JOHN HANCOCK
GROWTH AND
INCOME FUNDS
[John Hancock's graphic logo. A circle,
diamond, triangle and a cube]
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PROSPECTUS GROWTH AND INCOME FUND
AUGUST 30, 1996*
INDEPENDENCE EQUITY FUND
SOVEREIGN BALANCED FUND
SOVEREIGN INVESTORS FUND
SPECIAL VALUE FUND
UTILITIES FUND
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
- are not bank deposits
- are not federally insured
- are not endorsed by any bank or government agency
- are not guaranteed to achieve their goal(s)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
* January 1, 1997 for Growth and Income Fund. December 2, 1996 for Sovereign
Investors Fund and Sovereign Balanced Fund.
[John Hancock's graphic logo. A circle, diamond, triangle and a cube]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue, Boston,
Massachusetts 02199-7603
<PAGE>
CONTENTS
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A fund-by-fund look at goals, GROWTH AND INCOME FUND 4
strategies, risks, expenses and
financial history. INDEPENDENCE EQUITY FUND 6
SOVEREIGN BALANCED FUND 8
SOVEREIGN INVESTORS FUND 10
SPECIAL VALUE FUND 12
UTILITIES FUND 14
Policies and instructions for YOUR ACCOUNT
opening, maintaining and closing
an account in any growth and CHOOSING A SHARE CLASS 16
income fund.
HOW SALES CHARGES ARE CALCULATED 16
SALES CHARGE REDUCTIONS AND WAIVERS 17
OPENING AN ACCOUNT 17
BUYING SHARES 18
SELLING SHARES 19
TRANSACTION POLICIES 21
DIVIDENDS AND ACCOUNT POLICIES 21
ADDITIONAL INVESTOR SERVICES 22
Details that apply to the growth FUND DETAILS
and income funds as a group.
BUSINESS STRUCTURE 23
SALES COMPENSATION 24
MORE ABOUT RISK 26
FOR MORE INFORMATION BACK COVER
<PAGE>
OVERVIEW
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FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[A graphic image of a bullseye with an arrow in the middle of it.] GOAL AND
STRATEGY The fund's particular investment goals and the strategies it intends to
use in pursuing those goals.
[A graphic image of a black folder that contains a couple sheets of paper.]
PORTFOLIO SECURITIES The primary types of securities in which the fund invests.
Secondary investments are described in "More about risk" at the end of the
prospectus.
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] RISK FACTORS The major risk factors associated with the fund.
[A graphic image of a generic person.] PORTFOLIO MANAGEMENT The individual or
group (including subadvisers, if any) designated by the investment adviser to
handle the fund's day-to-day management.
[A graphic image of a percent symbol.] EXPENSES The overall costs borne by an
investor in the fund, including sales charges and annual expenses.
[A graphic image of a dollar sign.] FINANCIAL HIGHLIGHTS A table showing the
fund's financial performance for up to ten years, by share class. A bar chart
showing total return allows you to compare the fund's historical risk level to
those of other funds.
GOAL OF THE GROWTH AND INCOME FUNDS
John Hancock growth and income funds invest for varying combinations of income
and capital appreciation. Each fund has its own emphasis with regard to income,
growth and total return, and has its own strategy and risk/reward profile.
Because you could lose money by investing in these funds, be sure to read all
risk disclosure carefully before investing.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
- - are looking for a more conservative alternative to exclusively growth-oriented
funds
- - need an investment to form the core of a portfolio
- - seek above-average total return over the long term
- - are retired or nearing retirement
Growth and income funds may NOT be appropriate if you:
- - are investing for maximum return over a long time horizon
- - require a high degree of stability of your principal
THE MANAGEMENT FIRM
All John Hancock growth and income funds are managed by John Hancock Advisers,
Inc. Founded in 1968, John Hancock Advisers is a wholly owned subsidiary of John
Hancock Mutual Life Insurance Company and manages more than $19 billion in
assets.
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST TICKER SYMBOL CLASS A: TAGRX CLASS B: TSGWX
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks the highest total return (capital appreciation plus current income) that
is consistent with reasonable safety of capital. To pursue this goal, the fund
invests in a diversified portfolio of stocks, bonds and money market
instruments. Although the fund may concentrate in any of these securities, under
normal circumstances it invests primarily in stocks. The fund may not invest
more than 25% of assets in any one industry.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund may invest in most types of securities, including:
- - common and preferred stocks, warrants and convertible securities
- - U.S. Government and agency debt securities, including mortgage-backed
securities
- - corporate bonds, notes and other debt securities of any maturity
The fund favors stocks that have paid dividends in the past 12 months and show
potential for a dividend increase. The fund invests no more than 5% of assets in
junk bonds (bonds rated lower than BBB/Baa and their unrated equivalents), but
does not invest in bonds rated lower than B.
The fund may invest up to 25% of assets in foreign securities (35% during
adverse U.S. market conditions); however, foreign securities typically have not
exceeded 5% of assets. To a limited extent the fund also may invest in certain
higher-risk securities, and may engage in other investment practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth and income fund, the value of your investment will
fluctuate in response to stock and bond market movements.
To the extent that it invests in certain securities, the fund may be affected by
additional risks:
- - foreign securities: currency, information, natural event and political risks
- - mortgage-backed securities: extension and prepayment risks
These risks are defined in "More about risk" starting on page 26. This section
also details other higher-risk securities and practices that the fund may
utilize. Before you invest, please read "More about risk" carefully.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Timothy E. Keefe, CFA, has been the
leader of the fund's portfolio management team since joining John Hancock Funds
in July 1996. He is a senior vice president of the adviser and has been in the
investment business since 1987.
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INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee 0.625% 0.625%
12b-1 fee(3) 0.250% 1.00%
Other expenses 0.315% 0.315%
Total fund operating expenses 1.190% 1.940%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $62 $86 $112 $187
Class B shares
Assuming redemption
at end of period $70 $91 $125 $207
Assuming no redemption $20 $61 $105 $207
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly
pay more than the equivalent of the maximum permitted front-end sales
charge.
</TABLE>
4 GROWTH AND INCOME FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Graph]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED AUGUST 31, 1987 1988 1989 1990 1991 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.11 $ 12.04 $ 8.83 $ 10.19 $ 9.87 $ 11.77
Net investment income (loss) 0.42 0.50 0.55 0.20 0.20 0.32(1)
Net realized and unrealized gain (loss) on investments 1.77 (1.73) 1.42 (0.18) 2.07 0.89
Total from investment operations 2.19 (1.23) 1.97 0.02 2.27 1.21
Less distributions:
Dividends from net investment income (0.38) (0.49) (0.61) (0.27) (0.19) (0.25)
Distributions from net realized gain on
investments sold (0.88) (1.49) -- (0.07) (0.18) (0.30)
Total distributions (1.26) (1.98) (0.61) (0.34) (0.37) (0.55)
Net asset value, end of period $ 12.04 $ 8.83 $ 10.19 $ 9.87 $ 11.77 $ 12.43
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 22.58 (9.86) 23.47 0.18 23.80 10.47
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 90,974 69,555 70,513 63,150 77,461 89,682
Ratio of expenses to average net assets (%) 1.21 1.29 1.12 1.29 1.38 1.34
Ratio of net investment income (loss) to average
net assets (%) 3.86 5.45 6.07 1.96 1.90 2.75
Portfolio turnover rate (%) 138 120 214 69 70 119
Average brokerage commission rate(3) ($) N/A N/A N/A N/A N/A N/A
<CAPTION>
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CLASS A - YEAR ENDED AUGUST 31, 1993 1994 1995 1996
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<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.43 $ 12.08 $ 11.42 $ 13.38
Net investment income (loss) 0.40(1) 0.32(1) 0.21(1) 0.19(1)
Net realized and unrealized gain (loss) on investments 1.12 (0.61) 1.95 1.84
Total from investment operations 1.52 (0.29) 2.16 2.03
Less distributions:
Dividends from net investment income (0.42) (0.37) (0.20) (0.19)
Distributions from net realized gain on
investments sold (1.45) -- -- (0.15)
Total distributions (1.87) (0.37) (0.20) (0.34)
Net asset value, end of period $ 12.08 $ 11.42 $ 13.38 $ 15.07
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 13.64 (2.39) 19.22 15.33
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 115,780 121,160 130,183 139,548
Ratio of expenses to average net assets (%) 1.29 1.31 1.30 1.17
Ratio of net investment income (loss) to average
net assets (%) 3.43 2.82 1.82 1.28
Portfolio turnover rate (%) 107 195 99 74
Average brokerage commission rate(3) ($) N/A N/A N/A 0.0665
<CAPTION>
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CLASS B - YEAR ENDED AUGUST 31, 1991(1) 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.52 $ 11.77 $ 12.44 $ 12.10
Net investment income (loss) -- 0.23(1) 0.30(1) 0.24(1)
Net realized and unrealized gain (loss) on investments 0.25 0.89 1.12 (0.61)
Total from investment operations 0.25 1.12 1.42 (0.37)
Less distributions:
Dividends from net investment income -- (0.15) (0.31) (0.29)
Distributions from net realized gain on
investments sold -- (0.30) (1.45) --
Total distributions -- (0.45) (1.76) (0.29)
Net asset value, end of period $ 11.77 $ 12.44 $ 12.10 $ 11.44
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 2.17(5) 9.67 12.64 (3.11)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 7,690 29,826 65,010 114,025
Ratio of expenses to average net assets (%) 2.19(6) 2.07 2.19 2.06
Ratio of net investment income (loss) to average
net assets (%) 1.46(6) 2.02 2.53 2.07
Portfolio turnover rate (%) 70 119 107 195
Average brokerage commission rate(3) ($) N/A N/A N/A N/A
<CAPTION>
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CLASS B - YEAR ENDED AUGUST 31, 1995 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.44 $ 13.41
Net investment income (loss) 0.13(1) 0.08(1)
Net realized and unrealized gain (loss) on investments 1.96 1.85
Total from investment operations 2.09 1.93
Less distributions:
Dividends from net investment income (0.12) (0.09)
Distributions from net realized gain on
investments sold -- (0.15)
Total distributions (0.12) (0.24)
Net asset value, end of period $ 13.41 $ 15.10
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 18.41 14.49
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 114,723 125,781
Ratio of expenses to average net assets (%) 2.03 1.90
Ratio of net investment income (loss) to average
net assets (%) 1.09 0.55
Portfolio turnover rate (%) 99 74
Average brokerage commission rate(3) ($) N/A 0.0665
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(4) Class B shares commenced operations on August 22, 1991.
(5) Not annualized.
(6) Annualized.
</TABLE>
GROWTH AND INCOME FUND 5
<PAGE>
INDEPENDENCE EQUITY FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: JOHN HANCOCK CAPITAL SERIES TICKER SYMBOL CLASS A: JHDCX CLASS B: JHIDX
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks above-average total return (capital appreciation plus current income). To
pursue this goal, the fund invests primarily in a diversified stock portfolio
whose risk profile is similar to that of the S&P 500 index. The fund does not
invest exclusively in S&P 500 stocks.
In choosing stocks, the fund uses a proprietary computer model (NIXDEX) to
identify stocks that appear to be undervalued. The fund favors those undervalued
stocks that are selected by its model and that are believed to have improving
fundamentals. The fund may not invest more than 25% of assets in any one
industry.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
Under normal circumstances, the fund invests at least 65% of assets in common
stocks. It may also invest in warrants, preferred stocks and investment-grade
convertible debt securities.
The fund may invest in foreign securities in the form of American Depository
Receipts (ADRs) and U.S. dollar-denominated securities of foreign issuers traded
on U.S. exchanges. To a limited extent the fund also may invest in certain
higher-risk securities, and may engage in other investment practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth and income fund, the value of your investment will
fluctuate in response to stock and bond market movements. Because the fund
follows an index-tracking strategy, it is likely to remain fully invested even
if the fund's managers anticipate a market downturn.
To the extent that it invests in foreign securities, the fund may be affected by
additional risks, such as information, natural event and political risks. These
risks are defined in "More about risk" starting on page 26. This section also
details other higher-risk securities and practices that the fund may utilize.
Please read "More about risk" carefully before you invest.
MANAGEMENT/SUBADVISER
[A graphic image of a generic person.] The fund's investment decisions are made
by a portfolio management team, and no individual is primarily responsible for
making them. Team members are employees of Independence Investment Associates,
Inc., the fund's subadviser and a subsidiary of John Hancock Mutual Life
Insurance Company.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee (after expense limitation)(3) 0.00% 0.00%
12b-1 fee(4) 0.30% 1.00%
Other expenses 1.00% 1.00%
Total fund operating expenses (after limitation)(3) 1.30% 2.00%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $63 $89 $118 $199
Class B shares
Assuming redemption
at end of period $70 $93 $128 $215
Assuming no redemption $20 $63 $108 $215
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Reflects the adviser's temporary agreement to limit expenses. Without this
limitation, management fee would be 0.75% for each class and total fund
operating expenses would be 2.05% for Class A and 2.75% for Class B.
Management fee includes a subadviser fee equal to 55% of the management
fee.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
6 INDEPENDENCE EQUITY FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Graph]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED MAY 31, 1992(1) 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00 $ 10.98 $ 12.16 $ 12.68 $ 14.41
Net investment income (loss) 0.15 0.22 0.28(2) 0.32(2) 0.20(2)
Net realized and unrealized gain (loss) on investments 0.94 1.25 0.52 1.77 3.88
Total from investment operations 1.09 1.47 0.80 2.09 4.08
Less distributions:
Dividends from net investment income (0.11) (0.23) (0.23) (0.28) (0.22)
Distributions from net realized gain on investments sold -- (0.06) (0.05) (0.08) (0.29)
Total distributions (0.11) (0.29) (0.28) (0.36) (0.51)
Net asset value, end of period $ 10.98 $ 12.16 $ 12.68 $ 14.41 $ 17.98
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 10.95(4) 13.58 6.60 16.98 29.12
Total adjusted investment return at net asset value(3,5) (%) 9.23(4) 11.40 6.15 16.94 28.47
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 2,622 12,488 66,612 101,418 14,878
Ratio of expenses to average net assets (%) 1.66(6) 0.76 0.70 0.70 0.94
Ratio of adjusted expenses to average net assets(7) (%) 3.38(6) 2.94 1.15 0.74 1.59
Ratio of net investment income (loss) to average net assets (%) 1.77(6) 2.36 2.20 2.43 1.55
Ratio of adjusted net investment income (loss) to average
net assets(7) (%) 0.05(6) 0.18 1.75 2.39 0.90
Portfolio turnover rate (%) 53 53 43 71 157
Fee reduction per share ($) 0.15 0.20 0.06(2) 0.005(2) 0.08(2)
Average brokerage commission rate(8) ($) N/A N/A N/A N/A N/A
<CAPTION>
- ------------------------------------------------------------------------------
CLASS B - YEAR ENDED MAY 31, 1996(4)
- ------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.25
Net investment income (loss) 0.09(2)
Net realized and unrealized gain (loss) on investments 2.71
Total from investment operations 2.80
Less distributions:
Dividends from net investment income (0.09)
Net asset value, end of period $ 17.96
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 18.46(4)
Total adjusted investment return at net asset value(3,5) (%) 17.59(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 15,125
Ratio of expenses to average net assets (%) 2.00(6)
Ratio of adjusted expenses to average net assets(7) (%) 3.21(6)
Ratio of net investment income (loss) to average net assets (%) 0.78(6)
Ratio of adjusted net investment income (loss) to average
net assets(7) (%) (0.43)(6)
Portfolio turnover rate (%) 157
Fee reduction per share ($) 0.13(2)
Average brokerage commission rate(8) ($) N/A
(1) Class A and Class B shares commenced operations on June 10, 1991 and
September 7, 1995, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
INDEPENDENCE EQUITY FUND 7
<PAGE>
SOVEREIGN BALANCED FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST TICKER SYMBOL CLASS A: SVBAX CLASS B: SVBBX
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks current income, long-term growth of capital and income, and preservation
of capital. To pursue these goals, the fund allocates its assets among a
diversified mix of debt and equity securities. While the relative weightings of
debt and equity securities will shift over time, at least 25% of assets will be
invested in senior debt securities. The fund may not invest more than 25% of
assets in any one industry.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund may invest in any type or class of security, including (but not limited to)
stocks, warrants, U.S. Government and agency securities, corporate debt
securities, investment-grade short-term securities, foreign currencies and
options and futures contracts.
The fund's stock investments are exclusively in companies that have increased
their dividend payout in each of the last ten years. Up to 25% of the fund's
bond investments may be rated from BB/Ba to C (junk bonds).
The fund may invest up to 35% of assets in foreign securities; however, these
typically have not exceeded 5% of assets. To a limited extent the fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth and income fund, the value of your investment will
fluctuate in response to stock and bond market movements. To the extent that it
invests in certain securities, the fund may be affected by additional risks:
- - junk bonds: above-average credit, market and other risks
- - foreign securities: currency, information, natural event and political risks
- - mortgage-backed securities: extension and prepayment risks
These risks are listed and defined in "More about risk" starting on page 26.
This section also details other higher-risk securities and practices that the
fund may utilize. Please read "More about risk" carefully before you invest.
MANAGEMENT/SUBADVISER
[A graphic image of a generic person.] John F. Snyder III and Barry H. Evans,
CFA, lead the fund's portfolio management team. Mr. Snyder, an investment
manager since 1971, is an executive vice president of Sovereign Asset Management
Corporation, the fund's subadviser and a subsidiary of John Hancock Funds. Mr.
Evans, a senior vice president of the adviser, has been in the investment
business since joining John Hancock Funds in 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee(3) 0.60% 0.60%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.39% 0.39%
Total fund operating expenses 1.29% 1.99%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $62 $89 $117 $198
Class B shares
Assuming redemption
at end of period $70 $92 $127 $214
Assuming no redemption $20 $62 $107 $214
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Management fee includes a subadviser fee equal to 40% of the stock portion
of the management fee.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
8 SOVEREIGN BALANCED FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Chart]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED DECEMBER 31, 1992(1) 1993 1994 1995 1996(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00 $ 10.19 $ 10.74 $ 9.84 $ 11.75
Net investment income (loss) 0.04 0.46 0.50 0.44(3) 0.21
Net realized and unrealized gain (loss) on investments 0.20 0.68 (0.88) 1.91 0.41
Total from investment operations 0.24 1.14 (0.38) 2.35 0.62
Less distributions:
Dividends from net investment income (0.05) (0.45) (0.50) (0.44) (0.21)
Distributions from net realized gain on investments sold -- (0.14) (0.02) -- --
Total distributions (0.05) (0.59) (0.52) (0.44) (0.21)
Net asset value, end of period $ 10.19 $ 10.74 $ 9.84 $ 11.75 $ 12.16
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 2.37(5) 11.38 (3.51) 24.23 5.31(5)
Total adjusted investment return at net asset value(4,6) (%) 2.22(5) -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 5,796 62,218 61,952 69,811 70,458
Ratio of expenses to average net assets (%) 2.79(7) 1.45 1.23 1.27 1.27(7)
Ratio of adjusted expenses to average net assets(8) (%) 2.94(7) -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 3.93(7) 4.44 4.89 3.99 3.48(7)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) 3.78(7) -- -- -- --
Portfolio turnover rate (%) 0 85 78 45 15
Fee reduction per share ($) 0.0016 -- -- -- --
Average brokerage commission rate(9) ($) N/A N/A N/A N/A $ 0.07
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B - YEAR ENDED DECEMBER 31, 1992(1) 1993 1994 1995 1996(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00 $ 10.20 $ 10.75 $ 9.84 $ 11.74
Net investment income (loss) 0.03 0.37 0.43 0.36(3) 0.17
Net realized and unrealized gain (loss) on investments 0.20 0.70 (0.89) 1.90 0.42
Total from investment operations 0.23 1.07 (0.46) 2.26 0.59
Less distributions:
Dividends from net investment income (0.03) (0.38) (0.43) (0.36) (0.17)
Distributions from net realized gain on investments sold -- (0.14) (0.02) -- --
Total distributions (0.03) (0.52) (0.45) (0.36) (0.17)
Net asset value, end of period $ 10.20 $ 10.75 $ 9.84 $ 11.74 $ 12.16
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 2.29(5) 10.63 (4.22) 23.30 5.04(5)
Total adjusted investment return at net asset value(4,6) (%) 2.14(5) -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 14,311 78,775 79,176 87,827 88,344
Ratio of expenses to average net assets (%) 3.51(7) 2.10 1.87 1.96 1.97(7)
Ratio of adjusted expenses to average net assets(8) (%) 3.66(7) -- -- -- --
Ratio of net investment income (loss) to average net assets (%) 3.21(7) 4.01 4.25 3.31 2.78(7)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) 3.06(7) -- -- -- --
Portfolio turnover rate (%) 0 85 78 45 15
Fee reduction per share ($) 0.0012 -- -- -- --
Average brokerage commission rate(9) ($) N/A N/A N/A N/A 0.07
(1) Class A and Class B shares commenced operations on October 5, 1992. This
period is covered by the report of other independent auditors (not included
herein).
(2) Six months ended June 30, 1996. (Unaudited.)
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
SOVEREIGN BALANCED FUND 9
<PAGE>
SOVEREIGN INVESTORS FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST TICKER SYMBOL CLASS A: SOVIX CLASS B: SOVBX
- ------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term growth of capital and of income without assuming undue market
risks. Under normal circumstances, the fund invests most of its assets in a
diversified selection of stocks, although it may respond to market conditions by
investing in other types of securities such as bonds or short-term securities.
The fund may not invest more than 25% of assets in any one industry.
Currently, the fund utilizes a "dividend performers" strategy in selecting
portfolio stocks, investing exclusively in companies that have increased their
dividend payout in each of the last ten years.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund may invest in most types of securities, including:
- - common and preferred stocks, warrants and convertible securities
- - U.S. Government and agency debt securities, including mortgage-backed
securities
- - corporate bonds, notes and other debt securities of any maturity
The fund's bond investments are primarily investment-grade, although up to 5% of
assets may be invested in junk bonds rated as low as C and their unrated
equivalents. To a limited extent the fund may invest in certain higher-risk
securities, and may engage in other investment practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys] As with any growth and income fund, the value of your investment will
fluctuate in response to stock and bond market movements.
To the extent that the fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. Before you invest,
please read "More about risk" starting on page 26.
MANAGEMENT/SUBADVISER
[A graphic image of a generic person.] John F. Snyder III and Barry H. Evans,
CFA, lead the fund's portfolio management team. Mr. Snyder, an investment
manager since 1971, is an executive vice president of Sovereign Asset Management
Corporation, the fund's subadviser and a subsidiary of John Hancock Funds. Mr.
Evans, a senior vice president of the adviser, has been in the investment
business since joining John Hancock Funds in 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee(3) 0.58% 0.58%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.28% 0.34%
Total fund operating expenses 1.16% 1.92%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $61 $85 $111 $184
Class B shares
Assuming redemption
at end of period $70 $90 $124 $205
Assuming no redemption $20 $60 $104 $205
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Management fee includes a subadviser fee equal to 40% of the
management fee.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
10 SOVEREIGN INVESTORS FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar graph]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED DECEMBER 31, 1986(1,2) 1987(1) 1988(1) 1989(1) 1990(1) 1991(1,3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.31 $12.36 $10.96 $11.19 $12.60 $11.94
Net investment income (loss) 0.58 0.53 0.57 0.59 0.58 0.54
Net realized and unrealized gain (loss) on investments 1.89 0.65 2.01 (0.05) 3.03 0.54
Total from investment operations 2.47 0.08 1.22 2.60 0.53 3.57
Less distributions:
Dividends from net investment income (0.55) (0.58) (0.61) (0.61) (0.59) (0.53)
Distributions from net realized gain on investments sold (0.87) (0.90) (0.38) (0.58) (0.67) (0.09)
Total distributions (1.42) (1.48) (0.99) (1.19) (1.19) (1.20)
Net asset value, end of period $12.36 $10.96 $11.19 $12.60 $11.94 $14.31
Total investment return at net asset value(5)(%) 21.70 0.28 11.23 23.76 4.38 30.48
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000s omitted)($) 34,708 40,564 45,861 66,466 83,470 194,055
Ratio of expenses to average net assets (%) 0.70 0.85 0.86 1.07 1.14 1.18
Ratio of net investment income (loss) to average net assets(%) 4.28 3.96 4.97 4.80 4.77 4.01
Portfolio turnover rate (%) 34 59 35 40 55 67
Average brokerage commission rate(8)($) N/A N/A N/A N/A N/A N/A
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED DECEMBER 31, 1992(1) 1993 1994 1995 1996(4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $14.31 $14.78 $15.10 $14.24 $ 17.87
Net investment income (loss) 0.47 0.44 0.46 0.40 0.17
Net realized and unrealized gain (loss) on investments 0.39 (0.75) 3.71 1.43
Total from investment operations 1.01 0.83 (0.29) 4.11 1.60
Less distributions:
Dividends from net investment income (0.45) (0.42) (0.46) (0.40) 0.17
Distributions from net realized gain on investments sold (0.09) (0.11) (0.08) --
Total distributions (0.54) (0.51) (0.57) (0.48) (0.17)
Net asset value, end of period $14.78 $15.10 $14.24 $17.87 19.30
Total investment return at net asset value(5)(%) 7.23 5.71 (1.85) 29.15 8.98(6)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 872,932 1,258,575 1,090,231 1,280,321 1,364,566
Ratio of expenses to average net assets (%) 1.13 1.10 1.16 1.14 1.10(7)
Ratio of net investment income (loss) to average net assets(%) 3.32 2.94 3.13 2.45 1.87(7)
Portfolio turnover rate (%) 30 46 45 46 20
Average brokerage commission rate(8)($) N/A N/A N/A N/A 0.0688
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CLASS B - YEAR ENDED DECEMBER 31, 1994(9) 1995 1996(4)
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.02 $ 14.24 $ 17.86
Net investment income (loss) 0.38(10) 0.27(10) 0.10(10)
Net realized and unrealized gain (loss) on investment (0.69) 3.71 1.42
Total from investment operations (0.31) 3.98 1.52
Less distributions:
Dividends from net investment income (0.36) (0.28) (0.10)
Distributions from net realized gain on investments sold (0.11) (0.08) --
Total distributions (0.47) (0.36) (0.10)
Net asset value, end of period $ 14.24 $ 17.86 19.28
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5) (%) (2.04)(6) 28.16 8.54(6)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 128,069 257,781 337,938
Ratio of expenses to average net assets (%) 1.86(7) 1.90 1.86(7)
Ratio of net investment income (loss) to average net assets (%) 2.57(7) 1.65 1.14(7)
Portfolio turnover rate (%) 45 46 20
Average brokerage commission rate(8) ($) N/A N/A 0.0688
(1) These periods are covered by the report of other independent auditors (not
included herein).
(2) Restated for 2-for-1 stock split effective April 29, 1987.
(3) On October 23, 1991, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(4) Six months ended June 30, 1996. (Unaudited.)
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) Annualized.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(9) Class B shares commenced operations on January 3, 1994.
(10) Based on the average of the shares outstanding at the end of each month.
</TABLE>
SOVEREIGN INVESTORS FUND 11
<PAGE>
SPECIAL VALUE FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK CAPITAL SERIES TICKER SYMBOL CLASS A: SPVAX CLASS B: SPVBX
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks capital appreciation, with income as a secondary consideration. To pursue
this goal, the fund invests primarily in stocks that appear comparatively
undervalued and are out of favor. The fund looks for companies of any size whose
earnings power or asset value does not appear to be reflected in the current
stock price, and whose stocks thus have potential for appreciation. The fund
also takes a "margin of safety" approach, seeking those stocks that are believed
to have limited downside risk. The fund may not invest more than 25% of assets
in any one industry.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and convertible securities.
The fund may invest up to 50% of assets in foreign securities (including
American Depository Receipts), and under normal circumstances may invest up to
10% of net assets in investment-grade debt securities. To a limited extent the
fund also may invest in certain higher-risk securities and may engage in other
investment practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth and income fund, the value of your investment will
fluctuate. Even comparatively undervalued stocks typically fall in price during
broad market declines. Small- and medium-sized company stocks, which may
comprise a portion of the fund's portfolio, tend to be more volatile than the
market as a whole.
To the extent that it invests in foreign securities, the fund may be affected by
additional risks, such as currency, information, natural event and political
risks. These risks are defined in "More about risk" starting on page 26. This
section also details other higher-risk securities and practices that the fund
may utilize. Please read "More about risk" carefully before you invest.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] Timothy E. Keefe, CFA, has been the
leader of the fund's portfolio management team since August 1996. He is a senior
vice president of the adviser. He joined John Hancock Funds in July 1996 and has
been in the investment business since 1987.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee (after expense limitation)(3,4) 0.00% 0.00%
12b-1 fee(5) 0.30% 1.00%
Other expenses (after limitation)(3) 0.71% 0.71%
Total fund operating expenses (after limitation)(3) 1.01% 1.71%
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $60 $81 $103 $167
Class B shares
Assuming redemption
at end of period $67 $84 $113 $183
Assuming no redemption $17 $54 $ 93 $183
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(3) Reflects the adviser's temporary agreement to limit expenses (except for
12b-1 and transfer agent expenses). Without this limitation, management fees
would be 0.70% for each class, other expenses would be 0.90% for each class,
and total fund operating expenses would be 1.90% for Class A and 2.60% for
Class B.
(4) Includes a subadviser fee equal to 0.40% of the management fee.
(5) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
12 SPECIAL VALUE FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.]The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Graph]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED DECEMBER 31, 1994(1) 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 8.99
Net investment income (loss) 0.18(2) 0.21(2)
Net realized and unrealized gain (loss) on investments 0.48 1.60
Total from investment operations 0.66 1.81
Less distributions:
Dividends from net investment income (0.17) (0.20)
Distributions from net realized gain on investments sold -- (0.21)
Total distributions (0.17) (0.41)
Net asset value, end of period $ 8.99 $ 10.39
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 7.81(4) 20.26
Total adjusted investment return at net asset value(3,5) (%) 7.30(4) 19.39
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 4,420 12,845
Ratio of expenses to average net assets (%) 0.99(6) 0.98
Ratio of adjusted expenses to average net assets(7) (%) 4.98(6) 1.85
Ratio of net investment income (loss) to average net assets (%) 2.10(6) 2.04
Ratio of adjusted net investment income (loss) to average net assets(7) (%) (1.89)(6) 1.17
Portfolio turnover rate (%) 0.3 9
Fee reduction per share ($) 0.34(2) 0.09(2)
Average brokerage commission rate(8) ($) N/A N/A
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CLASS B - YEAR ENDED DECEMBER 31, 1994(1) 1995
- -------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 9.00
Net investment income (loss) 0.13(2) 0.12(2)
Net realized and unrealized gain (loss) on investments 0.48 1.59
Total from investment operations 0.61 1.71
Less distributions:
Dividends from net investment income (0.11) (0.12)
Distributions from net realized gain on investments sold -- (0.21)
Total distributions (0.11) (0.33)
Net asset value, end of period $ 9.00 $ 10.38
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 7.15(4) 19.11
Total adjusted investment return at net asset value(3,5) (%) 6.64(4) 18.24
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,296 16,994
Ratio of expenses to average net assets (%) 1.72(6) 1.73
Ratio of adjusted expenses to average net assets(7) (%) 5.71(6) 2.60
Ratio of net investment income (loss) to average net assets (%) 1.53(6) 1.21
Ratio of adjusted net investment income (loss) to average net assets(7) (%) (2.46)(6) 0.34
Portfolio turnover rate (%) 0.3 9
Fee reduction per share ($) 0.34(2) 0.09(2)
Average brokerage commission rate(8) ($) N/A N/A
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1994.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
SPECIAL VALUE FUND 13
<PAGE>
UTILITIES FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK CAPITAL SERIES TICKER SYMBOL CLASS A: JHUAX CLASS B: JHUBX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks current income and, to the extent consistent with this goal, growth of
income and long-term growth of capital. To pursue this goal, the fund invests
primarily in public utilities companies, such as those whose principal business
involves the generation, handling or sale of electricity, natural gas, water,
waste management services or non-broadcast telecommunications services. Under
normal circumstances, the fund will invest at least 65% of assets in these
companies. The fund may invest in other industries if fund management believes
it would help the fund meet its goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. and foreign companies. It
may also invest in warrants, preferred stocks and convertible securities.
Foreign securities (including American Depository Receipts) and investment-grade
debt securities may each comprise up to 25% of portfolio investments. To a
limited extent the fund also may invest in certain higher-risk securities, and
may engage in other investment practices.
For temporary defensive purposes, the fund may invest some or all of its assets
in investment-grade short-term securities.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth and income fund, the value of your investment will
fluctuate in response to stock and bond market movements. Because the fund
concentrates on a narrow segment of the economy, its performance is largely
dependent on that segment's performance. Utilities stocks may be adversely
affected by numerous factors, including government regulation and deregulation,
environmental issues, competition and rising interest rates.
To the extent that it invests in foreign securities, the fund may be affected by
additional risks such as currency, information, natural event and political
risks. These risks are defined in "More about risk" starting on page 26. This
section also details other higher-risk securities and practices that the fund
may utilize. Please read "More about risk" carefully before you invest.
PORTFOLIO MANAGEMENT
[A graphic image of a general person.] Gregory K. Phelps, leader of the fund's
portfolio management team since April 1996, is a vice president of the adviser.
He joined John Hancock Funds in January 1995 and has been in the investment
business since 1981.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[A graphic graphic image of a percent symbol.] Fund investors pay various
expenses, either directly or indirectly. The figures below show the expenses for
the past year, adjusted to reflect any changes. Future expenses may be greater
or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee (after expense limitation)(3) 0.26% 0.26%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.49% 0.49%
Total fund operating expenses (after limitation)(3) 1.05% 1.75%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $60 $82 $105 $172
Class B shares
Assuming redemption
at end of period $68 $85 $115 $188
Assuming no redemption $18 $55 $ 95 $188
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Reflects the adviser's temporary agreement to limit expenses (except for
12b-1 and transfer agent expenses). Without this limitation, management
fees would be 0.70% for each class and total fund operating expenses would
be 1.49% for Class A and 2.19% for Class B.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
14 UTILITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Graph]
(scale varies from fund to fund)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CLASS A - YEAR ENDED MAY 31, 1994(1) 1995 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 8.26 $ 8.48
Net investment income (loss) 0.12(2) 0.44(2) 0.41(2)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.36) 0.12 0.79
Total from investment operations (0.24) 0.56 1.20
Less distributions:
Dividends from net investment income -- (0.34) (0.41)
Distributions from net realized gains on investments sold -- -- (0.10)
Total distributions -- (0.34) (0.51)
Net asset value, end of period $ 8.26 $ 8.48 $ 9.17
total investment return at net asset value(3) (%) (2.82)(4) 7.10 14.44
Total adjusted investment return at net asset value(3,5) (13.89)(4) 6.44 14.01
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 781 19,229 22,574
Ratio of expenses to average net assets (%) 1.00(6) 1.04 1.04
Ratio of adjusted expenses to average net assets(7) (%) 12.07(6) 1.70 1.47
Ratio of net investment income (loss) to average net assets (%) 4.53(6) 5.39 4.49
Ratio of adjusted net investment income (loss) to average net assets(7) (%) (6.54)(6) 4.73 4.06
Portfolio turnover rate (%) 6 98 124
Fee reduction per share ($) 0.27(2) 0.05(2) 0.04(2)
Average brokerage commission rate(8) ($) N/A N/A N/A
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS B - YEAR ENDED MAY 31, 1994(1) 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 8.25 $ 8.45
Net investment income (loss) 0.08(2) 0.38(2) 0.34(2)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.33) 0.12 0.79
Total from investment operations (0.25) 0.50 1.13
Less distributions:
Dividends from net investment income -- (0.30) (0.34)
Distributions from net realized gains on investments sold -- -- (0.10)
Total distributions -- (0.30) (0.44)
Net asset value, end of period $ 8.25 $ 8.45 $ 9.14
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (2.94)(4) 6.31 13.68
Total adjusted investment return at net asset value(3,5) (14.01)(4) 5.65 13.25
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 445 38,344 47,759
Ratio of expenses to average net assets (%) 1.72(6) 1.71 1.77
Ratio of adjusted expenses to average net assets(7) (%) 12.79(6) 2.37 2.20
Ratio of net investment income (loss) to average net assets (%) 4.20(6) 4.64 3.77
Ratio of adjusted net investment income (loss) to average net assets(7) (%) (6.87)(6) 3.98 3.34
Portfolio turnover rate (%) 6 98 124
Fee reduction per share ($) 0.27(2) 0.05(2) 0.04(2)
Average brokerage commission rate(8) ($) N/A N/A N/A
(1) Class A and Class B shares commenced operations on February 1, 1994.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
UTILITIES FUND 15
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock growth and income funds offer two classes of shares, Class A
and Class B. Each class has its own cost structure, allowing you to choose the
one that best meets your requirements. Your financial representative can help
you decide.
================================================================================
CLASS A CLASS B
================================================================================
- - Front-end sales charges, as - No front-end sales charge; all your
described below. There are several money goes to work for you right
ways to reduce these charges, also away.
described below.
- Higher annual expenses than Class A
- - Lower annual expenses than Class B shares.
shares.
- A deferred sales charge on shares
you sell within six years of
purchase, as described below.
- Automatic conversion to Class A
shares after eight years, thus
reducing future annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
Sovereign Investors Fund offers Class C shares, which have their own expense
structure and are available to financial institutions only. Call Signature
Services for more information (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
<TABLE>
CLASS A Sales charges are as follows:
<CAPTION>
================================================================================
CLASS A SALES CHARGES
================================================================================
<S> <C> <C>
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. However, there is a contingent deferred sales charge (CDSC) on any
shares sold within one year of purchase, as follows:
<TABLE>
<CAPTION>
================================================================================
CDSC ON $1 MILLION+ INVESTMENTS
================================================================================
<S> <C>
YOUR INVESTMENT CDSC ON SHARES BEING SOLD
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the LAST day of that month.
</TABLE>
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
<TABLE>
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a contingent deferred sales charge
(CDSC) on shares you sell within six years of buying them. There is no CDSC on
shares acquired through reinvestment of dividends. The CDSC is based on the
original purchase cost or the current market value of the shares being sold,
whichever is less. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
<CAPTION>
================================================================================
CLASS B DEFERRED CHARGES
================================================================================
<S> <C>
YEARS AFTER PURCHASE CDSC ON SHARES BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the FIRST day of that month.
</TABLE>
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
16 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
- - Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
- - Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
- - Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services to add these options.
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each investor has an individual account, but for sales charge
purposes the group's investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify.
CDSC WAIVERS As long as Signature Services is notified at the time you sell, the
CDSC for either share class will generally be waived in the following cases:
- - to make payments through certain systematic withdrawal plans
- - to make certain distributions from a retirement plan
- - because of shareholder death or disability
To utilize: If you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
To utilize: contact your financial representative or Signature Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
- - government entities that are prohibited from paying mutual fund sales charges
- - financial institutions or common trust funds investing $1 million or more for
non-discretionary accounts
- - selling brokers and their employees and sales representatives
- - financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
- - fund trustees and other individuals who are affiliated with these or other
John Hancock funds
- - individuals transferring assets to a John Hancock growth fund from an
employee benefit plan that has John Hancock funds
- - members of an approved affinity group financial services program
- - certain insurance company contract holders (one-year CDSC usually applies)
- - participants in certain retirement plans with at least 100 members (one-year
CDSC applies)
To utilize: if you think you may be eligible for a sales charge waiver, contact
your financial representative or Signature Services, or consult the SAI.
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for the
John Hancock funds are as follows:
- non-retirement account: $1,000
- retirement account: $250
- group investments: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest at
least $25 a month
3 Complete the appropriate parts of the account application, carefully following
the instructions. If you have questions, please contact your financial
representative or call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
application. By applying for privileges now, you can avoid the delay and
inconvenience of having to file an additional application if you want to add
privileges later.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 17
<PAGE>
<TABLE>
================================================================================
BUYING SHARES
================================================================================
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY CHECK
[A graphic image of a check.]
- Make out a check for the - Make out a check for the investment
investment amount, payable amount payable to "John Hancock
to "John Hancock Signature Signature Services, Inc."
Services, Inc."
- Fill out the detachable investment
- Deliver the check and your slip from an account statement. If
completed application to no slip is available, include a
your financial note specifying the fund name, your
representative, or mail share class, your account number
them to Signature Services and the name(s) in which the
(address on next page). account is registered.
- Deliver the check and your
investment slip or note to your
financial representative, or mail
them to Signature Services (address
on next page).
BY EXCHANGE
[A graphic image of a white arrow
outlined in black that points to the
right above a black arrow that points
to the left.]
- Call your financial - Call Signature Services to request
representative or an exchange.
Signature Services to
request an exchange.
BY WIRE
[A graphic image of a jagged white
arrow outlined in black that points
upwards at a 45 degree angle.]
- Deliver your completed - Instruct your bank to wire the
application to your amount of your investment to:
financial representative,
or mail it to Signature First Signature Bank & Trust
Services.
Account # 900000260
Routing # 211475000
Specify the fund name, your share
- Obtain your account number class, your account number and the
by calling your financial name(s) in which the account is
representative or registered. Your bank may charge a
Signature Services. fee to wire funds.
- Instruct your bank to wire
the amount of your
investment to:
First Signature Bank &
Trust
Account # 900000260
Routing # 211475000
Specify the fund name,
your choice of share
class, the new account
number and the name(s) in
which the account is
registered. Your bank may
charge a fee to wire
funds.
BY PHONE
[A graphic image of a telephone.]
See "By wire" and "By - Verify that your bank or credit
exchange." union is a member of the Automated
Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and
"Bank Information" sections on your
account application.
- Call Signature Services to verify
that these features are in place on
your account.
- Tell the Signature Services
representative the fund name, your
share class, your account number,
the name(s) in which the account is
registered and the amount of your
investment.
</TABLE>
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
- --------------------------------------------------------------------------------
18 YOUR ACCOUNT
<PAGE>
<TABLE>
================================================================================
SELLING SHARES
================================================================================
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY LETTER
[A graphic image of the back of an
envelope.]
- Accounts of any type. - Write a letter of instruction or
complete a stock power indicating
- Sales of any amount. the fund name, your share class,
your account number, the name(s) in
which the account is registered and
the dollar value or number of shares
you wish to sell.
- Include all signatures and any
additional documents that may be
required (see next page).
- Mail the materials to Signature
Services.
- A check will be mailed to the
name(s) and address in which the
account is registered, or otherwise
according to your letter of
instruction.
BY PHONE
[A graphic image of a telephone.]
- Most accounts. - For automated service 24 hours a day
using your touch-tone phone, call
- Sales of up to $100,000. the EASI-Line at 1-800-338-8080.
- To place your order with a
representative at John Hancock
Funds, call Signature Services
between 8 A.M. and 4 P.M. Eastern
Time on most business days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[A graphic image of a jagged white
arrow outlined in black that points
upwards at a 45 degree angle.]
- Requests by letter to sell - Fill out the "Telephone Redemption"
any amount (accounts of section of your new account
any type). application.
- Requests by phone to sell - To verify that the telephone
up to $100,000 (accounts redemption privilege is in place on
with telephone redemption an account, or to request the forms
privileges). to add it to an existing account,
call Signature Services.
- Amounts of $1,000 or more will be
wired on the next business day. A $4
fee will be deducted from your
account.
- Amounts of less than $1,000 may be
sent by EFT or by check. Funds from
EFT transactions are generally
available by the second business
day. Your bank may charge a fee for
this service.
BY EXCHANGE
[A graphic image of a white arrow
outlined in black that points to the
right above a black arrow that points
to the left.]
- Accounts of any type. - Obtain a current prospectus for the
fund into which you are exchanging
- Sales of any amount. by calling your financial
representative or Signature
Services.
- Call Signature Services to request
an exchange.
</TABLE>
- --------------------------------------------------------------------------------
Address
John Hancock Signature Services, Inc.
P.O. Box 9116 Boston, MA 02205-9116
Phone
1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
YOUR ACCOUNT 19
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
<TABLE>
=========================================================[A graphic image of the
back of an envelope.]
<CAPTION>
SELLER REQUIREMENTS FOR WRITTEN REQUESTS
=========================================================
<S> <C>
Owners of individual, joint, sole - Letter of instruction.
proprietorship, UGMA/UTMA (custodial
accounts for minors) or general partner - On the letter, the signatures
accounts. and titles of all persons
authorized to sign for the
account, exactly as the account
is registered.
- Signature guarantee if
applicable (see above).
Owners of corporate or association - Letter of instruction.
accounts.
- Corporate resolution, certified
within the past 90 days.
- On the letter and the
resolution, the signature of
the person(s) authorized to
sign for the account.
- Signature guarantee if
applicable (see above).
Owners or trustees of trust accounts. - Letter of instruction.
- On the letter, the signature(s)
of the trustee(s).
- If the names of all trustees
are not registered on the
account, please also provide a
copy of the trust document
certified within the past 60
days.
- Signature guarantee if
applicable (see above).
Joint tenancy shareholders whose - Letter of instruction signed by
co-tenants are deceased. surviving tenant.
- Copy of death certificate.
- Signature guarantee if
applicable (see above).
Executors of shareholder estates. - Letter of instruction signed by
executor.
- Copy of order appointing
executor.
- Signature guarantee if
applicable (see above).
Administrators, conservators, guardians - Call 1-800-225-5291 for
and other sellers or account types not instructions.
listed above.
</TABLE>
20 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after your request is accepted by
Signature Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Signature Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, Signature Services is
responsible for any losses that may occur to any account due to an unauthorized
telephone call. Also for your protection, telephone transactions are not
permitted on accounts whose names or addresses have changed within the past 30
days. Proceeds from telephone transactions can only be mailed to the address of
record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
Class B shares will continue to age from the original date and will retain the
same CDSC rate as they had before the exchange, except that the rate will change
to that of the new fund if the new fund's rate is higher. A CDSC rate that has
increased will drop again with a future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Signature Services. Certificated
shares can only be sold by returning the certificates to Signature Services,
along with a letter of instruction or a stock power and a signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - after every transaction (except a dividend reinvestment) that affects your
account balance
- - after any changes of name or address of the registered owner(s)
- - in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The funds generally distribute most or all of their net earnings in
the form of dividends.
Income dividends are typically paid quarterly, and capital gains dividends, if
any, are typically paid annually.
YOUR ACCOUNT 21
<PAGE>
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
- - Complete the appropriate parts of your account application.
- - If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Signature Services,
Inc." Deliver your check and application to your financial representative or
Signature Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, 401(k) plans, 403(b) plans (including TSAs) and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund (except tax-free income funds) with a low minimum investment
of $250 or, for some group plans, no minimum investment at all. To find out
more, call Signature Services at 1-800-225-5291.
22 YOUR ACCOUNT
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock growth and income fund is an
open-end management investment company or a series of such a company.
Each fund is supervised by a board of trustees, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The boards of the John Hancock growth and income funds
may include individuals who are affiliated with the investment adviser. However,
the majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
[A flow chart that contains 8 rectangular-shaped boxes and illustrates the
hierarchy of how the funds are organized. Within the flowchart, there are 5
tiers. The tiers are connected by shaded lines.
Shareholders represent the first tier. There is a shaded vertical arrow on the
left-hand side of the page. The arrow has arrowheads on both ends and is
contained within two horizontal, shaded lines. This is meant to highlight tiers
two and three which focus on Distribution and Shareholder Services.
Financial Services Firms and their Representatives are shown on the second tier.
Principal Distributor and Transfer Agent are shown on the third tier.
A shaded vertical arrow on the right-hand side of the page denotes those
entities involved in the Asset Management. The arrow has arrowheads on both
ends and is contained within two horizontal, shaded lines. This fourth tier
includes the Investment Adviser and Subadvisers and the Custodian.
The fifth tier contains the Trustees.]
FUND DETAILS 23
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 is not expected to
exceed 0.02% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
INVESTMENT GOALS Except for Growth and Income Fund, Sovereign Balanced Fund and
Utilities Fund, each fund's investment goal is fundamental and may only be
changed with shareholder approval.
DIVERSIFICATION All of the growth and income funds are diversified.
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SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation authorizing annual fees of this type). The 12b-1 fee rates
vary by fund and by share class, according to Rule 12b-1 plans adopted by the
funds. The sales charges and 12b-1 fees paid by investors are detailed in the
fund-by-fund information. The portions of these expenses that are reallowed to
financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
<TABLE>
<CAPTION>
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CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
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UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Growth and Income $3,997,564 3.24%
Independence Equity $ 227,836 4.18%
Sovereign Balanced $3,097,061 3.72%
Sovereign Investors $1,907,573 1.00%
Special Value $ 807,110 7.50%
Utilities $1,584,645 3.41%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
</TABLE>
INITIAL COMPENSATION Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives the first
year's service fee at this time.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears.
Financial Services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
24 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
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CLASS A INVESTMENTS
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MAXIMUM
SALES CHARGE REALLOWANCE FIRST YEAR MAXIMUM
PAID BY INVESTORS OR COMMISSION SERVICE FEE TOTAL COMPENSATION(1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$ 50,000 - $ 99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
REGULAR INVESTMENTS OF
$1 MILLION OR MORE
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 and more above that -- 0.00% 0.25% 0.25%
WAIVER INVESTMENTS(2) -- 0.00% 0.25% 0.25%
<CAPTION>
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CLASS B INVESTMENTS
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MAXIMUM
REALLOWANCE FIRST YEAR MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
All amounts 3.75% 0.25% 4.00%
(1) Reallowance/commission percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members that take advantage of the sales charge
waivers described earlier in this prospectus.
</TABLE>
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
FUND DETAILS 25
<PAGE>
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MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of each fund's
risk profile in the fund-by-fund information.
The funds are permitted to utilize -- within limits established by the trustees
- -- certain other securities and investment practices that have higher risks and
opportunities associated with them. On the following page are brief descriptions
of these securities and practices, along with the risks associated with them.
The funds follow certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the performance of a John
Hancock growth and income fund will be positive over any period of time.
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TYPES OF INVESTMENT RISK
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment).
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
EXTENSION RISK The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.
INFORMATION RISK The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
- - HEDGED When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
- - SPECULATIVE To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like.
MANAGEMENT RISK The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. Common to all stocks and bonds and the
mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK The risk of losses directly attributable to government or
political actions of any sort.
PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value of mortgage-backed securities.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
<TABLE>
<CAPTION>
ANALYSIS OF FUNDS WITH 5% OR MORE IN JUNK BONDS(1)
QUALITY RATING
(S&P/MOODY'S)(2) SOVEREIGN BALANCED FUND
<S> <C>
INVESTMENT-GRADE BONDS
AAA/Aaa 16.0%
AA/Aa 2.2%
A/A 6.8%
BBB/Baa 5.7%
JUNK BONDS
BB/Ba 3.5%
B/B 5.3%
CCC/Caa 0.0%
CC/Ca 0.0%
C/C 0.0%
% OF PORTFOLIO IN BONDS 39.5%
- - Rated by Standard & Poor's or Moody's
(1) Data as of fund's last fiscal year end.
(2) In cases where the S&P and Moody's ratings for a given bond issue do not
agree, the issue has been counted in the higher category.
</TABLE>
26 FUND DETAILS
<PAGE>
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HIGHER-RISK SECURITIES AND PRACTICES
This table shows each fund's investment limitations as a percentage of portfolio
assets. In each case the principal types of risk are listed (see previous page
for definitions). Numbers in this table show allowable usage only; for actual
usage, consult the fund's annual/semi-annual reports.
10 Percent of total assets (italic type)
10 Percent of net assets (roman type)
+ No policy limitation on usage; fund may be using currently
* Permitted, but has not typically been used
- -- Not permitted
<TABLE>
<CAPTION>
GROWTH
AND INDEPENDENCE SOVEREIGN SOVEREIGN SPECIAL
INCOME EQUITY BALANCED INVESTORS VALUES UTILITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
BORROWING; REVERSE REPURCHASE AGREEMENTS
The borrowing of money from banks
or through reverse repurchase
agreements. Leverage, credit risks. 33.3 33.3 33 -- 33.3 33.3
REPURCHASE AGREEMENTS The purchase of
a security that must later be sold back
to the issuer at the same price plus
interest. Credit risk. + + + + + +
SECURITIES LENDING The lending of
securities to financial institutions,
which provide cash or government securities
as collateral. Credit risk.` 33 33.3 33.3 33.3 33.3 33.3
SHORT SALES The selling of securities
which have been borrowed on the
expectation that the market price will drop.
- - Hedged. Hedged leverage, market,
correlation, liquidity, opportunity risks. -- * * * * *
- - Speculative. Speculative leverage, market,
liquidity risks. -- * -- -- * --
SHORT-TERM TRADING Selling a security soon
after purchase. A portfolio engaging in short-term
trading will have higher turnover and transaction
expenses. Market risk. + + + + + +
SHORT-TERM TRADING will have higher turnover
and transaction expenses. Market risk. + + + + + +
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS The purchase or sale of
securities for delivery at a future date;
market value may change before delivery.
Market, opportunity, leverage risks. + + + + + +
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CONVENTIONAL SECURITIES
NON-INVESTMENT-GRADE DEBT SECURITIES Debt
securities rated below BBB/Baa are
considered junk bonds. Credit, market,
interest rate, liquidity, valuation and
information risks. 5 -- 25 5 -- --
FOREIGN SECURITIES Securities issued by
foreign companies, as well as American
or European depository receipts, which are
dollar-denominated securities typically
issued by American or European banks and
are based on ownership of securities issued
by foreign companies. Market, currency,
information, natural event, political risks. 35 + 35 * 50 25
RESTRICTED AND ILLIQUID SECURITIES Securities
not traded on the open market. May include
illiquid Rule 144A securities. Liquidity,
valuation, market risks. 10 15 15 15 15 15
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LEVERAGED DERIVATIVE SECURITIES
FINANCIAL FUTURES AND OPTIONS; SECURITIES
AND INDEX OPTIONS Contracts involving
the right or obligation to deliver or receive
assets or money depending on the performance
of one or more assets or an economic index.
- - Futures and related. Interest rate, currency,
market, hedged or speculative leverage,
correlation, liquidity, opportunity risks. + * + -- + *
- - Options on securities and indices. Interest
rate, currency, market, hedged or speculative
leverage, correlation, liquidity, credit,
opportunity risks. 10(1) l 5(1) 5(1) 5(1) *
CURRENCY CONTRACTS Contracts involving the
right or obligation to buy or sell a given
amount of foreign currency at a specified price
and future date.
- - Hedged. Currency, hedged leverage, correlation,
liquidity, opportunity risks. + -- + -- + +
- - Speculative. Currency, speculative leverage,
liquidity risks. -- -- -- -- -- --
(1) Applies to purchased options only.
</TABLE>
FUND DETAILS 27
<PAGE>
FOR MORE INFORMATION
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Two documents are available that offer further information on John Hancock
growth and income funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or the SAI,
please write or call:
John Hancock Signature Services, Inc.
P.O. Box 9116
Boston, MA 02205-9116
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
[John Hancock's graphic logo. A circle, diamond, triangle and a cube.]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[John Hancock Script Logo] [Copyright] 1996 John Hancock Funds, Inc.
GINPN 1/97
