REGISTRATION NO. 2-48925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, C.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. 40 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 23
(Check appropriate box or boxes)
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JOHN HANCOCK SOVEREIGN BOND FUND
(Exact Name of Registrant as Specified in Charter)
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 375-1700
---------
THOMAS H. DROHAN
VICE PRESIDENT AND SECRETARY
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (Check appropriate box)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[X] ON MAY 1, 1996 PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE (485 OR 486)
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, 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 ITS MOST RECENT
FISCAL YEAR ON OR ABOUT FEBRUARY 26, 1996.
<PAGE>
<TABLE>
<CAPTION>
JOHN HANCOCK SOVEREIGN BOND FUND
Cross Reference Sheet
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ---------------------- ------------------ -----------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; The Fund's Expenses; *
Share Price
3 The Fund's Financial Highlights; *
Performance
4 Investment Objectives and Policies; *
Organization and Management of the Fund
5 Organization and Management of the Fund; *
The Fund's Expenses; Back Cover Page
6 Organization and Management of the Fund; *
Dividends and Taxes; How to Buy Shares;
How to Redeem Shares; Additional Services
and Programs
7 How to Buy Shares; Share Price; *
Additional Services and Programs;
Alternative Purchase Arrangements; The
Fund's Expenses; Back Cover Page
8 How to Redeem Shares *
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
<PAGE>
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ---------------------- ------------------ -----------------------
16 * Investment Advisory 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
Sovereign
Bond Fund
Class A and Class B Shares
Prospectus
May 1, 1996
TABLE OF CONTENTS
Page
-------
Expense Information 2
The Fund's Financial Highlights 3
Investment Objective and Policies 5
Organization and Management of the Fund 9
Alternative Purchase Arrangements 10
The Fund's Expenses 11
Dividends and Taxes 12
Performance 13
How to Buy Shares 14
Share Price 15
How to Redeem Shares 20
Additional Services and Programs 22
Appendix 26
This Prospectus sets forth information about John Hancock Sovereign Bond
Fund (the "Fund") a diversified fund, that you should know before investing.
Please read and retain it for future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC"). You can obtain a copy of the Fund's
Statement of Additional Information, dated May 1, 1996, and incorporated by
reference in this Prospectus, free of charge by writing or telephoning: John
Hancock Investor Services Corporation, P.O. Box 9116, Boston, Massachusetts
02205-9116, 1-800-225-5291, (1-800-554-6713 TDD).
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
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.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses of the Fund's Class
A and Class B shares for the fiscal year ended December 31, 1995, adjusted to
reflect current fees and expenses. Actual fees and expenses in the future may
be greater or less than those indicated.
Class A Class B
Shares Shares
------- ---------
Shareholder Transaction Expenses
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* 5.00%
Redemption fee+ None None
Exchange fee None None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management fee 0.50% 0.50%
12b-1 fee** 0.30% 1.00%
Other expenses 0.35% 0.35%
Total Fund operating expenses 1.15% 1.85%
*No sales charge is payable at the time of purchase on investments of $1
million or more, but a contingent deferred sales charge may be imposed on
these investments, as described under the caption "Share Price," in the
event of certain redemption transactions within one year of purchase.
**The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Fund's average daily net assets, and the remaining portion
will be used to cover distribution expenses. See "The Fund's Expenses."
+Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
1 3 5 10
Example: Year Years Years Years
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment, assuming 5% annual return:
Class A Shares $56 $80 $105 $178
Class B Shares
-- Assuming complete redemption at end of period $69 $88 $120 $199
-- Assuming no redemption $19 $58 $100 $199
</TABLE>
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the
maximum front-end sales charge permitted under the National Association of
Securities Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained
in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "Investment Advisory
and Other Services" and "Distribution Contract."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose unqualified report is
included in the Fund's 1995 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, that may be
obtained free of charge by writing or telephoning John Hancock Investor
Services Corporation ("Investor Services") at the address or telephone number
listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991 1990
----- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.90 $15.53 $15.29 $15.31 $14.33 $14.77
--- ---- --- --- --- ---
Net Investment Income 1.12 1.12 1.14 1.20 1.29 1.32
Net Realized & Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts 1.50 (1.55) 0.62 (0.01) 0.98 (0.40)
--- ---- --- --- --- ---
Total from Investment Operations 2.62 (0.43) 1.76 1.19 2.27 0.92
--- ---- --- --- --- ---
Less Distributions:
Dividends from Net Investment Income (1.12) (1.12) (1.14) (1.21) (1.29) (1.35)
Distributions to shareholders from Capital
Paid-In -- -- -- -- -- (0.01)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts -- (0.08) (0.38) -- -- --
--- ---- --- --- --- ---
Total Distributions (1.12) (1.20) (1.52) (1.21) (1.29) (1.36)
--- ---- --- --- --- ---
Net Asset Value, End of Period $15.40 $13.90 $15.53 $15.29 $15.31 $14.33
=== ==== === === === ===
Total Investment Return at Net Asset
Value (e) 19.40% (2.75%) 11.80% 8.08% 16.59% 6.71%
Ratios and Supplemental Data
Net Assets, End of period (000,000's
omitted) $1,535 $1,326 $1,506 $1,386 $1,250 $1,103
Ratio of Expenses to Average Net Assets 1.13% 1.26% 1.41% 1.44% 1.27% 1.31%
Ratio of Net Investment Income to Average
Net Assets 7.58% 7.74% 7.18% 7.89% 8.81% 9.18%
Portfolio Turnover Rate 103%+ 85% 107% 87% 90% 92%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1989 1988 1987 1986
----- ------ ----- -----
<S> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.51 $14.53 $15.89 $15.85
--- ---- --- ---
Net Investment Income 1.43 1.44 1.40 1.55
Net Realized & Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts 0.27 (0.06) (1.17) 0.52
--- ---- --- ---
Total from Investment Operations 1.70 1.38 0.23 2.07
--- ---- --- ---
Less Distributions:
Dividends from Net Investment Income (1.44) (1.40) (1.53) (1.53)
Distributions to shareholders from Capital
Paid-In -- -- -- --
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts -- -- (0.06) (0.50)
--- ---- --- ---
Total Distributions (1.44) (1.40) (1.59) (2.03)
--- ---- --- ---
Net Asset Value, End of Period $14.77 $14.51 $14.53 $15.89
=== ==== === ===
Total Investment Return at Net Asset
Value (e) 12.13% 9.82% 1.58% 13.67%
Ratios and Supplemental Data
Net Assets, End of period (000,000's
omitted) $1,110 $1,104 $1,095 $1,152
Ratio of Expenses to Average Net Assets 0.80% 0.82% 0.82% 0.72%
Ratio of Net Investment Income to Average
Net Assets 9.68% 9.77% 9.32% 9.65%
Portfolio Turnover Rate 64% 66% 159% 163%
</TABLE>
3
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ---------- ----------
<S> <C> <C> <C>
CLASS B(a)
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 13.90 $ 15.52 $15.90(b)
------------ -------- --------
Net Investment Income 1.02 1.04 0.11
Net Realized & Unrealized Gain (Loss) on Investments and Financial
Futures Contracts 1.50 (1.54) --
------------ -------- --------
Total from Investment Operations 2.52 (0.50) 0.11
------------ -------- --------
Less Distributions:
Dividends from Net Investment Income (1.02) (1.04) (0.11)
Distributions from Net Realized Gain on Investments Sold and
Financial Futures Contracts -- (0.08) (0.38)
------------ -------- --------
Total Distributions (1.02) (1.12) (0.49)
------------ -------- --------
Net Asset Value, End of Period $ 15.40 $ 13.90 $15.52
============ ======== ========
Total Investment Return at Net Asset Value (e) 18.66% (3.13%) 0.90%
Ratios and Supplemental Data
Net Assets, End of period (000's omitted) $98,739 $40,299 $4,125
Ratio of Expenses to Average Net Assets 1.75% 1.78% 1.63%*
Ratio of Net Investment Income to Average Net Assets 6.87% 7.30% 0.57%*
Portfolio Turnover Rate 103%+ 85% 107%
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 22, 1995
(UNAUDITED) YEAR ENDED DECEMBER 31,
------------ ----------------------
1994 1993
<S> <C> <C> <C>
CLASS C(c)
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 13.90 $ 15.52 $15.86(b)
------------ -------- --------
Net Investment Income 0.42 1.19 0.81
Net Realized & Unrealized Gain (Loss) on Investments and Financial
Futures Contracts 0.91 (1.54) 0.04
------------ -------- --------
Total from Investment Operations 1.33 (0.35) 0.85
------------ -------- --------
Less Distributions:
Dividends from Net Investment Income (0.43) (1.19) (0.81)
Distributions from Net Realized Gain on Investments Sold and
Financial Futures Contracts -- (0.08) (0.38)
------------ -------- --------
Total Distributions (0.43) (1.27) (1.19)
------------ -------- --------
Net Asset Value, End of Period $ 14.80 $ 13.90 $15.52
============ ======== ========
Total Investment Return at Net Asset Value (e) 9.73%(d) (2.19%) 5.45%
Ratios and Supplemental Data
Net Assets, End of period (000's omitted) $ 142 $ 1,670 $ 867
------------ -------- --------
Ratio of Expenses to Average Net Assets 0.67%* 0.73% 0.90%*
Ratio of Net Investment Income to Average Net Assets 7.82%* 8.28% 4.90%*
Portfolio Turnover Rate N/A 85% 107%
</TABLE>
* On an annualized basis.
+ Portfolio turnover excludes merger activity.
(a) Class B shares commenced operations on November 23, 1993.
(b) Initial price to commence operations.
(c) Class C shares commenced operations on May 7, 1993. Net asset value and
net assets at the end of the period reflect amounts prior to the
redemption of all shares on May 22, 1995.
(d) Not annualized.
(e) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
N/A Not applicable.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
[sidebar]
The Fund's investment objective
is to generate a high level of
current income consistent
with prudent investment risk.
The Fund's investment objective is to generate a high level of current
income, consistent with prudent investment risk, through investment in a
diversified portfolio of freely marketable debt securities. The Fund's
Adviser seeks high current income consistent with the moderate level of risk
associated with a portfolio consisting primarily of investment grade debt
securities.
Under normal market conditions, at least 65% of the value of the Fund's
assets will be in bonds and/or debentures. In addition, the Fund contemplates
that at least 75% of the value of its total investments in debt securities
(other than commercial paper) will be represented by those securities that
have, at the time of purchase, a rating within the four highest grades as
determined by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa)
or Standard & Poor's Ratings Group ("S&P") (AAA, AA, A, or BBB) and debt
securities of banks, the U.S. Government and its agencies or
instrumentalities and other issuers which, although not rated as a matter of
policy by either Moody's or S&P, are considered by the Fund to have
investment quality comparable to securities receiving ratings within the four
highest grades. Debt securities rated Baa or BBB are considered medium-grade
obligations with speculative characteristics and adverse economic conditions
or changing circumstances may weaken the issuers' capacity to pay interest
and repay principal. The Fund will diversify its investments among a number
of industry groups without concentration in any particular industry. The
Fund's investments, and consequently its net asset value, will be subject to
the market fluctuations and risks inherent in all securities. There is no
assurance that the Fund will achieve its investment objective.
Securities of domestic and foreign issuers. The Fund may invest in U.S.
dollar-denominated securities of foreign and United States issuers that are
issued in or outside of the U.S. Foreign companies may not be subject to
accounting standards and government supervision comparable to U.S. companies,
and there is often less publicly available information about their
operations. Foreign markets generally provide less liquidity than U.S.
markets (and thus potentially greater price volatility) and typically provide
fewer regulatory protections for investors. Foreign securities can also be
affected by political or financial instability abroad. It is anticipated that
under normal conditions, the Fund will not invest more than 25% of its total
assets in foreign securities (excluding U.S. dollar-denominated Canadian
securities).
Mortgage-Backed and Derivative Securities
Mortgage-backed securities represent participation interests in pools of
adjustable and fixed mortgage loans which are guaranteed by agencies or
instrumentalities of the U.S. Government. Unlike conventional debt
obligations, mortgage-backed securities provide monthly payments derived from
the monthly interest and principal payments (including any prepayments) made
by the individual borrowers on the pooled mortgage loans. The mortgage loans
underlying mortgage-backed securities are generally subject to a greater rate
of principal prepayments in a declining interest rate environment and to a
lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the Fund
may fail to recover the full amount of its investment in mortgage-backed
securities
5
<PAGE>
notwithstanding any direct or indirect governmental or agency guarantee.
Since faster than expected prepayments must usually be invested in lower
yielding securities, mortgage-backed securities are less effective than
conventional bonds in "locking in" a specified interest rate. In a rising
interest rate environment, a declining prepayment rate may extend the average
life of many mortgage-backed securities. Extending the average life of a
mortgage-backed security increases the risk of depreciation due to future
increases in market interest rates.
The Fund's investments in mortgage-backed securities may include conventional
mortgage passthrough securities and certain classes of multiple class
collateralized mortgage obligations ("CMOs"). In order to reduce the risk of
prepayment for investors, CMOs are issued in multiple classes, each having
different maturities, interest rates, payment schedules and allocations of
principal and interest on the underlying mortgages. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of
principal and/or interest payments on the underlying mortgages. The CMO
classes in which the Fund may invest include but are not limited to
sequential and parallel pay CMOs, including planned amortization class
("PAC") and target amortization class ("TAC") securities.
Risks of Mortgage-Backed Securities. Different types of mortgage-backed
securities are subject to different combinations of prepayment, extension,
interest rate and/or other market risks. Conventional mortgage passthrough
securities and sequential pay CMOs are subject to all of these risks, but are
typically not leveraged. PACs, TACs and other senior classes of sequential
and parallel pay CMOs involve less exposure to prepayment, extension and
interest rate risk than other mortgage-backed securities, provided that
prepayment rates remain within expected prepayment ranges or "collars."
[sidebar]
The Fund may invest in
structured debt obligations
indexed to various financial
assets or rates.
Structured Securities. The Fund may invest in structured notes, bonds or
debentures, the value of the principal of and/or interest on which is to be
determined by reference to changes in the value of specific currencies,
interest rates, commodities, indices or other financial indicators (the
"Reference") or the relative change in two or more References. The interest
rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference.
The terms of the structured securities may provide that in certain
circumstances no principal is due at maturity and, therefore, may result in
the loss of the Fund's investment. Structured securities may be positively or
negatively indexed, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at
maturity. In addition, the change in interest rate or the value of the
security at maturity may be a multiple of the change in the value of the
Reference. Consequently, structured securities entail a greater degree of
market risk than other types of debt obligations. Structured securities may
also be more volatile, less liquid and more difficult to accurately price
than less complex fixed income investments.
Futures and Option Contracts. The Fund may engage in transactions in futures
contracts and options on futures contracts for hedging and speculative
purposes. The Fund's ability to hedge successfully will depend on the ability
of John Hancock Advisers, Inc. (the "Adviser") to predict accurately the
future direction of interest rate changes, the degree of correlation between
the futures and securities markets and other market fac-
6
<PAGE>
tors. There is no assurance that a liquid market for futures and options will
always exist. In addition, the Fund could be prevented from opening, or
realizing the benefits of closing out, a futures or options position because
of position limits or limits on daily price fluctuations imposed by an
exchange.
All of the Fund's futures contracts and options on futures contracts will be
traded on a U.S. or foreign commodity exchange or board of trade. The Fund
will not engage in a transaction in futures or options on futures for
speculative purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish speculative positions in futures
contracts and options on futures exceeds 5% of the Fund's net assets.
Lower-Rated Securities. The Fund may invest up to 25% of the value of its
total assets in fixed income securities rated below Baa by Moody's, or below
BBB by S&P, or in securities which are unrated. The Fund may invest in
securities rated as low as Ca by Moody's or CC by S&P, which may indicate
that the obligations are highly speculative and in default. Lower rated
securities are generally referred to as junk bonds. See the Appendix attached
to this Prospectus and the Statement of Additional Information, respectively,
for the distribution of securities in the various ratings categories and a
description of the characteristics of the categories. The Fund is not
obligated to dispose of securities whose issuers subsequently are in default
or which are downgraded below the above-stated ratings. The Fund may invest
in unrated securities which, in the opinion of the Adviser, offer comparable
yields and risks to those securities which are rated.
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income.
In addition, lower ratings reflect a greater possibility of an adverse change
in financial condition affecting the ability of the issuer to make payments
of interest and principal.
The market price and liquidity of lower rated fixed income securities
generally respond to short-term economic, corporate and market developments
to a greater extent than do higher rated securities. In the case of
lower-rated securities, 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
the bonds and value accurately the Fund's assets. The reduced availability of
reliable, objective data may increase the Fund's reliance on management's
judgment in valuing the high yield bonds. To the extent that the Fund invests
in these securities, the achievement of the Fund's objective will depend more
on the Adviser's judgment and analysis than would otherwise be the case. In
addition, the Fund's investments in high yield securities may be susceptible
to adverse publicity and investor perceptions, whether or not the perceptions
are justified by fundamental factors. In the past, economic downturns and
increases in interest rates have caused a higher incidence of default by the
issuers of lower-rated securities and may do so in the future, particularly
with respect to highly leveraged issuers. The market prices of zero coupon
and payment-in-kind bonds are affected to a greater extent by interest rate
changes, and thereby tend to
7
<PAGE>
be more volatile than securities that pay interest periodically and in cash.
Increasing rate note securities are typically refinanced by the issuers
within a short period of time. The Fund accrues income on these securities
for tax and accounting purposes, which is required to be distributed to
shareholders. Because no cash is received while income accrues on these
securities, the Fund may be forced to liquidate other investments to make the
distributions.
The Fund may acquire individual securities of any maturity and is not subject
to any limits as to the average maturity of its overall portfolio. The longer
the Fund's average portfolio maturity, the more the value of the portfolio
and the net asset value of the Fund's shares will fluctuate in response to
changes in interest rates. An increase in interest rates will generally
reduce the value of the Fund's portfolio securities and the Fund's shares,
while a decline in interest rates will generally increase their value.
Restricted Securities. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 (the "Securities Act"). The
Trustees will monitor the Fund's investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of
information. Purchases of other restricted securities are subject to an
investment restriction limiting all the Fund's illiquid securities to not
more than 15% of its net assets.
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 and
interests in money market funds. When the Fund lends portfolio securities,
there is a risk that the borrower may fail to return the loaned securities.
As a result, the Fund may incur a loss or in the event of the borrower's
bankruptcy 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 in excess of 33-1/3% of its total assets.
Repurchase Agreements, Forward Commitments and When-Issued Securities. The
Fund may enter into repurchase agreements and may purchase securities on a
forward or when-issued basis. In a repurchase agreement, the Fund buys a
security subject to the right and obligation to sell it back to the issuer at
a higher price. These transactions must be fully collateralized at all times,
but involve some credit risk to the Fund if the other party defaults on its
obligation and the Fund is delayed in or prevented from liquidating the
collateral. The Fund will segregate in a separate account cash or liquid,
high grade debt securities equal in value to its forward commitments and
when-issued securities. Purchasing securities for future delivery or on a
when-issued basis may increase the Fund's overall investment exposure and
involves a risk of loss if the value of the securities declines before the
settlement date.
Short-term Trading. Short-term trading means the purchase and subsequent sale
of a security after it has been held for a relatively brief period of time.
The Fund engages in short-term trading in response to changes in interest
rates or other economic trends and developments, or to realize capital gain
or improve income by taking advantage of yield disparities between various
fixed-income securities.
8
<PAGE>
Investment Restrictions. The Fund has adopted certain investment restrictions
that are detailed in the Statement of Additional Information where they are
designated as fundamental or nonfundamental. The investment objective and
fundamental investment restrictions may not be changed without shareholder
approval. All other investment policies and restrictions are nonfundamental
and can be changed by a vote of the Trustees without shareholder approval.
Portfolio turnover rates of the Fund for recent years are shown in the
section "The Fund's Financial Highlights."
[sidebar]
Brokers are chosen on best
price and execution.
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration to execution at the most favorable
prices, taking into account the broker's professional ability and quality of
service. Consideration may also be given to the broker's sale of Fund shares.
Pursuant to procedures established by the Trustees, the Adviser may place
securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc.
and Sutro & Company, Inc. They are indirectly owned by John Hancock Mutual
Life Insurance Company, (the "Life Company") which in turn indirectly owns
the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
[sidebar]
The Trustees elect officers and
retain the investment adviser
who is responsible for the day-
to-day operations of the Fund,
subject to the Trustees' policies
and supervision.
The Fund is a diversified open-end management investment company organized as
a Maryland corporation in 1973 and reorganized as a Massachusetts business
trust in 1984. The Fund has an unlimited number of authorized shares of
beneficial interest. The Fund's Declaration of Trust permits the Trustees,
without shareholder approval, to create and classify shares of beneficial
interest into separate series of the Fund. As of the date of this Prospectus,
the Trustees have not authorized the creation of any new series of the Fund.
Additional series may be added in the future. The Trust's Declaration of
Trust also permits the Trustees to classify and reclassify any series or
portfolio of shares into one or more classes. Accordingly, the Trustees have
authorized the issuance of two classes of the Fund, designated Class A and
Class B. The shares of each class represent an interest in the same portfolio
of investments of the Fund and have equal rights as to voting, redemption,
dividends and liquidation. However, each class bears different distribution
fees, and Class A and Class B shareholders have exclusive voting rights with
respect to their distribution plans.
Shareholders have certain rights to remove Trustees. The Fund is not required
to hold annual shareholder meetings, although special meetings may be held
for such purposes as electing or removing Trustees, changing fundamental
investment restrictions or approving a management contract. The Fund, under
certain circumstances, will assist in shareholder communications with other
shareholders.
[sidebar]
John Hancock Advisers, Inc.
advises investment companies
having a total asset value of
more than $16 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary
of the Life Company, a financial services company. The Adviser provides the
Fund, and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds,
Inc. ("John Hancock Funds"), an indirect subsidiary of the Life Company,
distributes shares for all of the John Hancock funds through selected
broker-dealers ("Selling Brokers"). Certain Fund officers are also officers
of the Adviser and John Hancock Funds. Pursuant to an order granted by the
Securities and Exchange Commission, the Fund has adopted
9
<PAGE>
a deferred compensation plan for its independent Trustees which allows
Trustees' fees to be invested by the Fund in other John Hancock funds.
James Ho is primarily responsible for the management of the Fund. Mr. Ho is
assisted by a team of portfolio managers and analysts. Mr. Ho also directs
all taxable fixed-income investment management for the Adviser and has been
associated with the Adviser since 1985.
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.
ALTERNATIVE PURCHASE ARRANGEMENTS
[sidebar]
An alternative purchase plan
allows you to choose the
method of payment that is
best for you.
You can purchase shares of the Fund at a price equal to their net asset value
per share, plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge
Alternative--Class A Shares") or on a contingent deferred basis (see
"Contingent Deferred Sales Charge Alternative--Class B Shares"). If you do
not specify on your account application the class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
[sidebar]
Investments in Class A
shares are subject to an
initial sales charge.
Class A Shares. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount you purchase is $1 million or more. If
you purchase $1 million or more of Class A shares you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.30% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price--Qualifying for a Reduced Sales Charge."
[sidebar]
Investments in Class B
shares are subject to a
contingent deferred sales
charge.
Class B Shares. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees
at a combined annual rate of up to 1.00% of the Fund's average daily net
assets attributable to the Class B shares. Investing in Class B shares
permits all of your dollars to work from the time you make your investment,
but the higher ongoing distribution fee will cause these shares to have
higher expenses than Class A shares. To the extent that any dividends are
paid by the Fund, these higher expenses will also result in lower dividends
than those paid on Class A shares.
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.
10
<PAGE>
Factors to Consider in Choosing an Alternative
[sidebar]
You should consider which
class of shares will be more
beneficial for you.
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares, given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider
whether, during the anticipated life of your Fund investment, the CDSC and
the accumulated fees on Class B shares would be less than the initial sales
charge and accumulated fees on Class A shares purchased at the same time, and
to what extent this differential would be offset by the Class A shares' lower
expenses. To help you make this determination, the table under the caption
"Expense Information" on the inside cover page of this Prospectus shows
examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial if you qualify for a reduced sales charge.
See "Share Price--Qualifying for a Reduced Sales Charge".
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent
any dividends are paid. However, because initial sales charges are deducted
at the time of purchase, you would not have all of your funds invested
initially and, therefore, would initially own fewer shares. If you do not
qualify for reduced initial sales charges and expect to maintain your
investment for an extended period of time, you might consider purchasing
Class A shares. This is because the accumulated distribution and service
charges on Class B shares may exceed the initial sales charge and accumulated
distribution and service charges on Class A shares during the life of your
investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all your funds invested initially. However you will be
subject to higher distribution fees and, for a six-year period, a CDSC.
In the case of Class A shares, distribution expenses that John Hancock Funds
incurs in connection with the sale of shares will be paid from the proceeds
of the initial sales charge and the ongoing distribution and service fees. In
the case of Class B shares, the expenses will be paid from the proceeds of
the ongoing distribution and service fees, as well as from the CDSC incurred
upon redemption within six years of purchase. The purpose and function of the
Class B shares' CDSC and ongoing distribution and service fees are the same
as those of the Class A shares' initial sales charge and ongoing distribution
and service fees. Sales personnel distributing the Fund's shares may receive
different compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the
same manner, at the same time and on the same day. They will also be in the
same amount, except for differences resulting from each class bearing only
its own distribution and service fees and shareholder meeting expenses. See
"Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser which for the 1995 fiscal year, was 0.50% of the Fund's average daily
net asset value.
[sidebar]
The Fund pays distribution
and service fees for marketing
and sales-related shareholder
servicing.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Under these Plans, the Fund will pay distribution and service
fees at an aggregate annual rate of up to 0.30% of the Class A shares'
average daily net assets and an aggregate annual
11
<PAGE>
rate of up to 1.00% of the Class B shares' average daily net assets. In each
case, up to 0.25% is for service expenses and the remaining amount is for
distribution expenses. The distribution fees will be used to reimburse John
Hancock Funds for its distribution expenses, 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.
The service fees are paid to compensate Selling Brokers and others providing
personal and account maintenance services to shareholders.
In the event John Hancock Funds is not fully reimbursed for payments it makes
or expenses it incurs under the Class A Plan, these expenses will not be
carried beyond one year from the date they were incurred. These unreimbursed
expenses under the Class B Plan will be carried forward together with
interest on the balance of these unreimbursed expenses.
For the fiscal year ended December 31, 1995 an aggregate of $2,970,686 of
distribution expenses, or 4.64% of the average net assets of the Class B
shares of the Fund, was not reimbursed or recovered by the John Hancock Funds
through the receipt of deferred sales charges or 12b-1 fees in prior periods.
The Fund compensates the Adviser for performing necessary tax and financial
management services. The compensation for 1996 is estimated to be at an
annual rate of 0.01875% of the average net assets of the Fund.
Information on the Fund's total expenses is in the Fund's Financial
Highlights section of this Prospectus.
DIVIDENDS AND TAXES
Dividends. Dividends from the Fund's net investment income are generally
declared daily and distributed monthly. Capital gains, if any, are generally
distributed annually.
Dividends are reinvested in additional shares of your class unless you elect
the option to receive cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment in additional shares option. Because of the higher expenses
associated with Class B shares, any dividend on these shares will be lower
than on the Class A shares. See "Share Price."
Taxation. Dividends from the Fund's net investment income and net short-term
capital gains are taxable to you as ordinary income. Dividends from the
Fund's net long-term capital gains are taxable as long-term capital gains.
These dividends are taxable whether received in cash or reinvested in
additional shares. Certain dividends may be paid in January of a given year,
but may be taxable as if you received them the previous December. The Fund
will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As a regulated investment company, the Fund will not
be subject to Fed-
12
<PAGE>
eral income taxes on any net investment income and net realized capital gains
that are distributed to its shareholders within the time period prescribed by
the Code. When you redeem (sell) or exchange shares, you may realize a
taxable gain or loss.
On the account application, you must certify that your social security or
other taxpayer identification number you provide is correct and that you are
not subject to backup withholding of Federal income tax. If you do not
provide this information, or are otherwise subject to this withholding, the
Fund may be required to withhold 31% of your dividends and the proceeds of
redemptions and exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from the Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different
tax treatment not described above. In many states, a portion of the Fund's
dividends that represent interest received by the Fund on direct U.S.
Government obligations may be exempt from tax. You should consult your tax
adviser for specific advice.
PERFORMANCE
[sidebar]
The Fund may advertise its
yield and total return.
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the
maximum offering price per share on the last day of that period. Yield is
calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, the Fund's yield may not equal
the income paid on your shares or the income reported in the Fund's financial
statements.
Total return shows the overall dollar or percentage change in value of a
hypothetical investment in the Fund, assuming the reinvestment of all
dividends. Cumulative total return shows the Fund's performance over a period
of time. Average annual total return shows the cumulative return divided over
the number of years included in the period. Because average annual total
return tends to smooth out variations in the Fund's performance, you should
recognize that it is not the same as actual year-to-year results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at a lower sales charge would result in
higher performance figures. Yield and total return for the Class B shares
reflect the deduction of the applicable CDSC imposed on a redemption of
shares held for the applicable period. All calculations assume that all
dividends are reinvested at net asset value on the reinvestment dates during
the periods. Total return and yield of Class A and Class B shares will be
calculated separately and, because each class is subject to different
expenses, the yield or total return with respect to each class for the same
period may differ. The relative performance of the Class A and Class B shares
will be affected by a variety of factors, including the higher operating
expenses attributable to the Class B shares, whether the Fund's investment
performance is better in the earlier or later portions of the period measured
and the level of net assets of the classes during the period. The Fund will
include the total return of both classes in any advertisement or promotional
materials including the Fund's performance data. The value of the Fund's
13
<PAGE>
shares, when redeemed, may be more or less than their original cost. Both
total return and yield are historical calculations and are not an indication
of future performance. See "Factors to Consider in Choosing an Alternative."
HOW TO BUY SHARES
[sidebar]
Opening an account
The minimum initial investment is $1,000 ($250 for group investments and
retirement plans). Complete the Account Application attached to this
Prospectus. Indicate whether you are purchasing Class A or Class B shares. If
you do not specify which class of shares you are purchasing, Investor
Services will assume you are investing in Class A shares.
By Check
1. Make your check payable to John Hancock Investor Services Corporation.
P.O. Box 9115
Boston, MA 02205-9115
2. Deliver the completed application and check to your registered
representative or Selling Broker, or mail it directly to Investor
Services.
By Wire
1. Obtain an account number by contacting your registered representative or
Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign Bond Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered representative or
Selling Broker, or mail it directly to Investor Services.
[sidebar]
Buying additional Class A
and Class B shares
Monthly Automatic
Accumulation
Program (MAAP)
1. Complete the "Automatic Investing" and "Bank Information" sections on the
Account Privileges Application, designating a bank account from which
funds may be drawn.
2. The amount you elect to invest will be withdrawn automatically from your
bank or credit union account.
By Telephone
1. Complete the "Invest-By-Phone" and "Bank Information" sections on the
Account Privileges Application, designating a bank account from which your
funds may be drawn. Note that in order to invest by phone, your account
must be in a bank or credit union that is a member of the Automated
Clearing House system (ACH).
2. After your authorization form has been processed, you may purchase
additional Class A or Class B shares by calling Investor Services
toll-free at 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which your
account is registered, the Fund name, the class of shares you own, your
account number and the amount you wish to invest.
4. Your investment normally will be credited to your account the business day
following your phone request.
14
<PAGE>
By Check
1. Either complete the detachable stub included on your account statement or
include a note with your investment listing the name of the Fund, the
class of shares you own, your account number and the name(s) in which the
account is registered.
2. Make your check payable to John Hancock Investor Services Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation.
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling Broker.
By Wire
Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Sovereign Bond Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
Other Requirements: All purchases must be made in U.S. dollars. Checks
written on foreign banks will delay purchases until U.S. funds are received,
and a collection charge may be imposed. Shares of the Fund are priced at the
offering price based on the net asset value computed after John Hancock Funds
receives notification of the dollar equivalent from the Fund's custodian
bank. Wire purchases normally take two or more hours to complete and, to be
accepted the same day, must be received by 4:00 p.m., New York time. Your
bank may charge a fee to wire funds. Telephone transactions are recorded to
verify information. Certificates are not issued unless a request is made in
writing to Investor Services.
[sidebar]
You will receive account
statements that you should
keep to help with your
personal recordkeeping.
You will receive a statement of your account after any transaction that
affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
[sidebar]
The offering price of your
shares is their net asset value
plus a sales charge, if appli-
cable, which will vary with
the purchase alternative you
choose.
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ.
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services, or fair
value as determined in good faith according to procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued at
amortized cost, which the Board of Trustees has determined to approximate
market value. Foreign securities are valued on the basis of quotations from
the primary market in which they are traded. 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 NAV is calculated once
daily as of the close of regular trading on the New York Stock Exchange
(generally at 4:00 P.M., New York time) on each day that the Exchange is
open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on
the New York Stock Exchange, and transmit it to John Hancock Funds before its
close of business, to receive that day's offering price.
15
<PAGE>
Initial Sales Charge Alternative--Class A Shares. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
Combined
Sales Sales Reallowance
Charge Charge and Service Reallowance
as a as a Fee as a to Selling
Percentage Percentage Percentage Brokers as a
Amount invested of of the of Percentage of
(Including Sales Offering Amount Offering Offering
Charge) Price Invested Price(+) Price(*)
- --------------------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 2.75% 2.83% 2.30% 2.06%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
</TABLE>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. A Selling Broker to whom substantially the entire sales charge is
reallowed may be deemed to be an underwriter under the Securities Act of
1933.
(**) No sales charge is payable at the time of purchase of Class A shares of
$1 million or more, but a CDSC may be imposed in the event of certain
redemption transactions within one year of purchase.
(***) John Hancock Funds may pay a commission and first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in aggregate, as
follows: 1% on sales to $4,999,999, 0.50% on the next $5 million and
0.25% on $10 million and over.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter it pays the service fee
periodically in arrears in an amount up to 0.25% of the Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
Sales charges ARE NOT APPLIED to any dividends that are reinvested in
additional Class A shares of the Fund.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual
rate of up to 0.05% of the daily net assets of the accounts attributable to
these brokers.
Under certain circumstances described below, investors in Class A shares may
be entitled to pay reduced sales charges. See "Qualifying For a Reduced Sales
Charge."
Contingent Deferred Sales Charge--Investments of $1 Million or More in Class
A Shares. Purchases of $1 million or more of the Fund's Class A shares will
be made at net asset value with no initial sales charge, but if the shares
are redeemed within 12 months after the end of the calendar month in which
the purchase was made (the CDSC period), a CDSC will be imposed. The rate of
the CDSC will depend on the amount invested as follows:
Amount Invested CDSC Rate
--------------------------------------- ----------
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
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
16
<PAGE>
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 above rate.
The CDSC will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the redeemed Class A shares.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends which have been reinvested in
additional Class A shares.
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. Therefore, it will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is
waived on redemption in certain circumstances. See the discussion under
"Waiver of Contingent Deferred Sales Charges."
[sidebar]
You may qualify for a
reduced sales charge on
your investments in
Class A shares.
Qualifying for a Reduced Sales Charge. If you invest more than $100,000 in
Class A shares of the Fund or a combination of John Hancock funds (except
money market funds), you may qualify for a reduced sales charge on your
investments in Class A shares through a LETTER OF INTENTION. You may also be
able to use the ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE to take
advantage of the value of your previous investments in shares of the John
Hancock funds in meeting the breakpoints for a reduced sales charge. For the
ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE, the applicable sales charge
will be based on the total of:
1. Your current purchase of Class A shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a)
all Class A shares of the Fund you hold, and (b) all Class A shares of any
other John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
Example:
If you hold Class A shares of a John Hancock fund with a net asset value of
$80,000 and, subsequently, invest $20,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 3.75% and not 4.50%. This
is the rate that would otherwise be applicable to investments of less than
$100,000. See "Initial Sales Charge Alternative--Class A Shares."
[sidebar]
Class A shares may be avail-
able without a sales charge
to certain individuals and
organizations.
If you are in one of the following categories, you may purchase Class A
shares of the Fund without paying a sales charge:
(bullet) 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 of any of
the foregoing; or any fund, pension, profit sharing or other benefit plan for
the individuals described above.
(bullet) Any state, county, city 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.*
17
<PAGE>
(bullet) A bank, trust company, credit union, savings institution or other
type of depository institution, its trust departments or common trust funds
if it is purchasing $1 million or more for non-discretionary customers or
accounts.*
(bullet) A broker, dealer, financial planner, consultant or registered
investment adviser that has entered into an agreement with John Hancock Funds
providing specifically for the use of Fund shares in fee-based investment
products made available to their clients.
(bullet) 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.
(bullet) A member of an approved affinity group financial services plan.*
* For investments made under these provisions, John Hancock funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A shares of the Fund 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.
Contingent Deferred Sales Charge Alternative--Class B Shares. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost
of the shares being redeemed. Accordingly, you will not be assessed a CDSC on
increases in account value above the initial purchase price, including shares
derived from dividend reinvestments.
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 reinvestment and next from the shares you have held the
longest during the six-year period. The CDSC is waived on redemptions in
certain circumstances. See the discussion "Waiver of Contingent Deferred
Sales Charges" below.
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:
<TABLE>
<CAPTION>
<S> <C> <C>
(bullet) Proceeds of 50 shares redeemed at $12 per share $ 600
(bullet) Minus proceeds of 10 shares not subject to CDSC because they were acquired
through dividend reinvestment (10 X $12) -120
(bullet) Minus appreciation on remaining shares, also not subject to CDSC (40 X $2) -80
---
(bullet) Amount subject to CDSC $ 400
</TABLE>
18
<PAGE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds
uses them to defray its expenses related to providing the Fund with
distribution services in connection with the sale of the Class B shares, such
as compensating selected Selling Brokers for selling these shares. The
combination of the CDSC and the distribution and service fees makes it
possible for the Fund to sell Class B shares without an initial sales charge.
The amount of the CDSC, if any, will vary depending on the number of years
from the time you purchase your Class B shares until the time you redeem
them. Solely for determining this holding period, any payment you make during
the month will be aggregated and deemed to have been made on the last day of
the month.
Contingent Deferred Sales
Year In Which Class B Shares Charge As a Percentage of
Redeemed Following Purchase Dollar Amount Subject to CDSC
- ------------------------------- --------------------------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision
of personal and account maintenance services to shareholders during the
twelve months following the sale, and thereafter the service fee is paid in
arrears.
If you purchased Class B shares prior to January 1, 1994, the applicable CDSC
as a percentage of the amount redeemed will be: 3% for redemptions during the
third year after purchase, 2.5% for redemptions during the fourth year, 2%
for redemptions during the fifth year, 1% for redemptions during the sixth
year, and no CDSC for the seventh year and thereafter.
[sidebar]
Under certain circumstances,
the CDSC on Class B and
Class A share redemptions
will be waived.
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 a
CDSC unless indicated otherwise, in the circumstances defined below:
(bullet) Redemptions of Class B shares made under a Systematic Withdrawal
Plan (see "How to Redeem Shares"), as long as your annual redemptions do not
exceed 10% of your account value at the time you established your Systematic
Withdrawal Plan and 10% of the value of your subsequent investments (less
redemptions) in that account at the time you notify Investor Services. This
waiver does not apply to Systematic Withdrawal Plan redemptions of Class A
shares that are subject to a CDSC.
(bullet) Redemptions made to effect distributions from an Individual
Retirement Account either before or after age 59-1/2, as long as the
distributions are based on your life expectancy or the joint-and-last
survivor life expectancy of you and your beneficiary. These distributions
must be free from penalty under the Code.
(bullet) Redemptions made to effect mandatory distributions under the Code
after age 70-1/2 from a tax-deferred retirement plan.
19
<PAGE>
(bullet) Redemptions made to effect distributions to participants or
beneficiaries from certain employer-sponsored retirement plans including
those qualified under Section 401(a) of the Code, custodial accounts under
Section 403(b)(7) of the Code and deferred compensation plans under Section
457 of the Code. The waiver also applies to certain returns of excess
contributions made to these plans. In all cases, the distributions must be
free from penalty under the Code.
(bullet) Redemptions due to death or disability.
(bullet) Redemptions made under the Reinvestment Privilege, as described in
"Additional Services and Programs" of this Prospectus.
(bullet) Redemptions made pursuant to the Fund's right to liquidate your
account if you own fewer than 50 shares.
(bullet) Redemptions made in connection with certain liquidation, merger or
acquisition transactions involving other investment companies or personal
holding companies.
(bullet) Redemptions from certain IRA and retirement plans that purchased
shares prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must
notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
Conversion of Class B Shares. Your Class B shares, and an appropriate portion
of reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur no later than the month following eight years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into this Fund from another John
Hancock fund, the calculation will be based on the time you purchased the
shares in the original fund. The Fund has been advised that the conversion of
Class B shares into Class A shares of the Fund should not change your tax
basis or tax holding period for the converted shares.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services, less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
recently made by check or Invest-by-Phone have been collected (which may
take up to 10 calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the
next business day. When you redeem your shares, you may realize a taxable
gain or loss, depending usually on the difference between what you paid for
them and what you receive for them, subject to certain tax rules. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment
for up to three business days or longer, as permitted by Federal securities
laws.
20
<PAGE>
[sidebar]
To assure acceptance of your
redemption request, please
follow these procedures.
By Telephone
All Fund shareholders are eligible automatically for the telephone redemption
privilege. Call 1-800-225-5291, from 8:00 A.M. to 4:00 P.M. (New York time),
Monday through Friday, excluding days on which the New York Stock Exchange is
closed. Investor Services employs the following procedures to confirm that
instructions received by telephone are genuine. Your name, the account
number, taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone instructions
are recorded.
You may redeem up to $100,000 by telephone, but the address on the account
must not have changed for the last 30 days. A check will be mailed to the
exact name(s) and address shown on the account.
If reasonable procedures, such as those described above, are not followed,
the Fund may be liable for any loss due to unauthorized or fraudulent
telephone instructions. In all other cases, neither the Fund nor Investor
Services will be liable for any loss or expense for acting upon telephone
instructions made according to the telephone transaction procedures mentioned
above.
Telephone redemption is not available for IRAs or other tax-qualified
retirement plans or shares of the Fund that are in certificated form.
During periods of extreme economic conditions or market changes, telephone
requests may be difficult to implement due to a large volume of calls. During
these times, you should consider placing redemption requests in writing or
using EASI-Line. EASI-Line's telephone number is 1-800-338-8080.
By Wire
If you have a telephone redemption form on file with the Fund, redemption
proceeds of $1,000 or more can be wired on the next business day to your
designated bank account, and a fee (currently $4.00) will be deducted. You
may also use electronic funds transfer to your assigned bank account, and the
funds are usually collectible after two business days. Your bank may or may
not charge for this service. Redemptions of less than $1,000 will be sent by
check or electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption" section
on the Account Privileges Application included with this Prospectus.
In Writing
Send a stock power or "letter of instruction" specifying the name of the
Fund, the dollar amount or the number of shares to be redeemed, your name,
class of shares, your account number and the additional requirements listed
below that apply to your particular account.
<TABLE>
<CAPTION>
Type of Registration Requirements
- ---------------------------------- ---------------------------------------------------------------
<S> <C>
Individual, Joint Tenants, Sole
Proprietorship, Custodial A letter of instruction signed (with titles where applicable)
(Uniform Gifts or Transfer to by all persons authorized to sign for the account, exactly as
Minors Act), General Partners. it is registered with the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate resolution, signed by
person(s) authorized to act on the account, with the
signature(s) guaranteed.
Trusts A letter of instruction signed by the Trustee(s) with the
signature(s) guaranteed. (If the Trustee's name is not
registered on your account, also provide a copy of the trust
document, certified within the last 60 days.)
</TABLE>
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
21
<PAGE>
[sidebar]
Who may guarantee your
signature
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less,
John Hancock Funds may guarantee the signature. The following institutions
may provide you with a signature guarantee, provided that the institution
meets credit standards established by Investor Services: (i) a bank; (ii) a
securities broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or meets certain
net capital requirements; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and
loan association, a cooperative bank, a federal savings bank or association;
or (v) a national securities exchange, a registered securities exchange or a
clearing agency.
Through Your Broker
Your broker may be able to initiate the redemption. Contact your broker for
instructions.
[sidebar]
Additional information
about redemptions
If you have certificates for your shares, you must submit them with your
stock power or a letter of instruction. Unless you specify to the contrary,
any outstanding Class A shares will be redeemed before Class B shares. You
may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining smaller accounts, the
Fund reserves the right to redeem at net asset value all shares in an account
which holds fewer than 50 shares (except accounts under retirement plans) and
to mail the proceeds to the shareholder, or the transfer agent may impose an
annual fee of $10.00. No account will be involuntarily redeemed or additional
fee imposed, if the value of the account is in excess of the Fund's minimum
initial investment. No CDSC will be imposed on involuntary redemptions of
shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed, and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this policy.
ADDITIONAL SERVICES AND PROGRAMS
[sidebar]
You may exchange shares of
the Fund for shares of the
same class of another John
Hancock fund.
Exchange Privilege
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker
and request a prospectus for the John Hancock fund that interests you. Read
the prospectus carefully before exchanging your shares. You can exchange
shares of each class of the Fund only for shares of the same class of another
John Hancock fund. For this purpose, John Hancock funds with only one class
of shares will be treated as Class A whether or not they have been so
designated.
Exchanges between funds that are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is
imposed. Class B shares of the Fund that are subject to a CDSC may be
exchanged into Class B shares of another John Hancock fund without incurring
the CDSC; however these shares will be subject to the CDSC schedule of the
shares acquired (except that exchanges into John Hancock Short-Term Strategic
Income Fund, John Hancock Intermediate Maturity Government Fund and John
Hancock Limited-Term Government Fund will be subject to the initial fund's
CDSC). For purposes of computing the CDSC payable upon redemption of shares
acquired in an exchange, the holding period of the original shares is added
to the holding period of the shares acquired in an exchange. However if you
exchange Class B shares purchased prior to January 1, 1994 for Class B shares
of any other John Hancock fund, you will continue to be subject to the CDSC
schedule in effect on your initial purchase date.
22
<PAGE>
The Fund reserves the right to require that you keep previously exchanged
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted a new exchange. The Fund may also terminate or alter the terms of
the exchange privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and
the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers
and investment advisers may exchange their clients' Fund shares, subject to
the terms of those agreements and John Hancock Funds' right to reject or
suspend those exchanges at any time. Because of the restrictions and
procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested
by shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive trading,
the Fund reserves the right to terminate the exchange privilege for any
person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its
shareholders adversely. The Fund may also temporarily or permanently
terminate the exchange privilege for any person who makes seven or more
exchanges out of the Fund per calendar year. Accounts under common control or
ownership will be aggregated for this purpose. Although the Fund will attempt
to give prior notice whenever it is reasonably able to do so, it may impose
these restrictions at any time.
By Telephone
1. When you complete the application for your initial purchase of Fund
shares, you authorize exchanges automatically by telephone unless you
check the box indicating that you do not wish to authorize telephone
exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable
to the account and other relevant information may be requested. In
addition, telephone instructions are recorded.
23
<PAGE>
In Writing
1. In a letter request an exchange and list the following:
--name and class of the Fund whose shares you currently own
--your account number
--the name(s) in which the account is registered
--the name of the fund in which you wish your exchange to be invested
--the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Reinvestment Privilege
[sidebar]
If you redeem shares of the
Fund, you may be able to
reinvest all or part of the
proceeds in shares of this
Fund or another John
Hancock fund without
paying an additional sales
charge.
1. You will not be subject to a sales charge on Class A shares that you
reinvest in a John Hancock fund that is otherwise subject to a sales
charge, as long as you reinvest within 120 days of the redemption date. If
you paid a CDSC upon a redemption, you may reinvest at net asset value in
the same class of shares from which you redeemed within 120 days. Your
account will be credited with the amount of the CDSC previously charged,
and the reinvested shares will continue to be subject to a CDSC. The
holding period of the shares acquired through reinvestment, for purposes
of computing the CDSC payable upon a subsequent redemption, will include
the holding period of the redeemed shares.
2. Any portion of your redemption may be reinvested in Fund shares or in
shares of other John Hancock funds, subject to the minimum investment
limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Fund's name, account number and class from which your shares were
originally redeemed.
Systematic Withdrawal Plan
[sidebar]
You can pay routine bills
from your account, or make
periodic disbursements from
your retirement account to
comply with IRS regulations.
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You
can also obtain the application from your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually
or on a selected monthly basis, to yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize, but all
payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares,
because you may be subject to an
24
<PAGE>
initial sales charge on your purchases of Class A shares or to a CDSC on
your redemptions of Class B shares. In addition, your redemptions are
taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks, or if deposits to a bank account are returned for any reason.
Monthly Automatic Accumulation Program (MAAP)
[sidebar]
You can make automatic
investments and simplify your
investing.
1. You can authorize an investment to be withdrawn automatically each month
on your bank, for investment in Fund shares, under the "Automatic
Investing" and "Bank Information" sections of the Account Privileges
Application.
2. You can also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account
Privileges Application.
3. You can terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the
Fund.
5. If you have payments withdrawn from a bank account and we are notified
that the account has been closed, your withdrawals will be discontinued.
Group Investment Program
[sidebar]
Organized groups of at least
four persons may establish
accounts.
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate
dollar amount of all participants' investments. To determine how to
qualify for this program, contact your registered representative or call
1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be
at least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at
any time.
Retirement Plans
1. You may use the Fund for various types of retirement plans, such as
Individual Retirement Accounts, Keogh plans (H.R. 10), pension and profit
sharing plans (including 401(k) Plans), Tax-Sheltered Annuity retirement
plans (403(b) or TSA plans), and Section 457 plans.
2. The initial investment minimum or aggregate minimum for any of these plans
is $250. However, accounts being established as group IRA, SEP, SARSEP,
TSA, 401(k) and Section 457 plans will be accepted without an initial
minimum investment.
25
<PAGE>
APPENDIX
Moody's describes its lower ratings for corporate bonds as follows.
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 are 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.
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.
Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
S&P describes its lower ratings for corporate bonds as follows:
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.
Debt rated BB, B, CCC, or C is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. 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.
26
<PAGE>
Quality Distribution
The average weighted quality distribution of the portfolio for the fiscal
year ended December 31, 1995:
<TABLE>
<CAPTION>
Rating
Assigned Rating
Average % of by % of Assigned % of
Security Ratings Value Portfolio Adviser Portfolio by Service Portfolio
- ---------------------- ------------ -------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
AAA $ 620,385,611 42.2% 0 0.0% $ 620,385,611 42.2%
AA 133,553,602 9.1% 0 0.0% 133,553,602 9.1%
A 215,842,868 14.6% 0 0.0% 215,842,868 14.6%
BAA 183,805,094 12.5% 0 0.0% 183,805,094 12.5%
BA 163,250,899 11.1% 0 0.0% 163,250,899 11.1%
B 114,575,945 7.8% 0 0.0% 114,575,945 7.8%
CAA 2,710,769 0.2% 0 0.0% 2,710,769 0.2%
CA 0 0.0% 0 0.0% 0 0.0%
C 0 0.0% 0 0.0% 0 0.0%
D 0 0.0% 0 0.0% 0 0.0%
---------- ------ ------- ------ ---------- --------
Debt Securities 1,434,124,788 97.5% 0 0.0% $1,434,124,788 97.5%
Equity Securities 0 0.0%
Short-Term Securities 36,605,154 2.5%
---------- ------
Total Portfolio 1,470,729,942 100.0%
Other Assets--Net 17,450,847
----------
Net Assets $1,488,180,789
==========
</TABLE>
27
<PAGE>
JOHN HANCOCK SOVEREIGN BOND FUND
Investment Adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Principal Distributor
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
TDD call 1-800-554-6713
JHD 2100P 5/96
JOHN HANCOCK
SOVEREIGN
BOND FUND
Class A and B Shares
Prospectus
May 1, 1996
A mutual fund seeking to generate a high
level of current income consistent with pru-
dent investment risk through investment in a
diversified portfolio of freely marketable
debt securities.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
Telephone 1-800-225-5291
[recycle symbol] Printed on recycled paper
<PAGE>
JOHN HANCOCK
SOVEREIGN BOND FUND
Class A and Class B Shares
Statement of Additional Information
May 1, 1996
This Statement of Additional Information provides information about John
Hancock Sovereign Bond Fund (the "Fund") in addition to the information that is
contained in the Fund's Class A and Class B Prospectus (the "Prospectus") dated
May 1, 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 OBJECTIVE AND POLICIES 2
CERTAIN INVESTMENT PRACTICES 3
INVESTMENT RESTRICTIONS 8
THOSE RESPONSIBLE FOR MANAGEMENT 11
INVESTMENT ADVISORY AND OTHER SERVICES 17
DISTRIBUTION CONTRACT 19
NET ASSET VALUE 21
INITIAL SALES CHARGE ON CLASS A SHARES 22
DEFERRED SALES CHARGE ON CLASS B SHARES 23
SPECIAL REDEMPTIONS 24
ADDITIONAL SERVICES AND PROGRAMS 24
DESCRIPTION OF THE FUND'S SHARES 25
TAX STATUS 26
CALCULATION OF PERFORMANCE 30
BROKERAGE ALLOCATION 32
TRANSFER AGENT SERVICES 33
CUSTODY OF PORTFOLIO 34
INDEPENDENT AUDITORS 34
FINANCIAL STATEMENTS --
<PAGE>
ORGANIZATION OF THE FUND
John Hancock Sovereign Bond Fund (the "Fund") is a diversified open-end
management investment company organized as a Massachusetts business trust under
the laws of The Commonwealth of Massachusetts. The Fund was organized in 1984 by
John Hancock Advisers, Inc. (the "Adviser") as the successor to John Hancock
Bond Fund, Inc., a Maryland corporation organized in 1973 by the Adviser. The
Adviser is 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.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to generate a high level of current
income, consistent with prudent investment risk, for distribution to its
shareholders through investment in a diversified portfolio of freely marketable
debt securities. The Fund's investments will be subject to the market
fluctuations and risks inherent in all securities. There is no assurance that
the Fund will achieve its investment objective. See "Investment Objective and
Policies" in the Fund's Prospectus.
The Fund will invest primarily in debt securities within the four highest
investment ratings and unrated securities considered by the Adviser to be of
comparable investment quality. The Fund will, when feasible, purchase debt
securities which are non-callable.
The Fund may purchase corporate debt securities bearing fixed or fixed and
contingent interest as well as those which carry certain equity features, such
as conversion or exchange rights or warrants for the acquisition of stock of the
same or a different issuer, or participations based on revenues, sales or
profits. The Fund will not exercise any such conversion, exchange or purchase
rights if, at the time, the value of all equity interests so owned would exceed
10% of the Fund's total assets taken at market value.
The market value of debt securities which carry no equity participation
usually reflects yields generally available on securities of similar quality and
type. When such yields decline, the market value of a portfolio already invested
at higher yields can be expected to rise if such securities are protected
against early call. Similarly, when such yields increase, the market value of a
portfolio already invested can be expected to decline. The Fund's portfolio may
include debt securities which sell at substantial discounts from par. These
securities are low coupon bonds which, during periods of high interest rates,
because of their lower acquisition cost tend to sell on a yield basis
approximating current interest rates.
The Fund intends to use short-term trading of securities as a means of
managing its portfolio to achieve its investment objective. The Fund, in
reaching a decision to sell one security and purchase another security at
approximately the same time, will take into account a number of factors,
including the quality ratings, interest rates, yields, maturity dates, call
prices, and refunding and sinking fund provisions of the securities under
consideration, as well as historical
2
<PAGE>
yield spreads and current economic information. The success of short-term
trading will depend upon the ability of the Fund to evaluate particular
securities, to anticipate relevant market factors, including trends of interest
rates and earnings and variations from such trends, to obtain relevant
information, to evaluate it promptly, and to take advantage of its evaluations
by completing transactions on a favorable basis. It is expected that the
expenses involved in short-term trading, which would not be incurred by an
investment company which does not use this portfolio technique, will be
significantly less than the profits and other benefits which will accrue to
shareholders.
The portfolio turnover rate will depend on a number of factors, including
the fact that the Fund intends to continue to qualify as a regulated investment
company under the Internal Revenue Code. Accordingly, the Fund intends to limit
its short-term trading so that less than 30% of the Fund's gross annual income
(including all dividend and interest income and gross realized capital gains,
both short and long-term, without being offset for realized capital losses) will
be derived from gross realized gains on the sale or other disposition of
securities held for less than three months. This limitation, which must be met
by all mutual funds in order to obtain such Federal tax treatment, at certain
times may prevent the Fund from realizing capital gains on some securities held
for less than three months.
CERTAIN INVESTMENT PRACTICES
When-Issued Securities. "When-issued" refers to securities whose terms are
available and for which a market exists, but which have not yet been issued. No
payment is made with respect to a when-issued transaction, until delivery is
due, often a month or more after the purchase.
The Fund may engage in when-issued transactions with respect to securities
purchased for its portfolio in order to obtain an advantageous price and yield
at the time of the transactions. When the Fund engages in a when-issued
transaction, 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
losing the opportunity to obtain a price and yield considered to be
advantageous. On the date the Fund enters into an agreement to purchase
securities on a when-issued basis, the Fund will segregate in a separate account
cash or liquid, high grade debt securities (i.e., securities rated in one of the
top three ratings categories by Moody's Investors Service, Inc.("Moody's") or
Standard & Poor's Ratings Group ("S&P) equal in value to the when-issued
commitment. These assets will be valued daily at market, and additional cash or
liquid, high grade debt 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 commitment.
Repurchase Agreements. A repurchase agreement is a contract under which the
Fund would acquire 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 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
3
<PAGE>
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 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.
Restricted Securities. The Fund may invest in restricted securities,
including those eligible for resale to certain institutional investors pursuant
to Rule 144A under the Securities Act of 1933 and foreign securities acquired in
accordance with Regulation S under the Securities Act of 1933. The Fund will not
invest more than 15% of its net assets in illiquid investments, which includes
repurchase agreements maturing in more than seven days, OTC options, 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 Board of Trustees may adopt
guidelines and delegate to the Adviser the daily function of determining and
monitoring the liquidity of restricted securities. The Board, however, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Board 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.
Financial Futures Contracts. 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 the Fund's exposure to interest rate
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 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
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
4
<PAGE>
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 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 may prevent this correlation from being perfect
and even a correct forecast of general 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 will be affected by variations in speculative market
demand for financial futures and debt securities, including technical influences
in futures trading. Differences between the financial instruments being hedged
and the instruments underlying the standard financial futures contracts
available for trading will be affected by interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, therefore, 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 market behavior or unexpected 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 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
5
<PAGE>
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 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 will be required to
continue to meet margin requirements until the position is closed.
Options on Financial Futures Contracts. The Fund may purchase and write
call and put options on financial futures contracts. 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 it. Options
on futures contracts involve risks similar to the risks relating to 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 transactions for bona
fide hedging or 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 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 it
intends to purchase. As evidence of this hedging intent, the Fund expects that
on 75% or more of
6
<PAGE>
the occasions on which it takes 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 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
to establish speculative 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 Internal Revenue Code
for maintaining its qualification as a regulated investment company for Federal
income tax purposes.
When the Fund purchases a financial futures contract, or writes a put
option or purchases a call option thereon, cash and high grade liquid debt
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 its broker, equals the market value of the futures contract.
Lower Rated High Yield Debt Obligations. The Fund may invest in high
yielding, fixed income securities rated Baa or lower by Moody's or BBB or lower
by S&P. The Fund will not invest in securities rated below Ca by Moody's or CC
by S&P. 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 generally fluctuate more than those of
high-rated securities. In addition, the lower rating reflects a greater
possibility of an adverse change in financial condition affecting the ability of
the issuer to make payments of interest and principal. The Adviser seeks to
minimize these risks through diversification, investment analysis and attention
to current developments in interest rates and economic conditions. To the extent
the Fund invests in securities in the lower rating categories, the achievement
of the Fund's goals is more dependent on the Adviser's ability than would be the
case if the Fund were investing in securities in the higher rated categories.
7
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions (as
well as the Fund's investment objective) will not be changed without approval of
a majority 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) Issue senior securities, except as permitted by paragraphs (2), (6) and
(7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on future contracts, forward commitments,
forward foreign exchange contracts and repurchase agreements entered into in
accordance with the Fund's investment policy, and the pledge, mortgage or
hypothecation of the Fund's assets within the meaning of paragraph (3) below are
not deemed to be senior securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 1/3% of the Fund's
total assets (including the amount borrowed) taken at market value. The Fund
will not use leverage to attempt to increase income. The Fund will not purchase
securities while outstanding borrowings exceed 5% of the Fund's total assets.
(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value.
(4) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
(5) Purchase or sell real estate or any interest therein, except that the
Fund may invest in securities of corporate or governmental entities secured by
real estate or marketable interest therein or issued by companies that invest in
real estate or interests therein.
(6) Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% 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 publicly distributed debt securities,
bank loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase is made
upon the original issuance of the securities.
8
<PAGE>
(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments and
options on such futures contracts, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.
(8) Purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets taken at
market value at the time of each investment. This limitation does not apply to
investments in obligations of the U.S. Government or any of its agencies or
instrumentalities.
(9) Purchase securities of an issuer, (other than the U.S. Government, its
agencies or instrumentalities) if
(a) Such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such issuer,
or
(b) Such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.
In connection with the lending of portfolio securities under item (6)
above, such loans must at all times be fully collateralized by cash or
securities of the U.S. Government or its agencies or instrumentalities and the
Fund's custodian must take possession of the collateral either physically or in
book entry form. Any cash collateral will consist of short-term high quality
debt instruments. Securities used as collateral must be marked to market daily.
Nonfundamental Investment Restrictions
The following restrictions are designated as nonfundamental and may be
changed by the Board of Trustees without shareholder approval:
The Fund may not:
(a) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Adviser to
save commissions or to average prices among them is not deemed to result in a
securities trading account.
(b) Purchase securities on margin or make short sales, except margin
deposits in connection with transactions in options, futures contracts, options
on futures contracts and other arbitrage transactions or unless by virtue of its
ownership of other securities, the Fund has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except that the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities and in connection with transactions involving
forward foreign currency exchange transactions.
9
<PAGE>
(c) Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in securities of closed-end investment companies,
(ii) such purchase would result in more than 3% of the total outstanding voting
securities of any one such closed-end investment company being held by the Fund,
or (iii) more than 5% of the Fund's total assets would be invested in any one
such closed-end investment company. The Fund will not invest in the securities
of any open-end investment company.
(d) Purchase securities of any issuer which, together with any predecessor,
has a record of less than three years' continuous operations prior to the
purchase if such purchase would cause investments of the Fund in all such
issuers to exceed 5% of the value of the total assets of the Fund.
(e) Invest for the purpose of exercising control over or management of any
company.
(f) Purchase warrants of any issuer, if, as a result of such purchases,
more than 2% of the value of the Fund's total assets would be invested in
warrants which are not listed on the New York Stock Exchange or the American
Stock Exchange or more than 5% of the value of the total assets of the Fund
would be invested in warrants generally, whether or not so listed. For these
purposes, warrants are to be valued at the lesser of cost or market value, but
warrants acquired by the Fund in units with or attached to debt securities shall
be deemed to be without value.
(g) Knowingly purchase or retain securities of an issuer if one or more of
the Trustees or officers of the Fund or directors or officers of the Adviser or
any investment management subsidiary of the Adviser individually owns
beneficially more than 0.5%, and together own beneficially more than 5%, of the
securities of such issuer.
(h) Purchase interests in oil, gas or other mineral leases or exploration
programs; however, this policy will not prohibit the acquisition of securities
of companies engaged in the production or transmission of oil, gas or other
minerals.
(i) Invest more than (i) 10% of its total assets in securities which are
restricted under the Securities Act of 1933 (the "1933 Act") (excluding
restricted securities that are eligible for resale pursuant to Rule 144A under
the 1933 Act) or (ii) 15% of the Fund's total assets in such restricted
securities (including restricted securities eligible for resale pursuant to Rule
144A).
(j) Purchase interests in real estate limited partnerships.
(k) 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.)
(l) Notwithstanding any investment restriction to the contrary, 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
10
<PAGE>
Group of Funds provided that, as a result, (i) no more than 10% of the Fund's
assets would be invested in securities of all other investment companies, (ii)
such purchase would not result in more than 3% of the total outstanding voting
securities of any one such investment company being held by the Fund and (iii)
no more that 5% of the Fund's assets would be invested in any one such
investment company.
In order to permit the sale of shares of the Fund in certain states, the
Trustees may, in their sole discretion, adopt restrictions on investment policy
more restrictive than those described above. Should the Trustees determine that
any such more restrictive policy is no longer in the best interest of the Fund
and its shareholders, the Fund may cease offering shares in the state involved
and the Trustees may revoke such restrictive policy. Moreover, if the states
involved shall no longer require any such restrictive policy, the Trustees may,
at their sole discretion, revoke such policy.
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its 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
Fund 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 and principal officers of the Fund during the past five years:
11
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With The Fund During the Past Five Years
- ---------------- ------------- --------------------------
<S> <C> <C>
*Edward J. Boudreau, Jr. Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1,2) Officer, the Adviser and The
Boston, Massachusetts Berkeley Financial Group ("The
Berkeley Group"); Chairman, NM
Capital Management, Inc. ("NM
Capital"); John Hancock Advisers
International Limited ("Advisers
International"); John Hancock
Funds, Inc., ("John Hancock
Funds"); John Hancock Investor
Services Corporation ("Investor
Services") and Sovereign Asset
Management Corporation ("SAMCorp")
(herein after the Adviser, The
Berkeley Group, NM Capital,
Advisers International, John
Hancock Funds, Investor Services
and SAMCorp are collectively
referred to as the "Affiliated
Companies"); Chairman, First
Signature Bank & Trust; Director,
John Hancock Freedom Securities
Corp., John Hancock Capital Corp.,
New England/Canada Business
Council; Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; President, the Adviser
(until July 1992). Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
</TABLE>
- --------------
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act:).
(1) A Member of the Executive Committee.
(2) A Member of Investment Committee of the Adviser.
(3) An Alternate Member of the Executive Committee.
(4) A Member of the Audit and Administration Committees.
12
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With The Fund During the Past Five Years
- ---------------- ------------- --------------------------
<S> <C> <C>
Dennis S. Aronowitz Trustee (4) Professor of Law, Boston University
Boston University School of Law; Trustee, Brookline
Boston, Massachusetts Savings Bank.
Richard P. Chapman, Jr. Trustee (4) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, Massachusetts Boston (lending); Director, Lumber
Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University
(education); Director, Depositors
Insurance Fund, Inc. (insurance).
William J. Cosgrove Trustee (4) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, New Jersey N.A. (retired September 1991);
Executive Vice President, Citadel
Group Representatives, Inc.;
Trustee, the Hudson City Savings
Bank.
Gail D. Fosler Trustee (4) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD economic and business research).
Bayard Henry Trustee (4) Corporate Advisor; Director,
31 Milk Street Fiduciary Trust Company (a trust
Boston, Massachusetts company); Director, Groundwater
Technology, Inc. (remediation);
Samuel Cabot, Inc.; Advisor,
Kestrel Venture Management.
*Anne C. Hodsdon Trustee and President (1,2) President and Chief Operating
101 Huntington Avenue Officer, the Adviser; Executive
Boston, Massachusetts Vice President, the Adviser (until
December 1994); Senior Vice
President; the Adviser (until
December 1993); Vice President, the
Adviser, until 1991.
</TABLE>
- --------------
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act:).
(1) A Member of the Executive Committee.
(2) A Member of Investment Committee of the Adviser.
(3) An Alternate Member of the Executive Committee.
(4) A Member of the Audit and Administration Committees.
13
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With The Fund During the Past Five Years
- ---------------- ------------- --------------------------
<S> <C> <C>
*Richard S. Scipione Trustee (1) General Counsel, the Life Company;
John Hancock Place Director, the Adviser, the
P.O. Box 111 Affiliated Companies, John Hancock
Boston, Massachusetts Distributors, Inc., JH Networking
Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp, NM Capital and John
Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993); Trustee, The
Berkeley Group.
Edward J. Spellman, CPA Trustee (4) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL
*Robert G. Freedman Vice Chairman and Chief Vice Chairman and Chief Investment
101 Huntington Avenue Investment Officer (2) Officer, the Adviser; President,
Boston, Massachusetts the Adviser (until December 1994).
*Thomas H. Drohan Senior Vice President and Senior Vice President and
101 Huntington Avenue Secretary Secretary, the Adviser.
Boston, Massachusetts
</TABLE>
- ------------------
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act.
(1) A Member of the Executive Committee.
(2) A Member of Investment Committee of the Adviser.
(3) An Alternate Member of the Executive Committee.
(4) A Member of the Audit and Administration Committees.
14
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With The Fund During the Past Five Years
- ---------------- ------------- --------------------------
<S> <C> <C>
*James B. Little Senior Vice President and Senior Vice President the Adviser.
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
*John A. Morin Vice President Vice President, the Adviser;
101 Huntington Avenue Counsel, the Life Company (until
Boston, Massachusetts 1995).
*Susan S. Newton Vice President, Assistant Vice President and Assistant
101 Huntington Avenue Secretary and Compliance Secretary, the Adviser.
Boston, Massachusetts Officer
*James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
- ------------------
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act.
(1) A Member of the Executive Committee.
(2) A Member of Investment Committee of the Adviser.
(3) An Alternate Member of the Executive Committee.
(4) A Member of the Audit and Administration Committees.
15
<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 of the 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 three non-Independent Trustees,
Messrs. Boudreau, Scipione and Ms. Hodsdon and each of the officers of the Fund
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.
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement From the Fund and
Aggregate Benefits Accrued Estimated John Hancock Fund
Compensation From as Part of the Annual Benefits Complex to Trustees(1)
Independent Trustees the Fund* Fund's Expenses* Upon Retirement (Total of 19 Funds)
- -------------------- --------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C>
Dennis S. Aronowitz $20,323 $ $ $ 61,050
Richard P. Chapman 5,554 15,440 - 62,800
William J. Cosgrove 5,554 14,769 - 61.050
Gail D. Fosler` 20,323 - - 60,800
Bayard Henry 19,605 - - 58,850
Edward J. Spellman 20,323 - - 61,050
------- ------- ------- --------
$91,682 $30,209 $ - $365,600
</TABLE>
* Compensation for the fiscal year ended December 31, 1995.
(1) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995.
The nominess of the Funds may at times be the record holders of in excess
of 5% of shares of any one or more Funds by virtue of holding shares in "street
name". As of March 13, 1996, the officers and trustees of the Trusts as a group
owned less than 1% of the outstanding shares of each class of each of the Funds.
16
<PAGE>
As of March 13, 1996, the following shareholders beneficially owned 5% of
or more of the outstanding shares of the Funds listed below:
<TABLE>
<CAPTION>
Percentage of
Number of shares total outstanding
Fund and Class of beneficial share of the class
Name and Address of Shareholder of Shares interest owned of the Fund
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith, Inc. Class B shares 603,562 8.57%
Attn Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
</TABLE>
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 Fund who is also an
affiliated person of the Adviser is named above, together with the capacity in
which such person is affiliated with the Fund and the Adviser.
As described in the Prospectus under the caption "Organization and
Management of the Fund," the Fund has entered into an investment management
contract with the Adviser. Under the investment management contract, the Adviser
provides the Fund (i) with a continuous investment program, consistent with the
Fund's stated investment objective and policies, (ii) supervision of all aspects
of the Fund's operations except those delegated to a custodian, transfer agent
or other agent and (iii) such executive, administrative and clerical personnel,
officers and equipment as are necessary for the conduct of its business. The
Adviser is responsible for the management of the Fund's portfolio assets.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provides 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 other funds or clients are selling the same security. If opportunities for
the 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
17
<PAGE>
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.
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's
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.
Under the terms of the investment management contract with the Fund, the
Adviser provides the Fund with office space, supplies and other facilities
required for the business of the Fund. The Adviser pays the compensation of all
other officers and employees of the Fund, and pays the expenses of clerical
services relating to the administration of the Fund.
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 Fund
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.
As provided by the investment management contract, the Fund pays the
Adviser monthly an investment management fee, which is based on a stated
percentage of the Fund's average of the daily net assets as follows:
Net Asset Value Annual Rate
--------------- -----------
First $1,500,000,000 0.50%
Next $500,000,000 0.45%
Next $500,000,000 0.40%
Amount over $2,500,000,000 0.35%
From time to time, the Adviser may reduce its 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 a 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.
On December 31, 1995, the net assets of the Fund were $1,633,942,540. For
the years ended December 31, 1993, 1994, and 1995 the Adviser received fees of
$6,488,835 and $7,116,092 and $7,406,635, respectively. The 1992 and 1993
advisory fee figures reflect the different advisory fee schedule that was in
effect before January 1, 1994.
If the total of all ordinary business expenses of the Fund for any fiscal
year exceeds limitations prescribed by any state in which shares of the Fund are
qualified for sale, the fee payable to the Adviser will be reduced to the extent
required by these limitations. At this time, the most restrictive limit on
expenses imposed by a state requires that expenses charged to the Fund in any
fiscal year not exceed 2 1/2% of the first $30,000,000 of the Fund's average net
18
<PAGE>
assets, 2% of the next $70,000,000 of such net assets, and 1 1/2% of the
remaining average net assets. When calculating the above limit, the Fund may
exclude interest, brokerage commissions and extraordinary expenses.
Pursuant to its 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 the
investment management 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 reckless disregard by the Adviser of its
obligations and duties under the investment management contract.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and presently has more than $16 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 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 S&P's
and A. M. Best. Founded in 1862, the Life Company has been serving clients for
over 130 years.
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
contract or any extension, renewal or amendment thereof remains in effect. If
the contract is no longer in effect, the Fund (to the extent that it lawfully
can) will cease to use such a 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 nonexclusive 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.
The investment management contract continues in effect from year to year if
approved annually by vote of a majority of the Trustees who are not interested
persons of one of the parties to the contract, 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 Fund's outstanding voting securities. 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 voting securities of the Fund.
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 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 net asset value next
19
<PAGE>
determined plus any applicable sales charge. In connection with the sale of
Class A and Class B shares, John Hancock Funds and Selling Brokers receive
compensation in the form of 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 sales charges are discussed further in the Prospectus.
The Fund's Trustees adopted Distribution Plans with respect to the Class A
and Class B shares (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%, respectively, of the
Fund's daily net assets attributable to shares of that class. However, the
service fee will not exceed 0.25% of the Fund's daily net assets attributable to
each class of shares. The distribution fees reimburse John Hancock Funds for its
distribution costs incurred in the promotion of sales of Fund shares, and the
service fees 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. Accordinlgy, the Fund does not
treat unreimbursed expenses relating to the Class B shares as a liability of the
Fund. The Plans were approved by a majority of the voting securities of the
Fund. The Plans and all amendments were approved by the Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on these 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 these expenditures were made. The Trustees review these
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 shares and
Class B shares of the Fund:
<TABLE>
<CAPTION>
Expense Items
Printing and
Mailing of Expenses of Interest Carrying
Prospectus to Compensation to John Hancock or Other Finance
Advertising New Shareholders Selling Brokers Funds Charges Other
----------- ---------------- --------------- ----- -------------
Sovereign Bond
- --------------
<S> <C> <C> <C> <C> <C>
Class A shares $379,227 $35,983 $3,009,477 $826,733 $ -
Class B shares 99,399 9,008 183,614 185,850 160,723
</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 in each case upon 60 days' written notice to John Hancock Funds, and (c)
automatically in the event
20
<PAGE>
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 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 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 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 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 are 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 a 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.
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 a Fund's NAV.
A 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 a Fund's NAV is not calculated. Consequently, a 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.
21
<PAGE>
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 reduced sales charges 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 owned
by the investor, the investor is entitled to accumulate 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, John Hancock Investor Services Inc.
(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
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 Charges. As described in the Prospectus, Class A shares of
the Fund may be sold without a sales charge to certain persons described in the
Prospectus.
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 current 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 (the
"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 specified 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 investments called for by the LOI over a forty-eight
(48) month period. These qualified retirement plans include group IRA, SEP,
SARSEP, TSA, 401(k), 403(b) and Section 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 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
22
<PAGE>
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 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 Class B shares
derived from reinvestment of dividends or capital gains distributions.
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
last day of the month.
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 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.
23
<PAGE>
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, 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 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. 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 from the redemption of Fund shares. Since the
redemption price of the 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
realization 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 and Class B shares of the Fund at the same time 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"). This program is explained
more fully in the Prospectus. 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 checks.
24
<PAGE>
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 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 other John Hancock fund, subject to the minimum investment
limit of 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 other John Hancock funds. If a CDSC was paid
upon a redemption, a shareholder may reinvest the proceeds from this 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
The Trustees of the Fund are responsible for the management and supervision
of the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have not authorized any additional series of the Fund,
other than the Fund, although they may do so in the future. The Declaration of
Trust also authorizes the Trustees to classify and reclassify the shares of the
Fund, or any other series of the Fund, into one or more classes. 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
shares.
Class A and Class B shares of the Fund represent an equal proportionate
interest in the aggregate net assets attributable to that class of the Fund.
The holders of Class A shares and Class B shares have certain exclusive
voting rights on matters relating to their respective Rule 12b-1 distribution
plans.
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 that (i) the distribution and service fees
relating to Class A and Class B shares will be borne
25
<PAGE>
exclusively by that class, (ii) Class B shares will pay higher distribution and
service fees than Class A shares and (iii) each class of shares will bear any
other class expenses properly attributable to that class of shares, subject to
the conditions imposed by the Internal Revenue Service in issuing rulings to
funds with multiple-class structure. Similarly, the net asset value per share
may vary depending on the class of shares purchased.
In the event of liquidation, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to such shareholders.
Shares entitle their holders to one vote per share, are freely transferable and
have no preemptive subscription or conversion rights. When issued, shares are
fully paid and non-assessable, by the Fund, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration
of Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Fund's outstanding shares and the Trustees shall promptly call
a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Fund. Shareholders
may, under certain circumstances, communicate with other shareholders in
connection with requesting a special meeting of shareholders. However, at any
time that less than a majority of the Trustees holding office were elected by
the shareholders, the Trustees will call a special meeting of shareholders for
the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the Fund. However, the Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or 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 Fund shareholder held
personally liable by reason of being or having been a shareholder. 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.
TAX STATUS
The Fund has qualified and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (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, if any) which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.
The Fund will be subject to a four percent 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 avoid liability for
such tax by satisfying such distribution requirements.
26
<PAGE>
Distributions from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Fund's Prospectus, whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital gains.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so received
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.
The amount of net realized 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 that will generate capital gains or to enter into options
or futures transactions. 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 these 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.
Upon a redemption of shares (including by exercise of the exchange
privilege) a shareholder will ordinarily realize a taxable gain or loss
depending upon his 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. 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 ninety (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 sixty-one (61) days beginning thirty (30) days before and ending
thirty (30) days after the shares are disposed of, such as pursuant to the
Automatic Dividend Reinvestment Plan. 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 all net capital gains, 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 long-term capital gains 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. 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
27
<PAGE>
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 shares in the Fund 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 by such losses, they would not result in Federal income tax
liability to the Fund and, as noted above, would not be distributed to
shareholders. The Fund has $20,654,741 of capital loss carryforwards available
to the extent provided by regulations, to offset future net realized capital
gains. These carryforwards expire at various amounts and times from 1996 through
2002.
Distributions from the Fund will not qualify for the dividends received
deduction for corporations.
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 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. Because more than 50% of the Fund's assets at the close of any
taxable year is not expected to consist of stocks or securities of foreign
corporations, the Fund will not be able to pass through such taxes to its
shareholders (as additional income) along with a corresponding entitlement to a
tax credit or deduction. The Fund will deduct such taxes in computing its
investment company taxable income.
The Fund accrues income on zero coupon securities or certain PIK or
increasing rate securities (and, in general, any other securities with original
issue discount or with market discount if the Fund elects to include market
discount in income currently) prior to the receipt of cash payments. The Fund
must distribute, at least annually, all or substantially all of its net income
to shareholders to qualify as a regulated investment company under the Code and
avoid Federal income and excise taxes. 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
distribution requirements.
The Fund may invest in debt obligations that are in the lower rating
categories or are unrated, including debt obligations of issuers not currently
paying interest as well as issuers who are in default. Investments in debt
obligations that are at risk of or in default present 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
28
<PAGE>
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
invests in such securities, 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.
Limitations imposed by the Code on regulated investment companies like the
Fund may restrict the Fund's ability to enter into futures and options
transactions. The options and futures 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 and timing of some capital gains and losses realized by
the Fund. Also, some of the Fund's losses on its transactions involving options
and futures contracts and/or offsetting portfolio positions may be deferred
rather than being taken into account currently in calculating the Fund's taxable
income. Some 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.
These transactions may thereafter affect the amount, timing and character of the
Fund's distributions to shareholders. The Fund will take into account the
special tax rules (including consideration of available elections) applicable to
options and futures transactions in order 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 shares of the Fund may
also be subject to state and local taxes. A state income (and possibly local
income and/or intangible property) tax exemption is generally available to the
extent 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
foregoing discussion related to U.S. investors that are not exempt from U.S.
Federal income tax. Different tax consequences will apply to plan participants,
tax-exempt investors and investors that are subject to tax deferral. You should
consult your tax adviser for specific advice. Under the Code, a tax-exempt
investor in the Fund will not generally recognize unrelated business taxable
income from its investment in the Fund unless the tax-exempt investor incurred
indebtedness to acquire or continue to hold Fund shares and such indebtedness
remains unpaid. 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
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
29
<PAGE>
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisors 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
For the 30-day period ended December 31, 1995, the annualized yield on
Class A and Class B shares of the Fund was 5.88% and 5.46%, respectively. The
average annual total return of the Class A shares of the Fund for the 1 year, 5
year and 10 year periods ended December 31, 1995 was 14.11%, 9.33% and 9.01%,
respectively and reflect payment of the maximum sales charge of 4.50%.
The average annual total return of Class B shares of the Fund for the 1
year period ended December 31, 1995 and since inception on November 19, 1993 was
13.71% and 5.96%, respectively. The Fund's yield is computed by dividing net
investment income per share determined for a 30-day period by the maximum
offering price per share (which includes the full sales charge) on the last day
of the period, according to the following standard formula:
The Fund's yield is computed by dividing net investment income per
share determined for a 30-day period by the maximum offering price per share
(which includes the full sales charge) on the last day of the period, according
to the following standard formula:
Yield = 2 ([(a - b) + 1] 6 - 1)
-----
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during the
period that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period (NAV where applicable).
30
<PAGE>
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 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 of 4.5% and 5.0%, respectively, is included in the
initial investment or the CDSC 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.
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 4.5% sales charge
on Class A shares or the 5% CDSC on Class B shares into account. 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. 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 total
return will be ranked or compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper -Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield 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.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MORNINGSTAR, and BARRON'S may also be utilized.
31
<PAGE>
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.
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 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 National Association of Securities
Dealers, Inc. and such other policies as 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 in 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 commitment to allocate portfolio
transactions upon any prescribed basis. While the Adviser will be primarily
responsible for the allocation of the Fund's brokerage business, their 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 Trustees. For the
32
<PAGE>
years ended on December 31, 1995, 1994, and 1993, no negotiated brokerage
commissions were paid on portfolio transactions.
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 such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended December 31,
1995, the Fund did not pay commissions 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.
("Distributors") and Sutro & Company, Inc., ("Sutro") each (an "Affiliated
Broker"). Pursuant to procedures established 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.
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 Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the 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 of the Trustees who are not
interested persons (as defined in the Investment Company Act) of the Fund, the
Adviser or the Affiliated Broker. 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.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation ("Investor Services"), P.O. Box
9116, Boston, MA 02205-9116, a wholly-owned indirect subsidiary of the Life
Company, is the transfer and dividend paying agent of the Fund. The Fund pays an
annual fee of $20.00 per shareholder for each Class A account and $22.50 for
each Class B per shareholder account, 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.
33
<PAGE>
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 24 Federal Street, Boston,
Massachusetts 02110. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. Ernst & Young LLP audits and renders an
opinion of the Fund's annual financial statements and prepares the Fund's annual
Federal income tax return.
34
<PAGE>
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 1995 Annual
Report to Shareholders for the year ended December 31, 1995 (filed
electronically on February 26, 1996; file nos. 811-2402 and 2-48925; accession
number 0000950135-96-001142):
John Hancock Sovereign Bond Fund
--------------------------------
Statement of Assets and Liabilities as of December 31, 1995.
Statement of Operations of the year ended December 31, 1995.
Statement of Changes in Net Asset for each of the two years ended
December 31.
Notes to Financial Statements.
Financial Highlights for each of the 10 years ended December 31, 1995.
Schedule of Investments as of December 31, 1995.
(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 March 29, 1996, the number of record holders of shares of Registrant
was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Shares - 141,143
Class B Shares - 6,483
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
C-1
<PAGE>
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
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.
C-2
<PAGE>
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.
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."
C-3
<PAGE>
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
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 Fund, John Hancock Current Interest, John
Hancock Series, Inc., John Hancock Tax-Free Bond Fund, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Limited-Term
Government Fund, John Hancock Tax-Exempt Income Fund, John Hancock Sovereign
Investors Fund, Inc., John Hancock Special Equities Fund, John Hancock Sovereign
Bond Fund, John Hancock Tax-Exempt Series, 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.
(b) Subadviser
C-4
<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 Chairman
101 Huntington Avenue Chief Executive Officer
Boston, Massachusetts
Robert H. Watts Director, ExecutiveVice President None
John Hancock Place and Chief Compliance Officer
P.O. Box 111
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
Thomas H. Drohan Senior Vice President Senior Vice President and
101 Huntington Avenue Secretary
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Director None
101 Huntington Avenue
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
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Susan S. Newton Vice President Vice President and
101 Huntington Avenue Assistant Secretary
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
William S. Nichols Senior Vice President None
101 Huntington Avenue
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-6
<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'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster 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, Massachusetts
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Michael T. Carpenter Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-7
<PAGE>
Keith Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman 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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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
26th day of April, 1996.
JOHN HANCOCK SOVEREIGN BOND FUND
By:_____________________________
Edward J. Boudreau, Jr.
Chairman
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
Edward J. Boudreau, Jr. (Principal Executive Officer)
/s/James B. Little
James B. Little Senior Vice President and Chief April 26, 1996
Financial Officer (Principal
Financial and Accounting Officer)
* Trustee
Dennis S. Aronowitz
* Trustee
Richard P. Chapman
* Trustee
William J. Cosgrove
* Trustee
Gail D. Fosler
* Trustee
Bayard Henry
C-9
<PAGE>
Signature Title Date
--------- ----- ----
Trustee
Anne C. Hodsdon
* Trustee
Richard S. Scipione
* Trustee
Edward J. Spellman
*By: /s/Thomas H. Drohan
------------------- April 26, 1996
Thomas H. Drohan
Attorney-in-Fact
</TABLE>
C-10
<PAGE>
John Hancock Sovereign Bond Fund
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
99.B1 Amended and Restated Declaration of Trust of Registrant
dated February 28, 1992.*
99.B1.1 Amendment to Declaration of Trust dated May 1, 1992.*
99.B1.2 Amendment to Declaration of Trust dated September 14, 1993.*
99.B1.3 Amendment to Declaration of Trust Agreement Abolition of Class
C Shares of Beneficial Interest of John Hancock Sovereign Bond
Fund dated May 1, 1995.+
99.B1.4 Amendment to Declaration of Trust amending Number of Trustees
and Appointing Individual to Fill a Vacancy dated March 5, 1996.+
99.B2 Amended and Restated By-Laws of Registrant as adopted on December
8, 1993.*
99.B2.1 Amendment to By-Laws dated December 13, 1994.*
99.B2.2 Amendment to By-Laws dated March 6, 1996.+
99.B4 Specimen share certificate for the Registrant.*
99.B5 Investment Management Contract between Registrant and John Hancock
Advisers, Inc. dated January 1, 1994.*
99.B6 Distribution Agreement with Registrant and John Hancock Broker
Distribution Services, Inc. dated August 1, 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.*
<PAGE>
99.B9 Transfer Agency Agreement between Registrant and John Hancock Fund
Services, Inc. dated January 1, 1991.*
99.B9.1 Accounting and Legal Services Agreement between John Hancock
Advisers, Inc. and the Registrant as of January 1, 1996.+
99.B.10 None
99.B11 Auditor's Consent.+
99.B12 Not Applicable
99.B13 None
99.B14 None
99.B15 Class A Distribution Plan between Registrant and John Hancock
Broker Services, Inc.*
99.B15.1 Class B Distribution Plan between Registrant and John Hancock
Broker Services, Inc.*
99.B16 Schedule for Computation of Yield and Total Return.*
99.B17 Powers of Attorney dated December 13, 1984, April 23, 1988, April
23, 1987, November 15, 1988, May 17, 1988, October 23, 1990,
October 15, 1991, January 1 1994.*
99.27 Class A
99.27 Class B
* Previously filed electronically with post-effective amendment number 39
(file nos. 811-2402 and 2-48925) on April 26, 1995, accession number
0000950146-95-000178.
+ Filed herewith.
JOHN HANCOCK SOVEREIGN BOND FUND
Abolition of Class C Shares
of Beneficial Interest of
John Hancock Sovereign Bond Fund (the "Fund")
The undersigned, being a majority of the Trustees of John Hancock Sovereign
Bond Fund, a Massachusetts business Trust (the "Trust"), acting pursuant to the
Amended and Restated Declaration of Trust dated February 28, 1992 of the Trust,
as amended from time to time (the "Declaration of Trust"), do hereby abolish the
class of shares of beneficial interest of the Fund previously established and
designated as "Class C Shares" and in connection therewith do hereby extinguish
any and all rights and preferences of such Class C Shares as set forth in the
Declaration of Trust and the Trust's Registration Statement on Form N-1A. The
abolition of the Class C shares of the Fund is effective as of May 1, 1995.
The Declaration of Trust is hereby amended to the extent necessary to
reflect the abolition of Class C Shares.
Capitalized terms not otherwise defined herein shall have the meaning set
forth in the Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 1st day of May, 1995.
/s/Edward J. Boudreau, Jr. /s/Dennis S. Aronowitz
Edward J. Boudreau, Jr. Dennis S. Aronowitz
as Trustee, not individually as Trustee, not individually
34 Swan Road Boston University
Winchester, MA 01890 Boston, Massachusetts
/s/Richard P. Chapman, Jr. /s/Edward J. Spellman
Richard P. Chapman, Jr. Edward J. Spellman
as Trustee, not individually as Trustee, not individually
160 Washington Street 295C Commercial Bld.
Brookline, Massachusetts Suite 200
Lauderdale by the Sea, FL
/s/William J. Cosgrove /s/Gail D. Fosler
William J. Cosgrove Gail D. Fosler
as Trustee, not individually as Trustee, not individually
20 Buttonwood Place 4104 Woodbine Street
Saddle River, New Jersey Chevy Chase, MD
- ----------------- ----------------
Bayard Henry Richard S. Scipione
as Trustees, not individually as Trustees, not individually
121 High Street John Hancock Place
Boston, Massachusetts Boston, Massachusetts
<PAGE>
The Declaration, a copy of which, together with all amendments thereto, is on
file in the office of the Secretary of State of The Commonwealth of
Massachusetts, provides that no Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely to the Trust
Property, or to the Trust Property of one or more specific Series of the Trust
if the claim arises from the conduct of such Trustee, officer, employee or agent
with respect to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust.
JOHN HANCOCK SOVEREIGN BOND FUND
Instrument Amending Number of Trustees
and Appointing Individual to Fill a Vacancy
The undersigned, constituting a majority of the Trustees of John Hancock
Sovereign Bond Fund, a Massachusetts business trust (the "Trust"), acting
pursuant to the Amended and Restated Declaration of Trust dated February 28,
1992 of the Trust, as amended from time to time, do hereby:
a) amend Section 2.12, effective March 5, 1996, to read as follows:
Section 2.12. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed
by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than two (2).
b) appoint Anne C. Hodsdon to fill a vacancy, such appointment to become
effective upon such individual accepting in writing such appointment and
agreeing to be bound by the terms of the Declaration of Trust and such
individual to hold office until his successor is elected and qualified or
until the earlier occurrence of any of the events specified in the first
sentence of Section 2.15 of the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned being at least a majority of the
Trustees of the Trust, have executed this amendment as of the 5th day of March,
1996.
/s/Dennis S. Aronowitz _________________________
Dennis S. Aronowitz Gail D. Fosler
/s/Edward J. Boudreau, Jr. _________________________
Edward J. Boudreau, Jr. Bayard Henry
/s/Richard P. Chapman, Jr. /s/Richard S. Scipione
Richard P. Chapman, Jr. Richard S. Scipione
/s/Wiliam J. Cosgrove /s/Edward J. Spellman
William J. Cosgrove Edward J. Spellman
The Declaration, a copy of which, together with all amendments thereto, is
on file in the office of the Secretary of State of The Commonwealth of
Massachusetts, provides that no Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his/her
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Trust Property of one or more specific Series of
the Trust if the claim arises from the conduct of such Trustee, officer,
employee or agent with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr., Dennis S.
Aronowitz, Richard P. Chapman, Jr., William J. Cosgrove, Richard S. Scipione,
and Edward J. Spellman, who each acknowledged the foregoing instrument to be his
or her fee act and deed, before me, this 5th day of March 1996.
/s/Ann Marie Kalapinski
Notary Public
My Commission Expires: 10/20/00
John Hancock Capital Series
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Limited Term Government Fund
John Hancock Sovereign Bond Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Tax-Exempt Income Fund
John Hancock World Fund
CONSIDERATION OF PROPOSAL TO AMEND THE BY-LAWS,
EFFECTIVE MARCH 6, 1996
RESOLVED, that the By-Laws of the Trust be and hereby are amended to delete
Article IV, Sub-Section 5.1 of the By-Laws and replace it with the following:
Executive Committees and Other Committees
Section 5.1. How Constituted. The Trustees may, by resolution, designate
one or more committees, including an Executive Committee, an Audit Committee and
an Administration Committee, each consisting of at least two Trustees. The
Trustees may, by resolution, designate one or more alternate members of any
committee to serve in the absence of any member or other alternate member of
such committee. Each member and alternate member of a committee shall be a
Trustee and shall hold office at the pleasure of the Trustees. The Chairman of
the Board shall be a member of the Executive Committee.
As of January 1, 1996
ACCOUNTING & LEGAL SERVICES AGREEMENT
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Dear Sir:
The John Hancock Funds listed on Schedule A (the "Funds") have selected John
Hancock Advisers, Inc. (the "Administrator") to provide certain accounting and
legal services for the Funds, as more fully set forth below, and you are willing
to provide such services under the terms and conditions hereinafter set forth.
Accordingly, the Funds agree with you as follows:
1. Services. Subject to the general supervision of the Board of
Trustees/Directors of the Funds, you will provide certain tax, accounting
and legal services (the "Services") to the Funds. You will, to the extent
such services are not required to be performed by you pursuant to an
investment advisory agreement, provide:
(A) such tax, accounting, recordkeeping and financial management services
and functions as are reasonably necessary for the operation of each
Fund. Such services shall include, but shall not be limited to,
supervision, review and/or preparation and maintenance of the
following books, records and other documents: (1) journals containing
daily itemized records of all purchases and sales, and receipts and
deliveries of securities and all receipts and disbursements of cash
and all other debits and credits, in the form required by Rule
31a-1(b) (1) under the Act; (2) general and auxiliary ledgers
reflecting all asset, liability, reserve, capital, income and expense
accounts, in the form required by Rules 31a-1(b) (2) (i)-(iii) under
the Act; (3) a securities record or ledger reflecting separately for
each portfolio security as of trade date all "long" and "short"
positions carried by each Fund for the account of the Funds, if any,
and showing the location of all securities long and the off-setting
position to all securities short, in the form required by Rule
31a-1(b) (3) under the Act; (4) a record of all portfolio purchases or
sales, in the form required by Rule 31a-1(b) (6) under the Act; (5) a
record of all puts, calls, spreads, straddles and all other options,
if any, in which any Fund has any direct or indirect interest or which
the Funds have granted or guaranteed, in the form required by Rule
31a-1(b) (7) under the Act; (6) a record of the proof of money
balances in all ledger accounts maintained pursuant to this Agreement,
in the form required by Rule 31a-1(b) (8) under the Act; (7) price
make-up sheets and such records as are necessary to reflect the
determination of each Funds' net asset value; and (8) arrange for, or
participate in (a) the preparation for the Fund of all required tax
returns, (b) the preparation and submission of reports to existing
shareholders and (c) the preparation of financial data or reports
required by the Securities and Exchange Commission and other
regulatory authorities;
<PAGE>
(B) certain legal services as are reasonably necessary for the operation
of each Funds. Such services shall include, but shall not be limited
to; (1) maintenance of each Fund's registration statement and federal
and state registrations; (2) preparation of certain notices and proxy
materials furnished to shareholders of the Funds; (3) preparation of
periodic reports of each Fund to regulatory authorities, including
Form N-SAR and Rule 24f-2 legal opinions; (4) preparation of materials
in connection with meetings of the Board of Trustees/Directors of the
Funds; (5) preparation of written contracts, distribution plans,
compliance procedures, corporate and trust documents and other legal
documents; (6) research advice and consultation about certain legal,
regulatory and compliance issues, (7) supervision, coordination and
evaluation of certain services provided by outside counsel.
(C) provide the Funds with staff and personnel to perform such accounting,
bookkeeping and legal services as are reasonably necessary to
effectively service the Fund. Without limiting the generality of the
foregoing, such staff and personnel shall be deemed to include
officers of the Administrator, and persons employed or otherwise
retained by the Administrator to provide or assist in providing of the
services to the Fund.
(D) maintain all books and records relating to the foregoing services; and
(E) provide the Funds with all office facilities to perform tax,
accounting and legal services under this Agreement.
2. Compensation of the Administrator The Funds shall reimburse the
Administrator for: (1) a portion of the compensation, including all
benefits, of officers and employees of the Administrator based upon the
amount of time that such persons actually spend in providing or assisting
in providing the Services to the Funds (including necessary supervision and
review); and (2) such other direct and indirect expenses, including, but
not limited to, those listed in paragraph (1) above, incurred on behalf of
the Fund that are associated with the providing of the Services and (3) 10%
of the reimbursement amount. In no event, however, shall such reimbursement
exceed levels that are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and
quality. Compensation under this Agreement shall be calculated and paid
monthly in a arrears.
3. No Partnership or Joint Venture. The Funds and you are not partners of or
joint ventures with each other and nothing herein shall be construed so as
to make you such partners or joint venturers or impose any liability as
such on any of you.
4. Limitation of Liability of the Administrator. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or from reckless
disregard by you of your obligations and duties under this Agreement. Any
person, even though also employed by you, who may be or become an employee
of and paid by the Funds shall be deemed, when acting within the scope of
his or her employment by the Funds, to be acting in such employment solely
for the Funds and not as your employee or agent.
<PAGE>
5. Duration and Termination of this Agreement. This Agreement shall remain in
force until the second anniversary of the date upon which this Agreement
was executed by the parties hereto, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually
by a majority of the Trustees/Directors. This Agreement may, on 60 days'
written notice, be terminated at any time without the payment of any
penalty by the Funds by vote of a majority of the Trustees/Directors, or by
you. This Agreement shall automatically terminate in the event of its
assignment.
6. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver
or termination is sought.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without
regard to the choice of law provisions thereof.
8. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement may
be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument. A copy of the Declaration of Trust of each Fund
organized as Massachusetts business trusts is on file with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of each such
Fund are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the Fund's property shall be bound.
Yours very truly,
JOHN HANCOCK FUNDS (See Schedule A)
By: /s/ James B. Little
James B. Little
Senior Vice President
The foregoing contract is
hereby agreed to as of the
date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
Anne C. Hodsdon
President
<PAGE>
January 1, 1996
SCHEDULE A
John Hancock Capital Series
- John Hancock Growth Fund
- John Hancock Special Value Fund
John Hancock Limited Term Government Fund
John Hancock Sovereign Bond Fund John
Hancock Sovereign Investors Fund, Inc.
- John Hancock Sovereign Investors Fund
- John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
- John Hancock Independence Diversified Core Equity Fund
- John Hancock Strategic Income Fund
- John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock World Fund
- John Hancock Pacific Basin Equities Fund
- John Hancock Global Rx Fund
- John Hancock Global Marketplace Fund
John Hancock Cash Reserve, Inc.
John Hancock Series, Inc.
- John Hancock Emerging Growth Fund
- John Hancock Global Resources Fund
- John Hancock Government Income Fund
- John Hancock High Yield Bond Fund
- John Hancock High Yield Tax-Free Fund
- John Hancock Money Market Fund
John Hancock Institutional Series Trust
- John Hancock Active Bond Fund
- John Hancock Dividend Performers Fund
- John Hancock Fundamental Value Fund
- John Hancock Global Bond Fund
- John Hancock International Equity Fund
- John Hancock Multi-Sector Growth Fund
- John Hancock Small Capitalization Equity Fund
- John Hancock Independence Diversified Core Equity Fund II
- John Hancock Independence Value Fund
- John Hancock Independence Balanced Fund
- John Hancock Independence Medium Capitalization Fund
- John Hancock Independence Growth Fund
John Hancock Declartion Trust
- John Hancock V.A. 500 Index Fund
- John Hancock V.A. Discovery Fund
- John Hancock V.A. Diversified Core Equity Fund
- John Hancock V.A. Emerging Equities Fund
- John Hancock V.A. Global Income Fund
- John Hancock V.A. International Fund
- John Hancock V.A. Money Market Fund
- John Hancock V.A. Sovereign Bond Fund
- John Hancock V.A. Strategic Income Fund
- John Hancokc V.A. Sovereign Investors Fund
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "The Fund's Financial
Highlights" in the Class A and Class B Shares prospectus and "Independent
Auditors" in the Class A and Class B Shares Statement of Additional Information
and to the use of our report dated February 9, 1996, on the financial statements
and financial highlights of the John Hancock Sovereign Bond Fund in this
Post-Effective Amendment Number 40 to Registration Statement (Form N-1A
No.2-48925) dated May 1, 1996.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 25, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> JOHN HANCOCK SOVEREIGN BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,603,019,688
<INVESTMENTS-AT-VALUE> 1,645,916,849
<RECEIVABLES> 30,063,310
<ASSETS-OTHER> 133,644
<OTHER-ITEMS-ASSETS> 42,821,623
<TOTAL-ASSETS> 1,676,038,265
<PAYABLE-FOR-SECURITIES> 40,189,661
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,906,064
<TOTAL-LIABILITIES> 42,095,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,599,608,475
<SHARES-COMMON-STOCK> 99,691,440
<SHARES-COMMON-PRIOR> 95,399,448
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,487,558)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,821,623
<NET-ASSETS> 1,633,942,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 128,984,162
<OTHER-INCOME> 0
<EXPENSES-NET> 17,183,825
<NET-INVESTMENT-INCOME> 111,800,337
<REALIZED-GAINS-CURRENT> 9,875,400
<APPREC-INCREASE-CURRENT> 140,081,956
<NET-CHANGE-FROM-OPS> 261,757,693
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 107,383,916
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,537,727
<NUMBER-OF-SHARES-REDEEMED> 14,896,492
<SHARES-REINVESTED> 5,650,757
<NET-CHANGE-IN-ASSETS> 265,915,334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (18,362,958)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,406,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,183,825
<AVERAGE-NET-ASSETS> 1,485,396,657
<PER-SHARE-NAV-BEGIN> 13.90
<PER-SHARE-NII> 1.12
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> 1.12
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.40
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> JOHN HANCOCK SOVEREIGN BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,603,019,688
<INVESTMENTS-AT-VALUE> 1,645,916,849
<RECEIVABLES> 30,063,310
<ASSETS-OTHER> 133,644
<OTHER-ITEMS-ASSETS> 42,821,623
<TOTAL-ASSETS> 1,676,038,265
<PAYABLE-FOR-SECURITIES> 40,189,661
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,906,064
<TOTAL-LIABILITIES> 42,095,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,599,608,475
<SHARES-COMMON-STOCK> 6,411,647
<SHARES-COMMON-PRIOR> 2,898,886
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,487,558)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,821,623
<NET-ASSETS> 1,633,942,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 128,984,162
<OTHER-INCOME> 0
<EXPENSES-NET> 17,183,825
<NET-INVESTMENT-INCOME> 111,800,337
<REALIZED-GAINS-CURRENT> 9,875,400
<APPREC-INCREASE-CURRENT> 140,081,956
<NET-CHANGE-FROM-OPS> 261,757,693
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,389,308
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,013,184
<NUMBER-OF-SHARES-REDEEMED> 681,957
<SHARES-REINVESTED> 181,534
<NET-CHANGE-IN-ASSETS> 265,915,334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (18,362,958)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,406,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,183,825
<AVERAGE-NET-ASSETS> 1,485,396,657
<PER-SHARE-NAV-BEGIN> 13.90
<PER-SHARE-NII> 1.02
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> 1.02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.40
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
