVERY GROWTH GROWTH BANK EQUITIES OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<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. 5 5 33.3 33.3 5 33.3 33.3
REPURCHASE AGREEMENTS The purchase of a security
that must later be sold back to the seller 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. 5 33.3 30 33.3 -- 33.3 33.3
SHORT SALES The selling of securities which have
been borrowed on the expectation that the market
price will drop.
* Hedged. Hedged leverage, market, correlation,
liquidity, opportunity risks. -- @ @ @ -- @ @
* Seculative. Speculative leverage, market,
liquidity risks. -- @ -- @ -- @ @
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
NON-INVESTMENT-GRADE CONVERTIBLE SECURITIES Debt
securities that convert into equity securities at
a future time. Convertibles rated below BBB/Baa are
considered "junk" bonds. Credit, market, interest
rate, liquidity, valuation and information risks. -- -- 10 5 5 -- --
FOREIGN EQUITIES
* Stocks issued by foreign companies. Market,
currency, information, natural event, political risks. -- 25 * 15 @ * *
* American or European depository receipts, which are
dollar-denominated securities typically issued by
American or European banks and are based on ownership
of securities issued by foreign companies. Market,
currency, information, natural event, political risks. 10 25 * 15 @ * *
RESTRICTED AND ILLIQUID SECURITIES Securities not
traded on the open market. May include illiquid Rule
144A securities. Liquidity, valuation, market risks. 15 15 10 15 15 15 15
- ------------------------------------------------------------------------------------------------------------------------------------
LEVERAGED DERIVATIVE SECURITIES
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.
* Futures and related options. Interest rate, currency,
market, hedged or speculative leverage, correlation,
liquidity, opportunity risks. * @ * @ @ @ *
* Options on securities and indices. Interest rate,
currency, market, hedged or speculative leverage,
correlation, liquidity, credit, opportunity risks. 5(1) 5(1) 10(1) @ 5(1) @ *
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.
* Hedged. Currency, hedged leverage, correlation,
liquidity, opportunity risks. -- * * * @ @ *
* Speculative. Currency, speculative leverage,
liquidity risks. -- -- -- -- @ @ --
(1) Applies to purchased options only.
</TABLE>
FUND DETAILS 29
<PAGE>
<PAGE>
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that To request a free copy of the cur-
offer further information on John rent annual/semi-annual report or
Hancock Growth Funds: SAI, please write or call:
ANNUAL/SEMI-ANNUAL John Hancock Investor Services
REPORT TO SHAREHOLDERS Corporation
Includes financial statements, P.O.Box 9116
detailed performance information Boston, MA 02205-9116
portfolio holdings, a statement from Telephone: 1-800-225-5291
portfolio management and the EASI-Line: 1-800-338-8080
auditor's report. TDD: 1-800-544-6713
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed
information on all aspects of the
funds. The current annual/
semi-annual report is included
in the SAI.
A current SAI has been filed with
the Securities and Exchange
Commission and is incorporated
by reference into this prospectus
(is legally a part of this prospectus).
[John Hancock's graphic logo.
A circle, diamond, triangle and a cube.]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FILM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[Copyright] John Hancock Funds, Inc.
GROPN 7/96
[John Hancock script logo]
<PAGE>
JOHN HANCOCK EMERGING GROWTH FUND
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
December 2, 1996
This Statement of Additional Information ("SAI") provides information
about John Hancock Emerging Growth Fund (the "Fund"), a diversified series of
John Hancock Series Trust (the "Trust"), in addition to the information that is
contained in the Fund's Prospectus, dated December 2, 1996 (the "Prospectus").
This SAI is not a prospectus. It should be read in conjunction with the
Prospectus, a copy of which can be obtained free of charge by writing or
telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-5291
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Trust 2
Certain Investment Practices 2
Investment Restrictions 17
Those Responsible for Management 21
Investment Advisory and Other Services 32
Distribution Contract 35
Net Asset Value 37
Initial Sales Charge on Class A Shares 38
Deferred Sales Charge on Class B Shares 41
Special Redemptions 45
Additional Services and Programs 45
Description of the Fund's Shares 46
Tax Status 49
Calculation of Performance 55
Brokerage Allocation 56
Transfer Agent Services 59
Custody of Portfolio 59
Independent Auditors 59
Appendix A 60
Financial Statements F-1
<PAGE>
ORGANIZATION OF THE TRUST
The Trust is an open-end management investment company organized as a
Massachusetts business trust under a Declaration of Trust dated December 2,
1996. Prior to December 22, 1994, the Fund was called Transamerica Emerging
Growth Fund.
The Fund is managed by John Hancock Advisers, Inc. (the "Adviser"), a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), chartered in 1862 with national headquarters at John
Hancock Place, Boston, Massachusetts.
CERTAIN INVESTMENT PRACTICES
The Fund seeks long-term growth of capital through investing primarily
(at least 80% of its assets in normal circumstances) in the common stocks of
emerging companies (those with a market capitalization of less than $1 billion).
Current income is not a factor of consequence in the selection of stocks for the
Fund.
In order to achieve its objective, the Fund invests in a diversified
group of companies whose growth rates are expected to significantly exceed that
of the average industrial company. It invests in these companies early in their
corporate life cycle before they become widely recognized and well known, and
while their reputations and track records are still emerging ("emerging
companies"). Consequently, the Fund invests in the stocks of emerging companies
whose capitalization, sales and earnings are smaller than those of the Fortune
500 companies. Further, the Fund's investments in emerging company stocks may
include those of more established companies which offer the possibility of
rapidly accelerating earnings because of revitalized management, new products,
or structural changes in the economy.
The nature of investing in emerging companies involves greater risk
than is customarily associated with investments in more established companies.
In particular, the value of securities of emerging companies tends to fluctuate
more widely than other types of investments. Because emerging companies may be
in the early stages of their development, they may be dependent on a relatively
few products or services. They may also lack adequate capital reserves or may be
dependent on one or two management individuals. Their stocks are often traded
"over-the-counter" or on a regional exchange, and may not be traded in volumes
typical of trading on a national exchange. Consequently, the investment risk is
higher than that normally associated with larger, older, better-known companies.
2
<PAGE>
In order to help reduce this risk, the Fund allocates its investments among
different industries.
Most of the Fund's investments will be in equity securities of U.S.
companies. However, since many emerging companies are located outside the United
States, a significant portion of the Fund's investments may occasionally be
invested in equity securities of non-U.S. companies.
While the Fund will invest primarily in emerging companies, the balance
of the Fund's assets may be invested in: (1) other common stocks; (2) preferred
stocks; (3) convertible securities (up to 10% of the Fund's total assets may be
invested in convertible securities rated as low as "B" by Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") to be
comparable in quality to those rated "B"); (4) warrants; and (5) debt
obligations of the U.S. Government, its agencies and instrumentalities.
In order to provide liquidity for the purchase of new investments and
to effect redemptions of its shares, the Fund will invest a portion of its
assets in high quality, short-term debt securities with remaining maturities of
one year or less, including U.S. Government securities, certificates of deposit,
bankers' acceptances, commercial paper, corporate debt securities and related
repurchase agreements.
During periods of unusual market conditions when the Adviser believes
that investing for temporary defensive purposes is appropriate, part or all of
the Fund's assets may be invested in cash or cash equivalents consisting of: (1)
obligations of banks (including certificates of deposit, bankers' acceptances
and repurchase agreements) with assets of $100,000,000 or more; (2) commercial
paper rated within the two highest rating categories of a nationally recognized
rating organization; (3) investment grade short-term notes; (4) obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities; and (5) related repurchase agreements.
Rights and Warrants. The Fund may purchase warrants and rights which
are securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price. Generally, warrants and stock
purchase rights do not carry with them the right to receive dividends or
exercise voting rights with respect to the underlying securities, and they do
not represent any rights in the assets of the issuer. As a result, an investment
in warrants and rights may be considered to entail greater investment risk than
certain other types of investments. In addition, the value of warrants and
rights does not necessarily change with the value of the underlying securities,
and they cease to have value if they are not exercised on or prior to their
expiration date. Investment in warrants and rights increases the potential
profit or loss to be realized from the investment of a given amount of the
3
<PAGE>
Fund's assets as compared with investing the same amount in the underlying
stock.
Lending of Portfolio Securities. The Fund may lend portfolio securities
to brokers, dealers, and financial institutions if the loan is collateralized by
cash or U.S. Government securities according to applicable regulatory
requirements. The Fund may reinvest any cash collateral in short-term
securities. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. The
Fund may not lend portfolio securities having a total value exceeding 30% of its
total assets.
American Depository Receipts (ADRS) and European Depository Receipts
(EDRs). The Fund may invest in securities of non-U.S. issuers directly or in the
form of American Depository Receipts (ADRs), European Depository Receipts (EDRs)
or other similar securities representing interests in the common stocks of
foreign issuers. ADRs are receipts, typically issued by a U.S. bank or trust
company, which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets and EDRs, in bearer form, are designed for use in
the European securities markets. The underlying securities are not always quoted
or denominated in the same currency as the ADRs or the EDRs.
Foreign Securities and Investments in Emerging Markets. The Fund may
invest in securities of foreign issuers, including debt and equity securities of
corporate and governmental issuers in countries with emerging economies or
securities markets.
Investing in securities of non-U.S. issuers, particularly securities of
issuers located in emerging countries, may entail greater risks than investing
in similar securities of U.S. issuers. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
many such securities and the currently low or nonexistent volume of trading,
which result in a lack of liquidity and in greater price volatility; (iii)
certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
Investing in securities of non-U.S. companies may entail additional
risks due to the potential political and economic instability of certain
countries and the risks of expropriation, nationalization, confiscation or the
4
<PAGE>
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation by any country, the Fund could lose its entire investment in any
such country.
In addition, even though opportunities for investment may exist in
foreign countries, and in particular emerging markets, any change in the
leadership or policies of the governments of those countries or in the
leadership or policies of the governments of those countries or in the
leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which may be represented by the securities purchased by the Fund. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by foreign securities
purchased by the Fund will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Fund could lose a
substantial portion of its investments in such countries. The Fund's investments
may similarly be adversely affected by exchange control regulation in any of
those countries.
Certain countries in which the Fund may invest may have vocal
minorities that advocate radical religious or revolutionary philosophies or
support ethnic independence. Any disturbance on the part of such individuals
could carry the potential for widespread destruction or confiscation of property
owned by individuals and entities foreign to such country and could cause the
loss of the Fund's investment in those countries.
Certain countries prohibit or impose substantial restrictions on
investments in their capital markets by foreign entities such as the Fund. As
illustrations, certain countries require governmental approval prior to
investments by foreign persons, or limit the amount of investment by foreign
persons in a particular company, or limit the investment by foreign persons to
only a specific class of securities of a company that may have less advantageous
terms than securities of the company available for purchase by nationals.
Moreover, the national policies of certain countries may restrict investment
opportunities in issuers or industries deemed sensitive to national interests.
In addition, some countries require governmental approval for the repatriation
of investment income, capital or the proceeds of securities sales by foreign
investors. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investments.
5
<PAGE>
Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most foreign securities held by the Fund will
not be registered with the Securities and Exchange Commission (the "SEC") and
the issuers thereof will not be subject to the SEC's reporting requirements.
Thus, there will be less available information concerning foreign issuers of
securities held by the Fund than is available concerning U.S. issuers. In
instances where the financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, the Adviser will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. Government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers.
Because the Fund may invest in securities which are denominated or
quoted in foreign currencies, the strength or weakness of the U.S. dollar
against such currencies may account for part of the Fund's investment
performance. A decline in the value of any particular currency against the U.S.
dollar will cause a decline in the U.S. dollar value of the Fund's holdings of
securities denominated in such currency and, therefore, will cause an overall
decline in the Fund's net asset value and any net investment income and capital
gains to be distributed in U.S. dollars to shareholders of the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the U.S., and other economic and financial conditions affecting the world
economy.
Although the Fund values its assets daily in terms of U.S. dollars, the
Fund does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. However, the Fund may do so from time to time, and
investors should be aware of the costs of currency conversion. Although currency
dealers do not charge a fee for conversion, they do realize a profit based on
the difference ("spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to sell that currency to the dealer.
6
<PAGE>
Securities of foreign issuers, and in particular many emerging country
issuers, may be less liquid and their prices more volatile than securities of
comparable U.S. issuers. In addition, foreign securities exchanges and brokers
are generally subject to less governmental supervision and regulation than in
the U.S., and foreign securities exchange transactions are usually subject to
fixed commissions, which are generally higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser.
The Fund's investment income or, in some cases, capital gains from
foreign issuers may be subject to foreign withholding or other foreign taxes,
thereby reducing the Fund's net investment income and/or net realized capital
gains. See "Tax Status."
Foreign Currency Transactions. Generally, the foreign currency exchange
transactions of the Fund may be conducted on a spot (i.e., cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. As a matter of nonfundamental policy, the Fund may also enter into
forward foreign currency exchange contracts involving currencies of the
different countries in which it may invest as a hedge against possible
variations in the foreign exchange rate between these currencies. This is
accomplished through contractual agreements to purchase or sell a specified
currency at a specified future date and price set at the time of the contract.
Transaction hedging is the purchase or sale of forward foreign currency
contracts with respect to specific receivables or payables of the Fund accruing
in connection with the purchase and sale of its portfolio securities denominated
in foreign currencies. Portfolio hedging is the use of forward foreign currency
contracts to offset portfolio security positions denominated or quoted in such
foreign currencies. The Fund will not attempt to hedge all of its foreign
portfolio positions and will enter into such transactions only to the extent, if
any, deemed appropriate by the Adviser.
If the Fund enters into a forward contract requiring it to purchase
foreign currency, its custodian bank will segregate cash or liquid securities in
a separate account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of such forward contract. Those
assets will be valued at market daily, and, if the value of the securities in
the separate account declines, additional cash or liquid securities will be
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placed in the account so that the value of the account will be equal to the
amount of the Fund's commitment with respect to such contracts.
Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency exchange
transactions varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency are usually conducted on a principal basis, no
fees or commissions are involved.
Lower Rated High Yield Debt Obligations. The Fund may invest in high
yielding, fixed income securities rated below investment grade (e.g. rated Baa
or lower by Moody's Investors Service, Inc. ("Moody's") and BBB or lower by
Standard & Poor's Ratings Group ("Standard & Poor's"). See Appendix A for a
description of ratings assigned by Moody's and Standard & Poor's.
Debt securities that are rated BBB or Baa or lower and unrated
securities can pose more risks and involve greater volatility of price and risk
of loss of principal and income than higher quality securities. These debt
securities are considered, to varying degrees, speculative in that change in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
quality securities. The high yield fixed income market is relatively new and its
growth occurred during a period of economic expansion. The market has not yet
been fully tested by an economic recession.
The market price and liquidity of lower rated fixed income securities
generally respond to short-term corporate and market developments to a greater
extent than the price and liquidity of higher rated securities, because these
developments are perceived to have a more direct relationship to the ability of
an issuer of lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market or the
reduced availability of market quotations will make it more difficult to dispose
of these bonds and to value them accurately. The reduced availability of
reliable objective data may increase the Fund's reliance on management's
judgment in valuing high yield bonds. In addition, the Fund's investments in
such bonds may be susceptible to adverse publicity and investor perceptions,
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whether or not justified by fundamental factors.
Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is a contract under which the Fund acquires a security for
a relatively short period (usually not more than seven days) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
System and with securities dealers. The Adviser will continuously monitor the
creditworthiness of the parties with whom the Fund enters into repurchase
agreements. The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the collateral
must be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and could experience losses, including the
possible decline in the value of the underlying securities during the period in
which the Fund seeks to enforce its rights thereto, possible subnormal levels of
income and lack of access to income during this period, and the expense of
enforcing its rights. The Fund will not invest in a repurchase agreement
maturing in more than seven days, if such investment, together with other
illiquid securities held by the Fund (including restricted securities) would
exceed 10% of the Fund's net assets.
Reverse Repurchase Agreements. The Fund may also enter into reverse
repurchase agreements which involve the sale of government securities held in
its portfolio to a bank with an agreement that the Fund will buy back the
securities at a fixed future date at a fixed price plus an agreed amount of
interest which may be reflected in the repurchase price. Reverse repurchase
agreements are considered to be borrowings by the Fund. Reverse repurchase
agreements involve the risk that the market value of securities purchased by the
Fund with proceeds of the transaction may decline below the repurchase price of
the securities sold by the Fund which it is obligated to repurchase. The Fund
will also continue to be subject to the risk of a decline in the market value of
the securities sold under the agreements because it will reacquire those
securities upon effecting their repurchase. The Fund will not enter into reverse
repurchase agreements exceeding in the aggregate 33 1/3% of the market value of
its total assets. The Fund will enter into reverse repurchase agreements only
with federally insured banks or savings and loan associations which are approved
in advance as being creditworthy by the Board of Trustees. Under procedures
established by the Board of Trustees, the Adviser will monitor the
creditworthiness of the banks involved.
Forward Commitment and When-Issued Securities. The Fund may purchase
securities on a when-issued or forward commitment basis. "When-issued" refers to
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<PAGE>
securities whose terms are available and for which a market exists, but which
have not been issued. The Fund will engage in when-issued transactions with
respect to securities purchased for its portfolio in order to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
For when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued
transactions, it relies on the seller to consummate the transaction. The failure
of the issuer or seller to consummate the transaction may result in the Fund's
losing the opportunity to obtain a price and yield considered to be
advantageous. The purchase of securities on a when-issued or forward commitment
basis also involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on
a when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities equal in value to the Fund's commitment. These
assets will be valued daily at market, and additional cash or securities will be
segregated in a separate account to the extent that the total value of the
assets in the account declines below the amount of the when-issued commitments.
Alternatively, the Fund may enter into offsetting contracts for the forward sale
of other securities that it owns.
Financial Futures Contracts. The Fund may buy and sell futures
contracts (and related options) on securities in which it is authorized to
invest. The Fund may hedge its portfolio by selling or purchasing financial
futures contracts as an offset against the effects of changes in interest rates
or in security or foreign currency values. Although other techniques could be
used to reduce exposure to market fluctuations, the Fund may be able to hedge
its exposure more effectively and perhaps at a lower cost by using financial
futures contracts. The Fund may enter into financial futures contracts for
hedging and other non-speculative purposes to the extent permitted by
regulations of the Commodity Futures Trading Commission ("CFTC").
Financial futures contracts have been designed by boards of trade which
have been designated "contract markets" by the CFTC. Futures contracts are
traded on these markets in a manner that is similar to the way a stock is traded
on a stock exchange. The boards of trade, through their clearing corporations,
guarantee that the contracts will be performed. Currently, financial futures
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contracts are based on interest rate instruments such as long-term U.S. Treasury
bonds, U.S. Treasury notes, Government National Mortgage Association ("GNMA")
modified pass-through mortgage-backed securities, three-month U.S. Treasury
bills, 90-day commercial paper, bank certificates of deposit and Eurodollar
certificates of deposit. It is expected that if other financial futures
contracts are developed and traded the Fund may engage in transactions in such
contracts.
Although some financial futures contracts by their terms call for
actual delivery or acceptance of financial instruments, in most cases the
contracts are closed out prior to delivery by offsetting purchases or sales of
matching financial futures contracts (same exchange, underlying security and
delivery month). Other financial futures contracts, such as futures contracts on
securities indices, by their terms call for cash settlements. If the offsetting
purchase price is less than the Fund's original sale price, the Fund realizes a
gain, or if it is more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than the Fund's original purchase price, the Fund realizes a
gain, or if it is less, the Fund realizes a loss. The transaction costs must
also be included in these calculations. The Fund will pay a commission in
connection with each purchase or sale of financial futures contracts, including
a closing transaction. For a discussion of the Federal income tax considerations
of trading in financial futures contracts, see the information under the caption
"Tax Status" below.
At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
Government securities, known as "initial margin," ranging upward from 1.1% of
the value of the financial futures contract being traded. The margin required
for a financial futures contract is set by the board of trade or exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the financial futures contract which is returned to the Fund
upon termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its initial margin
deposits. Each day, the futures contract is valued at the official settlement
price of the board of trade or exchange on which it is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract fluctuates.
This process is known as "mark to market." Variation margin does not represent a
borrowing or lending by the Fund but is instead a settlement between the Fund
and the broker of the amount one would owe the other if the financial futures
contract expired. In computing net asset value, the Fund will mark to market its
open financial futures positions.
Successful hedging depends on a strong correlation between the market
for the underlying securities and the futures contract market for those
securities. There are several factors that will probably prevent this
correlation from being a perfect one, and even a correct forecast of general
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interest rate trends may not result in a successful hedging transaction. There
are significant differences between the securities and futures markets which
could create an imperfect correlation between the markets and which could affect
the success of a given hedge. The degree of imperfection of correlation depends
on circumstances such as variations in speculative market demand for financial
futures and debt securities, including technical influences in futures trading
and differences between the financial instruments being hedged and the
instruments underlying the standard financial futures contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, thus, subject to greater
fluctuation in price than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise
of skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of unexpected market or interest rate trends. The Fund will
bear the risk that the price of the securities being hedged will not move in
complete correlation with the price of the futures contracts used as a hedging
instrument. Although the Adviser believes that the use of financial futures
contracts will benefit the Fund, an incorrect market prediction could result in
a loss on both the hedged securities in the Fund's portfolio and the hedging
vehicle so that the Fund's return might have been better had hedging not been
attempted. However, in the absence of the ability to hedge, the Adviser might
have taken portfolio actions in anticipation of the same market movements with
similar investment results but, presumably, at greater transaction costs. The
low margin deposits required for futures transactions permit an extremely high
degree of leverage. A relatively small movement in a futures contract may result
in losses or gains in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount the price of a futures contract may vary either
up or down from the previous day's settlement price, at the end of the current
trading session. Once the daily limit has been reached in a futures contract
subject to the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a particular
trading day and, therefore, does not limit potential losses because the limit
may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
Finally, although the Fund engages in financial futures transactions
only on boards of trade or exchanges where there appears to be an adequate
secondary market, there is no assurance that a liquid market will exist for a
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particular futures contract at any given time. The liquidity of the market
depends on participants closing out contracts rather than making or taking
delivery. In the event participants decide to make or take delivery, liquidity
in the market could be reduced. In addition, the Fund could be prevented from
executing a buy or sell order at a specified price or closing out a position due
to limits on open positions or daily price fluctuation limits imposed by the
exchanges or boards of trade. If the Fund cannot close out a position, it must
continue to meet margin requirements until the position is closed.
Options on Financial Futures Contracts. The Fund may buy and sell
options on financial futures contracts on securities in which it is authorized
to invest. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the period of the option. Upon
exercise, the writer of the option delivers the futures contract to the holder
at the exercise price. The Fund would be required to deposit with its custodian
initial and variation margin with respect to put and call options on futures
contracts written by them. Options on futures contracts involve risks similar to
the risks of transactions in financial futures contracts. Also, an option
purchased by the Fund may expire worthless, in which case the Fund would lose
the premium it paid for the option.
Other Considerations. The Fund will engage in futures and options
transactions for bona fide hedging or other non-speculative purposes to the
extent permitted by CFTC regulations. The Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes
- --i.e., futures contracts will be sold to protect against a decline in the price
of securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities, or the currency
in which they are denominated, the Fund intends to purchase. As evidence of this
hedging intent, the Fund expects that on 75% or more of the occasions on which
they take a long futures or option position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing equivalent amounts of related securities or assets denominated in the
related currency in the cash market at the time when the futures contract or
option position is closed out. However, in particular cases, when it is
economically advantageous for the Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Fund to elect to comply with a
different test, under which the aggregate initial margin and premiums required
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<PAGE>
to establish nonhedging positions in futures contracts and options on futures
will not exceed 5% of the net asset value of the Fund's portfolio, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. The
Fund will engage in transactions in futures contracts only to the extent such
transactions are consistent with the requirements of the Code for maintaining
their qualifications as regulated investment companies for Federal income tax
purposes.
When the Fund purchases financial futures contracts, or writes put
options or purchases call options thereon, cash or liquid securities will be
deposited in a segregated account with the Fund's custodian in an amount that,
together with the amount of initial and variation margin held in the account of
the broker, equals the market value of the futures contracts.
Options Transactions. The Fund may write listed and over-the-counter
covered call options and covered put options on securities in which it is
authorized to invest. In addition, the Fund may purchase listed and
over-the-counter call and put options. The extent to which covered options will
be used by the Fund will depend upon market conditions and the availability of
alternative strategies.
The Fund will write listed and over-the-counter call options only if
they are "covered," which means that the Fund owns or has the immediate right to
acquire the securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by the Fund may also be "covered" if the Fund
holds on a share-for-share basis a covering call on the same securities where
(i) the exercise price of the covering call held is equal to or less than the
exercise price of the call written or the exercise price of the covering call is
greater than the exercise price of the call written, in the latter case only if
the difference is maintained by the Fund in cash or liquid securities in a
segregated account with the Fund's custodian, and (ii) the covering call expires
at the same time as the call written. If a covered call option is not exercised,
the Fund would keep both the option premium and the underlying security. If the
covered call option written by the Fund is exercised and the exercise price,
less the transaction costs, exceeds the cost of the underlying security, the
Fund would realize a gain in addition to the amount of the option premium it
received. If the exercise price, less transaction costs, is less than the cost
of the underlying security, the Fund's loss would be reduced by the amount of
the option premium.
As the writer of a covered put option, the Fund will write a put option
only with respect to securities it intends to acquire for its portfolio and will
maintain in a segregated account with its custodian bank cash or liquid
securities with a value equal to the price at which the underlying security may
be sold to the Fund in the event the put option is exercised by the purchaser.
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The Fund may also write a "covered" put option by purchasing on a
share-for-share basis a put on the same security as the put written by the Fund
if the exercise price of the covering put held is equal to or greater than the
exercise price of the put written and the covering put expires at the same time
as or later than the put written.
When writing listed and over-the-counter covered put options on
securities, the Fund would earn income from the premiums received. If a covered
put option is not exercised, the Fund would keep the option premium and the
assets maintained to cover the option. If the option is exercised and the
exercise price, including transaction costs, exceeds the market price of the
underlying security, the Fund would realize a loss, but the amount of the loss
would be reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its
obligation prior to its exercise, it may effect a "closing purchase
transaction." This is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that the Fund's
position will be offset by the Options Clearing Corporation. The Fund may not
effect a closing purchase transaction after it has been notified of the exercise
of an option. There is no guarantee that a closing purchase transaction can be
effected. Although the Fund will generally write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular option or at any particular time, and for some options no secondary
market on an exchange may exist.
In the case of a written call option, effecting a closing transaction
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. In the case of
a written put option, it will permit the Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.
The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option. The Fund will realize a loss from a closing transaction if the cost of
the closing transaction is more than the premium received for writing the
option. However, because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation in the value of the underlying security owned
by the Fund.
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<PAGE>
Over-the-Counter Options. The Fund may engage in options transactions
on exchanges and in the over-the-counter markets. In general, exchange-traded
options are third-party contracts (i.e., performance of the parties' obligations
is guaranteed by an exchange or clearing corporation) with standardized strike
prices and expiration dates. Over-the-counter ("OTC") transactions are two-party
contracts with price and terms negotiated by the buyer and seller. The Fund will
acquire only those OTC options for which management believes the Fund can
receive on each business day at least two separate bids or offers (one of which
will be from an entity other than a party to the option) or those OTC options
valued by an independent pricing service. The Fund will write and purchase OTC
options only with member banks of the Federal Reserve System and primary dealers
in U.S. Government securities or their affiliates which have capital of at least
$50 million or whose obligations are guaranteed by an entity having capital of
at least $50 million. The SEC has taken the position that OTC options are
subject to the Fund's 15% restriction on illiquid investments. The SEC, however,
allows the Fund to exclude from the 15% limitation on illiquid securities a
portion of the value of the OTC options written by the Fund, provided that
certain conditions are met. First, the other party to the OTC options has to be
a primary U.S. Government securities dealer designated as such by the Federal
Reserve Bank. Second, the Fund must have an absolute contractual right to
repurchase the OTC options at a formula price. If the above conditions are met,
the Fund may treat as illiquid only that portion of the OTC option's value (and
the value of its underlying securities) which is equal to the formula price for
repurchasing the OTC option, less the OTC option's intrinsic value.
Short-Term Trading and Portfolio Turnover. Short-term trading means the
purchase and subsequent sale of a security after it has been held for a
relatively brief period of time. As a matter of nonfundamental policy, the Fund
may engage in short-term trading in response to stock market conditions, changes
in interest rates or other economic trends and developments, or to take
advantage of yield disparities between various fixed income securities in order
to realize capital gains or improve income. Short-term trading may have the
effect of increasing the Fund's portfolio turnover rate. A high rate of
portfolio turnover (100% or greater) involves correspondingly higher transaction
expenses and may make it more difficult for the Fund to qualify as a regulated
investment company for Federal income tax purposes.
Restricted Securities. The Fund will not invest more than 10% of its
total assets in securities that are not registered ("restricted securities")
under the Securities Act of 1933 (the "1933 Act"), including securities offered
and sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Fund will not invest more than 10% of its net assets in
illiquid investments, which include repurchase agreements maturing in more than
seven days, securities that are not readily marketable and restricted
securities. However, if the Board of Trustees determines, based upon a
continuing review of the trading markets for specific Rule 144A securities, that
16
<PAGE>
they are liquid, then such securities may be purchased without regard to the 10%
limit on illiquid investments. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
As a matter of nonfundamental policy, the Fund may acquire other
restricted securities, including securities for which market quotations are not
readily available. These securities may be sold only in privately negotiated
transactions or in public offerings with respect to which a registration
statement is in effect under the 1933 Act. Where registration is required, the
Fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be priced at fair market value as
determined in good faith by the Fund's Trustees.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions upon
its investments as set forth below which may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. A majority
for this purpose means: (a) more than 50% of the outstanding shares of the Fund
or (b) 67% or more of the shares represented at a meeting where more than 50% of
the outstanding shares of the Fund are represented, whichever is less. Under
these restrictions, the Fund may not:
(1) Borrow money in an amount in excess of 33-1/3% of its total assets, and then
only as a temporary measure for extraordinary or emergency purposes (except that
it may enter into a reverse repurchase agreement within the limits described in
the Prospectus or this SAI), or pledge, mortgage or hypothecate an amount of its
assets (taken at market value) in excess of 15% of its total assets, in each
case taken at the lower of cost or market value. For the purpose of this
restriction, collateral arrangements with respect to options, futures contracts,
options on futures contracts and collateral arrangements with respect to initial
and variation margins are not considered a pledge of assets.
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(2) Underwrite securities issued by other persons except insofar as the Fund may
technically be deemed an underwriter under the Securities Act of 1933 in selling
a portfolio security.
(3) Purchase or retain real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein and securities secured by real estate),
or mineral leases, commodities or commodity contracts, precious metals (except
contracts for the future delivery of fixed income securities, stock index and
currency futures and options on such futures) in the ordinary course of its
business. The Fund reserves the freedom of action to hold and to sell real
estate or mineral leases, commodities or commodity contracts acquired as a
result of the ownership of securities.
(4) Invest in direct participation interests in oil, gas or other mineral
exploration or development programs.
(5) Make loans to other persons except by the purchase of obligations in which
the Fund is authorized to invest and by entering into repurchase agreements;
provided that the Fund may lend its portfolio securities not in excess of 30% of
its total assets (taken at market value). Not more than 10% of the Fund's total
assets (taken at market value) will be subject to repurchase agreements maturing
in more than seven days. For these purposes the purchase of all or a portion of
an issue of debt securities shall not be considered the making of a loan. In
addition, the Fund may purchase a portion of an issue of debt securities of
types commonly distributed privately to financial institutions.
(6) Purchase the securities of any issuer if such purchase, at the time thereof,
would cause more than 5% of its total assets (taken at market value) to be
invested in the securities of such issuer, other than securities issued or
guaranteed by the United States. In applying these limitations, a guarantee of a
security will not be considered a security of the guarantor, provided that the
value of all securities issued or guaranteed by that guarantor, and owned by the
Fund, does not exceed 10% of the Fund's total assets. In determining the issuer
of a security, each state and each political subdivision agency, and
instrumentality of each state and each multi-state agency of which such state is
a member is a separate issuer. Where securities are backed only by assets and
revenues of a particular instrumentality, facility or subdivision, such entity
is considered the issuer.
(7) Invest in companies for the purpose of exercising control or management.
(8) Purchase or retain in its portfolio any securities issued by an issuer any
of whose officers, directors, trustees or security holders is an officer or
Director of the Fund, or is a member, partner, officer or Director of the
Adviser, if after the purchase of the securities of such issuer by the Fund one
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or more of such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both, all taken at
market value.
(9) Purchase any securities or evidences of interest therein on margin, except
that the Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities and the Fund may make deposits on
margin in connection with futures contracts and related options.
(10) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to obtain
securities without payment of further consideration equivalent in kind and
amount to the securities sold and provided that if such right is conditional the
sale is made upon equivalent conditions.
(11) Knowingly invest in securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or market makers do not exist or will not
entertain bids or offers), except for repurchase agreements, if, as a result
thereof more than 10% of the Fund's total assets (taken at market value) would
be so invested.
(12) Issue any senior security (as that term is defined in the Investment
Company Act of 1940) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder. For the purpose of this
restriction, collateral arrangements with respect to options, futures contracts
and options on futures contracts and collateral arrangements with respect to
initial and variation margins are not deemed to be the issuance of a senior
security.
(13) Concentrate its investments in any particular industry, but if it is deemed
appropriate for the attainment of its investment objective, the Fund may invest
up to 25% of its assets (taken at market value at the time of each investment)
in securities of issuers in any one industry.
(14) Purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of such
issuer to be held by the Fund; or purchase securities of any issuer if such
purchase at the time thereof would cause more than 10% of any class of
securities of such issuer to be held by the Fund. For this purpose all
indebtedness of an issuer shall be deemed a single class and all preferred stock
of an issuer shall be deemed a single class. In applying these limitations, a
guarantee of a security will not be considered a security of the guarantor,
provided that the value of all securities issued or guaranteed by that
guarantor, and owned by the Fund, does not exceed 10% of the Fund's total
assets. In determining the issuer of a security, each state and each political
19
<PAGE>
subdivision agency, and instrumentality of each state and each multi-state
agency of which such state is a member is a separate issuer. Where securities
are backed only by assets and revenues of a particular instrumentality, facility
or subdivision, such entity is considered the issuer.
Other Operating Policies
The Fund may, due to an undertaking with a state in which the Fund's
shares are currently qualified for sale, purchase warrants not to exceed 5% of
the Fund's net assets. Included within that amount, but not exceeding 2% of the
Fund's net assets, may be warrants for which there is no public market. Any such
warrants which are attached to securities at the time such securities are
acquired by the Fund will be deemed to be without value for the purpose of this
restriction.
The Fund will not invest more than 5% of its total assets in companies
which, including their respective predecessors, have a record of less than three
years' continuous operation.
In order to comply with certain state regulatory policies, the Fund
will not, as a matter of operating policy, pledge, mortgage or hypothecate its
portfolio securities if the percentage of securities so pledged, mortgaged or
hypothecated would exceed 15%.
In order to comply with certain state regulatory policies, the cost of
investments in options, financial futures, stock index futures and currency
futures, other than those acquired for hedging purposes, may not exceed 10% of
the Fund's total net assets.
As a nonfundamental investment restriction, the Fund may not purchase a
security if, as a result, (i) more than 10% of the Fund's total assets would be
invested in the securities of other investment companies, (ii) the Fund would
hold more than 3% of the total outstanding voting securities of any one
investment company, or (iii) more than 5% of the Fund's total assets would be
invested in the securities of any one investment company. These limitations do
not apply to (a) the investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in the securities of
open-end investment companies or (b) the purchase of shares of any investment
company in connection with a merger, consolidation, reorganization or purchase
of substantially all of the assets of another investment company. Subject to the
above percentage limitations, the Fund may, in connection with the John Hancock
Group of Funds Deferred Compensation Plan for Independent Trustees/Directors,
purchase securities of other investment companies within the John Hancock Group
of Funds. The Fund may not purchase the shares of any closed-end investment
20
<PAGE>
company except in the open market where no commission or profit to a sponsor or
dealer results from the purchase, other than customary brokerage fees.
These operating policies are not fundamental and may be changed without
shareholder approval. In order to comply with certain state regulatory
practices, certain policies, if changed, would require advance written notice to
shareholders.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trust's Trustees who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers and directors of the Adviser or officers
and directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
The following table sets forth the principal occupation or employment
of the Trustees during the past five years:
21
<PAGE>
<TABLE>
<CAPTION>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
<S> <C> <C>
Edward J. Boudreau, Jr.* Trustee, Chairman Chairman and Chief Executive
101 Huntington Avenue and Chief Executive Officer, the Adviser and The
Boston, MA 02199 Officer(3)(4) Berkeley Financial Group ("The
October 1944 Berkeley Group"); Chairman, NM
Capital Management, Inc. ("NM
Capital") and John Hancock Advisers
International Limited ("Advisers
International"); Chairman, Chief
Executive Officer and President,
John Hancock Funds, Inc. ("John
Hancock Funds"); John Hancock
Investor Services Corporation
("Investor Services"), First
Signature Bank and Trust Company
and Sovereign Asset Management
Corporation ("SAMCorp"); Director,
John Hancock Freedom Securities
Corporation, John Hancock Capital
Corporation and New England/ Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
22
<PAGE>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
James F. Carlin Trustee(1)(2) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995) and Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (since 1995);
Receiver, the City of Chelsea
(until August 1992).
William H. Cunningham Trustee(1)(2) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair for Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
23
<PAGE>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
Harold R. Hiser, Jr. Trustee(1)(2) Executive Vice President,
Schering-Plough Corporation Schering-Plough Corporation
One Giralda Farms (pharmaceuticals) (retired 1996);
Madison, NJ 07940-1000 Director, ReCapital Corporation
October 1931 (reinsurance) (until 1995).
Charles F. Fretz Trustee(1)(2) Retired; self-employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Forster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).
Anne C. Hodsdon* President and President and Chief Operating
101 Huntington Avenue Trustee(3)(4) Officer, the Adviser; Executive
Boston, MA 02199 Vice President, the Adviser (until
April 1953 December 1994); Senior Vice
President, the Adviser (until
December 1993); Vice President, the
Adviser (until 1991).
Charles L. Ladner Trustee(1)(2) Director, Energy North, Inc.
UGI Corporation (public utility holding
460 North Gulph Road company)(until 1992); Senior Vice
King of Prussia, PA 19406 President, Finance UGI Corp.
February 1938 (holding company, public utilities,
LPGAS).
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
24
<PAGE>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
Leo E. Linbeck, Jr. Trustee(1)(2) Chairman, President, Chief
3810 W. Alabama Executive Officer and Director,
Houston, TX 77027 Linbeck Corporation (a holding
August 1934 company engaged in various phases
of the construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Eastern Corporation (a diversified
energy company), Daniel Industries,
Inc. (manufacturer of gas measuring
products and energy related
equipment), GeoQuest International,
Inc. (a geophysical consulting
firm) (1980-1993); Director,
Greater Houston Partnership.
Patricia P. McCarter Trustee(1)(2) Director and Secretary, The
Swedesford Road McCarter Corp. (machine
RD #3, Box 121 manufacturer).
Malvern, PA 19355
May 1928
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
25
<PAGE>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
Steven R. Pruchansky Trustee(1)(2) Director and President, Mast
360 Horse Creek Drive, #208 Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust
(1982-1994); President, Maxwell
Building Corp. (until 1991).
Richard S. Scipione* Trustee(3) General Counsel, John Hancock
John Hancock Place Mutual Life Insurance Company;
P.O. Box 111 Director, the Adviser, Advisers
Boston, MA 02199 International, John Hancock Funds,
August 1937 Investor Services, John Hancock
Distributors, Inc., John Hancock
Subsidiaries, Inc., John Hancock
Property and Casualty Insurance and
its affiliates (until November
1993), SAMCorp and NM Capital;
Trustee, The Berkeley Group;
Director, JH Networking Insurance
Agency, Inc.
Norman H. Smith Trustee(1)(2) Lieutenant General, USMC, Deputy
Rt. 1, Box 249 E Chief of Staff for Manpower and
Linden, VA 22642 Reserve Affairs, Headquarters
March 1933 Marine Corps; Commanding General
III Marine Expeditionary Force/3rd
Marine Division (retired 1991).
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
26
<PAGE>
Position Held Principal Occupation(s)
Name and Address with the Trust During Past Five Years
- ---------------- -------------- ----------------------
John P. Toolan Trustee(1)(2) Director, The Smith Barney Muni
13 Chadwell Place Bond Funds, The Smith Barney
Morristown, NJ 07960 Tax-Free Money Fund, Inc., Vantage
September 1930 Money Market Funds (mutual funds),
The Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired 1991);
Director, Smith Barney, Inc.,
Mutual Management Company and
Smith, Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
</TABLE>
The executive officers of the Trust and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, the
business address of each is 101 Huntington Avenue, Boston, Massachusetts 02199.
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
27
<PAGE>
<TABLE>
<CAPTION>
Position(s) held Principal Occupation(s)
Name and Date of Birth with Trust During Past 5 Years
- ---------------------- ---------- -------------------
<S> <C> <C>
Robert G. Freedman* Vice Chairman and Chief Vice Chairman and Chief Investment
July 1938 Investment Officer(4) Officer, the Adviser; President,
the Adviser (until December 1994).
James B. Little* Senior Vice President and Senior Vice President, the Adviser.
February 1935 Chief Financial Officer
James J. Stokowski* Vice President and Vice President, the Adviser.
November 1946 Treasurer
Susan S. Newton* Vice President and Vice President and Assistant
March 1950 Secretary Secretary, the Adviser.
John A. Morin* Vice President Vice President, the Adviser.
July 1950
</TABLE>
* An "interested person" of the Fund, as such term is defined in the 1940
Act.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
28
<PAGE>
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or Trustees and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of August 30, 1996, the officers and trustees of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust and
the Fund. On such date, the following shareholders were the only record holders
or beneficial owners of 5% or more of the shares of either class of the Fund's
shares:
Percentage of
Outstanding
Name and Address Class Shares Shares of
of Shareholder of Shares Owned Class of Fund
- -------------- --------- ----- -------------
National Westminster Bank PLC Class A 75,464 14.45%
as Trustee of American Smaller
Companies Trust
Attn: Joe D'Mello
Juno Court
24 Prescott Street
London E18BB
Merrill Lynch Fenner & Smith Class A 649,979 12.38%
Trade House Account - Book Entry Class B 2,958,891 25.39%
Team B - 3rd Floor
4800 Deerlake Drive East
Jacksonville, FL 32246-6484
On such date, no other person(s) owned of record or was known by the Trust to
beneficially own as much as 5% of the outstanding shares of the Trust or of
either class of the Fund's shares.
As of December 22, 1994, the Trustees have established an Advisory
Board which acts to facilitate a smooth transition of management over a two-year
period (between Transamerica Fund Management Company ("TFMC"), the prior
investment adviser, and the Adviser). The members of the Advisory Board are
29
<PAGE>
distinct from the Board of Trustees, do not serve the Fund in any other capacity
and are persons who have no power to determine what securities are purchased or
sold on behalf of the Fund. Each member of the Advisory Board may be contacted
at 101 Huntington Avenue, Boston, Massachusetts 02199.
Members of the Advisory Board and their respective principal
occupations during the past five years are as follows:
R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas; co-
founder, Houston Parents' League; former board member of various civic and
cultural organizations in Houston, including the Houston Symphony, Museum
of Fine Arts and YWCA. Mrs. Bentsen is presently active in various civic
and cultural activities in the Washington, D.C. area, including membership
on the Area Board for The March of Dimes and is a National Trustee for the
Botanic Gardens of Washington, D. C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce Bank;
Trustee, Memorial Hospital System; Chairman of the Board of Regents of
Baylor University; Member, Board of Governors, National Association of
Securities Dealers, Inc.; Formerly, Chairman, Investment Company Institute;
formerly, President, Houston Chapter of Financial Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation); Member,
Board of Managers, Harris County Hospital District; Advisory Director,
Commercial State Bank, El Campo; Advisory Director, First National Bank of
Bryan; Advisory Director, Sterling Bancshares; Former Director and Vice
Chairman, Texas Commerce Bancshares; and Vice Chairman, Texas Commerce
Bank.
Compensation of the Board of Trustees and Advisory Board. The following
table provides information regarding the compensation paid by the Fund and the
other investment companies in the John Hancock Fund Complex to the Independent
Trustees and the Advisory Board members for their services for the Fund's most
recently completed fiscal year. Ms. Hodsdon and Messrs. Boudreau and Scipione,
each a non-Independent Trustee, and each of the officers of the Trust are
interested persons of the Adviser, are compensated by the Adviser and received
no compensation from the Funds for their services.
30
<PAGE>
Total Compensation
Aggregate from all Funds in
Compensation John Hancock Fund
Trustees from the Fund Complex to Trustees**
- -------- ------------- ---------------------
James F. Carlin $ 3,279 $ 60,700
William H. Cunningham* $ 8,672 $ 69,700
Charles F. Fretz $ 354 $ 56,200
Harold R. Hiser, Jr.* $ 353 $ 60,200
Charles L. Ladner $ 4,224 $ 60,700
Leo E. Linbeck, Jr. $ 8,922 $ 73,200
Patricia P. McCarter $ 4,224 $ 60,700
Steven R. Pruchansky $ 4,371 $ 62,700
Norman H. Smith $ 4,371 $ 62,700
John P. Toolan* $ 3,279 $ 60,700
------- --------
Totals $42,049 $627,500
* As of December 31, 1995 the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock fund complex for Mr.
Cunningham was $54,413, for Mr. Hiser was $31,324, and for Mr. Toolan was
$71,437 under the John Hancock Deferred Compensation Plan for Independent
Trustees (the "Plan").
** Total compensation from each Fund and other John Hancock funds is as of
December 31, 1995. As of this date there were sixty-one funds in the John
Hancock fund complex. Messrs. Carlin, Hiser, Ladner, Pruchansky, Smith,
Fretz, Toolan and Ms. McCarter served on the boards of 33 of the funds.
Messrs. Cunningham and Linbeck served on the boards of 31 of the funds.
Total Compensation
from all Funds in
Aggregate John Hancock Fund
Compensation Complex to
Advisory Board from the Fund* Advisory Board**
- -------------- -------------- ----------------
R. Trent Campbell $ 8,509 $ 54,000
Mrs. Lloyd Bentsen $ 8,826 $ 54,000
Thomas R. Powers $ 8,509 $ 54,000
Thomas B. McDade $ 8,509 $ 54,000
------- --------
TOTALS $34,353 $216,000
31
<PAGE>
* For the fiscal year ended October 31, 1995.
** As of December 31, 1995.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, the Fund receives its investment advice
from the Adviser. Investors should refer to the Prospectus for a description of
certain information concerning the investment management contract. Each of the
Trustees and principal officers of the Trust who is also an affiliated person of
the Adviser is named above, together with the capacity in which such person is
affiliated with the Trust and the Adviser or TFMC (the Fund's prior investment
adviser).
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199- 7603, was organized in 1968 and currently has more than $18 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 1,080,000 shareholders.
The Adviser is a wholly- owned subsidiary of The Berkeley Financial Group, which
is in turn a wholly-owned subsidiary of John Hancock Subsidiaries, Inc., which
is in turn a wholly-owned subsidiary of the Life Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $80 billion, the Life Company is one of the ten
largest life insurance companies in the United States and carries high ratings
from Standard & Poor's and A.M. Best's. Founded in 1862, the Life Company has
been serving clients for over 130 years.
The Fund has entered into an investment management contract with the
Adviser. Under the investment management contract, the Adviser provides the Fund
with (i) a continuous investment program, consistent with the Fund's stated
investment objective and policies, and (ii) supervision of all aspects of the
Fund's operations except those that are delegated to a custodian, transfer agent
or other agent. The Adviser is responsible for the day-to-day management of the
Fund's portfolio assets.
No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.
All expenses which are not specifically paid by the Adviser and which are
incurred in the operation of the Fund including, but not limited to, (i) the
fees of the Trustees of the Fund who are not "interested persons," as such term
is defined in the 1940 Act (the "Independent Trustees"), (ii) the fees of the
32
<PAGE>
members of the Trust's Advisory Board (described above) and (iii) the continuous
public offering of the shares of the Fund are borne by the Fund. Subject to the
requirements imposed by the Internal Revenue Service on funds having a
multiple-class structure, class expenses properly allocable to any Class A or
Class B shares will be borne exclusively by such class of shares.
As provided by the investment management contract, the Fund pays the
Adviser an investment management fee, which is accrued daily and paid monthly in
arrears, equal on an annual basis to 0.75% of the Fund's average daily net asset
value.
The Adviser may voluntarily and temporarily reduce its advisory fee or
make other arrangements to limit the Fund's expenses to a specified percentage
of average daily net assets. The Adviser retains the right to re-impose the
advisory fee and recover any other payments to the extent that, at the end of
any fiscal year, the Fund's annual expenses fall below this limit.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of any state limit where the
Fund is registered to sell shares of beneficial interest, the fee payable to the
Adviser will be reduced to the extent of such excess and the Adviser will make
any additional arrangements necessary to eliminate any remaining excess
expenses, if required by law. Currently, the most restrictive limit applicable
to the Fund is 2.5% of the first $30,000,000 of the Fund's average daily net
asset value, 2% of the next $70,000,000 and 1.5% of the remaining average daily
net asset value.
Pursuant to the investment management contract, the Adviser is not liable
to the Fund or its shareholders for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which its
contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its duties or
from its reckless disregard of the obligations and duties under the applicable
contract.
The initial term of the investment management contract expires on December
22, 1996, and the contract will continue in effect from year to year thereafter
if approved annually by a vote of a majority of the Independent Trustees of the
Fund, cast in person at a meeting called for the purpose of voting on such
approval, and by either a majority of the Trustees or the holders of a majority
of the Fund's outstanding voting securities. The management contract may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the Fund by vote of a majority of the outstanding voting securities
of the Fund, by the Trustees or by the Adviser. The management contract
terminates automatically in the event of its assignment.
33
<PAGE>
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser or for other funds or clients for which the Adviser
renders investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser or its
affiliates may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.
Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
investment management contract or any extension, renewal or amendment thereof
remains in effect. If the Fund's investment management contract is no longer in
effect, the Fund (to the extent that it lawfully can) will cease to use such
name or any other name indicating that it is advised by or otherwise connected
with the Adviser. In addition, the Adviser or the Life Company may grant the
non-exclusive right to use the name "John Hancock" or any similar name to any
other corporation or entity, including but not limited to any investment company
of which the Life Company or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.
For the period from November 1, 1994 to December 22, 1994 and for the
fiscal years ended October 31, 1994 and 1993, advisory fees paid by the Fund to
TFMC, the Fund's former investment adviser, amounted to $496,208, $2,706,438 and
$1,668,514, respectively. For the period from December 22, 1994 to October 31,
1995, advisory fees paid by the Fund to the Adviser amounted to $2,978,791.
Administrative Services Agreement. The Fund was a party to an
administrative services agreement with TFMC (the "Services Agreement"), pursuant
to which TFMC performed bookkeeping and accounting services and functions,
including preparing and maintaining various accounting books, records and other
documents and keeping such general ledgers and portfolio accounts as are
reasonably necessary for the operation of the Fund. Other administrative
services included communications in response to shareholder inquiries and
certain printing expenses of various financial reports. In addition, staff and
office space, facilities and equipment was provided as necessary to provide
administrative services to the Fund. The Services Agreement was amended in
connection with the appointment of the Adviser as adviser to the Fund to permit
services under the Agreement to be provided to the Fund by the Adviser and its
affiliates. The Services Agreement was terminated during the fiscal year 1995.
34
<PAGE>
For the fiscal years ended October 31, 1995, 1994 and 1993, the Fund paid
to TFMC (pursuant to the Services Agreement) $34,231, $222,044 and $157,911,
respectively.
DISTRIBUTION CONTRACT
Distribution Contract. The Fund's shares are sold on a continuous basis at
the public offering price. John Hancock Funds, a wholly-owned subsidiary of the
Adviser, has the exclusive right, pursuant to the Distribution Contract dated
December 22, 1994 (the "Distribution Contract"), to purchase shares from the
Fund at net asset value for resale to the public or to broker-dealers at the
public offering price. Upon notice to all broker-dealers ("Selling Brokers")
with whom it has sales agreements, John Hancock Funds may allow such Selling
Brokers up to the full applicable sales charge during periods specified in such
notice. During these periods, such Selling Brokers may be deemed to be
underwriters as that term is defined in the 1933 Act.
The Distribution Contract was initially adopted by the affirmative vote of
the Fund's Board of Trustees including the vote of a majority of the Independent
Trustees, cast in person at a meeting called for such purpose. The Distribution
Contract shall continue in effect until December 22, 1996 and from year to year
thereafter if approved by either the vote of the Fund's shareholders or the
Board of Trustees, including the vote of a majority of the Independent Trustees,
cast in person at a meeting called for such purpose. The Distribution Contract
may be terminated at any time, without penalty, by either party upon sixty (60)
days' written notice or by a vote of a majority of the outstanding voting
securities of the Fund and terminates automatically in the case of an assignment
by John Hancock Funds.
Total underwriting commissions for sales of the Fund's Class A Shares for
the fiscal year ended October 31, 1995, were $604,527. Of such amount, $67,705
was retained by the Fund's former distributor, Transamerica Fund Distributors,
Inc. and the remainder was reallowed to dealers.
Distribution Plans. The Board of Trustees, including the Independent
Trustees of the Fund, approved new distribution plans pursuant to Rule 12b-1
under the 1940 Act for Class A Shares ("Class A Plan") and Class B Shares
("Class B Plan"). Such Plans were approved by a majority of the outstanding
shares of each respective class on December 16, 1994 and became effective on
December 22, 1994.
Under the Class A Plan, the distribution or service fee will not exceed an
annual rate of 0.25% of the average daily net asset value of the Class A Shares
of the Fund. Any expenses under the Class A Plan not reimbursed within 12 months
35
<PAGE>
of being presented to the Fund for repayment are forfeited and not carried over
to future years. Under the Class B Plan, the distribution or service fee to be
paid by the Fund will not exceed an annual rate of 1.00% of the average daily
net assets of the Class B Shares of the Fund; provided that the portion of such
fee used to cover Service Expenses (described below) shall not exceed an annual
rate of 0.25% of the average daily net asset value of the Class B Shares of the
Fund. In accordance with generally accepted accounting principles, the Fund does
not treat unreimbursed distribution expenses attributable to Class B shares as a
liability of the Fund and does not reduce the current net assets of Class B by
such amount, although the amount may be payable under Class B Plan in the
future.
Under the Plans, expenditures shall be calculated and accrued daily and
paid monthly or at such other intervals as the Trustees shall determine. The fee
may be spent by John Hancock Funds on Distribution Expenses or Service Expenses.
"Distribution Expenses" include any activities or expenses primarily intended to
result in the sale of shares of the relevant class of the Fund, including, but
not limited to: (i) initial and ongoing sales compensation to Selling Brokers
and others (including affiliates of John Hancock Funds) engaged in the sale of
Fund shares; (ii) marketing, promotional and overhead expenses incurred in
connection with the distribution of Fund shares; and (iii) with respect to Class
B shares only, interest expenses on unreimbursed distribution expenses. "Service
Expenses" under the Plans include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of John Hancock
Funds) and others who furnish personal and shareholder account maintenance
services to shareholders of the relevant class of the Fund. For the fiscal year
ended October 31, 1995, an aggregate of $9,697,401 of distribution expenses or
3.02% of the average net assets of the Fund's Class B shares was not reimbursed
or recovered by John Hancock Funds through the receipt of deferred sales charges
or Rule 12b-1 fees in prior periods.
During the fiscal year ended October 31, 1995, the Funds paid John Hancock
Funds the following amounts of expenses with respect to the Class A and Class B
shares of the Fund:
<TABLE>
<CAPTION>
Printing and
Mailing of Interest,
Prospectuses Compensation Expenses of Carrying or
to New to Selling John Hancock Other Finance
Advertising Shareholders Brokers Funds Charges
----------- ------------ ------- ----- -------
<S> <C> <C> <C> <C> <C>
Class A shares $ 60,215 $ 6,025 $ 86,447 $205,221 None
Class B shares $191,492 $22,622 $1,142,644 $690,198 $1,093,651
</TABLE>
36
<PAGE>
Each of the Plans provides that it will continue in effect only as long
as its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may be
terminated (a) at any time by vote of a majority of the Trustees, a majority of
the Independent Trustees, or a majority of the respective Class' outstanding
voting securities or (b) by John Hancock Funds on 60 days' notice in writing to
the Fund. Each of the Plans further provides that it may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to the Plan. Each of the Plans
provides that no material amendment to the Plan will, in any event, be effective
unless it is approved by a majority vote of the Trustees and the Independent
Trustees of the Fund. The holders of Class A Shares and Class B Shares have
exclusive voting rights with respect to the Plan applicable to their respective
class of shares. In adopting the Plans, the Board of Trustees has determined
that, in its judgment, there is a reasonable likelihood that each Plan will
benefit the holders of the applicable class of shares of the Fund.
Information regarding the services rendered under the Plans and the
Distribution Contract and the amounts paid therefor by the respective class of
the Fund is provided to, and reviewed by, the Board of Trustees on a quarterly
basis. In this quarterly review, the Board of Trustees considers the continued
appropriateness of the Plans and the Distribution Contract and the level of
compensation provided therein.
When the Fund seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plans, committed to the discretion
of the Committee on Administration of the Trustees. The members of the Committee
on Administration are all Independent Trustees and identified in this Statement
of Additional Information under the heading "Those Responsible for Management."
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's
shares, the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations
furnished by a principal market maker or a pricing service, both of which
generally utilize electronic data processing techniques to determine valuations
for normal institutional size trading units of debt securities without exclusive
reliance upon quoted prices.
37
<PAGE>
Equity securities traded on a principal exchange or NASDAQ National
Market Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days
or less are generally valued at amortized cost, which approximates market value.
If market quotations are not readily available or if in the opinion of the
Adviser any quotation or price is not representative of true market value, the
fair value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars by the custodian bank based on London currency
exchange quotations as of 5:00 p.m., London time (12:00 noon, New York time) on
the date of any determination of the Fund's NAV.
The Fund will not price its securities on the following national
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A SHARES
Class A shares of the Fund are offered at a price equal to their net
asset value plus a sales charge which, at the option of the purchaser, may be
imposed either at the time of purchase (the "initial sales charge alternative")
or on a contingent deferred basis (the "deferred sales charge alternative").
Share certificates will not be issued unless requested by the shareholder in
writing, and then they will only be issued for full shares. The Trustees reserve
the right to change or waive a Fund's minimum investment requirements and to
reject any order to purchase shares (including purchase by exchange) when in the
judgment of the Adviser such rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A shares of the Fund
are described in the Prospectus. Methods of obtaining reduced sales charges
38
<PAGE>
referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A shares,
the investor is entitled to cumulate current purchases with the greater of the
current value (at offering price) of the Class A shares of the Fund, or if
Investor Services is notified by the investor's dealer or the investor at the
time of the purchase, the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to
purchases of Class A shares made at one time, the purchases will be combined if
made by (a) an individual, his or her spouse and their children under the age of
21 purchasing securities for his or her own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.
Without Sales Charge. Class A shares may be offered without a front-end
sales charge or CDSC to various individuals and institutions as follows:
o Any state, county or any instrumentality, department, authority, or agency
of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any
registered investment management company.
o A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it
is purchasing $1 million or more for non-discretionary customers or
accounts.
o A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of
any of the foregoing; retired officers, employees or Directors of any of
the foregoing; a member of the immediate family (spouse, children, mother,
father, sister, brother, mother-in-law, father-in-law) of any of the
foregoing; or any fund, pension, profit sharing or other benefit plan of
the individuals described above.
o A broker, dealer, financial planner, consultant or registered investment
advisor that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
39
<PAGE>
o A former participant in an employee benefit plan with John Hancock funds,
when he or she withdraws from his or her plan and transfers any or all of
his or her plan distributions directly to the Fund.
o A member of an approved affinity group financial services plan.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans with at least 100 eligible employees at the inception of
the Fund account, may purchase Class A shares with no initial sales charge.
However, if the shares are redeemed within 12 months after the end of the
calendar year in which the purchase was made, a CDSC will be imposed at the
following rate:
Amount Invested CDSC Rate
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Accumulation Privilege. Investors (including investors combining
purchases) who are already Class A shareholders may also obtain the benefit of
the reduced sales charge by taking into account not only the amount then being
invested but also the purchase price or value of the Class A shares already held
by such person.
Combination Privilege. Reduced sales charges (according to the schedule
set forth in the Prospectus) also are available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares of
the Fund and shares of all other John Hancock funds which carry a sales charge.
Letter of Intention. The reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention
(LOI), which should be read carefully prior to its execution by an investor. The
Fund offers two options regarding the specified period for making investments
under the LOI. All investors have the option of making their investments over a
period of thirteen (13) months. Investors who are using the Fund as a funding
medium for a qualified retirement plan, however, may opt to make the necessary
40
<PAGE>
investments called for by the LOI over a forty-eight (48) month period. These
qualified retirement plans include IRA, SEP, SARSEP, 401(k), 403(b) (including
TSAs) and 457 plans. Such an investment (including accumulations and
combinations) must aggregate $50,000 or more invested during the specified
period from the date of the LOI or from a date within ninety (90) days prior
thereto, upon written request to Investor Services. The sales charge applicable
to all amounts invested under the LOI is computed as if the aggregate amount
intended to be invested had been invested immediately. If such aggregate amount
is not actually invested, the difference in the sales charge actually paid and
the sales charge payable had the LOI not been in effect is due from the
investor. However, for the purchases actually made within the specified period
(either 13 or 48 months), the sales charge applicable will not be higher than
that which would have been applied (including accumulations and combinations)
had the LOI been for the amount actually invested.
The LOI authorizes Investor Services to hold in escrow sufficient Class
A shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrow shares will be released. If the total investment specified in the LOI
is not completed, the Class A shares held in escrow may be redeemed and the
proceeds used as required to pay such sales charges as may be due. By signing
the LOI, the investor authorizes Investor Services to act as his
attorney-in-fact to redeem any escrow shares and adjust the sales charge, if
necessary. A LOI does not constitute a binding commitment by an investor to
purchase, or by the Fund to sell, any additional shares and may be terminated at
any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per
share without the imposition of a sales charge so that the Fund will receive the
full amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge ("CDSC") at the rates set forth in the Prospectus as a percentage of the
dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost of
the Class B shares being redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase prices, including Class B
shares derived from reinvestment of dividends or capital gains distributions.
Class B shares are not available to full-service defined contribution
plans administered by Investor Services or the LIfe Company that had more than
100 eligible employees at the inception of the Fund account.
41
<PAGE>
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the first day
of the month.
In determining whether a CDSC applies to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through dividend and capital gain reinvestment, and next from the shares you
have held the longest during the six-year period. For this purpose, the amount
of any increase in a share's value above its initial purchase price is not
regarded as a share exempt from CDSC. Thus, when a share that has appreciated in
value is redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. Upon redemption, appreciation is effective only on a per share
basis for those shares being redeemed. Appreciation of shares cannot be redeemed
CDSC free at the account level.
When requesting a redemption for a specific dollar amount please
indicate if you require the proceeds to equal the dollar amount requested. If
not indicated, only the specified dollar amount will be redeemed from your
account and the proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
o Proceeds of 50 shares redeemed at $12 per share $600
o Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) -120
o Minus appreciation on remaining shares
(40 shares X 2) -80
-----
o Amount subject to CDSC $400
Proceeds from the CDSC are paid to John Hancock Funds and are used in
whole or in part by John Hancock Funds to defray its expenses related to
providing distribution-related services to the Fund in connection with the sale
of the Class B shares, such as the payment of compensation to select Selling
Brokers for selling Class B shares. The combination of the CDSC and the
42
<PAGE>
distribution and service fees facilitates the ability of the Fund to sell the
Class B shares without a sales charge being deducted at the time of the
purchase. See the Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account value,
including reinvested dividends, at the time you established your periodic
withdrawal plan and 12% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor Services.
(Please note that this waiver does not apply to periodic withdrawal plan
redemptions of Class A shares that are subject to a CDSC).
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other qualified plans as
described in the Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or beneficiaries
from employer sponsored retirement plans under Section 401(a) of the Code
(such as 401(k), Money Purchase Pension Plan, Profit Sharing Plan).
43
<PAGE>
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA accounts that purchased shares
prior to May 15, 1995.
Please see matrix for reference.
CDSC Waiver Matrix for Class B Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
401(a) Plan
Type of (401(k), MPP, IRA, IRA
Distribution PSP) 403(b) 457 Rollover Non-retirement
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- ------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions in periodic
or 12% of payments
account value
annually in
periodic
payments
- ------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for 12% of account
and 70 1/2 Life value annually
Expectancy in periodic
or 12% of payments
account value
annually in
periodic
payments
- ------------------------------------------------------------------------------------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of account
annuity annuity annuity value annually
payments payments payments in periodic
(72+) or (72+) or (72+) or payments
12% of 12% of 12% of
account account account
value value value
annually in annually in annually in
periodic periodic periodic
payments payments payments
- ------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ------------------------------------------------------------------------------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- ------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ------------------------------------------------------------------------------------------
Return of Waived Waived Waived Waived N/A
Excess
- ------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
If you qualify for a CDSC waiver under one of these situations, you
must notify Investor Services at the time you make your redemption. The waiver
will be granted once Investor Services has confirmed that you are entitled to
the waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, he would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund during any 90 day period for any one account.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. As described more fully in the Prospectus, the Fund
permits exchanges of shares of any class of the Fund for shares of the same
class in any other John Hancock fund offering that class.
Systematic Withdrawal Plan. As described briefly in the Prospectus, the
Fund permits the establishment of a Systematic Withdrawal Plan. Payments under
this plan represent proceeds arising from the redemption of Fund shares. Since
the redemption price of Fund shares may be more or less than the shareholder's
cost, depending upon the market value of the securities owned by the Fund at the
time of redemption, the distribution of cash pursuant to this plan may result in
recognition of gain or loss for purposes of Federal, state and local income
taxes. The maintenance of a Systematic Withdrawal Plan concurrently with
purchases of additional Class A or Class B shares of the Fund could be
disadvantageous to a shareholder because of the initial sales charge payable on
such purchases of Class A shares and the CDSC imposed on redemptions of Class B
shares and because redemptions are taxable events. Therefore, a shareholder
should not purchase Fund shares at the same time as a Systematic Withdrawal Plan
is in effect. The Fund reserves the right to modify or discontinue the
Systematic Withdrawal Plan of any shareholder on 30 days' prior written notice
to such shareholder, or to discontinue the availability of such plan in the
future. The shareholder may terminate the plan at any time by giving proper
notice to Investor Services.
45
<PAGE>
Monthly Automatic Accumulation Program ("MAAP"). This program is
explained fully in the Prospectus and the Account Privileges Application. The
program, as it relates to automatic investment checks, is subject to the
following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice if
any investment is not honored by the shareholder's bank. The bank shall be under
no obligation to notify the shareholder as to the non-payment of any check.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may,
within 120 days after the date of redemption, reinvest without payment of a
sales charge any part of the redemption proceeds in shares of the same class of
the Fund or another John Hancock mutual fund, subject to the minimum investment
limit in that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the Fund or in Class A shares of another John Hancock mutual fund. If a CDSC was
paid upon a redemption, a shareholder may reinvest the proceeds from that
redemption at net asset value in additional shares of the class from which the
redemption was made. The shareholder's account will be credited with the amount
of any CDSC charged upon the prior redemption and the new shares will continue
to be subject to the CDSC. The holding period of the shares acquired through
reinvestment will, for purposes of computing the CDSC payable upon a subsequent
redemption, include the holding period of the redeemed shares. The Fund may
modify or terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUND'S SHARES
Ownership of the Fund is represented by transferable shares of
beneficial interest. The Declaration of Trust permits the Trustees to create an
unlimited number of series and classes of shares of the Fund and, with respect
to each series and class, to issue an unlimited number of full or fractional
46
<PAGE>
shares and to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests of the
Fund.
Each share of each series or class of the Fund represents an equal
proportionate interest with each other in that series or class, none having
priority or preference over other shares of the same series or class. The
interest of investors in the various series or classes of the Fund is separate
and distinct. All consideration received for the sales of shares of a particular
series or class of the Fund, all assets in which such consideration is invested
and all income, earnings and profits derived from such investments will be
allocated to and belong to that series or class. As such, each such share is
entitled to dividends and distributions out of the net income belonging to that
series or class as declared by the Board of Trustees. Shares of the Fund have a
par value of $0.01 per share. The assets of each series are segregated on the
Fund's books and are charged with the liabilities of that series and with a
share of the Fund's general liabilities. The Board of Trustees determines those
assets and liabilities deemed to be general assets or liabilities of the Fund,
and these items are allocated among each series in proportion to the relative
total net assets of each series.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional classes within any
series (which would be used to distinguish among the rights of different
categories of shareholders, as might be required by future regulations or other
unforeseen circumstances). As of the date of this Statement of Additional
Information, the Trustees have authorized the issuance of two classes of shares
of the Fund, designated as Class A and Class B. Class A and Class B Shares of
the Fund represent an equal proportionate interest in the aggregate net asset
values attributable to that class of the Fund. Holders of Class A Shares and
Class B Shares each have certain exclusive voting rights on matters relating to
the Class A Plan and the Class B Plan, respectively. The different classes of
the Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except for differences resulting from the
facts that (i) the distribution and service fees relating to Class A and Class B
shares will be borne exclusively by that class; (ii) Class B shares will pay
higher distribution and service fees than Class A shares; and (iii) each of
Class A shares and Class B shares will bear any class expenses properly
allocable to such class of shares, subject to the requirements imposed by the
Internal Revenue Service on funds having a multiple- class structure.
Accordingly, the net asset value per share may vary depending whether Class A
shares or Class B shares are purchased.
47
<PAGE>
Voting Rights. Shareholders are entitled to a full vote for each full
share held, except that for Trust-wide shareholder votes the Trustees may
determine that it is appropriate for each dollar of net asset value to be
entitled to one vote and fractional dollars to a proportional vote. The Trustees
themselves have the power to alter the number and the terms of office of
Trustees, and they may at any time lengthen their own terms or make their terms
of unlimited duration (subject to certain removal procedures) and appoint their
own successors, provided that at all times at least a majority of the Trustees
have been elected by shareholders. The voting rights of shareholders are not
cumulative, so that holders of more than 50 percent of the shares voting can, if
they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees. Although the Fund need
not hold annual meetings of shareholders, the Trustees may call special meetings
of shareholders for action by shareholder vote as may be required by the 1940
Act or the Declaration of Trust. Also, a shareholder's meeting must be called if
so requested in writing by the holders of record of 10% or more of the
outstanding shares of the Trust. In addition, the Trustees may be removed by the
action of the holders of record of two-thirds or more of the outstanding shares.
Shareholder Liability. The Declaration of Trust provides that no
Trustee, officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability may
arise from his or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
As a Massachusetts business trust, the Fund is not required to issue
share certificates. The Fund shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning termination by action
of the shareholders.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the trust. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations and affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
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any other series. Liability is therefore limited to circumstances in which the
Fund itself would be unable to meet its obligations, and the possibility of this
occurrence is remote.
Notwithstanding the fact that the Prospectus is a combined prospectus
for the Fund and other John Hancock mutual funds, the Fund shall not be liable
for the liabilities of any other John Hancock mutual fund.
In order to avoid conflicts with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of the
Fund and its shareholders come first.
TAX STATUS
The Fund has qualified and elected to be treated as a "regulated
investment company" under Subchapter M of the Code, and intends to continue to
so qualify in the future. As such and by complying with the applicable
provisions of the Code regarding the sources of its income, the timing of its
distributions, and the diversification of its assets, the Fund will not be
subject to Federal income tax on its taxable income (including net short-term
and long-term capital gains) which is distributed to shareholders in accordance
with the timing requirements of the Code.
The Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to seek to avoid or minimize liability
for such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P") will be taxable under the Code for investors who are subject to
tax. If these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions from investment company taxable income
and/or net capital gain may be paid in January but may be taxable to
shareholders as if they had been received on December 31 of the previous year.
The tax treatment described above will apply without regard to whether
distributions are received in cash or reinvested in additional shares of the
Fund.
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Distributions, if any, in excess of E&P will constitute a return of
capital under the Code, which will first reduce an investor's federal tax basis
in Fund shares and then, to the extent such basis is exceeded, will generally
give rise to capital gains. Shareholders who have chosen automatic reinvestment
of their distributions will have a federal tax basis in each share received
pursuant to such a reinvestment equal to the amount of cash they would have
received had they elected to receive the distribution in cash, divided by the
number of shares received in the reinvestment.
If the Fund acquires stock in certain foreign corporations that receive
at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may, if available, ameliorate these
adverse tax consequences, but any such election would require the Fund to
recognize taxable income or gain without the concurrent receipt of cash. The
Fund may limit and/or manage its holdings in passive foreign investment
companies to minimize its tax liability or maximize its return from these
investments.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, certain foreign currency options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to the Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments or derivatives held for
less than three months, which gain is limited under the Code to less than 30% of
its gross income for each taxable year, and could under future Treasury
regulations produce income not among the types of "qualifying income" from which
the Fund must derive at least 90% of its gross income for each taxable year. If
the net foreign exchange loss for a year treated as ordinary loss under Section
988 were to exceed the Fund's investment company taxable income computed without
regard to such loss after consideration of certain regulations on the treatment
of "post-October losses" the resulting overall ordinary loss for such year would
not be deductible by the Fund or its shareholders in future years.
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The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. The Fund does not expect to qualify to pass such taxes through to its
shareholders, who consequently will not take such taxes into account on their
own tax returns. However, the Fund will deduct such taxes in determining the
amount it has available for distribution to shareholders.
The amount of the Fund's net short-term and long-term capital gains, if
any, in any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities or enter into options transactions that
will generate capital gains. At the time of an investor's purchase of Fund
shares, a portion of the purchase price is often attributable to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions in reality represent a
return of a portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon the amount of the proceeds and the investor's basis in his shares. Such
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands and will be long-term or short-term, depending
upon the shareholder's tax holding period for the shares and subject to the
special rules described below. A sales charge paid in purchasing Class A shares
of the Fund cannot be taken into account for purposes of determining gain or
loss on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. Such disregarded load will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange may be disallowed to the
extent the shares disposed of are replaced with other shares of the Fund within
a period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of, such as pursuant to an election to reinvest dividends in
additional shares. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized upon the redemption
of shares with a tax holding period of six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain with respect to such shares.
Although its present intention is to distribute, at least annually, all
net capital gain, if any, the Fund reserves the right to retain and reinvest all
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or any portion of the excess, as computed for Federal income tax purposes, of
net long-term capital gain over net short-term capital loss in any year. The
Fund will not in any event distribute net capital gain realized in any year to
the extent that a capital loss is carried forward from prior years against such
gain. To the extent such excess was retained and not exhausted by the
carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his return for his taxable year in which the last day of
the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or to a refund of, his pro rata share of the taxes paid by the Fund,
and (c) be entitled to increase the adjusted tax basis for his shares in the
Fund by the difference between his pro rata share of such excess and his pro
rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset its net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in Federal income
tax liability to the Fund and, as noted above, would not be distributed as such
to shareholders. At October 31, 1995, the Fund has a realized capital loss
carryforward of $6,354,280 which will expire in 2003.
For purposes of the dividends received deduction available to
corporations, dividends received by the Fund, if any, from U.S. domestic
corporations in respect of the stock of such corporations held by the Fund, for
U.S. Federal income tax purposes, for at least 46 days (91 days in the case of
certain preferred stock) and distributed and properly designated by the Fund may
be treated as qualifying dividends. Corporate shareholders must meet the minimum
holding period requirement stated above (46 or 91 days) with respect to their
shares of the Fund in order to qualify for the deduction and, if they have any
debt that is deemed under the Code directly attributable to such shares, may be
denied a portion of the dividends received deduction. The entire qualifying
dividend, including the otherwise deductible amount, will be included in
determining the excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may increase its
alternative minimum tax liability, if any. Additionally, any corporate
shareholder should consult its tax adviser regarding the possibility that its
basis in its shares may be reduced, for Federal income tax purposes, by reason
of "extraordinary dividends" received with respect to the shares, for the
purpose of computing its gain or loss on redemption or other disposition of the
shares.
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The Fund is required to accrue income on any debt securities that have
more than a de minimis amount of original issue discount (or debt securities
acquired at a market discount, if the Fund elects to include market discount in
income currently) prior to the receipt of the corresponding cash payment. The
mark to market rules applicable to certain options and forward contracts may
also require the Fund to recognize income or gain without a concurrent receipt
of cash. However, the Fund must distribute to shareholders for each taxable year
substantially all of its net income and net capital gains, including such income
or gain, to qualify as a regulated investment company and avoid liability for
any federal income or excise tax. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy these distribution
requirements.
A state income (and possibly local income and/or intangible property)
tax exemption is generally available to the extent (if any) the Fund's
distributions are derived from interest on (or, in the case of intangibles
taxes, the value of its assets is attributable to) certain U.S. Government
obligations, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. The Fund will not
seek to satisfy any threshold or reporting requirements that may apply in
particular taxing jurisdictions, although the Fund may in its sole discretion
provide relevant information to shareholders.
The Fund will be required to report to the Internal Revenue Service
(the "IRS") all taxable distributions to shareholders, as well as gross proceeds
from the redemption or exchange of Fund shares, except in the case of certain
exempt recipients, i.e., corporations and certain other investors distributions
to which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish a Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. A Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.
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Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
Limitations imposed by the Code on regulated investment companies like
the Fund may restrict the Fund's ability to enter into options, foreign currency
positions, and foreign currency forward contracts.
Certain options and forward foreign currency transactions undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of certain foreign
currency-related forward contracts or options, as ordinary income or loss) and
timing of some capital gains and losses realized by the Fund. Also, certain of
the Fund's losses on its transactions involving options or forward contracts
and/or offsetting or successor portfolio positions may be deferred rather than
being taken into account currently in calculating the Fund's taxable income or
gains. Certain of such transactions may also cause the Fund to dispose of
investments sooner than would otherwise have occurred. These transactions may
therefore affect the amount, timing and character of the Fund's distributions to
shareholders. Certain of the applicable tax rules may be modified if the Fund is
eligible and chooses to make one or more of certain tax elections that may be
available. The Fund will take into account the special tax rules (including
consideration of available elections) applicable to options and forward
contracts in order to seek to minimize any potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and ownership
of or gains realized on the redemption (including an exchange) of Fund shares
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
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(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute for Form W-8 is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
As of April 30, 1996, the average annual total returns of the Class B
shares of the Fund for the one and five year periods and the life-of-the Fund
since inception on October 26, 1987 were 39.52%, 19.38% and 22.15%,
respectively. As of April 30, 1996, the average annual returns for the Fund's
Class A shares for the one year period and since inception on August 22, 1991
were 38.21% and 18.39%, respectively.
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1-year, 5-year, and 10-year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at
the beginning of the 1 year, 5 year and life-of-fund periods.
In the case of Class A shares or Class B shares, this calculation
assumes the maximum sales charge is included in the initial investment or the
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CDSC is applied at the end of the period. This calculation also assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period.
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Fund's maximum sales
charge on Class A shares or the CDSC on Class B shares into account. Excluding
the Fund's sales charge on Class A shares and the CDSC on Class B shares from a
total return calculation produces a higher total return figure.
From time to time, in reports and promotional literature, the Fund's
yield and total return will be compared to indices of mutual funds and bank
deposit vehicles such as Lipper Analytical Services, Inc.'s "Lipper -- Fixed
Income Fund Performance Analysis," a monthly publication which tracks net
assets, total return, and yield on approximately 1,700 fixed income mutual funds
in the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers
are also used for comparison purposes, as well as the Russell and Wilshire
Indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, etc. will
also be utilized. The Fund's promotional and sales literature may make reference
to the Fund's "beta." Beta is a reflection of the market-related risk of the
Fund by showing how responsive the Fund is to the market.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
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BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by the Adviser and officers of
the Fund pursuant to recommendations made by its investment committee, which
consists of officers and Trustees of the Adviser and affiliates and officers and
Trustees who are interested persons of the Fund. Orders for purchases and sales
of securities are placed in a manner which, in the opinion of the Adviser, will
offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
makers reflect a "spread." Investments in debt securities are generally traded
on a net basis through dealers acting for their own account as principals and
not as brokers; no brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the NASD and other policies that the
Trustees may determine, the Adviser may consider sales of shares of the Fund as
a factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
To the extent consistent with the foregoing, the Fund will be governed
in the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser of the
Fund, and their value and expected contribution to the performance of the Fund.
It is not possible to place a dollar value on information and services to be
received from brokers and dealers, since it is only supplementary to the
research efforts of the Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser, and
conversely, brokerage commissions and spreads paid by other advisory clients of
the Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitments to allocate portfolio
transactions upon any prescribed basis. While the Fund's officers will be
primarily responsible for the allocation of the Fund's brokerage business, their
policies and practices in this regard must be consistent with the foregoing and
will at all times be subject to review by the Trustees. For the fiscal years
ended October 31, 1995, 1994 and 1993, the aggregate dollar amount of brokerage
commissions paid were $263,019, $318,023 and $330,454, respectively.
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As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Fund may pay to a broker which provides brokerage and research services to
the Fund an amount of disclosed commission in excess of the commission which
another broker would have charged for effecting that transaction. This practice
is subject to a good faith determination by the Trustees that the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. During the fiscal year ended August 31, 1995, the
Fund did not pay commissions as compensation to any brokers for research
services such as industry, economic and company reviews and evaluations of
securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc. ("Distributors"), a
broker-dealer, and an indirect shareholder of John Hancock Freedom Securities
Corporation and its two subsidiaries, Tucker Anthony Incorporated ("Tucker
Anthony") and Sutro & Company, Inc. ("Sutro") (each are "Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent with the above
policy of obtaining best net results, the Fund may execute portfolio
transactions with or through Tucker Anthony, Sutro or John Hancock Distributors.
During the year ended April 30, 1995, the Fund did not execute any portfolio
transactions with then affiliated brokers.
Any of the Affiliated Brokers may act as broker for the Fund on
exchange transactions, subject, however, to the general policy of the Fund set
forth above and the procedures adopted by the Trustees pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
1940 Act) of the Fund, the Adviser or the Affiliated Brokers. Because the
Adviser, which is affiliated with the Affiliated Brokers, has, as an investment
adviser to the Fund, the obligation to provide investment management services,
which includes elements of research and related investment skills, such research
and related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria. The Fund will not effect principal transactions with
Affiliated Brokers. The Fund may, however, purchase securities from other
members of underwriting syndicates of which Tucker Anthony, Sutro and John
Hancock Distributors are members, but only in accordance with the policy set
forth above and procedures adopted and reviewed periodically by the Trustees.
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The Fund's portfolio turnover rates for the fiscal years ended October 31, 1995
and 1994 were 23% and 25%, respectively. The Fund's relatively high portfolio
turnover rate was due to changes in asset allocation between U.S. Treasury
securities cash equivalents and GNMA certificates. These changes reflected the
portfolio managers' changing assessment of market conditions and expectations in
interest rate movements.
In order to avoid conflicts with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: pre- clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of the
Fund and its shareholders come first.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205- 9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$19.00 for each Class A shareholder and $21.50 for each Class B shareholder plus
certain out-of-pocket expenses. These expenses are aggregated and charged to the
Fund and allocated to each class on the basis of their relative net asset
values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian
agreement between the Fund and Investors Bank & Trust Company ("IBT"), 89 South
Street, Boston, Massachusetts. Under the custodian agreement, IBT performs
custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116,
has been selected as the independent auditors of the Fund. The financial
statements of the Fund for periods prior to August 31, 1995 in the Prospectus
and this Statement of Additional Information have been audited by Ernst & Young
LLP for the periods indicated in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
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APPENDIX A
Description of Bond Ratings
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group represent their opinions as to the quality of various debt instruments
they undertake to rate. It should be emphasized that ratings are not absolute
standards of quality. Consequently, debt instruments with the same maturity,
coupon and rating may have different yields while debt instruments of the same
maturity and coupon with different ratings may have the same yield.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment at some time in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
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during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack the characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B: Debt rated BB, and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
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JOHN HANCOCK
GLOBAL TECHNOLOGY FUND
Class A and Class B Shares
Statement of Additional Information
December 2, 1996
This Statement of Additional Information provides information about John
Hancock Global Technology Fund (the "Fund") in addition to the information that
is contained in the Fund's Class A and Class B Prospectus (the "Prospectus")
dated December 2, 1996.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-(800)-225-5291
TABLE OF CONTENTS
Statement of
Additional
Information
Page
ORGANIZATION OF THE FUND ......................................... 2
INVESTMENT OBJECTIVES AND POLICIES ............................... 3
INVESTMENT RESTRICTIONS .......................................... 12
THOSE RESPONSIBLE FOR MANAGEMENT ................................. 15
INVESTMENT ADVISORY AND OTHER SERVICES ........................... 24
DISTRIBUTION CONTRACT ............................................ 28
NET ASSET VALUE .................................................. 30
INITIAL SALES CHARGE ON CLASS A SHARES ........................... 31
DEFERRED SALES CHARGE ON CLASS B SHARES .......................... 34
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SPECIAL REDEMPTIONS .............................................. 37
ADDITIONAL SERVICES AND PROGRAMS ................................. 38
TAX STATUS ....................................................... 39
DESCRIPTION OF THE FUND'S SHARES ................................. 46
CALCULATION OF PERFORMANCE ....................................... 48
BROKERAGE ALLOCATION ............................................. 50
TRANSFER AGENT SERVICES .......................................... 51
CUSTODY OF PORTFOLIO ............................................. 52
INDEPENDENT AUDITORS ............................................. 52
APPENDIX ......................................................... A-1
FINANCIAL STATEMENTS ............................................. F-1
ORGANIZATION OF THE FUND
The Fund is a diversified series of John Hancock Series Trust (the
"Trust"), an open-end management investment company organized as a Massachusetts
business trust on December 2, 1996. On December 2, 1996, the Trust assumed the
registration statement of John Hancock Technology Series, Inc. (the "Company").
As of January 1, 1995, the Fund changed its name to John Hancock Global
Technology Fund. Effective October 1, 1992, the Fund ceased doing business as
Global Technology Fund and commenced doing business under the name John Hancock
Freedom Global Technology Fund. On December 6, 1991, the Company changed its
name from AFA Funds, Inc. and the Fund changed its name from National
Telecommunications & Technology Fund.
The Fund is managed by John Hancock Advisers, Inc. (the "Adviser") an
indirect wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), a Massachusetts life insurance company chartered in 1862,
with national headquarters at John Hancock Place, Boston, Massachusetts, and
American Fund Advisors, Inc. ("AFA" or the "Sub-Adviser").
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INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives and policies are set forth in the Fund's
Prospectus dated August 30, 1996 which is incorporated herein by reference. The
following information augments the Prospectus.
The Fund's primary investment objective is long-term growth of capital
through investments principally in equity securities of companies that rely
extensively on technology in their product development or operations. Income is
a secondary objective. There is no assurance that the Fund will achieve its
investment objectives. See "Goal and Strategy" in the Fund's Prospectus.
Investments in U.S. and foreign companies that rely extensively on
technology in product development or operations may be expected to benefit from
scientific developments and the application of technical advances resulting from
improving technology in many different fields, such as computer software and
hardware, semiconductors, telecommunications, defense and commercial
electronics, data storage and retrieval biotechnology and others. Generally,
investments will be made in securities of a company that relies extensively on
technology in product development or operations only if a significant part of
its assets are invested in, or a significant part of its total revenue or net
income is derived from, this technology.
Technology-Intensive Companies -- Considerations and Risks. Securities
prices of the companies in which the Fund invests have tended to be subject to
greater volatility than securities prices in many other industries, due to
particular factors affecting these industries. Competitive pressures may also
have a significant effect on the financial condition of technology-intensive
companies. For example, if the development of new technology continues to
advance at an accelerated rate, and the number of companies and product
offerings continues to expand, the companies could become increasingly sensitive
to short product cycles and aggressive pricing. Accordingly, the Fund's
performance will be particularly susceptible to factors affecting these
companies as well as the economy as a whole.
Foreign Currencies and Foreign Currency Transactions. Due to its
investments in foreign securities, the Fund may hold a portion of its assets in
foreign currencies. The foreign currency transactions of the Fund may be
conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund may enter
into forward foreign currency contracts involving currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rate between these currencies. The Fund may also engage in
speculative forward currency transactions, and may use forward currency
contracts as a substitute for investing in securities denominated in that
currency or in order to create a synthetic position consisting of a security
issued in one country and denominated in the currency of another country.
Forward
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currency transactions are accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. Transaction hedging is the purchase or sale of
forward foreign currency contracts with respect to specific receivables or
payables of the Fund accruing in connection with the purchase or sale of its
portfolio securities denominated in foreign currencies. Portfolio hedging is the
use of forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. The Fund will not attempt to
hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Adviser.
If the Fund enters into a forward contract requiring it to purchase foreign
currency, its custodian bank will segregate cash or liquid securities in a
separate account of the Fund in an amount equal to the value of the Fund's total
assets committed to the consummation of such forward contract. Those assets will
be valued at market daily and if the value of the assets in the separate account
declines, additional cash or liquid assets will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions varies
with such factors as the currency involved, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currency are usually conducted on a principal basis, no fees or commissions are
involved.
Characteristics and Risks of Foreign Securities Markets. The Fund may
invest in securities of foreign issuers. Normally the Fund will invest at least
65% of its net assets in securities of issuers in at least three countries, that
may include the United States, but will not invest more than 25% of its net
assets in any one foreign country. The securities markets of many countries have
in the past moved relatively independently of one another, due to differing
economic, financial, political and social factors. When markets in fact move in
different directions and offset each other, there may be a corresponding
reduction in risk for the Fund's portfolio as a whole. This lack of correlation
among the movements of the world's securities markets may also affect unrealized
gains the Fund has derived from movements in any one market.
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If the securities of markets moving in different directions are combined
into a single portfolio, such as that of the Fund, total portfolio volatility is
reduced. Since the Fund will invest in securities denominated in currencies
other than U.S. dollars, changes in foreign currency exchange rates will affect
the value of its portfolio securities. Currency exchange rates may not move in
the same direction as the securities markets in a particular country. As a
result, market gains may be offset by unfavorable exchange rate fluctuations.
Investments in foreign securities may involve risks and considerations not
present in domestic investments. Since foreign securities generally may be
denominated and pay interest or dividends in foreign currencies, the value of
the assets of the Fund attributable to such investment as measured in U.S.
dollars may be affected favorably or unfavorably by changes in the relationship
of the U.S. dollar to other currency rates. The Fund may incur costs in
connection with the conversion of foreign currencies into U.S. dollars and may
be adversely affected by restrictions on the conversion or transfer of foreign
currencies. In addition, there may be less publicly available information about
foreign companies than U.S. companies. Foreign companies may not be subject to
accounting, auditing, and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies.
Foreign securities markets, while growing in volume, have for the most part
substantially less volume than U.S. securities markets and securities of foreign
companies are generally less liquid and at times their prices may be more
volatile than securities of comparable U.S. companies. Foreign stock exchanges,
brokers and listed companies are generally subject to less government
supervision and regulation than those in the U.S. The customary settlement time
for non-U.S. securities is less frequent than in the U.S., which could affect
the liquidity of the Fund's investments. The Adviser and the Sub-Adviser will
monitor the settlement time for foreign securities and take undue settlement
delays into account in considering the desirability of allocating investments
among specific countries.
In some countries, there is the possibility of expropriation or
confiscatory taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions or other adverse political, social or diplomatic
developments that could affect investments in these countries.
These risks may be intensified in the case of investments in emerging
markets or countries with limited or developing capital markets. These countries
are located in the Asia-Pacific region, Eastern Europe, Latin and South America,
and Africa. Security prices in these markets can be significantly more volatile
than in more developed countries, reflecting the greater uncertainties of
investing in less established markets and economies. Political, legal and
economic structures in many
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of these emerging market countries may be undergoing significant evolution and
rapid development, and they may lack the social, political, legal and economic
stability characteristic of more developed countries. Emerging market countries
may have failed in the past to recognize private property rights. They may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions on repatriation
of assets, and may have less protection of property rights than more developed
countries. Their economies may be predominantly based on only a few industries,
may be highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times. The Fund
may be required to establish special custodial or other arrangements before
making certain investments in these countries. Securities of issuers located in
these countries may have limited marketability and may be subject to more abrupt
or erratic price movements.
High Yield "High Risk" Fixed Income Securities. The Fund may invest up to
10% of its net assets in fixed income securities that, at the time of
investment, are rated CC or higher by Standard & Poor's Ratings Group ("Standard
& Poor's") or Ca or higher by Moody's Investors Service, Inc. ("Moody's") or
their equivalent, and unrated fixed income securities of comparable quality as
determined by the Adviser. These securities include convertible and
nonconvertible bonds and debentures, zero coupon bonds, payment-in-kind
securities, increasing rate note securities, participation interests, stripped
debt securities and other derivative debt securities. The value of fixed income
securities generally varies inversely with interest rate changes. Convertible
issues, while influenced by the level of interest rates, are also subject to the
changing value of the underlying common stock into which they are convertible.
Ratings are based largely on the historical financial condition of the
issuer. Consequently, the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial condition, which may
be better or worse than the rating would indicate. The values of lower-rated
securities and unrated securities of comparable quality generally fluctuate more
than those of high-rated securities. There is a greater possibility that an
adverse change in the financial condition of an issuer of lower-rated securities
or unrated securities of comparable quality will affect the issuer's ability to
make payments of interest and principal. Bonds rated CC or Ca are highly
speculative and are often in default or have other marked shortcomings. Lower
rated securities are generally referred to as junk bonds. Bonds that have a
rating of BBB or lower from Standard & Poor's, Baa or lower from Moody's or an
equivalent rating and unrated bonds of comparable quality are considered
speculative. In addition, the market for such bonds may be less liquid than the
market for higher quality securities. To the extent the Fund invests in
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lower-rated securities and unrated securities of comparable quality, the
achievement of the Fund's investment objectives is more dependent on the
Sub-Adviser's ability than it would be if the Fund were investing in higher
quality securities.
Maturity generally is not a significant factor in the Adviser's security
selection process. Accordingly, the Fund may invest in fixed income securities
of any maturity.
Pay-In-Kind, Delayed and Zero Coupon Bonds. The Fund may invest in pay-
in-kind, delayed and zero coupon bonds. These are securities issued at a
discount from their face value because interest payments are typically postponed
until maturity. The amount of the discount rate varies depending on factors
including the time remaining until maturity, prevailing interest rates, the
security's liquidity and the issuer's credit quality. These securities may also
take the form of debt securities that have been stripped of their interest
payments. A portion of the discount with respect to stripped tax-exempt
securities or their coupons may be taxable. The market prices of pay-in-kind,
delayed and zero coupon bonds generally are more volatile than the market prices
of interest-bearing securities having similar maturities and credit quality. The
Fund's investments in pay-in-kind, delayed and zero coupon securities may
require the Fund to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements. See "Tax
Status."
Preferred Stock. The Fund may purchase preferred stock. Preferred stocks
are equity securities, but possess certain attributes of fixed income
securities. Holders of preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, but do not participate in other amounts available for distribution by
the issuing corporation. Dividends on preferred stock may be cumulative, and all
cumulative dividends usually must be paid prior to dividend payments to common
stockholders. Because of this preference, preferred stocks generally entail less
risk than common stocks. Upon liquidation, preferred stocks are entitled to a
specified liquidation preference, which is generally the same as the par or
stated value, and are senior in right of payment to common stocks. Preferred
stocks are equity securities in that they do not represent a liability of the
issuer and therefore do not offer a great a degree of protection of capital or
assurance of continued income as investments in corporate debt securities. In
addition, preferred stocks are subordinated in right of payment to all debt
obligations and creditors of the issuer, and convertible preferred stocks may be
subordinated to other preferred stock of the same issuer. See "Convertible
Securities" below for a description of certain characteristics of convertible
preferred stock.
Convertible Securities. The Fund may purchase convertible fixed income
securities and preferred stock. Convertible securities are securities that may
be converted at either a stated price or stated rate into underlying shares of
common stock of the same issuer. Convertible securities have general
characteristics similar to
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both fixed income and equity securities. Although to a lesser extent than with
straight debt securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stocks and therefore will also react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis, and consequently may not experience market value declines to the same
extent as the underlying common stock. When the market price of the underlying
common stock increases, the prices of the convertible securities tend to rise as
a reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer. However,
the issuers of convertible securities may default on their obligations.
Restricted Securities. The Fund may purchase securities that are not
registered ("restricted securities") under the Securities Act of 1933 ("1933
Act"), including securities offered and sold to "qualified institutional buyers"
under Rule 144A under the 1933 Act. The Fund may not invest more than 5% of its
net assets in restricted securities. Moreover, the Fund will not invest more
than 15% of its net assets in illiquid investments, which include repurchase
agreements maturing in more than seven days, securities that are not readily
marketable and restricted securities. However, if the Board of Trustees
determines, based upon a continuing review of the trading markets for specific
Rule 144A securities, that they are liquid, then such securities may be
purchased without regard to the 15% limit. The Trustees may adopt guidelines
and delegate to the Adviser the daily function of determining and monitoring the
liquidity of restricted securities. The Trustees, however, will retain
sufficient oversight and be ultimately responsible for the determinations. The
Trustees will carefully monitor the Fund's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Fund if qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
The Fund may acquire other restricted securities including securities for
which market quotations are not readily available. These securities may be sold
only in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the Securities Act of 1933.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
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Restricted securities will be priced at fair market value as determined in good
faith by the Fund's Trustees.
Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is a contract under which the Fund acquires a security for
a relatively short period (usually not more than 7 days) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
System and with "primary dealers" in U.S. Government securities. The Advisers
will continuously monitor the creditworthiness of the parties with whom the Fund
enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving
as collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income and lack of
access to income during this period and the expense of enforcing its rights.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to return
the securities involved in the transaction. As a result, the Fund may incur a
loss or, in the event of the borrower's bankruptcy, the Fund may be delayed in
or prevented from liquidating the collateral. It is a fundamental policy of the
Fund not to lend portfolio securities having a total value exceeding 33 1/3% of
its total assets.
Forward Commitment and When-Issued Securities. The Fund may purchase
securities on a when-issued or forward commitment basis. "When-issued" refers to
securities whose terms are available and for which a market exists, but which
have not been issued. The Fund will engage in when-issued transactions with
respect to securities purchased for its portfolio in order to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
For when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
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When the Fund engages in forward commitment and when-issued transactions,
it relies on the seller to consummate the transaction. The failure of the issuer
or seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities equal in value to the Fund's commitment. These
assets will be valued daily at market, and additional cash or securities will be
segregated in a separate account to the extent that the total value of the
assets in the account declines below the amount of the when-issued commitments.
Alternatively, the Fund may enter into offsetting contracts for the forward sale
of other securities that it owns.
Structured or Hybrid Notes. The Fund may invest in "structured" or "hybrid"
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the note is based on the
performance of a benchmark asset or market other than fixed income securities or
interest rates. Examples of these benchmarks include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows the Fund to gain exposure to the benchmark market while fixing the
maximum loss that the Fund may experience in the event that market does not
perform as expected. Depending on the terms of the note, the Fund may forego all
or part of the interest and principal that would be payable on a comparable
conventional note; the Fund's loss cannot exceed this foregone interest and/or
principal. An investment in structured or hybrid notes involves risks similar to
those associated with a direct investment in the benchmark asset.
Participation Interests. Participation interests, which may take the form
of interests in, or assignments of certain loans, are acquired from banks who
have made these loans or are members of a lending syndicate. The Fund's
investments in participation interests are subject to its limitation on
investments in illiquid securities. The Fund may purchase only those
participation interests that mature in 60 days or less, or, if maturing in more
than 60 days, that have a floating rate that is automatically adjusted at least
once every 60 days.
Covered Call Options. The Fund may sell covered call options that are
listed on a national securities exchange against its portfolio securities.
Portfolio securities underlying these call options must have an aggregate value
(determined as of the sale date) not exceeding 5% of the net assets of the Fund.
A call option gives the purchaser of the option the right to buy, and obligates
the writer to sell (if the option is exercised), the underlying security at the
exercise price at any time during the
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option period, regardless of the security's market price upon exercise of the
option. If the price of the underlying security rises above the exercise price
and the option is exercised, the Fund loses the opportunity to profit from that
portion of the rise which exceeds the exercise price.
The Fund will write listed call options only if they are "covered," which
means that the Fund owns or has the immediate right to acquire the securities
underlying the options without additional cash consideration upon conversion or
exchange of other securities held in its portfolio. A call option written by the
Fund may also be "covered" if the Fund holds on a share-for-share basis a
covering call on the same securities where (i) the exercise price of the
covering call held is equal to or less than the exercise price of the call
written or the exercise price of the covering call is greater than the exercise
price of the call written, in the latter case only if the difference is
maintained by the Fund in cash or liquid securities in a segregated account with
the Fund's custodian, and (ii) the covering call expires at the same time as or
later than the call written. If a covered call option is not exercised, the Fund
would keep both the option premium and the underlying security. If the covered
call option written by the Fund is exercised and the exercise price, less the
transaction costs, exceeds the cost of the underlying security, the Fund would
realize a gain in addition to the amount of the option premium it received. If
the exercise price, less transaction costs, is less than the cost of the
underlying security, the Fund's loss would be reduced by the amount of the
option premium.
If the writer of an exchange-traded option wishes to terminate its
obligation prior to its exercise, it may effect a "closing purchase
transaction." This is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that the Fund's
position will be offset by the Options Clearing Corporation. The Fund may not
effect a closing purchase transaction after it has been notified of the exercise
of an option. There is no guarantee that a closing purchase transaction can be
effected. Although the Fund will generally write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular option or at any particular time, and for some options no secondary
market on an exchange may exist.
In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. In the case of a
written put option, it will permit the Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.
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The Fund will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option.
The Fund will realize a loss from a closing transaction if the cost of the
closing transaction is more than the premium received for writing the option.
However, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation in the value of the underlying security owned by the
Fund.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions (as well as the fund's investment
objective) will not be changed without approval of the Fund's outstanding voting
securities which, as used in the Prospectus and this Statement of Additional
Information, means approval by the lesser of (1) 67% or more of the Fund's
shares represented at a meeting if at least 50% of the Fund's outstanding shares
are present in person or by proxy at the meeting or (2) 50% of the Fund's
outstanding shares. The Fund observes the following fundamental restrictions.
The Fund may not:
(1) Invest less than 65% of the value of its total assets (exclusive of
cash, U.S. Government securities and short-term commercial paper) in securities
of companies which rely extensively on technology in product development or
operation, except temporarily during periods when economic conditions with
respect to such companies in that industry are unfavorable.
(2) With respect to 75% of its total assets, purchase any security (other
than securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and repurchase agreements collateralized by such securities)
if, as a result: (a) more than 5% of its total assets would be invested in the
securities of any one issuer, or (b) the Fund would own more than 10% of the
voting securities of any one issuer.
(3) Issue senior securities, except as permitted by paragraphs (4) and (8)
below. For purposes of this restriction, the issuance of shares of common stock
in multiple classes, the purchase or sale of options, futures contracts and
options on futures contracts, forward commitments, and repurchase agreements
entered into in accordance with the Fund's investment policies, and the pledge,
mortgage or hypothecation of the Fund's assets are not deemed to be senior
securities
(4) Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes (including meeting redemptions without
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immediately selling securities), but not for leveraging or investment, in an
amount not to exceed 10% of the value of net assets at the time the borrowing is
made, provided, however, that as long as such borrowings exceed 5% of the value
of net assets, the Fund will not make any investments. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), asset coverage of 300% of any
borrowing must be maintained.
(5) Act as an underwriter of securities of other issuers except to the
extent that in selling portfolio securities it may be deemed to be an
underwriter for purposes of the 1933 Act.
(6) Purchase real estate or any interest therein (except real estate used
exclusively in the current operation of the Fund's affairs), but this
restriction does not prevent the Fund from investing in debt securities secured
by real estate or interests therein.
(7) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell options on securities, securities indices, currency
and other financial instruments, futures contracts on securities, securities
indices, currency and other financial instruments and options on such futures
contracts, forward commitments, interest rate swaps, caps and floors, securities
index put or call warrants and repurchase agreements entered into in accordance
with the Fund's investment policies.
(8) Make loans, except that the Fund may (1) lend portfolio securities in
accordance with the Fund's investment policies up to 33_% of the Fund's total
assets taken at market value, (2) enter into repurchase agreements, and (3)
purchase all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or nor the purchase is made upon the
original issuance of the securities.
Non-Fundamental Investment Restrictions
The following restrictions are designated as non-fundamental and may be
changed by the Board of Trustees without shareholder approval. The Fund may
not:
(1) Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment companies,
(ii) the Fund would hold more than 3% of the total outstanding voting securities
of any one investment company, or (iii) more than 5% of the Fund's total assets
would be invested in the securities of any one investment company. These
limitations do not apply to (a) the investment of cash collateral, received by
the Fund in connection with lending the Fund's portfolio securities, in the
13
<PAGE>
securities of open-end investment companies or (b) the purchase of shares of any
investment company in connection with a merger, consolidation, reorganization or
purchase of substantially all of the assets of another investment company.
Subject to the above percentage limitations, the Fund may, in connection with
the John Hancock Group of Funds Deferred Compensation Plan for Independent
Trustees/Trustees, purchase securities of other investment companies within the
John Hancock Group of Funds. In addition, as a nonfundamental restriction, the
Fund may not purchase the shares of any closed-end investment company except in
the open market where no commission or profit to a sponsor or dealer results
from the purchase, other than customary brokerage fees.
(2) Purchase securities on margin, although it may obtain such short-term
credits as may be necessary for the clearance of securities purchased.
(3) Make short sales of securities or maintain a short position.
(4) Purchase or sell puts, calls, straddles, spreads or any combination
thereof, except that (i) it may sell call options listed on a national
securities exchange against its portfolio securities if such call options remain
fully covered throughout the exercise period and where such underlying
securities have an aggregate value (determined as of the date the calls are
sold) not exceeding 5% of the total assets of the Fund, and (ii) the Fund may
purchase call options in related "closing purchase transactions," where not more
than 5% of its total assets are invested in such options.
(5) Purchase securities of an issuer which, together with any predecessor,
has been in operation for less than three years (except investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities), if, as a result, more than 5% of the Fund's total assets
would be invested in such securities.
(6) Purchase or sell interests in real estate limited partnerships or in
oil, gas or other mineral leases or exploration or development programs
(although it may invest in companies which own or invest in such interests).
(7) Purchase or retain the securities of an issuer any of the officers,
directors, trustees or security holders of which (a) is an officer or Trustee
of the Trust or a member, officer, director or trustee of its investment
adviser and (b) owns beneficially more than 1/2 of 1% of the shares or
securities of both (taken at market value) of such issuer, unless all such
individuals owning more than 1/2 of 1% of such shares or securities together own
beneficially less than 5% of such shares or securities or both.
(8) Invest more than 5% of the value of its total assets in warrants (other
than those that have been acquired in units or attached to other securities). No
more than 2% of the Fund's total assets may be invested in warrants which are
not listed on the New York Stock Exchange or the American Stock Exchange. In
14
<PAGE>
applying this limitation, warrants will be valued at the lesser of cost or
market value unless acquired by the Fund in units with, or attached to, debt
securities, in which case no value will be assigned.
(9) Invest in companies for the purpose of exercising control.
(10) Purchase any security, including any repurchase agreement maturing in
more than seven days, which is not readily marketable, if more than 15% of the
net assets of the Fund, taken at market value, would be invested in such
securities. (The staff of the Securities and Exchange Commission considers
over-the-counter options to be illiquid securities subject to the 15% limit.)
The Fund agrees that, in accordance with the Ohio Securities Division and
until such regulations are no longer required, it will comply with Rule
1301:6-3-09(E)(12) by not investing more than 15% of its total assets in the
aggregate in securities of issuers which, together with any predecessors, have a
record of less than three years continuous operation, and in securities of
issuers which are restricted as to disposition, including securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Board of Directors who elects
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Board of Directors. Several of the officers
and Directors of the Company are also officers or directors of the Adviser or
Sub-Adviser, or officers or directors of the Fund's principal distributor, John
Hancock Funds, Inc. ("John Hancock Funds").
The following table sets forth the principal occupation or employment of
the Trustees and principal officers of the Trust during the past five years:
-15-
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
<S> <C> <C>
Edward J. Boudreau, Jr.* Trustee, Chairman Chairman and Chief Executive
101 Huntington Avenue and Chief Executive Officer, the Adviser and The
Boston, MA 02199 Officer(1)(2) Berkeley Financial Group ("The
October 1944 Berkeley Group"); Chairman, NM
Capital Management, Inc. ("NM
Capital") and John Hancock
Advisers International Limited
("Advisers International");
Chairman, Chief Executive
Officer and President, John
Hancock Funds, Inc. ("John
Hancock Funds"); John Hancock
Investor Services Corporation
("Investor Services"), First
Signature Bank and Trust Company
and Sovereign Asset Management
Corporation ("SAMCorp");
Director, John Hancock Freedom
Securities Corporation, John
Hancock Capital Corporation and
New England/ Canada Business
Council; Member, Investment
Company Institute Board of
Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the
Adviser (until July 1992);
Chairman, John Hancock
Distributors, Inc. (until April,
1994).
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-16-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
Thomas W.L. Cameron* Trustee Chairman and Director, Sovereign
101 Huntington Avenue Advisers, Inc.; Senior Vice
Boston, MA 02199 President, Interstate/Johnson
February 1927 Lane Corp. (securities dealer);
and Trustee or Director of 21
funds managed by the Adviser.
James F. Carlin Trustee(3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments);
April 1940 Director, Arbella Mutual
Insurance Company (insurance),
Consolidated Group Trust
(insurance administration),
Carlin Insurance Agency, Inc.,
West Insurance Agency, Inc.
(until May 1995) and Uno
Restaurant Corp.; Chairman,
Massachusetts Board of Higher
Education (since 1995);
Receiver, the City of Chelsea
(until August 1992).
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-17-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
William H. Cunningham Trustee(3) Chancellor, University of Texas
601 Colorado Street System and former President of
O'Henry Hall the University of Texas, Austin,
Austin, TX 78701 Texas; Lee Hage and Joseph D.
January 1944 Jamail Regents Chair for Free
Enterprise; Director, LaQuinta
Motor Inns, Inc. (hotel
management company); Director,
Jefferson-Pilot Corporation
(diversified life insurance
company) and LBJ Foundation
Board (education foundation);
Advisory Director, Texas
Commerce Bank - Austin.
Harold R. Hiser, Jr. Trustee(3) Executive Vice President,
Schering-Plough Schering-Plough Corporation
Corporation (pharmaceuticals) (retired
One Giralda Farms 1996); Director, ReCapital
Madison, NJ 07940-1000 Corporation (reinsurance) (until
October 1931 1995).
Charles F. Fretz Trustee(3) Retired; self-employed; Former
RD #5, Box 300B Vice President and Director,
Clothier Springs Road Towers, Perrin, Forster &
Malvern, PA 19355 Crosby, Inc. (international
June 1928 management consultants)
(1952-1985).
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-18-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
Anne C. Hodsdon* President and President and Chief Operating
101 Huntington Avenue Trustee(1)(2) Officer, the Adviser; Executive
Boston, MA 02199 Vice President, the Adviser
April 1953 (until December 1994); Senior
Vice President, the Adviser
(until December 1993); Vice
President, the Adviser (until
1991).
Charles L. Ladner Trustee(3) Director, Energy North, Inc.
UGI Corporation (public utility holding
460 North Gulph Road company)(until 1992); Senior
King of Prussia, PA 19406 Vice President, Finance UGI
February 1938 Corp. (holding company, public
utilities, LPGAS).
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-19-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
Leo E. Linbeck, Jr. Trustee(3) Chairman, President, Chief
3810 W. Alabama Executive Officer and Director,
Houston, TX 77027 Linbeck Corporation (a holding
August 1934 company engaged in various
phases of the construction
industry and warehousing
interests); Former Chairman,
Federal Reserve Bank of Dallas
(1992, 1993); Chairman of the
Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Eastern Corporation (a
diversified energy company),
Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest
International, Inc. (a
geophysical consulting firm)
(1980-1993); Director, Greater
Houston Partnership.
Patricia P. McCarter Trustee(3) Director and Secretary, The
Swedesford Road McCarter Corp. (machine
RD #3, Box 121 manufacturer).
Malvern, PA 19355
May 1928
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-20-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
Steven R. Pruchansky Trustee(1)(3) Director and President, Mast
360 Horse Creek Drive, #208 Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August
1991); Director, Mast Realty
Trust (1982-1994); President,
Maxwell Building Corp. (until
1991).
Richard S. Scipione* Trustee General Counsel, John Hancock
John Hancock Place Mutual Life Insurance Company;
P.O. Box 111 Director, the Adviser, Advisers
Boston, MA 02199 International, John Hancock
August 1937 Funds, Investor Services, John
Hancock Distributors, Inc., John
Hancock Subsidiaries, Inc., John
Hancock Property and Casualty
Insurance and its affiliates
(until November 1993), SAMCorp
and NM Capital; Trustee, The
Berkeley Group; Director, JH
Networking Insurance Agency,
Inc.
Norman H. Smith Trustee(3) Lieutenant General, USMC, Deputy
Rt. 1, Box 249 E Chief of Staff for Manpower and
Linden, VA 22642 Reserve Affairs, Headquarters
March 1933 Marine Corps; Commanding General
III Marine Expeditionary
Force/3rd Marine Division
(retired 1991).
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-21-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
John P. Toolan Trustee(3) Director, The Smith Barney Muni
13 Chadwell Place Bond Funds, The Smith Barney
Morristown, NJ 07960 Tax-Free Money Fund, Inc.,
September 1930 Vantage Money Market Funds
(mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company)
and Smith Barney Trust Company
of Florida; Chairman, Smith
Barney Trust Company (retired
1991); Director, Smith Barney,
Inc., Mutual Management Company
and Smith, Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member
of the Executive Committee,
Smith Barney, Harris Upham &
Co., Incorporated (investment
bankers) (until 1991).
Robert G. Freedman* Vice Chairman and Vice Chairman and Chief
101 Huntington Avenue Chief Investment Investment Officer, the Adviser;
Boston, MA 02199 Officer(2) President, the Adviser (until
July 1938 December 1994); Director, the
Adviser, Advisers International,
John Hancock Funds Investor
Services, SAMCorp and NM
Capital; Senior Vice President,
The Berkeley Group.
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-22-
<PAGE>
Positions Held Principal Occupation(s)
Name and Address with the Registrant During Past Five Years
- ---------------- ---------------- ----------------------
James B. Little* Senior Vice Senior Vice President, the
101 Huntington Avenue President and Adviser, The Berkeley Group,
Boston, MA 02199 Chief Financial John Hancock Funds and Investor
February 1935 Officer Services
James J. Stokowski* Vice President Vice President, the Adviser.
101 Huntington Avenue and Treasurer
Boston, MA 02199
November 1946
Susan S. Newton* Vice President Vice President and Assistant
101 Huntington Avenue and Secretary Secretary, the Adviser; Vice
Boston, MA 02199 President and Secretary, John
March 1950 Hancock Funds, Investor Services
and John Hancock Distributors,
Inc. (until 1994); Secretary,
SAMCorp; Vice President, The
Berkeley Group.
John A. Morin* Vice President Vice President, the Adviser,
101 Huntington Avenue Investor Services and John
Boston, MA 02199 Hancock Funds; Counsel, John
July 1950 Hancock Mutual Life Insurance
Company; Vice President and
Assistant Secretary, The
Berkeley Group.
</TABLE>
* An "interested person" of the Company, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-23-
<PAGE>
All of the officers listed are officers or employees of the Adviser or the
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or directors and/or trustees of one or more other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation paid by
the Fund and the other investment companies in the John Hancock Fund Complex to
the Independent Trustees for their services. The four non-Independent
Trustees, Messrs. Boudreau, Cameron, Scipone, and Ms. Hodsdon, and each of the
officers of the Fund (except Mr. Gordon) are interested persons of the Adviser,
are compensated by the Adviser and/or its affiliates and receive no compensation
from the Fund for their services. Mr. Gordon is an interested person of the
Sub-Adviser, is compensated by the Sub-Adviser, and receives no compensation
from the Fund for his services.
Total Compensation From the
Aggregate Compensation Fund and John Hancock Fund
Independent Directors From the Fund(1) Complex to Trustees(2)
- --------------------- ---------------------- ---------------------------
Charles F. Fretz $ 1,306 $ 56,200
Jack P. Gould* 5,300 9,800
Charles L. Ladner 834 60,700
Patricia P. McCarter 834 60,700
Steven R. Pruchansky 877 62,700
Norman H. Smith 856 62,700
John P. Toolan+ 855 60,700
James F. Carlin 1,029 60,700
Harold R. Hiser, Jr.+ 1,497 60,200
William H. Cunningham+ 340 69,700
Leo E. Linbeck, Jr. 334 73,200
-------- --------
$ 14,062 $637,300
(1) Compensation for the fiscal year ended December 31, 1995.
(2) Total compensation from the Fund and the other John Hancock funds is as of
December 31, 1995.
* As of March 26, 1996, Mr. Gould resigned as a Trustee.
+ As of December 31, 1995, the value of the aggregate accrued deferred
compensation from all funds in the John Hancock fund complex for Mr. Cunningham
-24-
<PAGE>
was $54,413, for Mr. Hiser was $31,324 and for Mr. Toolan was $71,437 under the
John Hancock Deferred Compensation Plan for Independent Trustees.
As of August 30, 1996, the officers and Trustees of the Fund as a group
owned less than 1% of the outstanding shares of the fund.
As of August 30, 1996, the following shareholders beneficially owned 5% of
or more of outstanding shares of the Fund:
Number of Percentage of
shares of total outstanding
Name and Address of beneficial shares of the
Shareholder Class of Shares interest owned class of the Fund
- ------------------- --------------- -------------- -----------------
Merrill Lynch Pierce Class B shares 196,410 9.68
Fenner & Smith, Inc.
Attn: Mutual Fund
Operations
4800 Deer Lake Drive
Jacksonville FL 32246-6484
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund receives its investment advice from the Adviser and the Sub-
Adviser. Investors should refer to the Prospectus and below for a description of
certain information concerning the investment management contract. Each of the
Trustees and principal officers affiliated with the Trust who is also an
affiliated person of the Adviser or Sub-Adviser is named above, together with
the capacity in which such person is affiliated with the Trust, the Adviser or
Sub-Adviser.
The Trust on behalf of the Fund has entered into an investment management
contract with the Adviser dated December 6, 1991, and amended as of January 1,
1994, under which the Adviser in conjunction with the Sub-Adviser provides the
Fund with a continuous investment program, consistent with the Fund's
stated investment objectives and policies. The Adviser is responsible for the
day to day management of the Fund's portfolio assets. The Adviser has entered
into a sub-advisory contract with the Sub-Adviser dated December 6, 1991, under
which the Sub-Adviser, subject to the review of the Board of Trustees and the
overall supervision of the Adviser, is responsible for providing the Fund with
investment advice.
-25-
<PAGE>
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Adviser or their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Adviser or the Sub-Adviser for the Fund or
for other funds or clients for which the Adviser or Sub-Adviser renders
investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser, the
Sub-Adviser or their respective affiliates may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.
No person other than the Adviser and Sub-Adviser and their directors and
employees regularly furnishes advice to the Fund with respect to the
desirability of the Fund's investing in, purchasing or selling securities. The
Adviser and Sub-Adviser may from time to time receive statistical or other
similar factual information, and information regarding general economic factors
and trends, from the Life Company and its affiliates.
The Adviser pays the compensation and expenses of officers and employees of
the Fund, and Trustees of the Trust affiliated with the Adviser, the office
expenses of the Fund, including those of the Trust's Treasurer's and Secretary's
offices and other expenses incurred by the Adviser in connection with the
performance of its duties. All expenses which are not specifically paid by the
Adviser and which are incurred in the operation of the Fund (including fees of
Trustees of the Trust who are not "interested persons," as such term is defined
in the Investment Company Act but excluding certain distribution-related
activities required to be paid by the Adviser or John Hancock Funds) and the
continuous public offering of the shares of the Fund are borne by the Fund.
Subject to the requirements imposed by the Internal Revenue Service on funds
that have a multiple-class structure, class expenses properly allocable to any
of Class A or Class B shares will be borne exclusively by such class of shares.
As provided by the investment management contract, the Fund pays the
Adviser a fee computed daily and payable monthly, at an annual rate of 1% of the
value of the net assets of the Fund up to $100 million, and 3/4 of 1% of the
value of the net assets over $100 million, as compensation for the services
rendered by the Adviser. Effective January 1, 1995, the Adviser reduced a
portion of the management fee amounting to 0.15% of the average daily net asset
value of the first $100,000,000 of the Fund. In addition to the management fee,
the Adviser receives an annual administration fee of $100,000. The annual rate
of compensation is higher than the rate paid by most registered investment
companies, but is believed to be comparable to the fees paid by funds with
-26-
<PAGE>
comparable objectives. The Adviser, not the Fund, pays the Sub-Adviser a monthly
fee as described in the Prospectus. For the years ended December 31, 1995, 1994
and 1993, the Adviser received management fees of $1,045,680 (net of fee
reduction), $522,041 and $361,474, respectively and administration fees of
$100,000 from the Fund for each year.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, for any fiscal year are in excess of any
limitation imposed by a state where the shares of the Fund are registered for
sale, the fee payable to the Adviser will be reduced to the extent required by
such law and the Adviser will make any additional arrangements that the Adviser
is required by law to make. Currently, the most restrictive limit applicable to
the Fund is 2.5% of the first $30,000,000 of the Fund's average daily net asset
value, 2% of the next $70,000,000 of such assets and 1.5% of the remaining
average daily net asset value. Pursuant to the investment management contract
and sub-advisory contract, the Adviser and Sub-Adviser are not liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which their respective contract relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser or Sub-Adviser in the performance of their duties or from
their reckless disregard of the obligations and duties under the applicable
contract.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-
7603, was organized in 1968 and currently has more than $19 billion in assets
under management in its capacity as investment adviser to the Fund and other
mutual funds and publicly traded investment companies in the John Hancock group
of funds, having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of $80
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries high ratings from Standard & Poor's and A.M.
Best. Founded in 1862, the Life Company has been serving clients for over 130
years.
The Sub-Adviser, AFA, 1415 Kellum Place, Suite 205, Garden City, New York,
11530, was incorporated under the laws of New York in 1978. The Sub-Adviser,
subject to the supervision of the Adviser, manages the Fund's investments. AFA
also provides investment advisory and management services to individual and
institutional clients.
Pursuant to the sub-advisory contract, AFA provides day-to-day portfolio
management of the Fund. AFA furnishes the Adviser and the Fund with investment
advice and recommendations consistent with the investment policies, objectives
and restrictions of the Fund. AFA pays its own costs of maintaining staff and
personnel necessary for it to perform its obligations under the sub-advisory
-27-
<PAGE>
contract, expenses of its office rent, telephone, telecommunications and other
facilities required by it to perform services and any other expenses, including
legal, audit and professional fees and expenses, incurred by it in connection
with the performance of its duties under the sub-advisory contract.
Each of the investment management and sub-advisory contracts has an initial
two-year term commencing upon the close of business on December 6, 1991, and
thereafter continues in effect from year to year if approved annually by a vote
of a majority of the Trustees who are not interested persons of one of the
parties to the contract ("Independent Trustees"), cast in person at a meeting
called for the purpose of voting on such approval, and by either the Board of
Trustees or the holders of a "majority" of the Fund's outstanding voting
securities as defined in the 1940 Act. Each of the contracts automatically
terminates upon assignment. Each contract may be terminated without penalty on
60 days' notice at the option of either party to the respective contract or by
vote of a majority of the outstanding voting securities of the Fund. The
sub-advisory contract will terminate upon termination of the Adviser's
investment management contract.
DISTRIBUTION CONTRACT
The Fund has a distribution contract with John Hancock Funds. Under the
contract, John Hancock Funds is obligated to use its best efforts to sell shares
of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. John Hancock Funds accepts orders for the
purchase of the shares of the Fund which are continually offered at the net
asset value next determined, plus the applicable sales charge. In connection
with the sale of Class A and Class B shares, John Hancock Funds and Selling
Brokers receive compensation from a sales charge imposed, in the case of Class A
shares, at the time of sale or, in the case of Class B shares, on a deferred
basis.
The Fund's Trustees have adopted Distribution Plans with respect to Class A
and Class B shares (together, the "Plans") pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the Plans, the Fund will pay distribution
and service fees at an aggregate annual rate of up to 0.30% and 1.00% for Class
A and Class B, respectively, of the Fund's average net assets attributable to
shares of that class. However, the service fee will not exceed 0.25% of the
Fund's average daily net assets attributable to each class of shares. The
distribution fees will be used to reimburse the Distributor for its distribution
expenses, including but not limited to: (i) initial and ongoing sales
compensation to Selling Brokers and others (including affiliates of the
Distributor) engaged in the sale of Fund shares; (ii) marketing, promotional and
overhead expenses incurred in connection with the distribution of Fund shares;
and (iii) with respect to Class B shares only, interest expenses on unreimbursed
-28-
<PAGE>
distribution expenses. The service fees will be used to compensate Selling
Brokers for providing personal and account maintenance services to shareholders.
In the event that John Hancock Funds is not fully reimbursed for expenses
incurred by it under the Class B Plan in any fiscal year, John Hancock Funds may
carry these expenses forward, provided however, that the Trustees may terminate
the Class B Plan and thus the Fund's obligation to make further payments at any
time. Accordingly, the Fund does not treat unreimbursed expenses relating to the
Class B shares as a liability of the Fund. For the fiscal year ended December
31, 1995, an aggregate of $987,619 of distribution expenses, or 4.34% of the
average net assets of the Class B shares of the Fund, was not reimbursed or
recovered by John Hancock Funds through the receipt of deferred sales charges or
12b-1 fees in prior periods. The Plans were approved by a majority of the
Trustees, including a majority of the Independent Trustees, by votes cast in
person at meetings called for the purpose of voting on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the
Fund with a written report of the amounts expended under the Plans and the
purpose for which such expenditures were made. The Trustees review such reports
on a quarterly basis.
During the fiscal year ended December 31, 1995, the Fund paid John Hancock
Funds the following amounts of expenses with respect to the Class A and Class B
shares of the Fund:
Expense Items
<TABLE>
<CAPTION>
Printing and
Mailing of Expenses Interest,
Prospectuses Compensation of John Carrying or
to New to Selling Hancock Other Finance
Global Technology Fund Advertising Shareholders Brokers Funds Charges
- ---------------------- ----------- ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Class A Shares $56,438 $10,757 $89,300 $158,844 $ -
Class B Shares 31,799 5,883 44,891 85,964 58,569
</TABLE>
Each of the Plans provides that it will continue in effect only so long as
its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may
be terminated without penalty (a) by vote of a majority of the Independent
Trustees, (b) by a majority of the Fund's outstanding shares of the applicable
class upon 60 days' written notice to John Hancock Funds, and (c) automatically
in the event of assignment. Each of the Plans further provides that it may not
be amended to increase the maximum amount of the fees for the services described
therein without the approval of a majority of the outstanding shares of the
-29-
<PAGE>
class of the Fund which has voting rights with respect to the Plan. And finally,
each of the Plans provides that no material amendment to the Plan will, in any
event, be effective unless it is approved by a vote of a majority of both the
Trustees and the Independent Trustees of the Fund. The holders of Class A and
Class B shares have exclusive voting rights with respect to the Plan applicable
to their respective class of shares. In adopting the Plans the Trustees
concluded that, in their judgment, there is a reasonable likelihood that each
Plan will benefit the holders of the applicable class of shares of the Fund.
When the Fund seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Director is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plans, committed to the discretion
of the Committee on Administration of the Trustees. The members of the
Committee on Administration are all Independent Trustees and are identified in
this Statement of Additional Information under the heading "Those Responsible
for Management."
The Fund's distribution contract, discussed above, continues in effect from
year to year if approved annually by the vote of a majority of the Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval, and by either the Trustees or the holders of a majority of the
outstanding shares of each class of the Fund which has voting rights with
respect to the contract. The contract automatically terminates upon assignment
and may be terminated without penalty on 60 days' notice at the option of either
party to the contract or by vote of a majority of the outstanding shares of each
class of the Fund which has voting rights with respect to the contract.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's
shares, the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished
by a principal market maker or a pricing service, both of which generally
utilize electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
-30-
<PAGE>
Short-term debt investments which have a remaining maturity of 60 days or
less are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.
The Fund will not price its securities on the following national holidays:
New Year's Day; Presidents' Day; Good Friday; Memorial Day; Independence Day;
Labor Day; Thanksgiving Day; and Christmas Day. On any day an international
market is closed and the New York Stock Exchange is open, any foreign securities
will be valued at the prior day's close with the current day's exchange rate.
Trading of foreign securities may take place on Saturdays and U.S. business
holidays on which the Fund's NAV is not calculated. Consequently, the Fund's
portfolio securities may trade and the NAV of the Fund's redeemable securities
may be significantly affected on days when a shareholder has no access to the
Fund.
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Prospectus. Methods of obtaining a reduced sales charge
referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A shares
of the Fund, the investor is entitled to cumulate current purchases with the
greater of the current value (at offering price) of the Class A shares of the
Fund owned by the investor, or if Investor Services is notified by the
investor's dealer or the investor at the time of the purchase, the cost of the
Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases
of Class A shares made at one time, the purchases will be combined if made by
(a) an individual, his spouse and their children under the age of 21, purchasing
securities for his or their own account, (b) a trustee or other fiduciary
purchasing for a single trust, estate or fiduciary account, and (c) certain
groups of four or more individuals making use of salary deductions or similar
-31-
<PAGE>
group methods of payment whose funds are combined for the purchase of mutual
fund shares. Further information about combined purchases, including certain
restrictions on combined group purchases, is available from a Investor Services
or Selling Broker's representative.
Without Sales Charge. Class A shares may be offered without a front-end
sales charge or CDSC to various individuals and institutions as follows:
o Any state, county or any instrumentality, department, authority, or agency
of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any
registered investment management company.
o A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if it
is purchasing $1 million or more for non-discretionary customers or
accounts.
o A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales representatives
of any of the foregoing; retired officers, employees or Trustees of any of
the foregoing; a member of the immediate family (spouse, children, mother,
father, sister, brother, mother-in-law, father-in-law) of any of the
foregoing; or any fund, pension, profit sharing or other benefit plan for
the individuals described above.
o A broker, dealer, financial planner, consultant or registered investment
advisor that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products or services made available to their clients.
o A former participant in an employee benefit plan with John Hancock funds,
when he or she withdraws from his or her plan and transfers any or all of
his or her plan distributions directly to the Fund.
o A member of an approved affinity group financial services plan.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994, and participant directed defined
contribution plans with at least 100 eligible employees at the inception of
the Fund account, may purchase Class A shares with no initial sales charge.
However, if the shares are redeemed within 12 months after the end of the
calendar year in which the purchase was made, a CDSC will be imposed at the
following rate:
-----------------------------------------------------------------------
Amount Invested CDSC Rate
-----------------------------------------------------------------------
$1 to $4,999,999 1.00%
-----------------------------------------------------------------------
Next $5 million to $9,999,999 0.50%
-----------------------------------------------------------------------
Amounts of $10 million and over 0.25%
-----------------------------------------------------------------------
-32-
<PAGE>
Shareholders of the John Hancock Global Technology Fund who were
shareholders of John Hancock National Aviation & Technology Fund ("National
Aviation") who held shares prior to May 1, 1984 are permitted for an indefinite
period to purchase additional shares of the John Hancock Global Technology Fund
at net asset value, without a sales charge, provided that the purchasing
shareholder held shares of National Aviation continuously from April 30, 1984 to
July 28, 1995 (the date of the reorganization of National Aviation with the John
Hancock Global Technology Fund) and shares of the John Hancock Global Technology
Fund from that date to the date of the purchase in question.
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Accumulation Privilege. Investors (including investors combining purchases)
who are already Class A shareholders may also obtain the benefit of a reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price or current account value of the Class A shares already
held by such person.
Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Prospectus) also are available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares of
the Fund and shares of all other John Hancock funds which carry a sales charge.
Letter of Intention. Reduced sales charges are also applicable to
investments in Class A shares made over a specified period pursuant to a Letter
of Intention ("LOI"), which should be read carefully prior to its execution by
an investor. The Fund offers two options regarding the specified period for
making investments under the LOI. All investors have the option of making their
investments over a period of thirteen months. Investors who are using the Fund
as a funding medium for a qualified retirement plan, however, may opt to make
the necessary investments called for by the LOI over a forty-eight month period.
These qualified retirement plans include IRA's, SEP, SARSEP, 401(k), 403(b)
(including TSAs) and 457 plans. Such an investment (including accumulations and
combinations) must aggregate $100,000 or more invested during the specified
period from the date of the LOI or from a date within (90) days prior thereto,
upon written request to Investor Services. The sales charge applicable to all
amounts invested under the LOI is computed as if the aggregate amount intended
to be invested had been invested immediately. If such aggregate amount is not
actually invested, the difference in the sales charge actually paid and the
sales charge payable had the LOI not been in effect is due from the investor.
However, for the purchases actually made within the specified period, the sales
-33-
<PAGE>
charge applicable will not be higher than that which would have applied
(including accumulations and combinations) had the LOI been for the amount
actually invested.
The LOI authorizes Investor Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrow Class A shares will be released. If the total investment specified in
the LOI is not completed, the Class A shares held in escrow may be redeemed and
the proceeds used as required to pay such sales charge as may be due. By signing
the LOI, the investor authorizes Investor Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share
without the imposition of an initial sales charge so that the Fund will receive
the full amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within
six years of purchase will be subject to a contingent deferred sales charge
("CDSC") at the rates set forth in the Prospectus as a percentage of the dollar
amount subject to the CDSC. The charge will be assessed on an amount equal to
the lesser of the current market value or the original purchase cost of the
Class B shares being redeemed. Accordingly, no CDSC will be imposed on increases
in account value above the initial purchase prices, including increases in
account value derived from reinvestment of dividends or capital gains
distributions. No CDSC will be imposed on shares derived from reinvestment of
dividends or capital gains distributions.
Class B shares are not available to full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this number, all
payments during a month will be aggregated and deemed to have been made on the
first day of the month.
-34-
<PAGE>
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through dividend and capital gain reinvestment, and next from the shares you
have held the longest during the six-year period. For this purpose, the amount
of any increase in a share's value above its initial purchase price is not
regarded as a share exempt from CDSC. Thus, when a share that has appreciated in
value is redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. Upon redemption, appreciation is effective only on a per share
basis for those shares being redeemed. Appreciation of shares cannot be redeemed
CDSC free at the account level.
When requesting a redemption for a specific dollar amount please indicate
if you require the proceeds to equal the dollar amount requested. If not
indicated, only the specified dollar amount will be redeemed from your account
and the proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $ 600
* Minus proceeds of 10 shares not
subject to CDSC (dividend reinvestment) -120
* Minus appreciation on remaining shares (40 shares X $2) -80
-----
* Amount subject to CDSC $ 400
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole
or in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of the purchase. See the Prospectus for additional
information regarding the CDSC.
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
-35-
<PAGE>
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account value,
including reinvested dividends, at the time you established your periodic
withdrawal plan and 12% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor Services.
(Please note that this waiver does not apply to periodic withdrawal plan
redemptions of Class A shares that are subject to a CDSC.)
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other qualified plans as
described in the Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or beneficiaries
from employer sponsored retirement plans under Section 401(a) of the Code
(such as 401(k), Money Purchase Pension Plan, Profit-Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for reference.
-36-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
401(a) Plan
Type of (401(k), MPP, IRA, IRA
Distribution PSP) 403(b) 457 Rollover Non-retirement
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- ------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions in periodic
or 12% of payments
account value
annually in
periodic
payments
- ------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for 12% of account
and 70 1/2 Life value annually
Expectancy in periodic
or 12% of payments
account value
annually in
periodic
payments
- ------------------------------------------------------------------------------------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of account
annuity annuity annuity value annually
payments payments payments in periodic
(72+) or (72+) or (72+) or payments
12% of 12% of 12% of
account account account
value value value
annually in annually in annually in
periodic periodic periodic
payments payments payments
- ------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ------------------------------------------------------------------------------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- ------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ------------------------------------------------------------------------------------------
Return of Waived Waived Waived Waived N/A
Excess
- ------------------------------------------------------------------------------------------
</TABLE>
If you qualify for a waiver under one of these situations, you must notify
Investor Services at the time you make your redemption. The waiver will be
granted once Investor Services has confirmed you are entitled to the waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as
-37-
<PAGE>
prescribed by the Trustees. When the shareholder sells portfolio securities
received in this fashion he would incur a brokerage charge. Any such securities
would be valued for the purposes of making such payment at the same value as
used in determining net asset value. The Fund has, however, elected to be
governed by Rule 18f-1 under the Investment Company Act. Under that rule, the
Fund must redeem its shares for cash except to the extent that the redemption
payments to any one shareholder during any 90-day period would exceed the lesser
of $250,000 or 1% of the Fund's net asset value at the beginning of such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of
the Fund for shares of the same class in any other John Hancock fund offering
that class.
Systematic Withdrawal Plan. The Fund permits the establishment of a
Systematic Withdrawal Plan. Payments under this plan represent proceeds arising
from the redemption of the Fund's shares. Since the redemption price of the
shares of the Fund may be more or less than the shareholder's cost, depending
upon the market value of the securities owned by the Fund at the time of
redemption, the distribution of cash pursuant to this plan may result in
recognition of gain or loss for purposes of Federal, state and local income
taxes. The maintenance of a Systematic Withdrawal Plan concurrently with
purchases of additional Class A or Class B shares of the Fund could be
disadvantageous to a shareholder because of the initial sales charge payable on
such purchases of Class A shares and the CDSC imposed on redemptions of Class B
shares and because redemptions are taxable events.
Therefore, a shareholder should not purchase Class A or Class B shares at
the same time as a Systematic Withdrawal Plan is in effect. The Fund reserves
the right to modify or discontinue the Systematic Withdrawal Plan of any
shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Investor Services.
Monthly Automatic Accumulation Program ("MAAP"). The program, as it relates
to automatic investing, is subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Automatic Investing Program
may be revoked by Investor Services without prior notice if any investment is
not honored by the shareholder's bank. The bank shall be under no obligation to
notify the shareholder as to the non-payment of any checks.
-38-
<PAGE>
The Program may be discontinued by the shareholder either by calling
Investor Services or upon notice to Investor Services which is received at least
five (5) business days prior to the processing date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may,
within 120 days after the date of redemption, reinvest without payment of a
sales charge any part of the redemption proceeds in shares of the same class of
the Fund or in any of the other John Hancock funds, subject to the minimum
investment limit in that fund. The proceeds from the redemption of Class A
shares may be reinvested at net asset value without paying a sales charge in
Class A shares of the Fund or in Class A shares of any other John Hancock funds.
If a CDSC was paid upon a redemption, a shareholder may reinvest the proceeds
from such redemption at net asset value in additional shares of the class from
which the redemption was made. Such shareholder's account will be credited with
the amount of any CDSC charged upon the prior redemption and the new shares will
continue to be subject to the CDSC. The holding period of the shares acquired
through reinvestment will, for purposes of computing the CDSC payable upon a
subsequent redemption, include the holding period of the redeemed shares. The
Fund may modify or terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated as described under the heading "Tax
Status."
TAX STATUS
Each series of the Trust, including the Fund, is treated as a separate
entity for tax purposes. The Fund has qualified and has elected to be treated as
a "regulated investment company" under Subchapter M of the Code, and intends to
continue to so qualify for each taxable year. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a four percent nondeductible Federal excise tax
on certain amounts not distributed (and not treated as having been distributed)
on a timely basis in accordance with annual minimum distribution requirements.
The Fund intends under normal circumstances to seek to avoid or minimize
liability for such tax by satisfying such distribution requirements.
-39-
<PAGE>
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions from investment company taxable income
and/or net capital gain may be paid in January but may be taxable to
shareholders as if they had been received on December 31 of the previous year.
The tax treatment described above will apply without regard to whether
distributions are received in cash or reinvested in additional shares of the
Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not directly
related to the Fund's investment in stock or securities, possibly including
speculative currency positions or currency derivatives not used for hedging
purposes, may increase the amount of gain it is deemed to recognize from the
sale of certain investments or derivatives held for less than three months,
which gain is limited under the Code to less than 30% of its gross income for
each taxable year, and may under future Treasury regulations produce income not
among the types of "qualifying income" from which the Fund must derive at least
90% of its gross income for each taxable year. If the net foreign exchange loss
for a year were to exceed the Fund's investment company taxable income computed
without regard to such loss, the resulting overall ordinary loss for such year
would not be deductible by the Fund or its shareholders in future years.
Certain payments received by the Fund with respect to loan participations,
such as commitment fees or facility fees, may not be treated as qualifying
income under the 90% requirement referred to above if they are not properly
treated as interest under the Code.
-40-
<PAGE>
If the Fund invests in stock in certain non-U.S. corporations that receive
at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from these
passive foreign investment companies or gain from the sale of stock in such
companies, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. The Fund would not be able to pass through to
its shareholders any credit or deduction for such a tax. Certain elections may,
if available, ameliorate these adverse tax consequences, but any such election
could require the Fund to recognize taxable income or gain without the
concurrent receipt of cash. The Fund may limit and/or manage its investments in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.
Limitations imposed by the Code on regulated investment companies like the
Fund may restrict the Fund's ability to enter into options contracts, foreign
currency positions and foreign currency forward contracts. Certain of these
transactions may cause the Fund to recognize gains or losses from marking to
market even though its positions have not been sold or terminated and may affect
the character as long-term or short-term (or, in the case of certain foreign
currency options and forward contracts, as ordinary income or loss) of some
capital gains and losses realized by the Fund. Additionally, certain of the
Fund's losses on transactions involving options, forward contracts, and any
offsetting or successor positions in its portfolio may be deferred rather than
being taken into account currently in calculating the Fund's taxable income or
gain. Certain of such transactions may also cause the Fund to dispose of
investments sooner than would otherwise have occurred. These transactions may
therefore affect the amount, timing and character of the Fund's distributions to
shareholders. The Fund will take into account the special tax rules applicable
to options or forward contracts, including consideration of available elections,
in order to seek to minimize any potential adverse tax consequences.
The amount of net realized capital gains, if any, realized in any given
year will result from options transactions and sales of securities made with a
view to the maintenance of a portfolio believed by the Fund's management to be
most likely to attain the Fund's objective. Such sales, and any resulting gains
or losses, may therefore vary considerably from year to year. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or
undistributed taxable income of the Fund. Consequently, subsequent distributions
on those shares from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the purchase price.
-41-
<PAGE>
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and will be long-term or
short-term, depending upon the shareholder's tax holding period for the shares
and subject to the special rules described below. A sales charge paid in
purchasing Class A shares of the Fund cannot be taken into account for purposes
of determining gain or loss on the redemption or exchange of such shares within
90 days after their purchase to the extent Class A shares of the Fund or another
John Hancock fund are subsequently acquired without payment of a sales charge
pursuant to the reinvestment or exchange privilege. This disregarded charge will
result in an increase in the shareholder's tax basis in the shares subsequently
acquired. Also, any loss realized on a redemption or exchange may be disallowed
to the extent the shares disposed of are replaced with other shares of the Fund
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of, such as pursuant to automatic dividend reinvestments. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares.
Although the Fund's present intention is to distribute, at least annually,
all net capital gain, if any, the Fund reserves the right to retain and reinvest
all or any portion of the excess, as computed for Federal income tax purposes,
of net long-term capital gain over net short-term capital loss in any year. The
Fund will not in any event distribute net capital gain realized in any year to
the extent that a capital loss is carried forward from prior years against such
gain. To the extent such excess was retained and not exhausted by the carry
forward of prior years' capital losses, it would be subject to Federal income
tax in the hands of the Fund. Upon proper designation of this amount by the
Fund, each shareholder would be treated for Federal income tax purposes as if
the Fund had distributed to him on the last day of its taxable year his pro rata
share of such excess, and he had paid his pro rata share of the taxes paid by
the Fund and reinvested the remainder in the Fund. Accordingly, each shareholder
would (a) include his pro rata share of such excess as long-term capital gain in
his return for his taxable year in which the last day of the Fund's taxable year
falls, (b) be entitled either to a tax credit on his return for, or to a refund
of, his pro rata share of the taxes paid by the Fund, and (c) be entitled to
increase the adjusted tax basis for his Fund shares by the difference between
his pro rata share of this excess and the pro rata share of these taxes.
For Federal income tax purposes, the Fund is permitted to carryforward a
net capital loss in any year to offset net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset
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by such losses, they would not result in Federal income tax liability to the
Fund and, as noted above, would not be distributed as such to shareholders.
Presently, there are no capital loss carry forwards available to offset future
net capital gains.
Investment in debt obligations that are at risk of or in default presents
special tax issues for the Fund. Tax rules are not entirely clear about issues
such as when the Fund may cease to accrue interest, original issue discount, or
market discount, when and to what extent deductions may be taken for bad debts
or worthless securities, how payments received on obligations in default should
be allocated between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by the Fund, in the event it acquires or holds any such obligations,
in order to reduce the risk of distributing insufficient income to preserve its
status as a regulated investment company and seek to avoid becoming subject to
Federal income or excise tax.
For purposes of the dividends received deduction available to corporations,
dividends received by the Fund from U.S. domestic corporations in respect of any
share of stock held by the Fund, for U.S. Federal income tax purposes, for at
least 46 days (91 days in the case of certain preferred stock) and distributed
and properly designated by the Fund may be treated as qualifying dividends.
Corporate shareholders must meet the minimum holding period requirement stated
above (46 or 91 days) with respect to their shares of the Fund in order to
qualify for the deduction and, if they have any debt that is deemed under the
Code directly attributable to Fund shares, may be denied a portion of the
dividends received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be taken into account in determining
alternative minimum tax liability, if any. Additionally, any corporate
shareholder should consult its tax adviser regarding the possibility that its
tax basis in its shares may be reduced, for Federal income tax purposes, by
reason of "extraordinary dividends" received with respect to the shares, for the
purpose of computing its gain or loss on redemption or other disposition of the
shares.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to the Fund's investments in certain foreign securities.
Tax conventions between certain countries and the U.S. may reduce or eliminate
such taxes in some cases. Investors may be entitled to claim U.S. foreign tax
credits or deductions with respect to foreign income taxes or certain other
foreign taxes ("qualified foreign taxes"), subject to certain provisions and
limitations contained in the Code. Specifically, if more than 50% of the value
of Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends and distributions actually received) their pro rata shares of
qualified foreign taxes paid by the Fund even though not actually received
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by them, and (ii) treat such respective pro rata portions as qualified foreign
taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their shares of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from the
Fund as separate category of income for purposes of computing the limitations on
the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year, if any, that the Fund files the election described
above, its shareholders will be notified of the amount of (i) each shareholder's
pro rata share of qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. If the Fund
cannot or does not make this election, the Fund will deduct the foreign taxes it
pays in determining the amount it has available for distribution to
shareholders, and shareholders will not include these foreign taxes in their
income, nor will they be entitled to any tax deductions or credits with respect
to such taxes.
The Fund is required to accrue income on any debt securities that have more
than a de minimis amount of original issue discount (or debt securities acquired
at a market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options and forward contracts may also
require the Fund to recognize income or gain without a concurrent receipt of
cash. However, the Fund must distribute to shareholders for each taxable year
substantially all of its net income and net capital gains, including such income
or gain, to qualify as a regulated investment company and avoid liability for
any federal income or excise tax. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy these distribution
requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
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The Fund will be required to report to the Internal Revenue Service (the
"IRS") all taxable distributions to shareholders, as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provision.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under this law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of, and receipt of
distributions from, ownership of shares of the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
Fund investment is effectively connected will be subject to U.S. Federal income
tax treatment that is different from that described above. These investors may
be subject to nonresident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8 or authorized substitute for
Form W-8 is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S.
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investors should consult their tax advisers regarding such treatment and the
application of foreign taxes to an investment in the Fund.
Provided that the Fund qualifies as a regulated investment company under
the Code, it will not be required to pay Massachusetts corporate excise or
franchise taxes.
DESCRIPTION OF THE FUND'S SHARES
Ownership of the Fund is represented by transferable shares of beneficial
interest. The Declaration of Trust permits the Trustees to create an unlimited
number of series and classes of shares of the Fund and, with respect to each
series and class, to issue an unlimited number of full or fractional shares and
to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests of the Fund.
Each share of each series or class of the Fund represents an equal
proportionate interest with each other in that series or class, none having
priority or preference over other shares of the same series or class. The
interest of investors in the various series or classes of the Fund is separate
and distinct. All consideration received for the sales of shares of a particular
series or class of the Fund, all assets in which such consideration is invested
and all income, earnings and profits derived from such investments will be
allocated to and belong to that series or class. As such, each such share is
entitled to dividends and distributions out of the net income belonging to that
series or class as declared by the Board of Trustees. Shares of the Fund have a
par value of $0.01 per share. The assets of each series are segregated on the
Fund's books and are charged with the liabilities of that series and with a
share of the Fund's general liabilities. The Board of Trustees determines those
assets and liabilities deemed to be general assets or liabilities of the Fund,
and these items are allocated among each series in proportion to the relative
total net assets of each series.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional classes within any
series (which would be used to distinguish among the rights of different
categories of shareholders, as might be required by future regulations or other
unforeseen circumstances). As of the date of this Statement of Additional
Information, the Trustees have authorized the issuance of two classes of shares
of the Fund, designated as Class A and Class B. Class A and Class B Shares of
the Fund represent an equal proportionate interest in the aggregate net asset
values attributable to that class of the Fund. Holders of Class A Shares and
Class B Shares each have certain exclusive voting rights on matters relating to
the Class A Plan and the Class B Plan, respectively. The different classes of
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the Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares
will be calculated in the same manner, at the same time and on the same day and
will be in the same amount, except for differences resulting from the facts that
(i) the distribution and service fees relating to Class A and Class B shares
will be borne exclusively by that class; (ii) Class B shares will pay higher
distribution and service fees than Class A shares; and (iii) each of Class A
shares and Class B shares will bear any class expenses properly allocable to
such class of shares, subject to the requirements imposed by the Internal
Revenue Service on funds having a multiple- class structure. Accordingly, the
net asset value per share may vary depending whether Class A shares or Class B
shares are purchased.
Voting Rights. Shareholders are entitled to a full vote for each full share
held, except that for Trust-wide shareholder votes the Trustees may determine
that it is appropriate for each dollar of net asset value to be entitled to one
vote and fractional dollars to a proportional vote. The Trustees themselves have
the power to alter the number and the terms of office of Trustees, and they may
at any time lengthen their own terms or make their terms of unlimited duration
(subject to certain removal procedures) and appoint their own successors,
provided that at all times at least a majority of the Trustees have been elected
by shareholders. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose, elect
all Trustees being selected, while the holders of the remaining shares would be
unable to elect any Trustees. Although the Fund need not hold annual meetings of
shareholders, the Trustees may call special meetings of shareholders for action
by shareholder vote as may be required by the 1940 Act or the Declaration of
Trust. Also, a shareholder's meeting must be called if so requested in writing
by the holders of record of 10% or more of the outstanding shares of the Trust.
In addition, the Trustees may be removed by the action of the holders of record
of two-thirds or more of the outstanding shares.
Shareholder Liability. The Declaration of Trust provides that no Trustee,
officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability may
arise from his or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
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As a Massachusetts business trust, the Fund is not required to issue share
certificates. The Fund shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the trust. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations and affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Liability is therefore limited to circumstances in which the
Fund itself would be unable to meet its obligations, and the possibility of this
occurrence is remote.
Notwithstanding the fact that the Prospectus is a combined prospectus for
the Fund and other John Hancock mutual funds, the Fund shall not be liable for
the liabilities of any other John Hancock mutual fund.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
CALCULATION OF PERFORMANCE
The average annual total return of the Class A shares of the Fund for the 1
year, 5 year and 10 year periods ended June 30, 1996 was 3.25%, 21.18%, and
11.40%, respectively.
The average annual total return of the Class B shares of the Fund for the 1
year period ended June 30, 1996 and since inception on January 3, 1994 was
2.95% and 21.05%, respectively.
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1 year, 5 year and 10 year periods that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
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T = NROOT n(ERV/P) -1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1, 5 and 10 year periods.
This calculation assumes the maximum sales charge of 5.00% is included in
the initial investment or the CDSC is applied at the end of the period and also
assumes that all dividends and distributions are reinvested at net asset value
on the reinvestment dates during the period.
In addition to average annual total returns, the Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the change in value of an
investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Fund's 5.00% sales charge
on Class A shares or the CDSC on Class B shares into account. Excluding the
Fund's sales charge on Class A shares and the CDSC on Class B shares from a
total return calculation produces a higher return figure.
From time to time, in reports and promotional literature, the Fund's total
return will be compared to indices of mutual funds such as Lipper Analytical
Services, Inc.'s "Lipper-Mutual Performance Analysis," monthly publications
which track net assets and total return on equity mutual funds in the United
States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are also used
for comparison purposes, as well as the Russell and Wilshire Indices.
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Performance rankings and ratings reported periodically in national
financial publications such as Money magazine, Forbes, Business Week, The Wall
Street Journal, Micropal, Inc., Morning Star Inc., Stanger's and Barron's, etc.,
will also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of capital stock; and changes in
operating expenses are all examples of items that can increase or decrease the
Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser pursuant to
recommendations made by its investment committee, which consists of officers and
directors of the Adviser and officers and Trustees of the Trust who are
interested persons of the Trust, and by the Sub-Adviser. Orders for purchases
and sales of securities are placed in a manner, which, in the opinion of the
Adviser, will offer the best price and market for the execution of each such
transaction. Purchases from underwriters of portfolio securities may include a
commission or commissions paid by the issuer and transactions with dealers
serving as market maker reflect a "spread." Investments in debt securities are
generally traded on a net basis through dealers acting for their own account as
principals and not as brokers; no brokerage commissions are payable on such
transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. and other policies as the Trustees may determine, the Adviser and
the Sub-Adviser may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in
the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser and
Sub-Adviser of the Fund, and their value and expected contribution to the
performance of the Fund. It is not possible to place a dollar value on
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information and services to be received from brokers and dealers, since it is
only supplementary to the research efforts of the Adviser and Sub-Adviser. The
receipt of research information is not expected to reduce significantly the
expenses of the Adviser and Sub-Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund.
Similarly, research information and assistance provided to the Sub-Adviser by
brokers and dealers may benefit other advisory clients or affiliates of the
Sub-Adviser. The Fund will make no commitment to allocate portfolio transactions
upon any prescribed basis. While the Adviser, together with the Sub-Adviser,
will be primarily responsible for the allocation of the Fund's brokerage
business, the policies and practices of the Adviser in this regard must be
consistent with the foregoing and will at all times be subject to review by the
Board of Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Fund may pay to a broker which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Board of Trustees that the price
is reasonable in light of the services provided and policies as the Board of
Trustees may adopt from time to time. During the fiscal year ended December 31,
1995, the Fund directed commissions in the amount of $34,300 to compensate
brokers for research services such as industry, economic and company reviews and
evaluations of securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its subsidiaries,
three of which, Tucker Anthony Incorporated, John Hancock Distributors, Inc. and
Sutro & Company, Inc. are broker-dealers ("Affiliated Brokers"). Pursuant to
procedures determined by the Trustees and consistent with the above policy of
obtaining best net results, the Fund may execute portfolio transactions with or
through Affiliated Brokers. During the years ended December 31, 1995, 1994 and
1993, the Fund did not execute any portfolio transactions with Affiliated
Brokers.
During 1993, 1994 and 1995, the Fund paid total brokerage commissions,
excluding spreads or commissions on principal transactions, of $40,949, $81,677
and $102,799, respectively.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly-owned indirect subsidiary of the Life Company, is the
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transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$19.00 for each Class A shareholder and $21.50 for each Class B shareholder,
plus certain out-of-pocket expenses. These expenses are aggregated and charged
to the Fund and allocated to each class on the basis of the relative net asset
values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02111. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts 02110. Price Waterhouse LLP audits and renders an
opinion on the Fund's annual financial statements and reviews the Fund's annual
Federal income tax return.
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APPENDIX A
DESCRIPTION OF BOND RATINGS*
Moody's Bond ratings
Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most likely to impair
the fundamentally strong position of such issues.
Bonds which are rated 'Aa' are judged to be of high quality by all
standards. Together with the 'Aaa' group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in 'Aaa' securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in 'Aaa'
securities .
Bonds which are rated 'A' possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated 'Baa' are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position,
characterizes bonds in this class.
Bonds which are rated 'B' generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated 'Caa' are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
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* As described by the rating companies themselves.
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Bonds which are rated 'Ca' represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Standard & Poor's Bond ratings
AAA. This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB. Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB. Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B. Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB-rating.
CCC. Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied 'CCC' rating.
CC. The rating 'CC' is typically applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
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FINANCIAL STATEMENTS
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John Hancock Series Trust
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements listed below are included in and incorporated
by reference into Part B of the Registration Statement from the Global
Technology 1995 Annual Report to Shareholders for the year ended December 31,
1995 (filed electronically on February 26, 1996; file nos. 811-3392, and
2-75807; accession number 0000950135-96-001155) and Semi-Annual Report to
Shareholders for the period ended June 30, 1996 (filed electronically on August
22, 1996; file nos. 811-3392 and 2-75807; accession number
0001005477-96-000251); Emerging Growth Fund 1995 Annual Report to Shareholders
for the year ended October 31, 1995 (filed electronically on April 25, 1996;
file nos. 811-5254 and 33-16048, accession number 0001010521-96-000044) and
Semi-Annual Report to Shareholders for the period ended April 30, 1996 (filed
electronically on June 28, 1996, file nos. 811-5254 and 33-16048; accession
number 0001005477-96-000175).
John Hancock Global Technology Fund
-----------------------------------
Statement of Assets and Liabilities as of December 31, 1995.
Statement of Operations for the period ended December 31, 1995.
Statement of Changes in Net Asset for the period ended December 31, 1995.
Notes to Financial Statements.
Financial Highlights for each of the 10 years ended December 31, 1995.
Schedule of Investments as of December 31, 1995.
Report of Independent Auditors.
Statement of Assets and Liabilites as of June 30, 1996.
Statement of Operations for the period ended June 30, 1996.
Statement of Changes in Net Asset for the period ended June 30, 1996.
Notes to Financial Statements.
Financial Highlights for each of the 10 years ended June 30, 1996.
Schedule of Investments as of June 30, 1996.
John Hancock Emerging Growth Fund
---------------------------------
Statement of Assets and Liabilities as of October 31, 1995.
Statement of Operations for the year ended October 31, 1995.
Statement of Changes in Net Asset for the years ended October 31, 1995.
Notes to Financial Statements.
Financial Highlights for the years ended October 31, 1995.
Schedule of Investments as of October 31, 1995.
Report of Independent Auditors.
C-1
<PAGE>
Statement of Assets and Liabilities as of April 30, 1996 (unaudited).
Statement of Operations for the six months ended April 30, 1996
(unaudited).
Statement of Changes in Net Assets for the year ended October 31, 1995 and
for the six months ended April 30, 1996 (unaudited).
Notes to Financial Statements (unaudited).
Financial Highlights for each of the five years in the period ended October
31, 1995 and for the six months ended April 30, 1996 (unaudited).
Schedule of Investments as of April 30, 1996 (unaudited).
(b) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common control
with Registrant.
Item 26. Number of Holders of Securities
As of August 30, 1996, the number of record holders of shares of Registrant
was as follows:
Title of Class Number of Record Holders
John Hancock Global Technology Fund
Class A Shares - 23,298
Class B Shares - 8,823
John Hancock Emerging Growth Fund
Class A Shares - 7,634
Class B Shares - 35,784
Item 27. Indemnification
Section 4.3 of Registrant's Declaration of Trust provides that (i) every
person who is, or has been, a Trustee, officer, employee or agent of the
Trust (including any individual who serves at its request as director,
officer, partner, trustee or the like of another organization in which it
has any interest as a shareholder, creditor or otherwise) shall be
indemnified by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, to the
fullest extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof; and that
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
However, no indemnification shall be provided to a Trustee or officer (i)
against any liability to the Trust, a Series thereof or the Shareholders by
C-2
<PAGE>
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office; (ii) with
respect to any matter as to which he shall have been finally adjudicated
not to have acted in good faith in the reasonable belief that his action
was in the best interest of the Trust or a Series thereof; (iii) in the
event of a settlement or other disposition not involving a final
adjudication resulting in a payment by a Trustee or officer, unless there
has been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office by (A) a court by (B) a
majority of the Non- interested trustees or independent legal counsel, or
(C) a vote of the majority of the Fund's outstanding shares.
The rights of indemnification may be insured against by policies maintained
by the Trust, shall be severable, shall not affect any other rights to
which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors, administrators and
assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust or any Series thereof
other than Trustees and officers may be entitled by contract or otherwise
under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding may be advanced by the Trust or a Series thereof before
final disposition, if the recipient undertakes to repay the amount if it is
ultimately determined that he is not entitled to indemnification, provided
that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or Series
thereof shall be insured against losses arising out of any such
advances; or (ii) a majority of the Non-interested Trustees acting on
the matter (provided that a majority of the Non-interested Trustees
act on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the recipient ultimately will be found entitled to
indemnification.
For purposes of indemnification Non-interested Trustee" is one who (i)
is not an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule,
regulation or order of the Commission), and (ii) is not involved in
the claim, action, suit or proceeding.
(b) Under the Distribution Agreement. Under Section 12 of the Distribution
Agreement, John Hancock Funds, Inc. ("John Hancock Funds") has agreed to
indemnify the Registrant and its Trustees, officers and controlling persons
against claims arising out of certain acts and statements of John Hancock Funds.
C-3
<PAGE>
Section 9(a) of the By-Laws of the Insurance Company provides, in effect,
that the Insurance Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the of the Insurance
Company who serves as a Trustee or officer of the Registrant at the direction or
request of the Insurance Company against litigation expenses and liabilities
incurred while acting as such, except that such indemnification does not cover
any expense or liability incurred or imposed in connection with any matter as to
which such person shall be finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Insurance Company. In addition, no such person will be indemnified by the
Insurance Company in respect of any liability or expense incurred in connection
with any matter settled without final adjudication unless such settlement shall
have been approved as in the best interests of the Insurance Company either by
vote of the Board of Directors at a meeting composed of directors who have no
interest in the outcome of such vote, or by vote of the policyholders. The
Insurance Company may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an undertaking by the
person indemnified to repay such payment if he should be determined to be
entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and the Adviser
provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability was not
incurred by reason of gross negligence or reckless disregard of the duties
involved in the conduct of his office, and expenses in connection therewith may
be advanced by the Corporation, all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The underwriting
Agreement, the By-Laws of John Hancock Funds, the Adviser, or the Insurance
Company or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
C-4
<PAGE>
of appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Investment
Adviser, reference is made to Forms ADV (801-8124) filed under the Investment
Advisers Act of 1940, herein incorporated by reference.
Item 29. Principal Underwriters
(a) John Hancock Funds acts as principal underwriter for the Registrant and also
serves as principal underwriter or distributor of shares for John Hancock Cash
Reserve, Inc., John Hancock Bond Trust, John Hancock Current Interest, John
Hancock Series, Inc., John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Limited-Term
Government Fund, John Hancock Sovereign Investors Fund, Inc., John Hancock
Special Equities Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt
Series Fund, John Hancock Strategic Series, John Hancock Technology Series, Inc.
and John Hancock World Fund, John Hancock Investment Trust, John Hancock
Institutional Series Trust, Freedom Investment Trust, Freedom Investment Trust
II and Freedom Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Director, Chairman, President and Trustee, Chairman, and Chief
101 Huntington Avenue Chief Executive Officer Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman and Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
James McLaughlin Senior Vice President and Chief None
101 Huntington Avenue Financial Officer
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
C-6
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Christopher M. Meyer Second Vice President and None
101 Huntington Avenue Treasurer
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-7
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Allessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Masschusetts
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Keith Harstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-8
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
Registrant maintains the records required to be maintained by it under
Rules 31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment Company Act of
1940 as its principal executive offices at 101 Huntington Avenue, Boston
Massachusetts 02199-7603. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities,
may be maintained pursuant to Rule 31a-3 at the main office of Registrant's
Transfer Agent and Custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series upon
request and without charge.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
13th day of September, 1996.
JOHN HANCOCK TECHNOLOGY SERIES, INC.
By: *
------------------------------------
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ------------------------ Chairman and Chief Executive
Edward J. Boudreau, Jr. Officer (Principal Executive Officer)
/s/James B. Little
- ------------------------ Senior Vice President and Chief September 13, 1996
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
James F. Carlin
*
- ------------------------ Trustee
William H. Cunningham
*
- ------------------------ Trustee
Charles F. Fretz
*
- ------------------------ Trustee
Harold R. Hiser, Jr.
*
- ------------------------ Trustee
Anne C. Hodsdon
*
- ------------------------ Trustee
Charles L. Ladner
C-10
<PAGE>
*
- ------------------------ Trustee
Leo E. Linbeck, Jr.
*
- ------------------------ Trustee
Patricia P. McCarter
*
- ------------------------ Trustee
Steven R. Pruchansky
*
- ------------------------ Trustee
Norman H. Smith
*
- ------------------------ Trustee
Richard S. Scipione
*
- ------------------------ Trustee
John P. Toolan
By: /s/Susan S. Newton September 13, 1996
------------------
Susan S. Newton,
Attorney-in-Fact
Powers of Attorney dated
June 25, 1996, filed herewith
</TABLE>
C-11
<PAGE>
John Hancock Global Technology Fund
John Hancock Emerging Growth Fund
POWER OF ATTORNEY
The undersigned Trustee/Director of each of the above listed Trusts, each a
Massachusetts business trust, and Corporations, each a Maryland Corporation,
does hereby severally constitute and appoint EDWARD J. BOUDREAU, JR., SUSAN S.
NEWTON, AND JAMES B. LITTLE, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any Registration
Statement on Form N-1A and any Registration Statement on Form N-14 to be filed
by the Trust under the Investment Company Act of 1940, as amended (the "1940
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), and
any and all amendments to said Registration Statements, with respect to the
offering of shares and any and all other documents and papers relating thereto,
and generally to do all such things in my name and on my behalf in the capacity
indicated to enable the Trust to comply with the 1940 Act and the 1933 Act, and
all requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any such Registration Statements and any and all amendments
thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 25th day of June, 1996.
/s/Edward J. Boudreau, Jr. /s/Leo E. Linbeck, Jr.
- ----------------------------- --------------------------
Edward J. Boudreau, Jr. Leo E. Linbeck, Jr.
/s/ James F. Carlin /s/Patricia P. McCarter
- ----------------------------- --------------------------
James F. Carlin Patricia P. McCarter
/s/ William H. Cunningham /s/Steven R. Pruchansky
- ----------------------------- --------------------------
William H. Cunningham Steven R. Pruchansky
/s/Charles F. Fretz /s/Richard S. Scipione
- ----------------------------- --------------------------
Charles F. Fretz Richard S. Scipione
/s/Harold R. Hiser, Jr. /s/Norman H. Smith
- ----------------------------- --------------------------
Harold R. Hiser, Jr. Norman H. Smith
/s/Anne C. Hodsdon /s/John P. Toolan
- ----------------------------- --------------------------
Anne C. Hodsdon John P. Toolan
/s/Charles L. Ladner
- -----------------------------
Charles L. Ladner
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
13th day of September, 1996.
JOHN HANCOCK SERIES TRUST
By: *
------------------------------------
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ------------------------ Chairman and Chief Executive
Edward J. Boudreau, Jr. Officer (Principal Executive Officer)
/s/James B. Little
- ------------------------ Senior Vice President and Chief September 13, 1996
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
James F. Carlin
*
- ------------------------ Trustee
William H. Cunningham
*
- ------------------------ Trustee
Charles F. Fretz
*
- ------------------------ Trustee
Harold R. Hiser, Jr.
*
- ------------------------ Trustee
Anne C. Hodsdon
*
- ------------------------ Trustee
Charles L. Ladner
C-13
<PAGE>
*
- ------------------------ Trustee
Leo E. Linbeck, Jr.
*
- ------------------------ Trustee
Patricia P. McCarter
*
- ------------------------ Trustee
Steven R. Pruchansky
*
- ------------------------ Trustee
Norman H. Smith
*
- ------------------------ Trustee
Richard S. Scipione
*
- ------------------------ Trustee
John P. Toolan
By: /s/Susan S. Newton September 13, 1996
------------------
Susan S. Newton,
Attorney-in-Fact
Powers of Attorney dated
September 10, 1996, filed herewith
</TABLE>
C-14
<PAGE>
JOHN HANCOCK SERIES TRUST
POWER OF ATTORNEY
The undersigned Trustee of the above listed Trust, a Massachusetts
business trust, does hereby severally constitute and appoint EDWARD J. BOUDREAU,
JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
acting singly, to sign for me, in my name and in the capacity indicated below,
any Registration Statement on Form N-1A and any Registration Statement on Form
N-14 to be filed by the Trust under the Investment Company Act of 1940, as
amended (the "1940 Act"), and under the Securities Act of 1933, as amended (the
"1933 Act"), and any and all amendments to said Registration Statements, with
respect to the offering of shares and any and all other documents and papers
relating thereto, and generally to do all such things in my name and on my
behalf in the capacity indicated to enable the Trust to comply with the 1940 Act
and the 1933 Act, and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any such Registration Statements and any and
all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 10th day of September, 1996.
/s/Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.
/s/James F. Carlin
James F. Carlin
/s/William H. Cunningham
William H. Cunningham
/s/Charles F. Fretz
Charles F. Fretz
/s/Harold R. Hiser, Jr.
Harold R. Hiser, Jr.
/s/Anne C. Hodsdon
Anne C. Hodsdon
C-15
<PAGE>
/s/Charles L. Ladner
Charles L. Ladner
/s/Leo E. Linbeck, Jr.
Leo E. Linbeck, Jr.
/s/Patricia P. McCarter
Patricia P. McCarter
/s/Steven R. Pruchansky
Steven R. Pruchansky
/s/Richard S. Scipione
Richard S. Scipione
/s/Norman H. Smith
Norman H. Smith
/s/John P. Toolan
John P. Toolan
C-16
<PAGE>
John Hancock Series Trust
EXHIBIT INDEX
Exhibit No. Exhibit Description
99.B1 Articles of Incorporation of Registrant dated December 8, 1993.*
99B.1.1 Articles Supplementary dated December 8, 1993.*
99B1.2 Articles Supplementary dated December 4, 1994.*
99.B2 Amended By-Laws of Registrant as of November 30, 1993.*
99.B4 Specimen share certificate for the Registrant.*
99.B5 Investment Management Contract between Registrant and John
Hancock Advisers, Inc. dated December 6, 1991 as amended January
1, 1994.*
99.B5.1 Sub-Advisery Agreement between Registrant and American Fund
Advisor, Inc.*
99.B6 Distribution Agreement with Registrant and John Hancock Broker
Distribution Services, Inc. dated December 6, 1991.*
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock Broker
Distribution Services, Inc. and Selected Dealers.*
99.B6.2 Form of Financial Institution Sales and Service Agreement.*
99.B7 None
99.B8 Master Custodian Agreement between John Hancock Mutual Funds and
Investors Bank and Trust Company dated December 15, 1992.*
99.B9 Transfer Agency Agreement between Registrant and John Hancock
Fund Services, Inc. dated December 6, 1991.*
99.B10 None
99.B11 Auditor's Consents.+
99.B12 Not Applicable
99.B13 None
99.B14 None
<PAGE>
Exhibit No. Exhibit Description
99.B15 Class A Distribution Plan between John Hancock Global Technology
Fund dated July 28, 1995 and John Hancock Funds, Inc.**
99.B15.1 Class B Distribution Plan between John Hancock Global Technology
Fund dated July 28, 1995 and John Hancock Funds, Inc.**
99.B16 Schedule of Computation of Yield and Total Return.*
27.1A Global Technology - Annual+
27.1B Global Technology - Annual+
27.2A Global Technology - Semi-Annual+
27.2B Global Technology - Semi-Annual+
27.3A Emerging Growth- Annual+
27.3B Emerging Growth - Annual+
27.4A Emerging Growth - Semi-Annual+
27.4B Emerging Growth - Semi-Annual+
* Previously filed electronically with Post-effective amendment number 24
(file no. 8-113392 and 2-75807) on April 26, 1995, accession number
0000950135-95-00100.
** Previously filed electronically with Post-Effective Amendment number 25
(file nos. 811-3392 and 2-75807) on April 29, 1996, accession number
0001010521-96-000047.
+ Filed herewith.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for Emerging Growth Fund in the John Hancock Growth Funds Prospectus
and "Independent Auditors" in the John Hancock Emerging Growth Funds Class A and
Class B Shares Statement of Additional Information in Post-Effective amendment
No. 27 to the Registration Statement (Form N-1A, No. 2-75808) dated December 2,
1996.
We also consent to this incorporation by reference therein of our report dated
December 15, 1995, with respect to the financial statements and financial
highlights of the John Hancock Emerging Growth Fund (one of the portfolios
constituting John Hancock Series Trust) in this Form N-1A.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
September 11, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post Effective
Amendment No. 27 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated February 7, 1996, relating to the financial
statements and financial highlights appearing in the December 31, 1995 Annual
Report to Shareholders of the John Hancock Global Technology Fund, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in such Prospectus
and under the heading "Independent Auditors" in such Statement of Additional
Information.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
September 11, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> JOHN HANCOCK GLOBAL TECHNOLOGY FUND - CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 125,427,210
<INVESTMENTS-AT-VALUE> 191,911,514
<RECEIVABLES> 456,533
<ASSETS-OTHER> 12,505
<OTHER-ITEMS-ASSETS> 66,484,304
<TOTAL-ASSETS> 192,380,552
<PAYABLE-FOR-SECURITIES> 1,234,063
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 391,651
<TOTAL-LIABILITIES> 1,625,714
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,270,534
<SHARES-COMMON-STOCK> 6,324,664
<SHARES-COMMON-PRIOR> 2,925,484
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66,484,304
<NET-ASSETS> 190,754,838
<DIVIDEND-INCOME> 248,870
<INTEREST-INCOME> 749,744
<OTHER-INCOME> 0
<EXPENSES-NET> 2,308,243
<NET-INVESTMENT-INCOME> (1,309,629)
<REALIZED-GAINS-CURRENT> 13,461,306
<APPREC-INCREASE-CURRENT> 13,067,131
<NET-CHANGE-FROM-OPS> 25,218,808
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<NAME> JOHN HANCOCK GLOBAL TECHNOLOGY FUND - CLASS B
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<NAME> JOHN HANCOCK GLOBAL TECHNOLOGY FUND - CLASS A
<S> <C>
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<NAME> JOHN HANCOCK GLOBAL TECHNOLOGY FUND - CLASS B
<S> <C>
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<TABLE> <S> <C>
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<NUMBER> 031
<NAME> JOHN HANCOCK EMERGING GROWTH FUND - A
<S> <C>
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<NUMBER> 032
<NAME> JOHN HANCOCK EMERGING GROWTH FUND - B
<S> <C>
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<NAME> JOHN HANCOCK EMERGING GROWTH FUND - CLASS A
<S> <C>
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<NUMBER> 042
<NAME> JOHN HANCOCK EMERGING GROWTH FUND - CLASS B
<S> <C>
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