FILE NO. 2-29502
FILE NO. 811-1677
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 55 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 34 (X)
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JOHN HANCOCK CAPITAL SERIES
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, (617) 375-1700
---------
SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and Address of Agent for Service)
---------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
(X) On May 1, 2000 pursuant to paragraph (b) of Rule 485
( ) 75 days after filing pursuant to paragraph (a) of Rule 485
( ) on (date) pursuant to paragraph (a) of Rule 485
If appropriate, check the following box:
[] This post-effective amendment designates a new effective date for a
previously filed post-effective admendment.
<PAGE>
John Hancock
Equity Funds
Prospectus
May 1, 2000
- --------------------------------------------------------------------------------
Balanced Fund
Core Equity Fund
Core Growth Fund
Core Value Fund
Large Cap Growth Fund
Large Cap Value Fund
Mid Cap Growth Fund
Small Cap Growth Fund
Small Cap Value Fund
Sovereign Investors Fund
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these funds or determined whether the information in
this prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
Contents
- --------------------------------------------------------------------------------
A fund-by-fund summary Balanced Fund 4
of goals, strategies, risks,
performance and expenses. Core Equity Fund 6
Core Growth Fund 8
Core Value Fund 10
Large Cap Growth Fund 12
Large Cap Value Fund 14
Mid Cap Growth Fund 16
Small Cap Growth Fund 18
Small Cap Value Fund 20
Sovereign Investors Fund 22
Policies and instructions for Your account
opening, maintaining and Choosing a share class 24
closing an account in any How sales charges are calculated 24
equity fund. Sales charge reductions and waivers 25
Opening an account 26
Buying shares 27
Selling shares 28
Transaction policies 30
Dividends and account policies 30
Additional investor services 31
Further information on the Fund details
equity funds. Business structure 32
Financial highlights 33
For more information back cover
<PAGE>
Overview
- --------------------------------------------------------------------------------
JOHN HANCOCK EQUITY FUNDS
These funds seek long-term growth by investing primarily in common stocks.
However, the Balanced Fund also makes significant investments in fixed-income
securities. Each fund has its own strategy and its own risk profile.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
o have longer time horizons
o want to diversify their portfolios
o are seeking funds for the equity portion of an asset allocation portfolio
o are investing for retirement or other goals that are many years in the
future
Equity funds may NOT be appropriate if you:
o are investing with a shorter time horizon in mind
o are uncomfortable with an investment that may go up and down in value
RISKS OF MUTUAL FUNDS
Mutual funds are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Because
you could lose money by investing in these funds, be sure to read all risk
disclosure carefully before investing.
THE MANAGEMENT TEAM
All John Hancock equity funds are managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Financial Services, Inc. and manages more than $30 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip Art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip Art] Main risks The major risk factors associated with the fund.
[Clip Art] Past performance The fund's total return, measured year-by-year and
over time.
[Clip Art] Your expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
3
<PAGE>
Balanced Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks current income, long-term growth of capital and income
and preservation of capital. To pursue these goals, the fund allocates its
investments among a diversified mix of debt and equity securities.
At least 75% of the fund's stock investments are "dividend performers" --
companies whose dividend payments have increased steadily for ten years. In
managing the fund's stock portfolio, the managers use fundamental financial
analysis to identify individual companies with high-quality income statements,
substantial cash reserves and identifiable catalysts for growth, which may be
new products or benefits from industrywide growth. The managers generally visit
companies to evaluate the strength and consistency of their management strategy.
Finally, the managers look for stocks that are reasonably priced relative to
their earnings and industry. Historically, companies that meet these criteria
have tended to have large or medium market capitalizations.
At least 25% of assets will be invested in senior debt securities. The fund's
debt securities are used to enhance current income and provide some added
stability. The fund's investments in bonds of any maturity are primarily
investment-grade (rated BBB or above and their unrated equivalents). However, up
to 20% of assets may be in junk bonds rated as low as C and their unrated
equivalents.
Although the fund invests primarily in U.S. securities, it may invest up to 35%
of assets in foreign securities. The fund may also make limited use of certain
derivatives (investments whose value is based on indices, securities or
currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short- term securities. In these and other cases, the fund
might not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
John F. Snyder, III
- ---------------------------------------
Executive vice president of adviser
Joined team in 1994
Joined adviser in 1991
Began business career in 1971
Barry H. Evans, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1996
Joined adviser in 1986
Began business career in 1986
Peter M. Schofield, CFA
- ---------------------------------------
Vice president of adviser
Joined team in 1996
Joined adviser in 1996
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. All
figures assume dividend reinvestment. Past performance does not indicate future
results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
11.38% -3.51% 24.23% 12.13% 20.79% 14.01% 3.89%
2000 total return as of March 31: -3.99%
Best quarter: Q4 '98, 11.38% Worst quarter: Q3 '99, -4.89%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of
1 year 5 year Class A Class B
Class A - began 10/5/92 -1.30% 13.61% 10.67% --
Class B - began 10/5/92 -1.83% 13.77% -- 10.70%
Class C - began 5/1/99 -- -- -- --
Index 21.03% 28.54% 21.83% 21.83%
Index: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
4
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
and bond market movements.
The fund's management strategy has a significant influence on fund performance.
Large- or medium-capitalization stocks as a group could fall out of favor with
the market, causing the fund to underperform investments that focus on
small-capitalization stocks. Medium-capitalization stocks tend to be more
volatile than stocks of larger companies. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher risk securities and derivatives could become
harder to value or to sell at a fair price.
o Any bonds held by the fund could be downgraded in credit quality or go
into default. In addition, bond prices generally fall when interest rates
rise; this risk is greater for longer maturity bonds. Junk bond prices can
fall on bad news about the issuer, an industry or the economy in general.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.60% 0.60% 0.60%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.32% 0.32% 0.32%
Total fund operating expenses 1.22% 1.92% 1.92%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $618 $868 $1,137 $1,903
Class B - with redemption $695 $903 $1,237 $2,061
- without redemption $195 $603 $1,037 $2,061
Class C - with redemption $392 $697 $1,126 $2,321
- without redemption $293 $697 $1,126 $2,321
FUND CODES
Class A
- ---------------------------------------
Ticker SVBAX
CUSIP 47803P104
Newspaper BalA
SEC number 811-0560
JH fund number 36
Class B
- ---------------------------------------
Ticker SVBBX
CUSIP 47803P203
Newspaper BalB
SEC number 811-0560
JH fund number 136
Class C
- ---------------------------------------
Ticker --
CUSIP 47803P708
Newspaper --
SEC number 811-0560
JH fund number 536
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
5
<PAGE>
Core Equity Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks above-average total return (capital appreciation plus
income). To pursue this goal, the fund normally invests at least 65% of assets
in a diversified portfolio of equities which are primarily large-capitalization
stocks. The portfolio's risk profile is similar to that of the Standard & Poor's
500 Stock Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 70% to 80% of these companies also are included
in the Standard & Poor's 500 Stock Index. The subadviser's investment research
team is organized by industry and tracks these companies to develop earnings
estimates and five-year projections for growth. A series of proprietary computer
models use this in-house research to rank the stocks according to their
combination of:
o value, meaning they appear to be underpriced
o improving fundamentals, meaning they show potential for strong growth
This process, together with a risk/return analysis against the Standard & Poor's
500 Stock Index, results in a portfolio of approximately 100 to 130 of the
stocks from the top 60% of the menu. The fund generally sells stocks that fall
into the bottom 20% of the menu.
In normal market conditions, the fund is almost entirely invested in stocks. The
fund may invest in dollar-denominated foreign securities and make limited use of
certain derivatives (investments whose value is based on indices or securities).
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
SUBADVISER
Independence Investment
Associates, Inc.
- ---------------------------------------
Team responsible for day-to-day
investment management
A subsidiary of John Hancock Financial
Services, Inc.
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. Beginning
May 1, 2000, a 1% front-end sales charge on Class C shares will be imposed which
would result in lower returns if reflected in these figures. All figures assume
dividend reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
9.01% 16.12% -2.14% 37.20% 21.24% 29.19% 28.84% 12.37%
2000 total return as of March 31: 1.90%
Best quarter: Q4 '98, 24.17% Worst quarter: Q3 '98, -12.75%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of Life of
1 year 5 year Class A Class B Class C
Class A - began 6/10/91 6.74% 24.21% 17.50% -- --
Class B - began 9/7/95 6.59% -- -- 22.07% --
Class C - began 5/1/98 10.59% -- -- -- 12.74%
Index 21.03% 28.54% 19.80% 26.58% 19.84%
Index: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
6
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or
medium-capitalization stocks.
The fund's management strategy has a significant influence on fund performance.
If the investment research team's earnings estimates or projections turn out to
be inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
inadequate or inaccurate financial information and social or political
instability.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.74% 0.74% 0.74%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.33% 0.33% 0.33%
Total fund operating expenses 1.37% 2.07% 2.07%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $633 $913 $1,212 $2,064
Class B - with redemption $710 $949 $1,314 $2,221
- without redemption $210 $649 $1,114 $2,221
Class C - with redemption $407 $742 $1,202 $2,476
- without redemption $308 $742 $1,202 $2,476
FUND CODES
Class A
- ---------------------------------------
Ticker JHDCX
CUSIP 409902707
Newspaper CoreEqA
SEC number 811-1677
JH fund number 25
Class B
- ---------------------------------------
Ticker JHIDX
CUSIP 409902806
Newspaper CoreEqB
SEC number 811-1677
JH fund number 125
Class C
- ---------------------------------------
Ticker JHCEX
CUSIP 409902863
Newspaper CoreEqC
SEC number 811-1677
JH fund number 525
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
7
<PAGE>
Core Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks above-average total return. To pursue this goal, the
fund invests in a diversified portfolio of primarily large-capitalization stocks
and emphasizes stocks of companies with relatively high potential long-term
earnings growth. The portfolio's risk profile is substantially similar to that
of the Russell 1000 Growth Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 40% to 50% of these companies also are included
in the Russell 1000 Growth Index. The subadviser's investment research team is
organized by industry and tracks these companies to develop earnings estimates
and five-year projections for growth. A series of proprietary computer models
use this in-house research to rank the stocks according to their combination of:
o value, meaning they appear to be underpriced
o improving fundamentals, meaning they show potential for strong growth
This process, together with a risk/return analysis against the Russell 1000
Growth Index, results in a portfolio of approximately 100 to 130 of the stocks
from the top 60% of the menu. The fund generally sells stocks that fall into the
bottom 20% of the menu.
In normal market conditions, the fund is almost entirely invested in stocks. The
fund may, however, invest in certain other types of equity securities, including
dollar-denominated foreign securities.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
SUBADVISER
Independence Investment
Associates, Inc.
- ---------------------------------------
Team responsible for day-to-day
investment management
A subsidiary of John Hancock Financial
Services, Inc.
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The year-by-year and average annual figures are for Class I
shares, which are offered in a separate prospectus. Annual returns should be
substantially similar since all classes invest in the same portfolio. However,
Class I shares' average annual figures do not reflect sales charges or 12b-1
fees which were imposed beginning July 1, 1999 for Class A, B and C shares.
Year-by-year, average annual and index figures do not reflect these charges and
would be lower if they did. All figures assume dividend reinvestment. Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Class I year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1996 1997 1998 1999
20.52% 36.22% 37.94% 20.00%
2000 total return as of March 31: 8.99%
Best quarter: Q4 '98, 27.44% Worst quarter: Q3 '98, -12.00%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of
1 year Class I
Class I - began 10/2/95 20.00% 27.96%
Class A - began 7/1/99 -- --
Class B - began 7/1/99 -- --
Class C - began 7/1/99 -- --
Index 33.16% 30.53%
Index: Russell 1000 Growth Index, an unmanaged index of growth stocks in the
Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks.
8
<PAGE>
MAIN RISKS
{Clip Art] The value of your investment will go up and down in response to stock
market movements.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or
medium-capitalization stocks. Similarly, growth stocks could underperform value
stocks.
The fund's management strategy has a significant influence on fund performance.
If the investment research team's earnings estimates or projections turn out to
be inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Foreign investments carry additional risks, including potentially
inadequate or inaccurate financial information and social or political
instability.
================================================================================
YOUR EXPENSES
{Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly. Class A expense figures below show the expenses for the past year
adjusted to reflect any changes.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
(as a % of purchase or sales price,
whichever is less) none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.80% 0.80% 0.80%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.18% 1.18% 1.18%
Total fund operating expenses 2.28% 2.98% 2.98%
Expense reimbursement (at least until 7/1/00) 1.03% 1.03% 1.03%
Net annual operating expenses 1.25% 1.95% 1.95%
The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions and that the average
annual return was 5%. The example is for comparison only, and does not represent
the fund's actual expenses and returns, either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $621 $1,152 $1,708 $3,218
Class B - with redemption $698 $1,196 $1,817 $3,368
- without redemption $198 $ 896 $1,617 $3,368
Class C - with redemption $395 $ 987 $1,701 $3,593
- without redemption $296 $ 987 $1,701 $3,593
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
FUND CODES
Class A
- ---------------------------------------
Ticker JACGX
CUSIP 410132849
Newspaper CoreGrA
SEC number 811-8852
JH fund number 79
Class B
- ---------------------------------------
Ticker JBCGX
CUSIP 410132831
Newspaper CoreGrB
SEC number 811-8852
JH fund number 179
Class C
- ---------------------------------------
Ticker --
CUSIP 410132823
Newspaper --
SEC number 811-8852
JH fund number 579
9
<PAGE>
Core Value Fund
GOAL AND STRATEGY
{Clip Art] The fund seeks above-average total return. To pursue this goal, the
fund invests in a diversified portfolio of primarily large-capitalization stocks
and emphasizes relatively undervalued stocks and high dividend yields. The
portfolio's risk profile is substantially similar to that of the Russell 1000
Value Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 50% to 60% of these companies also are included
in the Russell 1000 Value Index. The subadviser's investment research team is
organized by industry and tracks these companies to develop earnings estimates
and five-year projections for growth. A series of proprietary computer models
use this in-house research to rank the stocks according to their combination of:
o value, meaning they appear to be underpriced
o improving fundamentals, meaning they show potential for strong growth
This process, together with a risk/return analysis against the Russell 1000
Value Index, results in a portfolio of approximately 100 to 130 of the stocks
from the top 60% of the menu. The fund generally sells stocks that fall into the
bottom 20% of the menu.
In normal market conditions, the fund is almost entirely invested in stocks. The
fund may, however, invest in certain other types of equity securities, including
dollar-denominated foreign securities.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
SUBADVISER
Independence Investment
Associates, Inc.
- --------------------------------------
Team responsible for day-to-day
investment management
A subsidiary of John Hancock Financial
Services, Inc.
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. Class A average annual figures reflect sales charges.
Year-by-year and index figures do not reflect these charges and would be lower
if they did. In addition, 12b-1 fees will be imposed beginning July 1, 2000 for
Class A shares and would result in lower returns if reflected in these figures.
All figures assume dividend reinvestment. Past performance does not indicate
future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1996 1997 1998 1999
20.66% 30.63% 18.79% 4.65%
2000 total return as of March 31: -2.52%
Best quarter: Q4 '98, 18.79% Worst quarter: Q3 '98, -13.99%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of
1 year Class A
Class A - began 10/2/95 -0.60% 17.80%
Class B - began 7/1/99 -- --
Class C - began 7/1/99 -- --
Index 7.35% 20.09%
Index: Russell 1000 Value Index, an unmanaged index of value stocks in the
Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks.
10
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on small- or
medium-capitalization stocks. Similarly, value stocks could underperform growth
stocks.
The fund's management strategy has a significant influence on fund performance.
If the investment research team's earnings estimates or projections turn out to
be inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Foreign investments carry additional risks, including potentially
inadequate or inaccurate financial information and social or political
instability.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly. Class A expense figures below show the expenses for the past year,
adjusted to reflect any changes.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
(as a % of purchase or sales price,
whichever is less) none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.80% 0.80% 0.80%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 1.08% 1.08% 1.08%
Total fund operating expenses 2.18% 2.88% 2.88%
Distribution and service (12b-1) fee reduction
(until 7/1/00) 0.30% -- --
Expense reimbursement (at least until 7/1/00) 0.93% 0.93% 0.93%
Net annual operating expenses 0.95% 1.95% 1.95%
The hypothetical example below shows what your expenses would be after the fee
reduction and expense reimbursement (first year only) if you invested $10,000
over the time frames indicated, assuming you reinvested all distributions and
that the average annual return was 5%. The example is for comparison only, and
does not represent the fund's actual expenses and returns, either past or
future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $592 $1,105 $1,643 $3,109
Class B - with redemption $698 $1,176 $1,777 $3,281
- without redemption $198 $ 876 $1,577 $3,281
Class C - with redemption $395 $ 897 $1,661 $3,509
- without redemption $296 $ 897 $1,661 $3,509
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
FUND CODES
Class A
- ---------------------------------------
Ticker JHIVX
CUSIP 410132807
Newspaper --
SEC number 811-8852
JH fund number 88
Class B
- ---------------------------------------
Ticker --
CUSIP 410132815
Newspaper --
SEC number 811-8852
JH fund number 188
Class C
- ---------------------------------------
Ticker --
CUSIP 410132799
Newspaper --
SEC number 811-8852
JH fund number 588
11
<PAGE>
Large Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 65% of assets in stocks of
large-capitalization companies (companies in the capitalization range of the
Standard & Poor's 500 Stock Index, which was $316 million to $553.02 billion as
of March 31, 2000).
In choosing individual stocks, the managers use fundamental financial analysis
to identify companies with:
o strong cash flows
o secure market franchises
o sales growth that outpaces their industries
The fund generally invests in 30 to 60 U.S. companies that are diversified
across sectors. The fund has tended to emphasize, or overweight, certain sectors
such as health care, technology or consumer goods. These weightings may change
in the future.
The management team uses various means to assess the depth and stability of
companies' senior management, including interviews and company visits. The fund
favors companies for which the managers project an above-average growth rate.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 15% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indices,
securities or currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PORTFOLIO MANAGER
Team responsible for day-to-day
investment management
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. Beginning
May 1, 2000, a 1% front-end sales charge on Class C shares will be imposed which
would result in lower returns if reflected in these figures. All figures assume
dividend reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -8.34% 41.68% 6.06% 13.03% -7.50% 27.17% 20.40% 16.70% 26.42% 20.52%
2000 total return as of March 31: 1.28%
Best quarter: Q4 '98, 22.38% Worst quarter: Q3 '90, -18.75%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of
1 year 5 year 10 year Class B Class C
Class A 14.48% 20.93% 14.02% -- --
Class B - began 1/3/94 14.73% 21.11% -- 16.08% --
Class C - began 6/1/98 18.69% -- -- -- 23.26%
Index 21.03% 28.54% 18.19% 23.55% 22.32%
Index: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
12
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on small- or
medium-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.30% 0.30% 0.30%
Total fund operating expenses 1.35% 2.05% 2.05%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $631 $906 $1,202 $2,043
Class B - with redemption $708 $943 $1,303 $2,200
- without redemption $208 $643 $1,103 $2,200
Class C - with redemption $405 $736 $1,192 $2,455
- without redemption $306 $736 $1,192 $2,455
FUND CODES
Class A
- ---------------------------------------
Ticker JHNGX
CUSIP 409906302
Newspaper LpCpGrA
SEC number 811-4630
JH fund number 20
Class B
- ---------------------------------------
Ticker JHGBX
CUSIP 409906401
Newspaper LpCpGrB
SEC number 811-4630
JH fund number 120
Class C
- ---------------------------------------
Ticker --
CUSIP 409906849
Newspaper --
SEC number 811-4630
JH fund number 520
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
13
<PAGE>
Large Cap Value Fund
GOAL AND STRATEGY
[Clip Art] 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 normally invests at least 65% of assets in stocks of
large-capitalization companies (companies in the capitalization range of the
Standard & Poor's 500 Stock Index, which was $316 million to $553.02 billion as
of March 31, 2000).
In managing the portfolio, the managers emphasize a value-oriented approach to
individual stock selection. With the aid of proprietary financial models, the
management team looks for companies that are selling at what appear to be
substantial discounts to their long-term intrinsic and "franchise" values. These
companies often have identifiable catalysts for growth, such as new products,
business reorganizations or mergers.
The fund manages risk by typically holding between 50 and 150 large companies
that are diversified across industry sectors. The management team also uses
fundamental financial analysis to identify individual companies with substantial
cash flows, reliable revenue streams, superior competitive positions and strong
management.
The fund may attempt to take advantage of short-term market volatility by
investing in corporate restructurings or pending acquisitions.
In selecting bonds of any maturity, the manager looks for the most favorable
risk/return ratios. The fund may invest up to 15% of net assets in junk bonds
rated as low as CC/Ca and their unrated equivalents.
The fund may invest up to 25% of assets in foreign securities (35% during
adverse U.S. market conditions). The fund may also make limited use of certain
derivatives (investments whose value is based on indices, securities or
currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
Timothy E. Quinlisk, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1998
Joined adviser in 1998
Began business career in 1985
R. Scott Mayo, CFA
- ---------------------------------------
Joined team in 2000
Joined adviser in 1998
Began business career in 1993
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. Beginning
May 1, 2000, a 1% front-end sales charge on Class C shares will be imposed which
would result in lower returns if reflected in these figures. All figures assume
dividend reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -0.44% 32.29% 6.02% 9.74% -8.49% 36.74% 22.21% 36.71% 15.94% 37.89%
2000 total return as of March 31: 8.07%
Best quarter: Q4 '99, 31.65% Worst quarter: Q3 '98, -12.94%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of
1 year 5 year 10 year Class B Class C
Class A 30.99% 28.25% 17.15% -- --
Class B - began 8/22/91 31.95% 28.49% -- 18.21% --
Class C - began 5/1/98 35.94% -- -- -- 21.33%
Index 21.03% 28.54% 18.19% 19.73% 19.84%
Index: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
14
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
and bond market movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on small- or
medium-capitalization stocks. Similarly, value stocks could underperform growth
stocks. In addition, if the managers' securities selection strategies do not
perform as expected, the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise and longer
maturity will increase volatility. Junk bond prices can fall on bad news
about the economy, an industry or a company.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred s ales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.625% 0.625% 0.625%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
Other expenses 0.295% 0.295% 0.295%
Total fund operating expenses 1.17% 1.92% 1.92%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $613 $853 $1,111 $1,849
Class B - with redemption $695 $903 $1,237 $2,048
- without redemption $195 $603 $1,037 $2,048
Class C - with redemption $392 $697 $1,126 $2,321
- without redemption $293 $697 $1,126 $2,321
FUND CODES
Class A
- ---------------------------------------
Ticker TAGRX
CUSIP 41013P103
Newspaper LgCpVIA
SEC number 811-0560
JH fund number 50
Class B
- ---------------------------------------
Ticker TSGWX
CUSIP 41013P202
Newspaper LgCpVIB
SEC number 811-0560
JH fund number 150
Class C
- ---------------------------------------
Ticker JHLVX
CUSIP 41013P301
Newspaper LgCpVIC
SEC number 811-0560
JH fund number 550
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
15
<PAGE>
Mid Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of
medium-capitalization companies (companies in the capitalization range of the
Russell Midcap Growth Index, which was $171 million to $66.54 billion as of
March 31, 2000).
The manager conducts fundamental financial analysis to identify companies with
above-average earnings growth.
In choosing individual securities, the manager looks for companies with growth
stemming from a combination of gains in market share and increasing operating
efficiency. Before investing, the manager identifies a specific catalyst for
growth, such as a new product, business reorganization or merger.
The management team generally maintains personal contact with the senior
management of the companies the fund invests in.
The manager considers broad economic trends, demographic factors, technological
changes, consolidation trends and legislative initiatives.
The fund generally invests in more than 100 companies. The fund may not invest
more than 5% of assets in any one security.
The fund may invest up to 10% of assets in foreign securities. The fund may also
make limited use of certain derivatives (investments whose value is based on
indices or currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PORTFOLIO MANAGER
Barbara C. Friedman, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1998
Joined adviser in 1998
Began business career in 1973
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indices for reference). This information may help provide an indication of the
fund's risks. The average annual figures reflect sales charges; the year-by-year
and index figures do not, and would be lower if they did. Beginning May 1, 2000,
a 1% front-end sales charge on Class C shares will be imposed which would result
in lower returns if reflected in these figures. All figures assume dividend
reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
-8.76% 34.24% 29.05% 2.37% 6.53% 58.17%
2000 total return as of March 31: 12.79%
Best quarter: Q4 '98, 22.66% Worst quarter: Q3 '98, -21.36%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of Life of
1 year 5 year Class A Class B Class C
Class A - began 11/1/93 50.24% 23.19% 16.58% -- --
Class B - began 11/1/93 52.21% 23.44% -- 16.75% --
Class C - began 6/1/98 56.11% -- -- -- 34.27%
Index 1 21.03% 28.54% 23.07% 23.07% 22.32%
Index 2 18.23% 21.86% 17.21% 17.21% 36.63%
Index 1: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
Index 2: Russell Midcap Growth Index, an unmanaged index containing those stocks
from the Russell Midcap Index with a greater-than-average growth orientation.
16
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Medium-capitalization stocks tend to be more volatile than stocks of larger
companies, and as a group could fall out of favor with the market, causing the
fund to underperform investments that focus either on small- or on
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the manager's security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.80% 0.80% 0.80%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.50% 0.50% 0.50%
Total fund operating expenses 1.60% 2.30% 2.30%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
Class A $655 $ 980 $1,327 $2,305
Class B - with redemption $733 $1,018 $1,430 $2,461
- without redemption $233 $ 718 $1,230 $2,461
Class C - with redemption $430 $ 811 $1,318 $2,709
- without redemption $331 $ 811 $1,318 $2,709
FUND CODES
Class A
- ---------------------------------------
Ticker SPOAX
CUSIP 409906807
Newspaper MdCpGrA
SEC number 811-4630
JH fund number 39
Class B
- ---------------------------------------
Ticker SPOBX
CUSIP 409906880
Newspaper MdCpGrB
SEC number 811-4630
JH fund number 139
Class C
- ---------------------------------------
Ticker --
CUSIP 409906823
Newspaper --
SEC number 811-4630
JH fund number 539
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
17
<PAGE>
Small Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of
small-capitalization companies (companies in the capitalization range of the
Russell 2000 Growth Index, which was $23 million to $10.45 billion as of March
31, 2000).
The managers look for companies in the emerging growth phase of development that
are not yet widely recognized. The fund also may invest in established companies
that, because of new management, products or opportunities, offer the
possibility of accelerating earnings.
To manage risk, the fund typically invests in 150 to 220 companies across many
industries, and does not invest more than 5% of assets in any one company.
In choosing individual securities, the managers use fundamental financial
analysis to identify rapidly growing companies. The managers favor companies
that dominate their market niches or are poised to become market leaders. They
look for strong senior management teams and coherent business strategies. They
generally maintain personal contact with the senior management of the companies
the fund invests in.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 10% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indices or
currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash and cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PORTFOLIO MANAGERS
Bernice S. Behar, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1996
Joined adviser in 1991
Began business career in 1986
Laura J. Allen, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1998
Joined adviser in 1998
Began business career in 1981
Anurag Pandit, CFA
- ---------------------------------------
Vice president of adviser
Joined team in 1996
Joined adviser in 1996
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indices for reference). This information may help provide an indication of the
fund's risks. The average annual figures reflect sales charges; the year-by-year
and index figures do not, and would be lower if they did. Beginning May 1, 2000,
a 1% front-end sales charge on Class C shares will be imposed which would result
in lower returns if reflected in these figures. All figures assume dividend
reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class B year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -1.15% 58.82% 12.13% 11.82% -1.49% 42.13% 12.95% 14.45% 11.65% 63.62%
2000 total return as of March 31: 14.03%
Best quarter: Q4 '99, 43.58% Worst quarter: Q3 '90, -23.09%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of
1 year 5 year 10 year Class A Class C
Class A - began 8/22/91 56.65% 27.03% -- 20.50% --
Class B 58.62% 27.25% 20.60% -- --
Class C - began 6/1/98 62.59% -- -- -- 45.00%
Index 1 21.26% 16.69% 13.40% 15.19% 7.92%
Index 2 43.09% 18.99% 13.51% 14.65% 22.94%
Index 1: Russell 2000 Index, an unmanaged index of 2,000 U.S.
small-capitalization stocks.
Index 2: Russell 2000 Growth Index, an unmanaged index containing those stocks
from the Russell 2000 Index with a greater-than-average growth orientation.
18
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Small-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on medium- or large-
capitalization stocks. Similarly, growth stocks could underperform value stocks.
To the extent the fund invests in a given industry, its performance will be hurt
if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
Stocks of smaller companies are more volatile than stocks of larger companies.
Many smaller companies have short track records, narrow product lines or niche
markets, making them highly vulnerable to isolated business setbacks.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher risk securities and derivatives could become
harder to value or to sell at a fair price; this risk could also affect
small-capitalization stocks, especially those with low trading volumes.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred s ales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
Other expenses 0.34% 0.34% 0.34%
Total fund operating expenses 1.34% 2.09% 2.09%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $630 $903 $1,197 $2,032
Class B - with redemption $712 $955 $1,324 $2,229
- without redemption $212 $655 $1,124 $2,229
Class C - with redemption $409 $748 $1,212 $2,497
- without redemption $310 $748 $1,212 $2,497
FUND CODES
Class A
- ---------------------------------------
Ticker TAEMX
CUSIP 478032105
Newspaper SmCpGrA
SEC number 811-3392
JH fund number 60
Class B
- ---------------------------------------
Ticker TSEGX
CUSIP 478032204
Newspaper SmCpGrB
SEC number 811-3392
JH fund number 160
Class C
- ---------------------------------------
Ticker --
CUSIP 478032501
Newspaper --
SEC number 811-3392
JH fund number 560
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
19
<PAGE>
Small Cap Value Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks capital appreciation. To pursue this goal, the fund
normally invests at least 80% of assets in stocks of small-capitalization
companies (companies in the capitalization range of the Russell 2000 Index,
which was $23 million to $10.45 billion as of March 31, 2000).
In managing the portfolio, the managers emphasize a value-oriented approach to
individual stock selection. With the aid of proprietary financial models, the
management team looks for U.S. and foreign companies that are selling at what
appear to be substantial discounts to their long-term value. These companies
often have identifiable catalysts for growth, such as new products, business
reorganizations or mergers.
The management team uses fundamental financial analysis of individual companies
to identify those with substantial cash flows, reliable revenue streams and
strong competitive positions. The strength of companies' management teams is
also a key selection factor. The fund diversifies across industry sectors. The
fund may not invest more than 5% of assets in any one security.
The fund may invest up to 15% of assets in a basket of foreign securities or in
bonds of any maturity rated as low as CC/Ca and their unrated equivalents (bonds
below BBB/Baa are considered junk bonds). The fund may make limited use of
certain derivatives (investments whose value is based on indices or currencies).
Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PORTFOLIO MANAGERS
Timothy E. Quinlisk, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1998
Joined adviser in 1998
Began business career in 1985
R. Scott Mayo, CFA
- ---------------------------------------
Joined team in 2000
Joined adviser in 1998
Began business career in 1993
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. Beginning
May 1, 2000, a 1% front-end sales charge on Class C shares will be imposed which
would result in lower returns if reflected in these figures. All figures assume
dividend reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
7.81% 20.26% 12.91% 25.25% -2.10% 98.25%
2000 total return as of March 31: 10.76%
Best quarter: Q4 '99, 47.75% Worst quarter: Q3 '98, -21.43%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of Life of
1 year 5 year Class A Class B Class C
Class A - began 1/3/94 88.27% 25.69% 22.54% -- --
Class B - began 1/3/94 92.03% 25.90% -- 22.67% --
Class C - began 5/1/98 95.94% -- -- -- 39.67%
Index 21.26% 16.69% 13.39% 13.39% 4.00%
Index: Russell 2000 Index, an unmanaged index of 2,000 U.S. small-capitalization
stocks.
20
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Small-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on medium- or
large-capitalization stocks. Similarly, value stocks could underperform growth
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
Stocks of smaller companies are more volatile than stocks of larger companies.
Many smaller companies have short track records, narrow product lines or niche
markets, making them highly vulnerable to isolated business setbacks.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher risk securities and derivatives could become
harder to value or to sell at a fair price; this risk could also affect
small-capitalization stocks, especially those with low trading volumes.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Any bonds held by the fund could be downgraded in credit quality or go
into default. In addition, bond prices generally fall when interest rates
rise; this risk is greater for longer maturity bonds. Junk bond prices can
fall on bad news about the issuer, an industry or the economy in general.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.70% 0.70% 0.70%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.54% 0.54% 0.54%
Total fund operating expenses 1.54% 2.24% 2.24%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $649 $ 962 $1,297 $2,243
Class B - with redemption $727 $1,000 $1,400 $2,399
- without redemption $227 $ 700 $1,200 $2,399
Class C - with redemption $424 $ 793 $1,288 $2,649
- without redemption $325 $ 793 $1,288 $2,649
FUND CODES
Class A
- ---------------------------------------
Ticker SPVAX
CUSIP 409905700
Newspaper SmCpVlA
SEC number 811-3999
JH fund number 37
Class B
- ---------------------------------------
Ticker SPVBX
CUSIP 409905809
Newspaper SmCpVlB
SEC number 811-3999
JH fund number 137
Class C
- ---------------------------------------
Ticker SPVCX
CUSIP 409905882
Newspaper --
SEC number 811-3999
JH fund number 537
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
21
<PAGE>
Sovereign Investors Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital and income without
assuming undue market risks. To pursue this goal, the fund normally invests at
least 80% of stocks in a diversified portfolio of companies with market
capitalizations within the range of the Standard & Poor's 500 Stock Index. On
March 31, 2000, that range was $316 million to 553.02 billion.
All of the fund's stock investments are "dividend performers" -- companies whose
dividend payments have increased steadily for ten years. The managers use
fundamental financial analysis to identify individual companies with
high-quality income statements, substantial cash reserves and identifiable
catalysts for growth, which may be new products or benefits from industrywide
growth. The managers generally visit companies to evaluate the strength and
consistency of their management strategy. Finally, the managers look for stocks
that are reasonably priced relative to their earnings and industry.
Historically, companies that meet these criteria have tended to have large or
medium capitalizations.
The fund may not invest more than 5% of assets in any one security. The fund may
invest in bonds of any maturity, with up to 5% of assets in junk bonds rated as
low as C and their unrated equivalents.
The fund typically invests in U.S. companies but may invest in
dollar-denominated foreign securities. It may also make limited use of certain
derivatives (investments whose value is based on indices).
Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
================================================================================
PORTFOLIO MANAGERS
John F. Snyder, III
- ---------------------------------------
Executive vice president of adviser
Joined team in 1983
Joined adviser in 1991
Began business career in 1971
Barry H. Evans, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1996
Joined adviser in 1986
Began business career in 1986
Peter M. Schofield, CFA
- ---------------------------------------
Vice president of adviser
Joined team in 1996
Joined adviser in 1996
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. The average annual figures reflect sales charges; the
year-by-year and index figures do not, and would be lower if they did. Beginning
May 1, 2000, a 1% front-end sales charge on Class C shares will be imposed which
would result in lower returns if reflected in these figures. All figures assume
dividend reinvestment. Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Class A year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
4.38% 30.48% 7.23% 5.71% -1.85% 29.15% 17.57% 29.14% 15.62% 5.91%
2000 total return as of March 31: -6.02%
Best quarter: Q4 '98, 15.55% Worst quarter: Q3 '90, -9.03%
- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/99
- --------------------------------------------------------------------------------
Life of Life of
1 year 5 year 10 year Class B Class C
Class A 0.60% 17.93% 13.23% -- --
Class B - began 1/3/94 0.20% 18.06% -- 14.55% --
Class C - began 5/1/98 4.17% -- -- -- 6.24%
Index 21.03% 28.54% 18.19% 23.55% 19.84%
Index: Standard & Poor's 500 Stock Index, an unmanaged index of 500 stocks.
22
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
and bond market movements.
The fund's management strategy has a significant influence on fund performance.
Large- or medium-capitalization stocks as a group could fall out of favor with
the market, causing the fund to underperform funds that focus on
small-capitalization stocks. In addition, if the managers' securities selection
strategies do not perform as expected, the fund could underperform its peers or
lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including inadequate or
inaccurate financial information and social or political instability.
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise and longer
maturity will increase volatility. Junk bond prices can fall on bad news
about the economy, an industry or a company.
================================================================================
YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
- --------------------------------------------------------------------------------
Shareholder transaction expenses(1) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- --------------------------------------------------------------------------------
Management fee 0.54% 0.54% 0.54%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.21% 0.21% 0.21%
Total fund operating expenses 1.05% 1.75% 1.75%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
- --------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A $602 $817 $1,050 $1,718
Class B - with redemption $678 $851 $1,149 $1,878
- without redemption $178 $551 $ 949 $1,878
Class C - with redemption $375 $646 $1,039 $2,142
- without redemption $276 $646 $1,039 $2,142
FUND CODES
Class A
- ---------------------------------------
Ticker SOVIX
CUSIP 47803P302
Newspaper SvInvA
SEC number 811-0560
JH fund number 29
Class B
- ---------------------------------------
Ticker SOVBX
CUSIP 47803P401
Newspaper SvInvB
SEC number 811-0560
JH fund number 129
Class C
- ---------------------------------------
Ticker SOVCX
CUSIP 47803P609
Newspaper --
SEC number 811-0560
JH fund number 529
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
23
<PAGE>
Your account
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Each share class has its own cost structure, including a Rule 12b-1 plan that
allows it to pay fees for the sale, distribution and service of its shares. Your
financial representative can help you decide which share class is best for you.
- --------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------
o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 0.30% (0.25% for Large Cap Value
and Small Cap Growth).
- --------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A deferred sales charge, as described on following page.
o Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
- --------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------
o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 1.00%.
o A 1.00% contingent deferred sales charge on shares sold within one year of
purchase.
o No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
For actual past expenses of each share class, see the fund-by-fund information
earlier in this prospectus.
Because 12b-1 fees are paid on an ongoing basis, they may cost share-holders
more than other types of sales charges.
Investors purchasing $1 million or more of Class B or Class C shares may want to
consider the lower operating expenses of Class A shares.
Your broker receives a percentage of these sales charges and fees. In addition,
John Hancock Funds may pay significant compensation out of its own resources to
your broker.
Your broker or agent may charge you a fee to effect transactions in fund shares.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
Class A and Class C Sales charges are as follows:
- --------------------------------------------------------------------------------
Class A sales charges
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Class C sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment
Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none
Investments of $1 million or more Class A and Class C shares are available with
no front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any Class A shares sold within one year of purchase, as follows:
- --------------------------------------------------------------------------------
CDSC on $1 million+ investments
- --------------------------------------------------------------------------------
CDSC on shares
Your investment 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 first day of that month.
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
24 YOUR ACCOUNT
<PAGE>
Class B Shares are offered at their net asset value per share, without any
initial sales charge.
Class B and Class C A CDSC may be charged if you sell Class B or Class C shares
within a certain time after you bought them, as described in the tables below.
There is no CDSC on shares acquired through reinvestment of dividends. The CDSC
is based on the original purchase cost or the current market value of the shares
being sold, whichever is less. The CDSCs are as follows:
- --------------------------------------------------------------------------------
Class B deferred charges
- --------------------------------------------------------------------------------
CDSC on shares
Years after purchase 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 6th year none
- --------------------------------------------------------------------------------
Class C deferred charges
- --------------------------------------------------------------------------------
Years after purchase CDSC
1st year 1.00%
After 1st year none
For purposes of these CDSCs, all purchases made during a calendar month are
counted as having been made on the first day of that month.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. Retirement plans investing $1 million in
Class B shares may add that value to Class A purchases to calculate
charges.
o Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had
been purchased at once.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services, or consult the SAI (see the
back cover of this prospectus).
Group Investment Program A group may be treated as a single purchaser under the
accumulation and combination privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, making the investors potentially eligible for reduced sales charges.
There is no charge or obligation to invest (although initial investments must
total at least $250), and individual investors may close their accounts at any
time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of this prospectus).
CDSC waivers As long as Signature Services is notified at the time you sell, the
CDSC for each share class will generally be waived in the following cases:
o to make payments through certain systematic withdrawal plans
o to make certain distributions from a retirement plan
o because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
YOUR ACCOUNT 25
<PAGE>
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives
o financial representatives utilizing fund shares in fee-based investment
products under signed agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds
o individuals transferring assets from an employee benefit plan into a John
Hancock fund
o certain John Hancock insurance contract holders (one-year CDSC usually
applies)
o participants in certain retirement plans with at least 100 eligible
employees (one-year CDSC applies)
Class C shares may be offered without front-end sales charges to various
individuals and institutions, including certain retirement plans.
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o fee-based clients of selling brokers who have placed at least $2
billion in John Hancock funds: $250
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. You must notify
your financial representative or Signature Services if this information
changes. For more details, please contact your financial representative or
call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges
later.
5 Make your initial investment using the table on the next page. You and
your financial representative can initiate any purchase, exchange or sale
of shares.
26 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clip Art] o Make out a check for o Make out a check for the investment
the investment amount, amount payable to "John Hancock
payable to "John Signature Services, Inc."
Hancock Signature
Services, Inc." o Fill out the detachable investment
slip from an account statement. If no
o Deliver the check and slip is available, include a note
your completed specifying the fund name, your share
application to your class, your account number and the
financial name(s) in which the account is
representative, or mail registered.
them to Signature
Services (address o Deliver the check and your investment
below). slip or note to your financial
representative, or mail them to
Signature Services (address below).
By exchange
[Clip Art] o Call your financial o Log on to www.jhfunds.com to process
representative or exchanges between funds.
Signature Services to
request an exchange. o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services to request an
exchange.
By wire
[Clip Art] o Deliver your completed o Instruct your bank to wire the amount
application to your of your investment to:
financial First Signature Bank & Trust
representative, or mail Account # 900000260
it to Signature Routing # 211475000
Services.
o Obtain your account Specify the fund name, your share class,
number by calling your your account number and the name(s) in
financial which the account is registered. Your
representative or bank may charge a fee to wire funds.
Signature Services.
o Instruct your bank to
wire the amount of your
investment to:
First Signature Bank
& Trust
Account # 900000260
Routing # 211475000
Specify the fund name,
your choice of share
class, the new account
number and the name(s)
in which the account is
registered. Your bank
may charge a fee to
wire funds.
By Internet
[Clip Art] See "By exchange" and o Verify that your bank or credit union
"By wire." is a member of the Automated Clearing
House (ACH) system.
o Complete the "Bank Information"
section on your account application.
o Log on to www.jhfunds.com to initiate
purchases using your authorized bank
account.
By phone
[Clip Art] See "By exchange" and o Verify that your bank or credit union
"By wire." is a member of the Automated Clearing
House (ACH) system.
o Complete the "Bank Information"
section on your account application.
o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services between 8 A.M. and
4 P.M. Eastern Time on most business
days.
- --------------------------------------------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 27
<PAGE>
- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of instruction or
complete a stock power indicating the
o Sales of any amount. fund name, your share class, your
account number, the name(s) in which
the account is registered and the
dollar value or number of shares you
wish to sell.
o Include all signatures and any
additional documents that may be
required (see next page).
o Mail the materials to Signature
Services.
o A check will be mailed to the name(s)
and address in which the account is
registered, or otherwise according to
your letter of instruction.
By Internet
[Clip Art] o Most accounts. o Log on to www.jhfunds.com to initiate
redemptions from your funds.
o Sales of up to
$100,000.
By phone
[Clip Art] o Most accounts. o Call EASI-Line for automated service
24 hours a day using your touch tone
o Sales of up to phone at 1-800-338-8080.
$100,000.
o Call your financial representative or
Signature Services between 8 A.M. and
4 P.M. Eastern Time on most business
days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to o To verify that the Internet or
sell any amount. telephone redemption privilege is in
place on an account, or to request the
o Requests by Internet or form to add it to an existing account,
phone to sell up to call Signature Services.
$100,000.
o Amounts of $1,000 or more will be
wired on the next business day. A $4
fee will be deducted from your
account.
o Amounts of less than $1,000 may be
sent by EFT or by check. Funds from
EFT transactions are generally
available by the second business day.
Your bank may charge a fee for this
service.
By exchange
[Clip Art] o Accounts of any type. o Obtain a current prospectus for the
fund into which you are exchanging by
o Sales of any amount. Internet or by calling your financial
representative or Signature Services.
o Log on to www.jhfunds.com to process
exchanges between your funds.
o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services to request an
exchange.
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
28 YOUR ACCOUNT
<PAGE>
Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request unless they were previously provided to Signature Services and are
still accurate. These items are shown in the table below. You may also need to
include a signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You will need to obtain your signature guarantee from a member of the Signature
Guarantee Medallion Program. Most brokers and securities dealers are members of
this program. A notary public CANNOT provide a signature guarantee.
- --------------------------------------------------------------------------------
Seller Requirements for written requests
- --------------------------------------------------------------------------------
[Clip Art]
Owners of individual, joint or o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors). o On the letter, the signatures of all
persons authorized to sign for the
account, exactly as the account is
registered.
o Signature guarantee if applicable (see
above).
Owners of corporate, sole o Letter of instruction.
proprietorship, general partner or
association accounts. o Corporate business/organization
resolution, certified within the past
12 months, or a John Hancock Funds
business/ organization certification
form.
o On the letter and the resolution, the
signature of the person(s) authorized
to sign for the account.
o Signature guarantee if applicable (see
above).
Owners or trustees of trust o Letter of instruction.
accounts.
o On the letter, the signature(s) of the
trustee(s).
o Copy of the trust document certified
within the past 12 months or a John
Hancock Funds trust certification
form.
o Signature guarantee if applicable (see
above).
Joint tenancy shareholders with o Letter of instruction signed by
rights of survivorship whose surviving tenant.
co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see
above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing executor,
certified within the past 12 months.
o Signature guarantee if applicable (see
above).
Administrators, conservators, o Call 1-800-225-5291 for instructions.
guardians and other sellers or
account types not listed above.
- --------------------------------------------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
YOUR ACCOUNT 29
<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). The funds use market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The funds may also value securities at fair value
if the value of these securities has been materially affected by events
occurring after the close of a foreign market. Foreign stock or other portfolio
securities held by the funds may trade on U.S. holidays and weekends, even
though the funds' shares will not be priced on those days. This may change a
fund's NAV on days when you cannot buy or sell shares.
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 Signature Services receives your
request in good order.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line, accessing www.jhfunds.com, 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. Also for your protection, telephone
redemption transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. Proceeds from telephone transactions can
only be mailed to the address of record.
Exchanges You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical. Class B and Class
C shares will continue to age from the original date and will retain the same
CDSC rate. However, if the new fund's CDSC rate is higher, then the rate will
increase. A CDSC rate that has increased will drop again with a future exchange
into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Signature Services. Certificated
shares can only be sold by returning the certificates to Signature Services,
along with a letter of instruction or a stock power and a signature guarantee.
Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The funds generally distribute most or all of their net earnings in
the form of dividends. Any capital gains are distributed annually. Balanced and
Sovereign Investors funds typically pay income dividends quarterly. Core Value
typically pays income dividends annually. The other funds do not usually pay
income dividends. Most of these dividends are from capital gains.
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
30 YOUR ACCOUNT
<PAGE>
you. However, if the check is not deliverable, your dividends will be
reinvested.
Taxability of dividends Dividends you receive from a fund, whether reinvested or
taken as cash, are generally considered taxable. Dividends from a fund's
short-term capital gains are taxable as ordinary income. Dividends from a fund's
long-term capital gains are taxable at a lower rate. Whether gains are
short-term or long-term depends on the fund's holding period. Some dividends
paid in January may be taxable as if they had been paid the previous December.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they
are all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
Retirement plans John Hancock Funds offers a range of retirement plans,
including traditional, Roth and Education IRAs, SIMPLE plans, SEPs, 401(k) plans
and other pension and profit-sharing plans. Using these plans, you can invest in
any John Hancock fund (except tax-free income funds) with a low minimum
investment of $250 or, for some group plans, no minimum investment at all. To
find out more, call Signature Services at 1-800-225-5291.
YOUR ACCOUNT 31
<PAGE>
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the John Hancock
equity funds. Each fund's board of trustees oversees the fund's business
activities and retains the services of the various firms that carry out the
fund's operations.
The trustees of the Balanced, Core Growth, Core Value, Large Cap Value, Mid Cap
Growth and Small Cap Growth funds have the power to change these funds'
respective investment goals without shareholder approval.
Management fees The management fees paid to the investment adviser by the John
Hancock equity funds last fiscal year are as follows:
- --------------------------------------------------------------------------------
Fund % of net assets
- --------------------------------------------------------------------------------
Balanced 0.60%
Core Equity 0.74%
Core Growth 0.00%
Core Value 0.00%
Large Cap Growth 0.75%
Large Cap Value 0.625%
Mid Cap Growth 0.80%
Small Cap Growth 0.75%
Small Cap Value 0.70%
Sovereign Investors 0.54%
------------------------------------------------------
Shareholders
------------------------------------------------------
Distribution and
shareholder services
------------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
------------------------------------------------------
------------------------------------------------------
Principal distributor
John Hancock Funds, Inc.
Markets the funds and distributes shares
through selling brokers, financial planners
and other financial representatives.
------------------------------------------------------
------------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends,
and processing of buy and sell requests.
------------------------------------------------------
------------------------------------------------------
Subadviser
Independence Investment
Associates, Inc.
53 State Street
Boston, MA 02109
Provides portfolio
management to certain
funds.
------------------------------------------------------
------------------------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and
investment activities.
------------------------------------------------------
Asset
management
------------------------------------------------------
Custodian
Investors Bank & Trust Co.
Holds the funds' assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating each fund's NAV.
------------------------------------------------------
------------------------------------------------------
Trustees
Oversee the fund's activities.
------------------------------------------------------
32 FUND DETAILS
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These tables detail the performance of each fund's share classes, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Balanced Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 12/95 12/96 12/97 12/98 12/99
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.84 $11.75 $12.27 $13.33 $14.06
Net investment income (loss)(1) 0.44 0.41 0.37 0.36 0.35
Net realized and unrealized gain (loss) on investments 1.91 0.99 2.14 1.47 0.18
Total from investment operations 2.35 1.40 2.51 1.83 0.53
Less distributions:
Dividends from net investment income (0.44) (0.41) (0.37) (0.36) (0.36)
Distributions in excess of net investment income -- -- -- -- (0.00)(2)
Distributions from net realized gain on investments sold -- (0.47) (1.08) (0.74) (0.18)
Total distributions (0.44) (0.88) (1.45) (1.10) (0.54)
Net asset value, end of period $11.75 $12.27 $13.33 $14.06 $14.05
Total investment return at net asset value(3) (%) 24.23 12.13 20.79 14.01 3.89
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 69,811 71,242 84,264 97,072 130,690
Ratio of expenses to average net assets (%) 1.27 1.29 1.22 1.21 1.22
Ratio of net investment income (loss) to average net assets (%) 3.99 3.33 2.77 2.61 2.47
Portfolio turnover rate (%) 45 80 115 83 94
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 12/95 12/96 12/97 12/98 12/99
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.84 $11.74 $12.27 $13.33 $14.06
Net investment income (loss)(1) 0.36 0.32 0.28 0.27 0.26
Net realized and unrealized gain (loss) on investments 1.90 1.01 2.14 1.46 0.17
Total from investment operations 2.26 1.33 2.42 1.73 0.43
Less distributions:
Dividends from net investment income (0.36) (0.33) (0.28) (0.26) (0.26)
Distributions in excess of net investment income -- -- -- -- (0.00)(2)
Distributions from net realized gain on investments sold -- (0.47) (1.08) (0.74) (0.18)
Total distributions (0.36) (0.80) (1.36) (1.00) (0.44)
Net asset value, end of period $11.74 $12.27 $13.33 $14.06 $14.05
Total investment return at net asset value(3) (%) 23.30 11.46 19.96 13.23 3.16
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 87,827 90,855 101,249 115,682 111,564
Ratio of expenses to average net assets (%) 1.96 1.99 1.91 1.88 1.92
Ratio of net investment income (loss) to average net assets (%) 3.31 2.63 2.08 1.93 1.76
Portfolio turnover rate (%) 45 80 115 83 94
</TABLE>
FUND DETAILS 33
<PAGE>
Balanced Fund continued
- --------------------------------------------------------------------------------
Class C - period ended: 12/99(4)
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $14.60
Net investment income (loss)(1) 0.19
Net realized and unrealized gain (loss) on investments (0.37)
Total from investment operations (0.18)
Less distributions:
Dividends from net investment income (0.19)
Distributions in excess of net investment income (0.00)(2)
Distributions from net realized gain on investments sold (0.18)
Total distributions (0.37)
Net asset value, end of period $14.05
Total investment return at net asset value(3) (%) (1.15)(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 330
Ratio of expenses to average net assets (%) 1.84(6)
Ratio of net investment income (loss) to average net assets (%) 1.88(6)
Portfolio turnover rate (%) 94
(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Class C shares began operations on May 1, 1999.
(5) Not annualized.
(6) Annualized. fund details Core Equity Fund Figures audited by
PricewaterhouseCoopers LLP.
34 FUND DETAILS
<PAGE>
Core Equity Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 5/95 5/96 12/96(1) 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $12.68 $14.41 $17.98 $19.42 $23.93 $30.14
Net investment income (loss)(2) 0.32 0.20 0.13 0.10 0.05 (0.02)
Net realized and unrealized gain (loss) on investments 1.77 3.88 1.72 5.55 6.81 3.72
Total from investment operations 2.09 4.08 1.85 5.65 6.86 3.70
Less distributions:
Dividends from net investment income (0.28) (0.22) (0.14) (0.04) -- --
Distributions from net realized gain on investments sold (0.08) (0.29) (0.27) (1.10) (0.65) (0.63)
Total distributions (0.36) (0.51) (0.41) (1.14) (0.65) (0.63)
Net asset value, end of period $14.41 $17.98 $19.42 $23.93 $30.14 $33.21
Total investment return at net asset value(3) (%) 16.98 29.12 10.33(4) 29.19 28.84 12.37
Total adjusted investment return at net asset value(3,5) (%) 16.94 28.47 10.08(4) 29.17 -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 101,418 14,878 31,013 92,204 200,962 393,792
Ratio of expenses to average net assets (%) 0.70 0.94 1.30(6) 1.42 1.39 1.37(7)
Ratio of adjusted expenses to average net assets(8) (%) 0.74 1.59 1.73(6) 1.44 -- --
Ratio of net investment income (loss) to average net assets (%) 2.43 1.55 1.16(6) 0.45 0.17 (0.06)
Ratio of adjusted net investment income (loss) to
average net assets(8) (%) 2.39 0.90 0.73(6) 0.43 -- --
Portfolio turnover rate (%) 71 157 35 62 50 98
Fee reduction per share(2) ($) 0.005 0.08 0.05 0.00(9) -- --
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 5/96(10) 12/96(1) 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.25 $17.96 $19.41 $23.80 $29.75
Net investment income (loss)(2) 0.09 0.05 (0.06) (0.14) (0.24)
Net realized and unrealized gain (loss) on investments 2.71 1.72 5.56 6.74 3.66
Total from investment operations 2.80 1.77 5.50 6.60 3.42
Less distributions:
Dividends from net investment income (0.09) (0.05) (0.01) -- --
Distributions from net realized gain on investments sold -- (0.27) (1.10) (0.65) (0.63)
Total distributions (0.09) (0.32) (1.11) (0.65) (0.63)
Net asset value, end of period $17.96 $19.41 $23.80 $29.75 $32.54
Total investment return at net asset value(3) (%) 18.46(4) 9.83(4) 28.39 27.90 11.59
Total adjusted investment return at net asset value(3,5) (%) 17.59(4) 9.58(4) 28.37 -- --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 15,125 42,461 134,939 347,045 664,104
Ratio of expenses to average net assets (%) 2.00(6) 2.00(6) 2.12 2.09 2.07(7)
Ratio of adjusted expenses to average net assets(8) (%) 3.21(6) 2.43(6) 2.14 -- --
Ratio of net investment income (loss) to average net assets (%) 0.78(6) 0.45(6) (0.25) (0.53) (0.77)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) (0.43)(6) 0.02(6) (0.27) -- --
Portfolio turnover rate (%) 157 35 62 50 98
Fee reduction per share(2) ($) 0.13 0.05 0.00(9) -- --
</TABLE>
FUND DETAILS 35
<PAGE>
Core Equity Fund continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Class C - period ended: 12/98(10) 12/99
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $27.81 $29.75
Net investment income (loss)(2) (0.09) (0.25)
Net realized and unrealized gain (loss) on investments 2.68 3.67
Total from investment operations 2.59 3.42
Less distributions:
Distributions from net realized gain on investments sold (0.65) (0.63)
Net asset value, end of period $29.75 $32.54
Total investment return at net asset value(3) (%) 9.46(4) 11.59
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 6,901 29,859
Ratio of expenses to average net assets (%) 2.12(6) 2.08(7)
Ratio of net investment income (loss) to average net assets (%) (0.53)(6) (0.80)
Portfolio turnover rate (%) 50 98
</TABLE>
(1) Effective December 31, 1996, the fiscal year end changed from May 31 to
December 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(6) Annualized.
(7) Expense ratios do not include interest expense due to bank loans, which
amounted to less than 0.01%.
(8) Unreimbursed, without fee reduction.
(9) Less than $0.01 per share.
(10) Class B shares began operations on September 7, 1995. Class C shares began
operations on May 1, 1998.
36 FUND DETAILS
<PAGE>
Core Growth Fund
Figures audited by Deloitte & Touche LLP.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class I - period ended: 2/96(1) 2/97 2/98 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $9.29 $11.01 $14.88
Net investment income (loss)(2) 0.03 0.05 0.04 0.01
Net realized and unrealized gain (loss) on investments 0.81 2.16 4.34 3.40
Total from investment operations 0.84 2.21 4.38 3.41
Less distributions:
Dividends from net investment income (0.03) (0.04) (0.03) (0.02)
Distributions in excess of net investment income -- -- -- (0.00)(3)
Distributions from net realized gain on investments sold (0.02) (0.45) (0.48) (0.62)
Total distributions (0.05) (0.49) (0.51) (0.64)
Net asset value, end of period $9.29 $11.01 $14.88 $17.65
Total investment return at net asset value(4) (%) 9.94(5) 24.19 40.52 22.92
Total adjusted investment return at net asset value(4,6) (%) (5.63)(5) 17.40 37.95 21.89
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 549 883 4,605 7,855
Ratio of expenses to average net assets (%) 0.95(7) 0.95 0.95 0.95
Ratio of adjusted expenses to average net assets(8,9) (%) 38.57(7) 7.74 3.52 1.98
Ratio of net investment income (loss) to average net assets (%) 0.91(7) 0.49 0.34 0.06
Ratio of adjusted net investment income (loss) to average net
assets(8,9) (%) (36.71)(7) (6.30) (2.23) (0.97)
Portfolio turnover rate (%) 21 142 91 54
Fee reduction per share(2) ($) 1.36 0.68 0.33 0.17
</TABLE>
(1) Began operations on October 2, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Not annualized.
(6) An estimated total return calculation, which does not take into
consideration fee reductions by the adviser during the periods shown.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
(9) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net income as a percentage of average net assets is
expected to increase as the net assets of the fund grow.
FUND DETAILS 37
<PAGE>
Core Value Fund
The financial information presented is for periods prior to reclassification as
Class A shares on July 1, 1999.
Figures audited by Deloitte & Touche LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 2/96(1) 2/97 2/98 2/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $9.47 $10.88 $13.93
Net investment income (loss)(2) 0.10 0.23 0.21 0.15
Net realized and unrealized gain (loss) on investments 0.96 1.77 3.33 1.23
Total from investment operations 1.06 2.00 3.54 1.38
Less distributions:
Dividends from net investment income (0.09) (0.19) (0.13) (0.18)
Distributions from net realized gain on investments sold -- (0.40) (0.36) (2.77)
Total distributions (0.09) (0.59) (0.49) (2.95)
Net asset value, end of period $9.47 $10.88 $13.93 $12.36
Total investment return at net asset value(3) (%) 12.52(4) 21.36 32.97 9.87
Total adjusted investment return at net asset value(3,5) (%) (1.18)(4) 15.92 32.02 8.94
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 682 1,323 7,747 6,685
Ratio of expenses to average net assets (%) 0.95(6) 0.95 0.95 0.95
Ratio of adjusted expenses to average net assets(7,8) (%) 34.06(6) 6.39 1.90 1.88
Ratio of net investment income (loss) to average net assets (%) 2.81(6) 2.26 1.60 1.03
Ratio of adjusted net investment income (loss) to average net assets(7,8) (%) (30.30)(6) (3.18) 0.65 0.10
Portfolio turnover rate (%) 12 66 119 61
Fee reduction per share(2) ($) 1.22 0.55 0.12 0.13
</TABLE>
(1) Began operations on October 2, 1995.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Total investment return assumes dividend reinvestment.
(4) Not annualized.
(5) An estimated total return calculation, which does not take into
consideration fee reductions by the adviser during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net income as a percentage of average net assets is
expected to increase as the net assets of the fund grow.
38 FUND DETAILS
<PAGE>
Large Cap Growth Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 12/94 12/95 10/96(1) 10/97 10/98 10/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.40 $15.89 $19.51 $23.28 $24.37 $22.27
Net investment income (loss) (0.10) (0.09)(2) (0.13)(2) (0.12)(2) (0.11)(2) (0.17)(2)
Net realized and unrealized gain (loss) on investments (1.21) 4.40 3.90 3.49 2.17 5.65
Total from investment operations (1.31) 4.31 3.77 3.37 2.06 5.48
Less distributions:
Distributions from net realized gain on investments
sold (0.20) (0.69) -- (2.28) (4.16) (2.71)
Net asset value, end of period $15.89 $19.51 $23.28 $24.37 $22.27 $25.04
Total investment return at net asset value(3) (%) (7.50) 27.17 19.32(4) 16.05 9.80 27.58
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 46,466 241,700 279,425 303,067 381,591 484,196
Ratio of expenses to average net assets (%) 1.65 1.48 1.48(5) 1.44 1.40 1.35(6)
Ratio of net investment income (loss) to average net
assets (%) (0.64) (0.46) (0.73)(5) (0.51) (0.50) (0.70)
Portfolio turnover rate (%) 52 68(7) 59 133 153(7) 183
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 12/94(8) 12/95 10/96(1) 10/97 10/98 10/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $17.16 $15.83 $19.25 $22.83 $23.70 $21.38
Net investment income (loss)(2) (0.20) (0.26) (0.26) (0.27) (0.25) (0.31)
Net realized and unrealized gain (loss) on investments (0.93) 4.37 3.84 3.42 2.09 5.38
Total from investment operations (1.13) 4.11 3.58 3.15 1.84 5.07
Less distributions:
Distributions from net realized gain on investments
sold (0.20) (0.69) -- (2.28) (4.16) (2.71)
Net asset value, end of period $15.83 $19.25 $22.83 $23.70 $21.38 $23.74
Total investment return at net asset value(3) (%) (6.56)(4) 26.01 18.60(4) 15.33 9.04 26.70
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 3,807 15,913 25,474 36,430 217,448 312,046
Ratio of expenses to average net assets (%) 2.38(5) 2.31 2.18(5) 2.13 2.08 2.02(6)
Ratio of net investment income (loss) to average net
assets (%) (1.25)(5) (1.39) (1.42)(5) (1.20) (1.16) (1.37)
Portfolio turnover rate (%) 52 68(7) 59 133 153(7) 183
<CAPTION>
- ---------------------------------------------------------------------------------------------
Class C - period ended: 10/98(8) 10/99
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $21.43 $21.37
Net investment income (loss)(2) (0.10) (0.31)
Net realized and unrealized gain (loss) on investments 0.04 5.38
Total from investment operations (0.06) 5.07
Less distributions:
Distributions from net realized gain on investments sold -- (2.71)
Net asset value, end of period $21.37 $23.73
Total investment return at net asset value(3) (%) (0.28)(4) 26.72
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 152 1,457
Ratio of expenses to average net assets (%) 2.10(5) 2.05(6)
Ratio of net investment income (loss) to average net assets (%) (1.14)(5) (1.36)
Portfolio turnover rate (%) 153(7) 183
</TABLE>
(1) Effective October 31, 1996, the fiscal year end changed from December 31
to October 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Expense ratios do not include interest expense due to bank loans, which
amounted to less than 0.01%.
(7) Excludes merger activity.
(8) Class B and Class C shares began operations on January 3, 1994 and June 1,
1998, respectively.
FUND DETAILS 39
<PAGE>
Large Cap Value Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 8/95(1) 8/96 12/96(2) 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $11.42 $13.38 $15.07 $15.62 $19.32 $21.26
Net investment income (loss)(4) 0.21 0.19 0.05 0.12 0.16 0.09(3)
Net realized and unrealized gain (loss) on investments,
financial futures contracts and foreign currency transactions 1.95 1.84 2.15 5.57 2.85 7.80
Total from investment operations 2.16 2.03 2.20 5.69 3.01 7.89
Less distributions:
Distributions from net investment income (0.20) (0.19) (0.08) (0.07) (0.14) --
Distributions from net realized gain on investments sold -- (0.15) (1.57) (1.92) (0.93) (2.13)
Total distributions (0.20) (0.34) (1.65) (1.99) (1.07) (2.13)
Net asset value, end of period $13.38 $15.07 $15.62 $19.32 $21.26 $27.02
Total investment return at net asset value(5) (%) 19.22 15.33 14.53(6) 36.71 15.94 37.89
Total adjusted investment return at net asset value(5) (%) -- -- -- -- 15.92 --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 130,183 139,548 163,154 303,313 421,218 604,214
Ratio of expenses to average net assets (%) 1.30 1.17 1.22(7) 1.12 1.16(8) 1.17
Ratio of net investment income (loss) to average net
assets (%) 1.82 1.28 0.85(7) 0.65 0.79(8) 0.40
Portfolio turnover rate (%) 99 74 26 102(9) 64 113
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 8/95(1) 8/96 12/96(2) 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $11.44 $13.41 $15.10 $15.66 $19.31 $21.20
Net investment income (loss)(4) 0.13 0.08 0.01 (0.02) 0.01 (0.07)
Net realized and unrealized gain (loss) on investments,
financial futures contracts and foreign currency transactions 1.96 1.85 2.14 5.60 2.84 7.75
Total from investment operations 2.09 1.93 2.15 5.58 2.85 7.68
Less distributions:
Distributions from net investment income (0.12) (0.09) (0.02) (0.01) (0.03) --
Distributions from net realized gain on investments sold -- (0.15) (1.57) (1.92) (0.93) (2.09)
Total distributions (0.12) (0.24) (1.59) (1.93) (0.96) (2.09)
Net asset value, end of period $13.41 $15.10 $15.66 $19.31 $21.20 $26.79
Total investment return at net asset value(5) (%) 18.41 14.49 14.15(6) 35.80 15.05 36.95
Total adjusted investment return at net asset value(5) (%) -- -- -- -- 15.03 --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 114,723 125,781 146,399 340,334 547,945 768,322
Ratio of expenses to average net assets (%) 2.03 1.90 1.98(7) 1.87 1.91(8) 1.88
Ratio of net investment income (loss) to average net
assets (%) 1.09 0.55 0.10(7) (0.10) 0.05(8) (0.31)
Portfolio turnover rate (%) 99 74 26 102(9) 64 113
</TABLE>
40 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Class C - period ended: 12/98(10) 12/99
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $22.03 $21.20
Net investment income (loss)(4) 0.03 (0.09)
Net realized and unrealized gain (loss) on investments, financial futures
contracts and foreign currency transactions 0.09 7.77
Total from investment operations 0.12 7.68
Less distributions:
Distributions from net investment income (0.02) --
Distributions from net realized gain on investments sold (0.93) (2.09)
Total distributions (0.95) (2.09)
Net asset value, end of period $21.20 $26.79
Total investment return at net asset value(5) (%) 0.83(6) 36.94
Total adjusted investment return at net asset value(5) (%) 0.82(6) --
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,711 12,674
Ratio of expenses to average net assets (%) 1.92(7,8) 1.92
Ratio of net investment income (loss) to average net assets (%) 0.28(7,8) (0.40)
Portfolio turnover rate (%) 64 113
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(2) Effective December 31, 1996, the fiscal year end changed from August 31 to
December 31.
(3) Class A has net investment income, because of its relatively lower class
expenses as compared to other share classes.
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) Annualized.
(8) Reflects voluntary management fee reduction in effect during the year
ended December 31, 1998. As a result of such fee reductions, expenses of
Class A, Class B and Class C shares of the fund reflect reductions of less
than $0.01 per share. Absent such reductions, the ratio of expenses to
average net assets would have been 1.18%, 1.93% and 1.94% for Class A,
Class B and Class C shares, respectively, and the ratio of net investment
income to average net assets would have been 0.77%, 0.03% and 0.26% for
Class A, Class B and Class C shares, respectively.
(9) Portfolio turnover rate excludes merger activity.
(10) Class C shares began operations on May 1, 1998. fund details
FUND DETAILS 41
<PAGE>
Mid Cap Growth Fund
Figures audited by PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 10/95 10/96 10/97 10/98 10/99
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $7.93 $9.32 $10.92 $11.40 $9.11
Net investment income (loss)(1) (0.07) (0.11) (0.06) (0.09) (0.12)
Net realized and unrealized gain (loss) on investments 1.46 3.34 1.00 (0.89) 3.86
Total from investment operations 1.39 3.23 0.94 (0.98) 3.74
Less distributions:
Distributions from net realized gain on investments sold -- (1.63) (0.46) (1.31) --
Net asset value, end of period $9.32 $10.92 $11.40 $9.11 $12.85
Total investment return at net asset value(2) (%) 17.53 36.15 8.79 (9.40) 41.05
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 101,562 156,578 141,997 101,138 112,082
Ratio of expenses to average net assets (%) 1.59 1.59 1.59 1.59 1.60
Ratio of net investment income (loss) to average net assets (%) (0.87) (1.00) (0.57) (0.86) (1.14)
Portfolio turnover rate (%) 155 240 317 168 153
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 10/95 10/96 10/97 10/98 10/99
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $7.87 $9.19 $10.67 $11.03 $8.72
Net investment income (loss)(1) (0.13) (0.18) (0.13) (0.15) (0.18)
Net realized and unrealized gain (loss) on investments 1.45 3.29 0.95 (0.85) 3.68
Total from investment operations 1.32 3.11 0.82 (1.00) 3.50
Less distributions:
Distributions from net realized gain on investments sold -- (1.63) (0.46) (1.31) --
Net asset value, end of period $9.19 $10.67 $11.03 $8.72 $12.22
Total investment return at net asset value(2) (%) 16.77 35.34 7.84 (9.97) 40.14
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 137,363 238,901 204,812 134,188 145,816
Ratio of expenses to average net assets (%) 2.30 2.29 2.28 2.27 2.23
Ratio of net investment income (loss) to average net assets (%) (1.55) (1.70) (1.25) (1.54) (1.77)
Portfolio turnover rate (%) 155 240 317 168 153
<CAPTION>
- -----------------------------------------------------------------------------------------
Class C - period ended: 10/98(3) 10/99
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $9.99 $8.72
Net investment income (loss)(1) (0.06) (0.19)
Net realized and unrealized gain (loss) on investments (1.21) 3.68
Total from investment operations (1.27) 3.49
Net asset value, end of period $8.72 $12.21
Total investment return at net asset value(2) (%) (12.71)(4) 40.02
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 100 276
Ratio of expenses to average net assets (%) 2.29(5) 2.30
Ratio of net investment income (loss) to average net assets (%) (1.66)(5) (1.82)
Portfolio turnover rate (%) 168 153
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Class C shares began operations on June 1, 1998.
(4) Not annualized.
(5) Annualized.
42 FUND DETAILS
<PAGE>
Small Cap Growth Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A(1) - period ended: 10/95(2) 10/96 10/97 10/98 10/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $6.71 $9.02 $10.22 $12.35 $8.41
Net investment income (loss)(3) (0.07) (0.09) (0.07) (0.08) (0.12)
Net realized and unrealized gain (loss) on investments 2.38 1.29 2.41 (1.34) 4.59
Total from investment operations 2.31 1.20 2.34 (1.42) 4.47
Less distributions:
Distributions from net realized gain on investments sold -- -- (0.21) (2.52) (0.23)
Net asset value, end of period $9.02 $10.22 $12.35 $8.41 $12.65
Total investment return at net asset value(4) (%) 34.56 13.27 23.35 (14.14) 54.41
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 179,481 218,497 209,384 179,700 266,886
Ratio of expenses to average net assets (%) 1.38 1.32 1.29(5) 1.36(5) 1.34(5)
Ratio of net investment income (loss) to average net assets (%) (0.83) (0.86) (0.57) (1.02) (1.17)
Portfolio turnover rate (%) 23 44 96 103 1.04
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Class B(1) - period ended: 10/95(2) 10/96 10/97 10/98 10/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $6.51 $8.70 $9.78 $11.72 $7.81
Net investment income (loss)(3) (0.11) (0.15) (0.14) (0.15) (0.18)
Net realized and unrealized gain (loss) on investments 2.30 1.23 2.29 (1.24) 4.24
Total from investment operations 2.19 1.08 2.15 (1.39) 4.06
Less distributions:
Distributions from net realized gain on investments sold -- -- (0.21) (2.52) (0.23)
Net asset value, end of period $8.70 $9.78 $11.72 $7.81 $11.64
Total investment return at net asset value(4) (%) 33.60 12.48 22.44 (14.80) 53.31
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 393,478 451,268 472,594 361,992 478,468
Ratio of expenses to average net assets (%) 2.11 2.05 2.02(5) 2.07(5) 2.03(5)
Ratio of net investment income (loss) to average net assets (%) (1.55) (1.59) (1.30) (1.73) (1.87)
Portfolio turnover rate (%) 23 44 96 103 104
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class C - period ended: 10/98(6) 10/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.96 $7.81
Net investment income (loss)(3) (0.03) (0.19)
Net realized and unrealized gain (loss) on investments (1.12) 4.23
Total from investment operations (1.15) 4.04
Less distributions:
Distributions from net realized gain on investments sold -- (0.23)
Net asset value, end of period $7.81 $11.62
Total investment return at net asset value(4) (%) (12.83)(7) 53.05
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 468 3,866
Ratio of expenses to average net assets (%) 2.11(5,8) 2.09(5)
Ratio of net investment income (loss) to average net assets (%) (1.86)(8) (1.94)
Portfolio turnover rate (%) 103 104
</TABLE>
(1) All per share amounts and net asset values have been restated to reflect
the four-for-one stock split effective May 1, 1998.
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Expense ratios do not include interest expense due to bank loans, which
amounted to less than $0.01 per share.
(6) Class C shares began operations on June 1, 1998.
(7) Not annualized.
(8) Annualized.
FUND DETAILS 43
<PAGE>
Small Cap Value Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 12/94(1) 12/95 12/96 12/97 10/98(2) 10/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $8.99 $10.39 $10.32 $12.27 $10.82
Net investment income (loss)(3) 0.18 0.21 0.14 0.06 0.02 (0.09)
Net realized and unrealized gain (loss) on investments 0.48 1.60 1.17 2.52 (1.47) 6.67
Total from investment operations 0.66 1.81 1.31 2.58 (1.45) 6.58
Less distributions:
Dividends from net investment income (0.17) (0.20) (0.14) (0.03) -- --
Distributions from net realized gain on investments sold -- (0.21) (1.24) (0.60) -- (0.13)
Total distributions (0.17) (0.41) (1.38) (0.63) -- (0.13)
Net asset value, end of period $8.99 $10.39 $10.32 $12.27 $10.82 $17.27
Total investment return at net asset value(4) (%) 7.81(5) 20.26 12.91 25.25 (11.82)(5) 61.39
Total adjusted investment return at net asset value(4,6) (%) 7.30(5) 19.39 12.20 24.65 (12.33)(5) 61.24
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,420 12,845 15,853 20,961 22,528 51,746
Ratio of expenses to average net assets (%) 0.99(7) 0.98 0.99 0.99 1.01(7) 1.39
Ratio of adjusted expenses to average net assets(8) (%) 4.98(7) 1.85 1.70 1.59 1.62(7) 1.54
Ratio of net investment income (loss) to average net
assets (%) 2.10(7) 2.04 1.31 0.47 0.25(7) (0.67)
Ratio of adjusted net investment income (loss) to
average net assets(8) (%) (1.89)(7) 1.17 0.60 (0.13) (0.36)(7) (0.82)
Portfolio turnover rate (%) 0.3 9 72 140 69 140
Fee reduction per share(3) ($) 0.34 0.09 0.08 0.07 0.06 0.02
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 12/94(1) 12/95 12/96 12/97 10/98(2) 10/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $8.50 $9.00 $10.38 $10.31 $12.21 $10.71
Net investment income (loss)(3) 0.13 0.12 0.07 (0.03) (0.04) (0.18)
Net realized and unrealized gain (loss) on investments 0.48 1.59 1.17 2.53 (1.46) 6.58
Total from investment operations 0.61 1.71 1.24 2.50 (1.50) 6.40
Less distributions:
Dividends from net investment income (0.11) (0.12) (0.07) -- -- --
Distributions from net realized gain on investments sold -- (0.21) (1.24) (0.60) -- (0.13)
Total distributions (0.11) (0.33) (1.31) (0.60) -- (0.13)
Net asset value, end of period $9.00 $10.38 $10.31 $12.21 $10.71 $16.98
Total investment return at net asset value(4) (%) 7.15(5) 19.11 12.14 24.41 (12.29)(5) 60.33
Total adjusted investment return at net asset value(4,6) (%) 6.64(5) 18.24 11.43 23.81 (12.80)(5) 60.18
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 3,296 16,994 22,097 35,033 30,637 75,103
Ratio of expenses to average net assets (%) 1.72(7) 1.73 1.69 1.69 1.71(7) 2.06
Ratio of adjusted expenses to average net assets(8) (%) 5.71(7) 2.60 2.40 2.29 2.32(7) 2.21
Ratio of net investment income (loss) to average net
assets (%) 1.53(7) 1.21 0.62 (0.24) (0.45)(7) (1.34)
Ratio of adjusted net investment income (loss) to
average net assets(8) (%) (2.46)(7) 0.34 (0.09) (0.84) (1.06)(7) (1.49)
Portfolio turnover rate (%) 0.3 9 72 140 69 140
Fee reduction per share(3) ($) 0.34 0.09 0.08 0.07 0.06 0.02
</TABLE>
44 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Class C - period ended: 10/98(1) 10/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $13.39 $10.71
Net investment income (loss)(3) (0.03) (0.19)
Net realized and unrealized gain (loss) on investments (2.65) 6.58
Total from investment operations (2.68) 6.39
Less distributions:
Distributions from net realized gain on investments sold -- (0.13)
Net asset value, end of period $10.71 $16.97
Total investment return at net asset value(4) (%) (20.01)(5) 60.24
Total adjusted investment return at net asset value(4,6) (%) (20.32)(5) 60.09
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) $422 $3,774
Ratio of expenses to average net assets (%) 1.71(7) 2.09
Ratio of adjusted expenses to average net assets(8) (%) 2.32(7) 2.29
Ratio of net investment income (loss) to average net assets (%) (0.54)(7) (1.43)
Ratio of adjusted net investment income (loss) to average net assets(8) (%) (1.15)(7) (1.58)
Portfolio turnover rate (%) 69 140
Fee reduction per share(3) ($) 0.04 0.02
</TABLE>
(1) Class A and Class B shares began operations on January 3, 1994. Class C
shares began operations on May 1, 1998.
(2) Effective October 31, 1998, the fiscal year end changed from December 31
to October 31.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) 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.
FUND DETAILS 45
<PAGE>
Sovereign Investors Fund
Figures audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - period ended: 12/95 12/96 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $14.24 $17.87 $19.48 $22.41 $24.23
Net investment income (loss) 0.40 0.36(1) 0.32(1) 0.31(1) 0.30(1)
Net realized and unrealized gain (loss) on investments 3.71 2.77 5.31 3.11 1.11
Total from investment operations 4.11 3.13 5.63 3.42 1.41
Less distributions:
Dividends from net investment income (0.40) (0.36) (0.32) (0.31) (0.35)
Distributions from net realized gain on investments sold (0.08) (1.16) (2.38) (1.29) (0.78)
Total distributions (0.48) (1.52) (2.70) (1.60) (1.13)
Net asset value, end of period $17.87 $19.48 $22.41 $24.23 $24.51
Total investment return at net asset value(2) (%) 29.15 17.57 29.14 15.62 5.91
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,280,321 1,429,523 1,748,490 1,884,460 1,787,615
Ratio of expenses to average net assets (%) 1.14 1.13 1.06 1.03 1.05
Ratio of net investment income (loss) to average net assets (%) 2.45 1.86 1.44 1.33 1.21
Portfolio turnover rate (%) 46 59 62 51 64
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - period ended: 12/95 12/96 12/97 12/98 12/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $14.24 $17.86 $19.46 $22.38 $24.20
Net investment income (loss)(1) 0.27 0.21 0.16 0.14 0.13
Net realized and unrealized gain (loss) on investments 3.71 2.77 5.29 3.11 1.11
Total from investment operations 3.98 2.98 5.45 3.25 1.24
Less distributions:
Dividends from net investment income (0.28) (0.22) (0.15) (0.14) (0.18)
Distributions from net realized gain on investments sold (0.08) (1.16) (2.38) (1.29) (0.78)
Total distributions (0.36) (1.38) (2.53) (1.43) (0.96)
Net asset value, end of period $17.86 $19.46 $22.38 $24.20 $24.48
Total investment return at net asset value(2) (%) 28.16 16.67 28.14 14.79 5.20
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 257,781 406,523 610,976 790,277 819,537
Ratio of expenses to average net assets (%) 1.90 1.91 1.83 1.79 1.73
Ratio of net investment income (loss) to average net assets (%) 1.65 1.10 0.67 0.58 0.54
Portfolio turnover rate (%) 46 59 62 51 64
<CAPTION>
- ---------------------------------------------------------------------------------------
Class C - period ended: 12/98(3) 12/99
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance
Net asset value, beginning of period $24.43 $24.22
Net investment income (loss)(1) 0.13 0.13
Net realized and unrealized gain (loss) on investments 1.07 1.10
Total from investment operations 1.20 1.23
Less distributions:
Distributions from net investment income (0.12) (0.17)
Distributions from net realized gain on investments sold (1.29) (0.78)
Total distributions (1.41) (0.95)
Net asset value, end of period $24.22 $24.50
Total investment return at net asset value(2) (%) 5.18(4) 5.17
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,627 10,591
Ratio of expenses to average net assets (%) 1.67(5) 1.75
Ratio of net investment income to average net assets (%) 0.84(5) 0.51
Portfolio turnover rate (%) 51 64
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Class C shares began operations on May 1, 1998.
(4) Not annualized.
(5) Annualized.
46 FUND DETAILS
<PAGE>
<PAGE>
For more information
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
equity funds:
Annual/Semiannual Report to Shareholders
Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).
Statement of Additional Information (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA02217-1000
By phone: 1-800-225-5291
By EASI-Line: 1-800-338-8080
By TDD: 1-800-544-6713
On the Internet: www.jhfunds.com
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request:
[email protected]
(duplicating fee required)
On the Internet: www.sec.gov
[LOGO] JOHN HANCOCK FUNDS John Hancock Funds, Inc.
A Global Investment Management Firm 101 Huntington Avenue
Boston MA 02199-7603
(C)2000 John Hancock Funds, Inc.
EQTPN 5/00
<PAGE>
JOHN HANCOCK CORE EQUITY FUND
Class A, Class B and Class C Shares
Statement of Additional Information
May 1, 2000
This Statement of Additional Information provides information about John Hancock
Core Equity Fund (the "Fund"), in addition to the information that is contained
in the combined Equity Funds' current Prospectus (the "Prospectus"). The Fund is
a diversified series of John Hancock Capital Series (the "Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
1-(800)-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund............................................... 2
Investment Objective and Policies...................................... 2
Investment Restrictions................................................ 10
Those Responsible for Management....................................... 12
Investment Advisory and Other Services................................. 20
Distribution Contracts................................................. 23
Sales Compensation..................................................... 24
Net Asset Value........................................................ 27
Initial Sales Charge on Class A and Class C Shares..................... 28
Deferred Sales Charge on Class B and Class C Shares.................... 30
Special Redemptions.................................................... 34
Additional Services and Programs....................................... 34
Purchase and Recemptions Through Third Parties......................... 36
Description of the Fund's Shares....................................... 36
Tax Status............................................................. 38
Calculation of Performance ............................................ 42
Brokerage Allocation................................................... 43
Transfer Agent Services................................................ 46
Custody of Portfolio................................................... 46
Independent Auditors................................................... 46
Appendix A - Description of Investment Ratings......................... A-1
Appendix B - Description of Bond Ratings............................... B-1
FinancialStatements.................................................... F-1
1
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser.
The Adviser is an indirect, wholly-owned subsidiary of John Hancock Life
Insurance Company (formerly John Hancock Mutual Life Insurance Company) (the
"Life Company"), a Massachusetts life insurance company chartered in 1862 with
national headquarters at John Hancock Place, Boston, Massachusetts. The Life
Company is wholly owned by John Hancock Financial Services, Inc., a Delaware
corporation organized in February, 2000.
On June 3, 1996, the Fund changed its name from John Hancock Independence
Diversified Core Equity Fund to John Hancock Independence Equity Fund. Prior to
May 1, 1999, the Fund was called John Hancock Independence Equity Fund.
The Fund has one sub-adviser: Independent Investment Associates, Inc. ("IIA" or
"Sub-Adviser") which is a subsidiary of the Life Company.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risk. The investment objective of the Fund is
fundamental and may only be changed by the Trustees with shareholder approval.
There is no assurance that the Fund will achieve its investment objective.
The investment objective of the Fund is to seek above-average total return,
consisting of capital appreciation and income. The Fund will diversify its
investments to create a portfolio with a risk profile and characteristics
similar to the Standard & Poor's 500 Stock Index. Consequently, the Fund will
invest in a number of industry groups without concentration in any particular
industry. The Fund's investments will be subject to the market fluctuation and
risks inherent in all securities. Under normal market conditions, the Fund
invests principally (at least 65% of its assets) in common stocks.
Ratings as Investment Criteria. In general, the ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") represent
the opinions of these agencies as to the quality of the securities which they
rate. It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of debt securities. Among the
factors which will be considered are the long-term ability of the issuer to pay
principal and interest and general economic trends. Appendix B contains further
information concerning the ratings of Moody's and S&P and their significance.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund.
Fixed Income Securities. Under normal market conditions, the Fund may invest in
fixed income securities (including debt securities and preferred stocks) that
are rated Baa or better by Moody's or BBB or better by S&P or, if unrated,
determined to be of comparable quality by the Adviser and the Sub-Adviser
("investment grade debt securities"). The value of fixed income securities
varies inversely with changes in the prevailing levels of interest rates. In
addition, debt securities rated BBB or Baa and unrated debt securities of
2
<PAGE>
comparable quality are considered medium grade obligations and have speculative
characteristics. Adverse changes in economic conditions or other circumstances
are more likely to lead to weakened capacity to make principal and interest
payment than in the case of higher grade obligations.
For temporary defensive purposes, the Fund may invest up to 100% of its assets
in investment grade debt securities of any type or maturity.
Investment in Foreign Securities. The Fund may invest in the securities of
foreign issuers in the form of sponsored and unsponsored American Depository
Receipts ("ADRs") and U.S. dollar-denominated securities of foreign issuers
traded on U.S. exchanges. ADRs (sponsored and unsponsored) are receipts,
typically issued by U.S. banks, which evidence ownership of underlying
securities issued by a foreign corporation. ADRs are publicly traded on a U.S.
stock exchange or in the over-the-counter market. An investment in foreign
securities including ADRs may be affected by changes in currency rates and in
exchange control regulations. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information including financial information, in
the United States and, therefore, there may not be a correlation between such
information and the market value of the unsponsored ADR. Foreign companies may
not be subject to accounting standards or government supervision comparable to
U.S. companies, and there is often less publicly available information about
their operations. Foreign companies may also be affected by political or
financial inability abroad. These risk considerations may be intensified in the
case of investments in ADRs of foreign companies that are located in emerging
market countries. ADRs of companies located in these countries may have limited
marketability and may be subject to more abrupt or erratic price movements.
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price, plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and during the period in which the Fund
seeks to enforce its rights thereto, possible subnormal levels of income, lack
of access to income during this period, and the expense of enforcing its rights.
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
3
<PAGE>
securities sold under the agreements because it will require those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain a separate
account consisting of liquid securities, of any type or maturity, in an amount
at least equal to the repurchase prices of the securities (plus any accrued
interest thereon) under such agreements. In addition, the Fund will not enter
into reverse repurchase agreements or borrow money, except from banks as a
temporary measure for extraordinary emergency purposes in amounts not to exceed
33 1/3% of the value of the Fund's total assets (including the amount borrowed)
taken at market value. The Fund will not leverage to attempt to increase income.
The Fund will not purchase securities while outstanding borrowings exceed 5% of
the Fund's total assets. The Fund will enter into reverse repurchase agreements
only with federally insured banks or savings and loan associations which are
approved in advance as being creditworthy by the Trustees. Under procedures
established by the Trustees, the Adviser will monitor the creditworthiness of
the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities, that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining the monitoring and liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
Options on Securities and Securities Indices. The Fund may purchase and write
(sell) call and put options on securities in which it may invest or on any
securities index based on securities in which it may invest. These options may
be listed on national domestic securities exchanges or traded in the
over-the-counter market. The Fund may write covered put and call options and
purchase put and call options to enhance total return, as a substitute for the
purchase or sale of securities, or to protect against declines in the value of
portfolio securities and against increases in the cost of securities to be
acquired.
Writing Covered Options. A call option on securities written by the Fund
obligates the Fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. A put option on securities written by the Fund obligates the Fund to
purchase specified securities from the option holder at a specified price if the
option is exercised at any time before the expiration date. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash settlement payments and does
not involve the actual purchase or sale of securities. In addition, securities
index options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. Writing covered call options may deprive the Fund of the
opportunity to profit from an increase in the market price of the securities in
its portfolio. Writing covered put options may deprive the Fund of the
opportunity to profit from a decrease in the market price of the securities to
be acquired for its portfolio.
4
<PAGE>
All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities in a
segregated account with a value at least equal to the Fund's obligation under
the option, (ii) entering into an offsetting forward commitment and/or (iii)
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the Fund's net exposure on its written
option position. A written call option on securities is typically covered by
maintaining the securities that are subject to the option in a segregated
account. The Fund may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts") in the market value of securities of the type in which it
may invest. The Fund may also sell call and put options to close out its
purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain on the purchase of a call
option if, during the option period, the value of such securities exceeded the
sum of the exercise price, the premium paid and transaction costs; otherwise the
Fund would realize either no gain or a loss on the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against a
decline in the market value of the Fund's portfolio securities. Put options may
also be purchased by the Fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.
5
<PAGE>
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates or securities prices, the Fund
may purchase and sell various kinds of futures contracts and purchase and write
call and put options on these futures contracts. The Fund may also enter into
closing purchase and sale transactions with respect to any of these contracts
and options. The futures contracts may be based on various securities,
securities indices and any other financial instruments and indices. All futures
contracts entered into by the Fund are traded on U.S. exchanges or boards of
trade that are licensed, regulated or approved by the Commodity Futures Trading
Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures contracts are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
6
<PAGE>
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire. When
securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities held by the Fund or securities with characteristics similar to
those of the Fund's portfolio securities.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available. The Fund may also purchase futures
contracts as a substitute for transactions in securities, to alter the
investment characteristics of portfolio securities or to gain or increase its
exposure to a particular securities market.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
7
<PAGE>
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. The Fund will determine that the
price fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in securities
held by the Fund or securities or instruments which it expects to purchase. As
evidence of its hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to establish a
segregated account consisting of cash or liquid securities in an amount equal to
the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices may result
in a poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
8
<PAGE>
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers and financial institutions if the loan is collateralized by cash or U.S.
Government securities according to applicable regulatory requirements. The Fund
may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrant and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Short Sales. The Fund may engage in short sales "against the box". In a short
sale against the box, the Fund agrees to sell at a future date a security that
it either contemporaneously owns or has the right to acquire at no extra cost.
If the price of the security has declined at the time the Fund is required to
deliver the security, the Fund will benefit from the difference in the price. If
the price of the security has increased, the Fund will be required to pay the
difference.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
9
<PAGE>
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A
high rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage expenses. The Fund's portfolio turnover rate is set forth in
the table under the caption "Financial Highlights" in the Prospectus.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of a majority of the Fund's outstanding
voting securities which, as used in the Prospectus and this Statement of
Additional Information, means the approval by the lesser of (1) the holders of
67% or more of the Fund's shares represented at a meeting if more than 50% of
the Fund's outstanding shares are present in person or by proxy at that meeting
or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
(1) Issue senior securities, except as permitted by paragraphs (2), (6) and
(7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale
of options, futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Fund's investment
policies, and the pledge, mortgage or hypothecation of the Fund's
assets within the meaning of paragraph (3) below, are not deemed to be
senior securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 1/3% of
the value of the Fund's total assets (including the amount borrowed)
taken at market value. The Fund will not leverage to attempt to
increase income. The Fund will not purchase securities while
outstanding borrowings exceed 5% of the Fund's total assets.
(3) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such
pledging, mortgaging or hypothecating does not exceed 33 1/3% of the
Fund's total assets taken at market value.
(4) Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the 1933 Act.
(5) Purchase or sell real estate or any interest therein, except that the
Fund may invest in securities of corporate or governmental entities
secured by real estate or marketable interests therein or securities
issued by companies that invest in real estate or interests therein.
10
<PAGE>
(6) Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of publicly
distributed debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities.
(7) Invest in commodities or in commodity contracts or in puts, calls, or
combinations of both, except options on securities, securities indices
and currency, futures contracts on securities, securities indices and
currency and options on such futures, forward foreign currency exchange
contracts, forward commitments, securities index put or call warrants
and repurchase agreements entered into in accordance with the Fund's
investment policies.
(8) Purchase the securities of issuers conducting their principal activity
in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets
taken at market value at the time of such investment. This limitation
does not apply to investments in obligations of the U.S. Government or
any of its agencies or instrumentalities.
(9) Purchase securities of an issuer (other than the U.S. Government, its
agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by
the Fund.
In connection with the lending of portfolio securities under paragraph (6)
above, such loans must at all times be fully collateralized and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Securities used as collateral must be marked to market daily.
Non-Fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
The Fund may not:
(a) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the
management of the Adviser or Sub-Adviser to save commissions or to
average prices among them is not deemed to result in a joint securities
trading account.
(b) Purchase securities on margin or make short sales, except in connection
with arbitrage transactions or unless, by virtue of its ownership of
other securities, the Fund has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right
is conditional, the sale is made upon the same conditions, except that
the Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
11
<PAGE>
(c) Purchase a security if, as a result, (i) more than 10% of the Fund's total
assets would be invested in the securities of other investment companies, (ii)
the Fund would hold more than 3% of the total outstanding voting securities of
any one investment company, or (iii) more than 5% of the Fund's total assets
would be invested in the securities of any one investment company. These
limitations do not apply to (a) the investment of cash collateral, received by
the Fund in connection with lending the Fund's portfolio securities, in the
securities of open- end investment companies or (b) the purchase of shares of
any investment company in connection with a merger, consolidation,
reorganization or purchase of substantially all of the assets of another
investment company. Subject to the above percentage limitations, the Fund may,
in connection with the John Hancock Group of Funds Deferred Compensation Plan
for Independent Trustees/ Directors, purchase securities of other investment
companies within the John Hancock Group of Funds.
(d) Invests more than 15% of its net assets in illiquid securities.
If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of the restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also Officers or Directors of the Adviser, or Officers
or Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
12
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Stephen L. Brown* Trustee and Chairman (1, 2) Chairman and Chief Executive Officer,
John Hancock Place John Hancock Life Insurance Company;
P.O. Box 111 Chairman and Director, John Hancock
Boston, MA 02117 Advisers, Inc. (The Adviser), John
July 1937 Hancock Funds, Inc. (John Hancock
Funds), The Berkeley Financial
Group, Inc. (The Berkeley Group);
Director, John Hancock
Subsidiaries, Inc.; John Hancock
Insurance Agency, Inc.; (Insurance
Agency), (until June 1999); Federal
Reserve Bank of Boston (until March
1999); John Hancock Signature
Services, Inc. (Signature Services)
(until January 1997) ; Trustee,
John Hancock Asset Management
(until March 1997).
Maureen R. Ford * Trustee, Vice Chairman and Chief President, Broker/Dealer Distributor,
101 Huntington Avenue Executive Officer John Hancock Life Insurance Company;
Boston, MA 02199 Vice Chairman, Director and Chief
April 1955 Executive Officer, the Advisers, The
Berkeley Group, John Hancock Funds;
Chairman, Director and President,
Insurance Agency, Inc.; Chairman,
Director and Chief Executive Officer,
Sovereign Asset Management
Corporation (SAMCorp.); Senior Vice
President, MassMutual Insurance Co.
(until 1999); Senior Vice President,
Connecticut Mutual Insurance Co.
(until 1996).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
13
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Dennis S. Aronowitz Trustee Professor of Law, Emeritus, Boston
1216 Falls Boulevard University School of Law (as of
Fort Lauderdale, FL 33327 1996); Director, Brookline Bankcorp.
June 1931
Richard P. Chapman, Jr. Trustee (1) Chairman, President, and Chief
160 Washington Street Executive Officer, Brookline
Brookline, MA 02147 Bankcorp. (lending); Director,
February 1935 Lumber Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University (education);
Director, Depositors Insurance Fund,
Inc. (insurance).
William J. Cosgrove Trustee Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.;
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
14
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Leland O. Erdahl Trustee Director of Uranium Resources
8046 Mackenzie Court Corporation, Hecla Mining Company,
Las Vegas, NV 89129 Canyon Resources Corporation and
December 1928 Apollo Gold, Inc.; Director Original
Sixteen to One Mines, Inc. (until
1999); Management Consultant (from
1984-1987 and 1991-1998); Director,
Freeport-McMoran Copper & Gold, Inc.
(until 1997); Vice President, Chief
Financial Officer and Director of
Amax Gold, Inc. (until 1998).
Richard A. Farrell Trustee President of Farrell, Healer & Co.,
The Venture Capital Fund of New England (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980,
23rd Floor headed the venture capital group at
Boston, MA 02110 Bank of Boston Corporation.
November 1932
Gail D. Fosler Trustee Senior Vice President and Chief
3054 So. Abingdon Street Economist, The Conference Board
Arlington, VA 22206 (non-profit economic and business
December 1947 research); Director, Unisys Corp.;
and H.B. Fuller Company. Director,
National Bureau of Economic
Research (academic).
William F. Glavin Trustee President Emeritus, Babson College
120 Paget Court - John's Island (as of 1997); Vice Chairman, Xerox
Vero Beach, FL 32963 Corporation (until June 1989);
March 1932 Director, Caldor Inc., Reebok, Inc.
(since 1994) and Inco Ltd.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
15
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Dr. John A. Moore Trustee President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939
Patti McGill Peterson Trustee Executive Director, Council for
Council For International Exchange of International Exchange of Scholars
Scholars (since January 1998), Vice
3007 Tilden Street, N.W. President, Institute of
Washington, D.C. 20008 International Education (since
May 1943 January 1998); Senior Fellow,
Cornell Institute of Public
Affairs, Cornell University (until
December 1997); President Emerita
of Wells College and St. Lawrence
University; Director, Niagara
Mohawk Power Corporation (electric
utility).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
16
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John W. Pratt Trustee Professor of Business Administration
2 Gray Gardens East Emeritus, Harvard University
Cambridge, MA 02138 Graduate School of Business
September 1931 Administration (as of June 1998).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Insurance Company; Director, the
P.O. Box 111 Adviser, John Hancock Funds,
Boston, MA 02117 Signator Investors, Inc., John
August 1937 Hancock Subsidiaries, Inc.,
SAMCorp., NM Capital, The Berkeley
Group, JH Networking Insurance
Agency, Inc.; Insurance Agency, Inc.
(until June 1999), Signature
Services (until January 1997).
Osbert M. Hood Executive Vice President and Chief Executive Vice President and Chief
101 Huntington Avenue Financial Officer Financial Officer, each of the John
Boston, MA 02199 Hancock Funds; Executive Vice
August 1952 President, Treasurer and Chief
Financial Officer of the Adviser,
the Berkeley Group, John Hancock
Funds, SAMCorp. And NM Capital;
Senior Vice President, Chief
Financial Officer and Treasurer,
Signature Services; Director
IndoCam Japan Limited; Vice
President and Chief Financial
Officer, John Hancock Life
Insurance Company, Retail Sector
(until 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
17
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Thomas H. Connors Vice President and Compliance Officer Vice President and Compliance
101 Huntington Avenue Officer, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds, Inc.
September 1959
Susan S. Newton Vice President, Secretary and Chief Vice President, Secretary and Chief
101 Huntington Avenue Legal Officer Legal Officer, the Adviser; John
Boston, MA 02199 Hancock Funds, Signature Services,
March 1950 The Berkeley Group, NM Capital and
SAMCorp.
James J. Stokowski Vice President, Treasurer and Chief Vice President, the Adviser.
101 Huntington Avenue Accounting Officer
Boston, MA 02199
November 1946
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
</TABLE>
18
<PAGE>
The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Messrs. Brown, and Scipione and Ms.
Ford, each a non-Independent Trustee, and each of the officers of the Fund are
interested persons of the Adviser are compensated by the Adviser and receive no
compensation from the Fund for their services.
Aggregate Total Compensation From the
Compensation Fund and John Hancock Fund
Independent Trustees From the Fund(1) Complex to Trustees(2)
- -------------------- ---------------- ----------------------
Dennis S. Aronowitz $ 2,862 $75,250
Richard P. Chapman, Jr+ 2,862 75,250
William J. Cosgrove+ 2,689 72,250
Douglas M. Costle * 1,768 56,000
Leland O. Erdahl 2,694 72,350
Richard A. Farrell 2,862 75,250
Gail D. Fosler 2,689 72,250
William F. Glavin+ 2,473 68,100
Dr. John A. Moore+ 2,694 72,350
Patti McGill Peterson 2,867 75,350
John W. Pratt 2,689 72,250
----------- ------
Total $ 29,149 $786,650
--------
(1) Compensation is for the fiscal year ended December 31, 1999.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 1999. As of this date, there were sixty-five
funds in the John Hancock Fund Complex of which each of these Independent
Trustees serving thirty-one funds.
(+) As of December 31, 1999, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $112,162, Mr. Cosgrove was $224,553, Mr. Glavin was $342,213 and for
Dr. Moore was $283,877 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees.
* Effective December 31, 1999, Mr. Costle resigned as Trustee of the Complex.
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of April 1, 2000 officers and Trustees of the Fund as a group beneficially
owned less than 1% of the outstanding shares of the Fund. As of that date, the
following shareholders beneficially owned 5% or more of the shares of the Fund:
19
<PAGE>
Percentage of Total
Name and Address of Outstanding Shares of
Shareholders Class of Shares the Class of the Fund
- ------------ --------------- ---------------------
MLPF&S For The B 14.39%
Sole Benefit of its Customers
Attn Fund Administration 97HP2
4800 Deer Lake Drive East
2nd Floor
Jacksonville FL 32246-6484
MLPF&S For The C 20.92%
Sole Benefit of its Customers
Attn Fund Administration
4800 Deer Lake Drive East
2nd Floor
Jacksonville FL 32246-6484
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and more than $30 billion in assets under management in
its capacity as investment adviser to the Fund and other funds in the John
Hancock group of funds as well as institutional accounts. The Adviser is an
affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of more
than $100 billion, the Life Company is one of the ten largest life insurance
companies in the United States, and carries a high rating from Standard & Poor's
and A. M. Best. Founded in 1862, the Life Company has been serving clients for
over 130 years.
The Sub-Adviser, IIA, located at 53 State Street, Boston, Massachusetts 02109,
was organized in 1982 and currently manages over $38 billion in assets for
primarily institutional clients. The Sub-Adviser is a wholly-owned indirect
subsidiary of the Life Company.
The Fund has entered into an investment management contract with the Adviser
(the "Advisory Agreement") which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser, in conjunction with the
Sub-Adviser will: (a) furnish continuously an investment program for the Fund
and determine, subject to the overall supervision and review of the Trustees,
which investments should be purchased, held, sold or exchanged and (b) provide
supervision over all aspects of the Fund's operations except those which are
delegated to a custodian, transfer agent or other agent.
The Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser under
which the Sub-Adviser, subject to the review of the Trustees and the overall
supervision of the Adviser, is responsible for managing the investment
operations of the Fund and the composition of the Fund's portfolio and
furnishing the Fund with advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities.
20
<PAGE>
The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts
maintaining a committed line of credit and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund; the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
memberships; insurance premiums; and any extraordinary expenses.
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:
Net Asset Value Annual Rate
--------------- -----------
First $750,000,000 0.75%
Amount over $750,000,000 0.70%
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Adviser or their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Adviser or Sub-Adviser for the Fund or for
other funds or clients for which the Adviser or Sub-Adviser renders investment
advice arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds or
clients in a manner deemed equitable to all of them. To the extent that
transactions on behalf of more than one client of the Adviser, the Sub-Adviser
or their respective affiliates may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.
Pursuant to the Advisory Agreement and Sub-Advisory Agreement, the Adviser and
Sub-Adviser are not liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which their
respective Agreements relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser or Sub-Adviser in the
performance of their duties or from their reckless disregard of the obligations
and duties under the applicable Agreements.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
21
<PAGE>
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.
Under the Sub-Advisory Agreement, the Fund may use the name "Independence" or
any name derived from or similar to it only for so long as the Sub-Advisory
Agreement or any extension, renewal or amendment thereof remains in effect. If
the Sub-Advisory Agreement is no longer in effect, the Fund (to the extent that
it lawfully can) will cease to use such name or any other name indicating that
it is advised by or otherwise connected with the Sub-Adviser. In addition, the
Sub-Adviser or the Life Company may grant the nonexclusive right to use the name
"Independence" or any similar name to any other corporation or entity, including
but not limited to any investment company of which the Sub-Adviser or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.
The continuation of the Advisory Agreement was approved by all Trustees. The
Advisory Agreement and Sub-Advisory Agreement discussed below, will continue in
effect from year to year, provided that its continuance is approved annually
both by (i) by the holders of a majority of the outstanding voting securities of
the Trust or by the Trustees, and (ii) by a majority of the Trustees who are not
parties to the Agreement or "interested persons" of any such parties. Both
agreements may be terminated on 60 days written notice by any party or by a vote
of a majority of the outstanding voting securities of the Fund and will
terminate automatically if it is assigned. The Sub-Advisory Agreement terminates
automatically upon the termination of the Advisory Agreement.
As provided in the Sub-Advisory Agreement, the Adviser (not the Fund) pays the
Sub-Adviser a quarterly subadvisory fee at the annual rate of 55% of the
management fee paid by the Fund to the Adviser for the preceding three months.
Effective September 1, 1995, the Adviser voluntarily limited the Fund's total
expenses to 1.30% for Class A shares and 2.00% for Class B shares. Effective
March 1, 1997, the Adviser terminated this limitation. For the fiscal year ended
December 31, 1997, the Adviser received fees of $1,192,014. After expense
reductions by the Adviser, the Adviser's management fees for the fiscal year
ended December 31, 1997 was $1,161,340. For the fiscal years ended December 31,
1998 and 1999, the Adviser received fees of $2,732,174 and $6,706,432,
respectively.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal years ended December 31, 1997, 1998 and 1999,
the Fund paid the Adviser $28,710, $57,322 and $163,633 for services under this
Agreement.
Personnel of the Adviser, Sub-Adviser, and their affiliates may trade securities
for their personal accounts. The Fund also may hold, or may be buying or
selling, the same securities. To prevent the Fund from being disadvantaged, the
Adviser, Sub-Adviser and their affiliates and the Fund have adopted a code of
ethics which restricts the trading activity of those personnel.
22
<PAGE>
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. These Selling Brokers are authorized to
designate other intermediaries to receive purchase and redemption orders on
behalf of the Fund. John Hancock Funds accepts orders for the purchase of the
shares of the Fund which are continually offered at net asset value next
determined, plus any applicable sales charge, if any. In connection with the
sale of Funds shares, John Hancock Funds and Selling Brokers receive
compensation from a sales charge imposed, in the case of Class A shares, at the
time of sale. In the case of Class B or Class C shares, the broker receives
compensation immediately but John Hancock Funds is compensated on a deferred
basis.
Total underwriting commissions for sales of the Fund's Class A shares for the
fiscal years ended December 31, 1997, 1998 and 1999 were $842,977, $1,365,233
and $2,540,595, respectively. Of such amounts $134,403, $189,710 and $229,219,
respectively, retained by John Hancock Funds. The remainder of the underwriting
commissions were reallowed to dealers.
The Fund's Trustees adopted Distribution Plans with respect to each class of
shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% for Class A shares and 1.00% for Class B
and Class C shares of the Fund's average daily net assets attributable to shares
of that class. However, the service fees will not exceed 0.25% of the Fund's
average daily net assets attributable to each class of shares. The distribution
fees will be used to reimburse John Hancock Funds for its distribution expenses,
including but not limited to: (i) initial and ongoing sales compensation to
Selling Brokers and others (including affiliates of John Hancock Funds) engaged
in the sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of Fund shares; and (iii) with
respect to Class B and Class C shares only, interest expenses on unreimbursed
distribution expenses. The service fees will be used to compensate Selling
Brokers and others for providing personal and account maintenance services to
shareholders. In the event that John Hancock Funds is not fully reimbursed for
payments or expenses it incurs under the Class A Plan, these expenses will not
be carried beyond twelve months from the date they were incurred. Unreimbursed
expenses under the Class B and Class C Plans will be carried forward together
with interest on the balance of these unreimbursed expenses. The Fund does not
treat unreimbursed expenses under the Class B and Class C Plans as a liability
of the Fund because the Trustees may terminate the Class B and /or Class C Plans
at any time with no additional liability for these expenses to the shareholders
of the Fund. For the fiscal year ended December 31, 1999 an aggregate of
$1,156,954 of distribution expenses or 0.21% of the average net assets of the
Fund's Class B shares was not reimbursed or recovered by John Hancock Funds
through the receipt of deferred sales charges or Rule 12b-1 fees in prior
periods. For the fiscal year December 31, 1999, an aggregate of $37,861 of
distribution expenses or 0.20% of the average net assets of the Fund's Class C
shares was not reimbursed or recovered by John Hancock Funds through the receipt
of deferred sales charges or Rule 12b-1 fees in prior periods.
The Plans and all amendments were approved by the Trustees, including a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on these Plans.
23
<PAGE>
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plan and the purpose for
which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plans provide that they may be terminated without
penalty (a) by a vote of a majority of the Independent Trustees, (b) by a vote
of a majority of the Fund's outstanding shares of the applicable class in each
case upon 60 days' written notice to John Hancock Funds, and (c) automatically
in the event of assignment. The Plans further provide that they may not be
amended to increase the maximum amount of the fees for the services described
therein without the approval of a majority of the outstanding shares of the
class of the Fund which has voting rights with respect to the Plan. Each Plan
provides that no material amendment to the Plan will be effective unless it is
approved by a majority vote of the Trustees and the Independent Trustees of the
Fund. The holders of Class A, Class B and Class C shares have exclusive voting
rights with respect to the Plan applicable to their respective class of shares.
In adopting the Plans, the Trustees concluded that, in their judgment, there is
a reasonable likelihood that the Plans will benefit the holders of the
applicable class of shares of the Fund.
Amounts paid to the John Hancock Funds by any class of shares of the Fund will
not be used to pay the expenses incurred with respect to any other class of
shares of the Fund; provided, however, that expenses attributable to the Fund as
a whole will be allocated, to the extent permitted by law, according to the
formula based upon gross sales dollars and/or average daily net assets of each
such class, as may be approved from time to time by vote of a majority of the
Trustees. From time to time, the Fund may participate in joint distribution
activities with other Funds and the costs of those activities will be borne by
each Fund in proportion to the relative net asset value of the participating
Funds.
During the fiscal year ended December 31, 1999, the Funds paid John Hancock
Funds the following amounts of expenses in connection with their services for
the Fund.
<TABLE>
<CAPTION>
Expense Items
-------------
Printing and
Mailing of Expenses of Interest Carrying
Prospectus to Compensation to John Hancock or Other Finance
Advertising New Shareholders Selling Brokers Funds Charges
----------- ---------------- --------------- ----- -------
<S> <C> <C> <C> <C> <C>
Class A $ 240,993 $ 3,969 $ 225,777 $ 503,110 $ 0
Class B $ 1,200,539 $ 18,755 $ 1,764,778 $ 2,560,609 $ 62,955
Class C $ 51,867 $ 1,054 $ 24,682 $ 113,496 $ 0
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pays compensation to financial services firms that sell the Fund's shares. These
firms typically pass along a portion of this compensation to your financial
representative.
24
<PAGE>
The two primary sources of compensation payments are: (1) the 12b-1 fees that
are paid out of the Fund's assets and (2) sales charges paid by investors. The
sales charges and 12b-1 fees are detailed in the prospectus and under the
"Distribution Contracts" in this Statement of Additional Information. The
portions of these expenses that are reallowed to financial services firms are
shown on the next page.
Whenever you make an investment in the Fund, the financial services firm
receives a reallowance, as described below. The firm also receives the first
year's service fee at this time. 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 fund net assets. This fee is paid quarterly in
arrears by the Fund.
In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms which sell or
arrange for the sale of shares of the Fund. Such compensation provided by John
Hancock Funds may include, for example, financial assistance to financial
services firms in connection with their conferences or seminars, sales or
training programs for invited registered representatives and other employees,
payment for travel expenses, including lodging, incurred by registered
representatives and other employees for such seminars or training programs,
seminars for the public, advertising and sales campaigns regarding one or more
Funds, and/or other financial services firms-sponsored events or activities.
From time to time, John Hancock Funds may make expense reimbursements for
special training of a financial services firm's registered representatives and
other employees in group meetings or to help pay the expenses of sales contests.
Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.
25
<PAGE>
First year
Sales charge Maximum service fee Maximum
paid by investors reallowance (% of net total compensation (1)
Class A investments (% of offering price) (% of offering price) investment) (3) (% 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
Class A shares of
$1 million or more (4)
- ----------------------
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50% (2)
Next $1 or more above that -- 0.00% 0.25% 0.25% (2)
Retirement investments of
Class A shares of
$1 million or more*
- -------------------
First $1M - $24,999,999 -- 0.75% 0.25% 1.00%
Next $25M -$49,999,999 -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
First year
Maximum service fee Maximum total
reallowance (% of net compensation (1)
Class B investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
All amounts -- 3.75% 0.25% 4.00%
First year
Maximum service fee Maximum total
reallowance (% of net compensation (1)
Class C investments (% of offering price) investment) (3) (% of offering price)
- ------------------- --------------------- --------------- ---------------------
Amounts purchased
at NAV -- 0.75% 0.25% 1.00%
All other amounts 1.00% 1.75% 0.25% 2.00%
</TABLE>
(1) Reallowance percentages and service fee percentages are calculated from
different amounts, and therefore may not equal total compensation
percentages if combined using simple addition.
(2) For Group Investment Programs sales, the maximum total compensation for
investments of $1 million or more is 1.00% of the offering price (one year
CDSC of 1.00% applies for each sale).
26
<PAGE>
(3) After first year subsequent service fees are paid quarterly in arrears.
(4) Includes new investments aggregated with investments since the last annual
reset. John Hancock Funds may take recent redemptions into account in
determining if an investment qualifies as a new investment.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
*Retirement investments only. These include traditional, Roth and Education
IRAs, SIMPLE IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money
Purchase Pension Plan, profit-sharing plan and other retirement plans as
described in the Internal Revenue Code.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after the closing of a foreign market, assets are valued by a
method that the Trustees believe accurately reflects fair value.
The NAV of each Fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing the a class's net assets by the number of it shares
outstanding. On any day an international market is closed and the New York Stock
Exchange is open, any foreign securities will be valued at the prior day's close
with the current day's exchange rate. Trading of foreign securities may take
place on Saturdays and U.S. business holidays on which the Fund's NAV is not
calculated. Consequently, the Fund's portfolio securities may trade and the NAV
of the Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
27
<PAGE>
INITIAL SALES CHARGE ON CLASS A AND CLASS C SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then only
be issued for full shares. The Trustees reserve the right to change or waive a
Fund's minimum investment requirements and to reject any order to purchase
shares (including purchase by exchange) when in the judgment of the Adviser such
rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A and Class C shares of the
Fund are described in the Prospectus. Methods of obtaining reduced sales charges
referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A shares
of the Fund, the investor is entitled to cumulate current purchases with the
greater of the current value (at offering price) of the Class A shares of the
Fund, or if John Hancock Signature Services, Inc. ("Signature Services") is
notified by the investor's dealer or the investor at the time of the purchase,
the cost of the Class A shares owned.
Without Sales Charge. Class A shares may be offered without a front-end sales
charge or contingent deferred sales charges ("CDSC") to various individuals and
institutions as follows:
o A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandparents, grandchildren, mother, father, sister,
brother, mother-in-law, father-in-law, daughter-in-law, son-in-law,
niece, nephew and same sex domestic partner) of any of the foregoing;
or any fund, pension, profit sharing or other benefit plan for the
individuals described above.
o A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into a signed agreement with John
Hancock Funds providing specifically for the use of fund shares in
fee-based investment products or services made available to their
clients.
o A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to the Fund.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Retirement plans participating in Merrill Lynch servicing programs,
if the Plan has more than $3 million in assets or 500 eligible
employees at the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.
28
<PAGE>
o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approved by
the Securities and Exchange Commission.
o Existing full service clients of the Life Company who were group
annuity contract holders as of September 1, 1994, and participant
directed retirement plans with at least 100 eligible employees at the
inception of the Fund account. Each of these investors may purchase
Class A shares with no initial sales charge. However, for each Fund, if
the shares are redeemed within 12 months after the end of the calendar
year in which the purchase was made, a CDSC will be imposed at the
following rate:
Amount Invested CDSC RATE
--------------- ---------
$1 to $4,999,000 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Class C shares may be offered without a front-end sales charge to:
o Retirement plans for which John Hancock Signature Services
performs employer sponsored plan recordkeeping services. (These
types of plans include 401(k), money purchase pension, profit
sharing and SIMPLE 401k.)
o An investor who buys through a Merrill Lynch omnibus account.
However, a CDSC may apply if the shares are sold within 12 months
of purchase.
Class A and Class C shares may also be purchased without an initial sales charge
in connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Combination Privilege. In calculating the sales charge applicable to purchases
of Class A shares made at one time, the purchases will be combined to reduce
sales charges if made by (a) an individual, his or her spouse and their children
under the age of 21, purchasing securities for his or their own account, (b) a
trustee or other fiduciary purchasing for a single trust, estate or fiduciary
account and (c) groups which qualify for the Group Investment Program (see
below). A company's (not an individual's) qualified and non-qualified retirement
plan investments can be combined to take advantage of this privilege. Further
information about combined purchases, including certain restrictions on combined
group purchases, is available from Signature Services or a Selling Broker's
representative.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount being invested but also
the investor's purchase price or current value of the Class A shares of all John
Hancock funds which carry a sales charge already held by such person. Class A
shares of John Hancock money market funds will only be eligible for the
accumulation privilege if the investor has previously paid a sales charge on the
amount of those shares. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize. A company's (not an individual's)
qualified and non-qualified retirement plan investments can be combined to take
advantage of this privilege.
Group Investment Program. Under the Combination and Accumulation Privileges, all
members of a group may combine their individual purchases of Class A shares to
potentially qualify for breakpoints in the sales charge schedule. This feature
is provided to any group which (1) has been in existence for more than six
months, (2) has a legitimate purpose other than the purchase of mutual fund
shares at a discount for its members, (3) utilizes salary deduction or similar
group methods of payment, and (4) agrees to allow sales materials of the fund in
its mailings to members at a reduced or no cost to John Hancock Funds.
29
<PAGE>
Letter of Intention. Reduced sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using the Fund as a funding medium for a
retirement plan, however, may opt to make the necessary investments called for
by the LOI over a forty-eight (48) month period. These retirement plans include
traditional, Roth and Education IRAs, SEP, SARSEP, 401(k), 403(b) (including
TSAs), SIMPLE IRA, SIMPLE (401(k), Money purchase pension, Profit Sharing and
Section 457 plans. An individual's non-qualified and qualified retirement plan
investments cannot be combined to satisfy an LOI of 48 months. Such an
investment (including accumulations and combinations but not including
reinvested dividends) must aggregate $50,000 or more during the specified period
from the date of the LOI or from a date within ninety (90) days prior thereto,
upon written request to Signature Services. The sales charge applicable to all
amounts invested under the LOI is computed as if the aggregate amount intended
to be invested had been invested immediately. If such aggregate amount is not
actually invested, the difference in the sales charge actually paid and the
sales charge payable had the LOI not been in effect is due from the investor.
However, for the purchases actually made within the specified period (either 13
or 48 months) the sales charge applicable will not be higher than that which
would have applied (including accumulations and combinations) had the LOI been
for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrow shares will be released. If the total investment specified in the LOI
is not completed, the Class A shares held in escrow may be redeemed and the
proceeds used as required to pay such sales charge as may be due. By signing the
LOI, the investor authorizes Signature Services to act as his attorney-in-fact
to redeem any escrowed Class A shares and adjust the sales charge, if necessary.
A LOI does not constitute a binding commitment by an investor to purchase, or by
the Fund to sell, any additional Class A shares and may be terminated at any
time.
DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B and Class C shares which are redeemed
within six years or one year of purchase, respectively will be subject to a CDSC
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
or Class C shares being redeemed. No CDSC will be imposed on increases in
account value above the initial purchase price or on shares derived from
reinvestment of dividends or capital gains distributions.
30
<PAGE>
Class B shares are not available to full-service retirement plans administered
by Signature Services or the Life Company that had more than 100 eligible
employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of both Class B and Class C
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period for Class B or one year CDSC
redemption period for Class C or those you acquired through dividend and capital
gain reinvestment, and next from the shares you have held the longest during the
six-year period for Class B shares. For this purpose, the amount of any increase
in a share's value above its initial purchase price is not subject to a CDSC.
Thus, when a share that has appreciated in value is redeemed during the CDSC
period, a CDSC is assessed only on its initial purchase price.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 Class B shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
oProceeds of 50 shares redeemed at $12 per shares (50 x 12) $600.00
o*Minus Appreciation ($12 - $10) x 100 shares (200.00)
o Minus proceeds of 10 shares not subject to
CDSC (dividend reinvestment) (120.00)
-------
oAmount subject to CDSC $280.00
*The appreciation is based on all 100 shares in the account not just
the shares being redeemed.
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Brokers for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C shares without a sales charge being deducted at
the time of the purchase.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class C shares and of Class A shares that are subject
to a CDSC, unless indicated otherwise, in the circumstances defined below:
For all account types:
31
<PAGE>
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability. (Does not apply to trust
accounts unless trust is being dissolved.)
* Redemptions made under the Reinstatement Privilege, as described
in "Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B (but not Class C) shares made under a periodic
withdrawal plan or redemptions for fees charged by planners or advisors
for advisory services, as long as your annual redemptions do not exceed
12% of your account value, including reinvested dividends, at the time
you established your periodic withdrawal plan and 12% of the value of
subsequent investments (less redemptions) in that account at the time
you notify Signature Services. (Please note that this waiver does not
apply to periodic withdrawal plan redemptions of Class A or Class C
shares that are subject to a CDSC).
* Redemptions by Retirement plans participating in Merrill Lynch
servicing programs, if the Plan has less than $3 million in assets or
500 eligible employees at the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
* Redemptions of Class A shares by retirement plans that invested through
the PruArray Program sponsored by Prudential Securities.
* Redemptions of Class A shares made after one year from the inception
date of a retirement plan at John Hancock for which John Hancock is
recordkeeper.
For Retirement Accounts (such as traditional, Roth and Education IRAs, SIMPLE
IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money Purchase
Pension Plan, Profit-Sharing Plan and other plans as described in the Internal
Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under sections
401(a) (such as Money Purchase Pension Plans and Profit-Sharing/401(k)
Plans), 457 and 408 (SEPs and SIMPLE IRAs) of the Internal Revenue
Code.
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA accounts that purchased shares
prior to May 15, 1995.
Please see matrix for some examples.
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Non-retirement
Distribution (401 (k), MPP, Rollover
PSP) 457 & 408
(SEPs & Simple
IRAs)
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Death or Disability Waived Waived Waived Waived Waived
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions in periodic
or 12% of payments
account value
annually in
periodic
payments.
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments.
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Under 59 1/2 Waived for Waived for Waived for Waived for 12% of account
(Class B only) annuity annuity annuity annuity value annually
payments (72t) payments (72t) payments (72t) payments (72t) in periodic
or 12% of or 12% of or 12% of or 12% of payments
account value account value account value account value
annually in annually in annually in annually in
periodic periodic periodic periodic
payments. payments. payments. payments.
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Loans Waived Waived N/A N/A N/A
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Hardships Waived Waived Waived N/A N/A
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Qualified Domestic Waived Waived Waived N/A N/A
Relations Orders
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Termination of Waived Waived Waived N/A N/A
Employment Before
Normal Retirement Age
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Return of Excess Waived Waived Waived Waived N/A
- ----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
</TABLE>
33
<PAGE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act. Under
that rule, the Fund must redeem its shares for cash except to the extent that
the redemption payments to any shareholder during any 90-day period would exceed
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a Fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock 500 Index Fund and John Hancock
Intermediate Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994 for
Class B shares of any other John Hancock fund, the acquired shares will continue
to be subject to the CDSC schedule that was in effect when the exchanged shares
were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of the Fund shares. Since the redemption price of the Fund shares may
be more or less than the shareholder's cost, depending upon the market value of
the securities owned by the Fund at the time of redemption, the distribution of
cash pursuant to this plan may result in realization of gain or loss for
purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional shares of
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<PAGE>
the Fund could be disadvantageous to a shareholder because of the initial sales
charge payable on such purchases of Class A shares and the CDSC imposed on
redemptions of Class B and Class C shares and because redemptions are taxable
events. Therefore, a shareholder should not purchase shares at the same time
that a Systematic Withdrawal Plan is in effect. The Fund reserves the right to
modify or discontinue the Systematic Withdrawal Plan of any shareholder on 30
days' prior written notice to such shareholder, or to discontinue the
availability of such plan in the future. The shareholder may terminate the plan
at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). The program is explained in the
Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the nonpayment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the due date of any investment.
Reinstatement or Reinvestment Privilege. If Signature Services is notified prior
to reinvestment, a shareholder who has redeemed Fund shares may, within 120 days
after the date of redemption, reinvest without payment of a sales charge any
part of the redemption proceeds in shares of the same class of the Fund or
another John Hancock fund, subject to the minimum investment limit of that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the Fund or in
Class A shares of any John Hancock fund. If a CDSC was paid upon a redemption, a
shareholder may reinvest the proceeds from this redemption at net asset value in
additional shares of the class from which the redemption was made. The
shareholder's account will be credited with the amount of any CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege 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. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS."
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Retirement plans participating in Merrill Lynch's servicing programs:
Class A shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain broker-dealers.
Brokers may charge for their services or place limitations on the extent to
which you may use the services of the Fund. The Fund will be deemed to have
received a purchase or redemption order when an authorized broker, or if
applicable, a broker's authorized designee, receives the order. If a broker is
an agent or designee of the Fund, orders are processed at the NAV next
calculated after the broker receives the order. The broker must segregate any
orders it receives after the close of regular trading on the New York Stock
Exchange and transmit those orders to the Fund for execution at NAV next
determined. Some brokers that maintain nominee accounts with the Fund for their
clients charge an annual fee on the average net assets held in such accounts for
accounting, servicing, and distribution services they provide with respect to
the underlying Fund shares. The Adviser, the Fund, and John Hancock Funds, Inc.
(the Fund's principal distributor), share in the expense of these fees.
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series and classes
without further action by shareholders. As of the date of this Statement of
Additional Information, the Trustees have authorized shares of the Fund.
Additional series may be added in the future. The Trustees have also authorized
the issuance of three classes of shares of the Fund, designated as Class A,
Class B and Class C.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each Class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class will be borne exclusively
by that class, (ii) Class B and Class C shares will pay higher distribution and
service fees than Class A shares and (iii) each class of shares will bear any
class expenses properly allocable to that class of shares, subject to the
conditions the Internal Revenue Service imposes with respect to the
multiple-class structures. Similarly, the net asset value per share may vary
depending on which class of shares are purchased. No interest will be paid on
uncashed dividend or redemption checks.
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In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no fund included in this Fund's prospectus shall be liable
for the liabilities of any other John Hancock fund. Liability is therefore
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
loss 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.
Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
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TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions and the diversification of its assets, the Fund
will not be subject to Federal income tax on its taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
this tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than those gains and losses included in
computing net capital gain, after reduction by deductible expenses.). Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. The tax treatment
described above will apply without regard to whether distributions are received
in cash or reinvested in additional shares of the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
If the Fund invests in stock (including an option to acquire stock such as is
inherent in a convertible bond) of certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. An election may be available to ameliorate these
adverse tax consequences, but could require the Fund to recognize taxable income
or gain without the concurrent receipt of cash. These investments could also
result in the treatment of associated capital gains as ordinary income. The Fund
may limit and/or manage its holdings in passive foreign investment companies to
minimize its tax liability or maximize its return from these investments.
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The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Some tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. The Fund does not expect to qualify to pass such taxes
through to its shareholders, who consequently will not take such taxes into
account on their own tax returns. However, the Fund will deduct such taxes in
determining the amount it has available for distribution to shareholders.
The amount of the Fund's net realized capital gains, if any, in any given year
will vary depending upon the Adviser's current investment strategy and whether
the Adviser believes it to be in the best interest of the Fund to dispose of
portfolio securities and /or engage in options, futures or forward transactions
will generate capital gains. At the time of an investor's purchase of shares of
the Fund, a portion of the purchase price is often attributed to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions (or portions thereof) in
reality represent a return of a portion of the purchase price.
Upon a redemption or other disposition of shares (including by exercise of the
exchange privilege) in a transaction that is treated as a sale for tax purposes,
a shareholder will ordinarily realize a taxable gain or loss depending upon the
amount of the proceeds and the investor's basis in his shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's tax holding period for the shares and subject to the special rules
described below. A sales charge paid in purchasing shares of the Fund cannot be
taken into account for purposes of determining gain or loss on the redemption or
exchange of such shares within 90 days after their purchase to the extent shares
of the Fund or another John Hancock fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
This disregarded charge will result in an increase in the shareholder's tax
basis in the shares subsequently acquired. Also, any loss realized on a
redemption or exchange may be disallowed to the extent the shares disposed of
are replaced with other shares of the Fund within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to an election to reinvest dividends in additional shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares. Shareholders should consult their own tax advisers
regarding their particular circumstances to determine whether a disposition of
Fund shares is properly treated as a sale for tax purposes, as is assumed in the
foregoing discussion.
Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net long-term capital gains realized in any
year to the extent that a capital loss is carried forward from prior years
against such gain. To the extent such excess was retained and not exhausted by
the carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his tax return for his taxable year in which the last day
of the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or to a refund of, his pro rata share of the taxes paid by the Fund,
and (c) be entitled to increase the adjusted tax basis for his shares in the
Fund by the difference between his pro rata share of such excess and his pro
rata share of such taxes.
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For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in Federal income tax liability
to the Fund and, as noted above, would not be distributed as such to
shareholders. Presently, there are no realized capital loss carryforwards
available to offset future net realized capital gains.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) during a prescribed period extending before and after each
dividend and distributed and properly designated by the Fund may be treated as
qualifying dividends. Corporate shareholders must meet the holding period
requirements stated above with respect to their shares of the Fund for each
dividend in order to qualify for the deduction and, if they have any debt that
is deemed under the Code directly attributable to Fund shares, may be denied a
portion of the dividends received deduction. The entire qualifying dividend,
including the otherwise-deductible amount, will be included in determining the
excess (if any) of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its alternative minimum
tax liability. Additionally, any corporate shareholder should consult its tax
adviser regarding the possibility that its basis in its shares may be reduced,
for Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares and, to the extent such basis would be reduced below
zero, that current recognition of income would be required.
The Fund is required to accrue income on any debt securities that have more than
a de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payment. The mark to
market or constructive sale rules applicable to certain options, futures,
forwards, short sales or other transactions and forward contracts may also
require the Fund to recognize income or gain without a concurrent receipt of
cash. Additionally, some countries restrict repatriation which may make it
difficult or impossible for the Fund to obtain cash corresponding to its
earnings or assets in those countries. However, the Fund must distribute to
shareholders for each taxable year substantially all of its net income and net
capital gains, including such income or gain, to qualify as a regulated
investment company and avoid liability for any federal income or excise tax.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy these distribution requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
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The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. A Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into options and futures, foreign
currency positions and foreign currency forward contracts.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain types of
investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions and ownership of or gains
realized on the redemption (including an exchange) of shares of the Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to non- resident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8, Form W-8BEN or authorized
withholding certificate is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any
Massachusetts income tax.
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CALCULATION OF PERFORMANCE
As of December 31, 1999, the average annual total return for Class A shares of
the Fund for the 1 year and 5 year periods since commencement of operations on
June 10, 1991 were 6.74%, 24.21% and 17.50%.
As of December 31, 1999, the average annual total return for Class B shares of
the Fund for the 1 year period and since commencement of operations on September
7, 1995 were 6.59% and 22.07%, respectively.
As of December 31, 1999, the average annual total return for Class C shares of
the Fund for 1 year period since commencement of operations on May 1, 1998 were
10.59% and 12.74%, respectively.
Total return is computed by finding the average annual compounded rate of return
over the one-year, five year and life-of-fund periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
n ______
T = \ / ERV/P - 1
Where:
P= a hypothetical initial investment of $1,000.
T= average annual total return.
n= number of years.
ERV= ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1 year, 5 year and life-of-fund periods.
Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, this calculation
assumes the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period, respectively. This calculation assumes
that all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
or the CDSC on Class B or Class C shares into account. Excluding the Fund's
sales charge on Class A shares and the CDSC on Class B or Class C shares from a
total return calculation produces a higher total return figure.
The Fund may advertise yield, where appropriate. The Fund's yield is computed by
dividing net investment income per share determined for a 30-day period by the
maximum offering price per share (which includes the full sales charge, if
applicable) on the last day of the period, according to the following standard
formula:
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6
Yield = 2 ( [ ( a - b ) + 1 ] - 1 )
-------
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during the period
that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the period (NAV
where applicable).
From time to time, in reports and promotional literature, the Fund's total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S may
also be utilized. The Fund's promotional and sales literature may make reference
to the Fund's "beta". Beta is a reflection of the market related risk of the
Fund by showing how responsive the Fund is to the market.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Sub-Adviser, or the Adviser
pursuant to recommendations made by an investment committee, which consists of
officers and directors of the Adviser and officers and Trustees of the Trust who
are interested persons of the Fund. Orders for purchases and sales of securities
are placed in a manner, which, in the opinion of the officers of the Fund, will
offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
maker reflect a "spread." Debt securities are generally traded on a net basis
through dealers acting for their own account as principals and not as brokers;
no brokerage commissions are payable on such transactions.
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In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
The policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and such other policies as the Trustees may determine, the Adviser and
Sub-Adviser may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and, to a
lesser extent, statistical assistance furnished to the Adviser and Sub-Adviser
of the Fund. It is not possible to place a dollar value on information and
services to be received from brokers and dealers, since it is only supplementary
to the research efforts of the Adviser and Sub-Adviser. The receipt of research
information is not expected to reduce significantly the expenses of the Adviser
and Sub-Adviser. The research information and statistical assistance furnished
by brokers and dealers may benefit the Life Company or other advisory clients of
the Adviser, and, conversely, brokerage commissions and spreads paid by other
advisory clients of the Adviser may result in research information and
statistical assistance beneficial to the Fund. Similarly, research information
and assistance provided to the Sub-Adviser by brokers and dealers may benefit
other advisory clients or affiliates of the Sub-Adviser, and, conversely,
brokerage commissions and spreads paid by other advisory clients of the
Sub-Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitment to allocate portfolio
transactions upon any prescribed basis. While the Adviser, in conjunction with
the Sub-Adviser, will be primarily responsible for the allocation of the Fund's
brokerage business, the policies and practices of the Adviser in this regard
must be consistent with the foregoing and will at all times be subject to review
by the Trustees. For the years ended December 31, 1997, 1998 and 1999, the Fund
paid negotiated brokerage commission in the amount of $222,400, $447,997 and
$1,685,370, respectively.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended December 31,
1999, the Fund directed no commissions to compensate brokers for research
services such as industry and company reviews and evaluations of the securities.
44
<PAGE>
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of shareholder Signator Investors, Inc., a broker-dealer (until
January 1, 1999, the John Hancock Distributors, Inc.) ("Signator" or "Affiliated
Broker"). Pursuant to procedures determined by the Trustees and consistent with
the above policy of obtaining best net results the Fund may execute portfolio
transaction with or through Affiliated Broker. During the year ended December
31, 1997, 1998 and 1999, the Fund did not execute any portfolio transactions
with Affiliated Broker.
Signator may act as broker for the Fund on exchange transactions, subject,
however, to the general policy of the Fund set forth above and the procedures
adopted by the Trustees pursuant to the Investment Company Act. Commissions paid
to an Affiliated Broker must be at least as favorable as those which the
Trustees believe to be contemporaneously charged by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold. A transaction would not be placed with an Affiliated Broker if the Fund
would have to pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers except for accounts for which the Affiliated Broker
acts as clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to the Fund as determined by a majority of the
Trustees who are not interested persons (as defined in the Investment Company
Act) of the Fund, the Adviser, the Sub-Adviser or the Affiliated Broker. Because
the Adviser, which is affiliated with the Affiliated Broker, and the Sub-Adviser
have, as investment advisers to the Fund, the obligation to provide investment
management services, which includes elements of research and related investment
skills, such research and related skills will not be used by the Affiliated
Broker as a basis for negotiating commissions at a rate higher than that
determined in accordance with the above criteria.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.
For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, duration benchmarks and credit and sector exposure. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate securities to be
sold or purchased for the Fund with those to be sold or purchased for other
clients managed by it in order to obtain best execution.
45
<PAGE>
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
Massachusetts 02217-1000, a wholly-owned indirect subsidiary of the Life
Company, is the transfer and dividend paying agent for the Fund. The Fund pays
Signature Services an annual fee of $19.00 for each Class A shareholder account
and $21.50 for each Class B shareholder account and $20.50 for each Class C
shareholder account. The Fund also pays certain out-of-pocket expenses. These
expenses are aggregated and charged to the Fund allocated to each class on the
basis of their relative net asset value.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 200 Clarendon Street,
Boston, Massachusetts 02116. Under the custodian agreement, Investors Bank &
Trust Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent accountants of the Fund are PricewaterhouseCoopers LLP located
at 160 Federal Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP
audits and renders an opinion on the Fund's annual financial statements and
reviews the Fund's annual Federal income tax return.
46
<PAGE>
APPENDIX-A
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's principal securities and
investment practices. You may find the most concise description of the fund's
risk profile in the prospectus.
A fund is permitted to utilize -- within limits established by the trustees --
certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that the fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them, with examples of related securities and
investment practices included in brackets. See the "Investment Objectives and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The fund
follows certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the fund will earn income or
show a positive total return over any period of time -- days, months or years.
TYPES OF INVESTMENT RISK
Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). (e.g. short sales, financial
futures and options; securities and index options, currency contracts).
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. (e.g. Borrowing; reverse repurchase agreements, repurchase
agreements, securities lending, non-investment-grade debt securities, financial
futures and options; securities and index options).
Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. (e.g. Foreign
securities, financial futures and options; securities and index options,
currency contracts).
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. (e.g. non-investment-grade debt securities, foreign
securities).
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. (e.g.
Non investment-grade debt securities, financial futures and options; securities
and index options).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.
Borrowing; reverse repurchase agreements, short-sales, when-issued securities
and forward commitments; financial futures and options; securities and index
options, currency contracts).
A-1
<PAGE>
o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
o Speculative To the extent that a derivative is not used as a hedge, the fund
is directly exposed to the risks of that derivative. Gains or losses from
speculative positions in a derivative may be substantially greater than the
derivative's original cost.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. (e.g. short sales,
non-investment-grade debt securities; restricted and illiquid securities,
financial futures and options; securities and index options, currency
contracts).
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. (e.g. Short sales, short-term trading,
when-issued securities and forward commitments, non-investment-grade securities,
foreign securities, financial futures and options; securities and index options,
restricted and illiquid securities).
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events. (e.g. Foreign securities).
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. (e.g. Short sales, when -issued securities and forward commitments,
financial futures and options; securities and index options, currency
contracts).
Political risk The risk of losses directly attributable to government or
political actions of any sort. (e.g. Foreign securities)
Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, 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. (e.g. Non-investment-grade debt
securities, restricted and illiquid securities).
A-2
<PAGE>
APPENDIX B - Description of Bond Ratings
RATINGS
Bonds.
Standard & Poor's Bond Ratings
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
To provide more detailed indications of credit quality, the ratings AA to BBB
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
A provisional rating, indicated by "p" following a rating, is sometimes used by
Standard & Poor's. It assumes the successful completion of the project being
financed by the issuance of the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion.
Moody's Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Generally speaking, the safety of
obligations of this class is so absolute that with the occasional exception of
oversupply in a few specific instances, characteristically, their market value
is affected solely by money market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. The market
value of Aa bonds is virtually immune to all but money market influences, with
the occasional exception of oversupply in a few specific instances.
B-1
<PAGE>
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical modifier
1 indicates that the security ranks at the high end, 2 in the mid-range, and 3
nearer the low end, of the generic category. These modifiers of rating symbols
Aa, A and Baa are to give investors a more precise indication of relative debt
quality in each of the historically defined categories.
Conditional ratings, indicated by "Con", are sometimes given when the security
for the bond depends upon the completion of some act or the fulfillment of some
condition. Such bonds, are given a conditional rating that denotes their
probably credit statute upon completion of that act or fulfillment of that
condition.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical modifier
1 indicates that the security ranks at the high end, 2 in the mid-range, and 3
nearer the low end, of the generic category. These modifiers are to give
investors a more precise indication of relative debt quality in each of the
historically defined categories.
B-2
<PAGE>
FINANCIAL STATEMENTS
The financial statements listed below are included in the Fund's 1999 Annual
Report to Shareholders for the year ended December 31, 1999; (filed
electronically on February 28, 2000, accession number 0000928816-00-000112) and
are included in and incorporated by reference into Part B of the Registration
Statement for John Hancock Core Equity Fund (file nos. 811-1677 and 2-29502).
Statement of Assets and Liabilities as of December 31, 1999.
Statement of Operations for the year ended of December 31, 1999.
Statement of Changes in Net Asset for the period ended
December 31, 1999.
Financial Highlights for the period ended December 31, 1999.
Schedule of Investments as of December 31, 1999.
Notes to Financial Statements.
Report of Independent Auditors.
s:\n1a\sai\indeqty\98may1.doc
F-1
<PAGE>
JOHN HANCOCK CAPITAL SERIES
PART C.
OTHER INFORMATION
Item. 23. Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is directly or indirectly controlled by or under common control with
Registrant.
Item. 25. Indemnification.
Indemnification provisions relating to the Registrant's Trustees, officers,
employees and agents is set forth in Article VII of the Registrant's By Laws
included as Exhibit 2 herein.
Under Section 12 of the Distribution Agreement, John Hancock Funds, Inc. ("John
Hancock Funds") has agreed to indemnify the Registrant and its Trustees,
officers and controlling persons against claims arising out of certain acts and
statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Mutual Life Insurance Company ("the
Insurance Company") provides, in effect, that the Insurance Company will,
subject to limitations of law, indemnify each present and former director,
officer and employee of the Insurance Company who serves as a Trustee or officer
of the Registrant at the direction or request of the Insurance Company against
litigation expenses and liabilities incurred while acting as such, except that
such indemnification does not cover any expense or liability incurred or imposed
in connection with any matter as to which such person shall be finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Insurance Company. In addition, no such
person will be indemnified by the Insurance Company in respect of any final
adjudication unless such settlement shall have been approved as in the best
interests of the Insurance Company either by vote of the Board of Directors at a
meeting composed of directors who have no interest in the outcome of such vote,
or by vote of the policyholders. The Insurance Company may pay expenses incurred
in defending an action or claim in advance of its final disposition, but only
upon receipt of an undertaking by the person indemnified to repay such payment
if he should be determined not to be entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. ("the Adviser") provide as follows:
"Section 9.01. Indemnity. Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a director, officer, employee or agent of the
Corporation or is or was at any time since the inception of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and the liability was not incurred by reason of gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and expenses in connection therewith may be advanced by the Corporation,
all to the full extent authorized by the law."
<PAGE>
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust and By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Advisers.
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Form ADV (801-8124) filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
Item 27. Principal Underwriters.
(a) John Hancock Funds acts as principal underwriter for the Registrant and also
serves as principal underwriter or distributor of shares for John Hancock Cash
Reserve, Inc., John Hancock Bond Trust, John Hancock Current Interest, John
Hancock Series Trust, John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Bond Fund, John
Hancock Tax-Exempt Series, John Hancock Strategic Series, John Hancock World
Fund, John Hancock Investment Trust, John Hancock Institutional Series Trust,
John Hancock Special Equities Fund, John Hancock Investment Trust II and John
Hancock Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Stephen L. Brown Director and Chairman Trustee and Chairman
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Maureen R. Ford Director, Vice Chairman and Trustee, Vice Chairman and
101 Huntington Avenue Chief Executive Officer Chief Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
Osbert M. Hood Executive Vice President, Chief Executive Vice President
101 Huntington Avenue Financial Officer and Treasurer and Chief Financial Officer
Boston, Massachusetts
David A. King Director None
380 Stuart Street
Boston, Massachusetts
Richard O. Hansen Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-3
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Susan S. Newton Vice President Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-4
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
James V. Bowhers President None
101 Huntington Avenue
Boston, Massachusetts
Kathleen M. Graveline Senior Vice President None
P.O. Box 111
Boston, Massachusetts
Keith F. Hartstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Peter Mawn Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
J. William Bennintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
Renee Humphrey Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address With Underwriter with Registrant
---------------- ---------------- ---------------
Karen F. Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
(c) None.
Item 28. Location of Accounts and Records.
The Registrant maintains the records required to be maintained by it
under Rules 31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at 101
Huntington Avenue, Boston Massachusetts 02199-7603. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant to
Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to 485(b)
under the Securities Act of 1933 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Boston, and The Commonwealth of Massachusetts on the 27th day of April,
2000.
JOHN HANCOCK CAPITAL SERIES
By: * /s/Stephen L. Brown
--------------------------
Stephen L. Brown
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman and Chief Executive April 27, 2000
- ------------------------- Officer (Principal Executive
Stephen L. Brown Officer)
*
- ------------------------- Trustee, Vice Chairman and
Maureen R. Ford Chief Executive Officer
*
- ------------------------- Executive Vice President and
Osbert M. Hood Chief Financial Officer
/s/James J. Stokowski Vice President, Treasurer
- --------------------- (Principal Accounting Officer)
James J. Stokowski
_________*_________ Trustee
Dennis S. Aronowitz
_________*_____________ Trustee
Richard P. Chapman, Jr.
_________*_________ Trustee
William J. Cosgrove
_________*______ Trustee
Leland O. Erdahl
C-7
<PAGE>
_______*_________ Trustee
Richard A. Farrell
_______*______ Trustee
Gail D. Fosler
________*_______________ Trustee
William F. Glavin
________*________________ Trustee
John A. Moore
________*________________ Trustee
Patti McGill Peterson
_________*_______________ Trustee
Richard S. Scipione
By: /s/Susan S. Newton April 27, 2000
------------------
Susan S. Newton,
Attorney-in-Fact, under
Powers of Attorney
January 1, 1999,
March 17, 1999 and December 7, 1999
filed herewith.
<PAGE>
John Hancock Capital Series John Hancock Sovereign Bond Fund
John Hancock Declaration Trust John Hancock Special Equities Fund
John Hancock Income Securities Trust John Hancock Strategic Series
John Hancock Investment Trust II John Hancock Tax-Exempt Series Fund
John Hancock Investment Trust III John Hancock World Fund
John Hancock Investors Trust
POWER OF ATTORNEY
-----------------
The undersigned Trustee/Officer of each of the above listed Trusts,
each a Massachusetts business trust, does hereby severally constitute and
appoint Susan S. Newton and James J. STOKOWSKI, and each acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
acting singly, to sign for me, in my name and in the capacity indicated below,
any Registration Statement on Form N-1A and any Registration Statement on Form
N-14 to be filed by the Trust under the Investment Company Act of 1940, as
amended (the "1940 Act"), and under the Securities Act of 1933, as amended (the
"1933 Act"), and any and all amendments to said Registration Statements, with
respect to the offering of shares and any and all other documents and papers
relating thereto, and generally to do all such things in my name and on my
behalf in the capacity indicated to enable the Trust to comply with the 1940 Act
and the 1933 Act, and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any such Registration Statements and any and
all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 7th day of December, 1999.
/s/Stephen L. Brown /s/William F. Glavin
- ------------------- --------------------
Stephen L. Brown, as Trustee and Chairman William F. Glavin
/s/Maureen R. Ford /s/Anne C. Hodsdon
- ------------------ ------------------
Maureen R. Ford, as Trustee, Anne C. Hodsdon, as Trustee and President
Vice Chairman, Chief Executive Officer
/s/Dennis S. Aronowitz /s/Osbert M. Hood
- ---------------------- -----------------
Dennis S. Aronowitz Osbert M. Hood, as Chief Financial Officer
/s/Richrd P. Chapman /s/John A. Moore
- -------------------- ----------------
Richard P. Chapman, Jr. John A. Moore
/s/William J. Cosgrove /s/Patti McGill Peterson
- ---------------------- ------------------------
William J. Cosgrove Patti McGill Peterson
/s/Leland O. Erdahl /s/John W. Pratt
- ------------------- ----------------
Leland O. Erdahl John W. Pratt
/s/Richard A. Farrell /s/Richard S. Scipione
- --------------------- ----------------------
Richard A. Farrell Richard S. Scipione
/s/Gail D. Fosler
- -----------------
Gail D. Fosler
<PAGE>
The Declaration of Trust, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his/her duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Dennis S. Aronowitz, Stephen
L. Brown, Richard P. Chapman, Jr., William J. Cosgrove, Leland O. Erdahl,
Richard A. Farrell, Maureen L. Ford, Gail D. Fosler, William F. Glavin, Anne C.
Hodsdon, Osbert M. Hood, John A. Moore, Patti McGill Peterson, John W. Pratt,
and Richard S. Scipione, who acknowledged the foregoing instrument to be his or
her free act and deed, before me, this 7th day of December, 1999.
/s/Ann Marie White
------------------
Notary Public
My Commission Expires: 10/20/00
<PAGE>
John Hancock Capital Series
INDEX TO EXHIBITS
99.(a) Articles of Incorporation. Amended and Restated Declaration of Trust
dated June 8, 1999.******
99.(a).1 Establishment and Designation of Class A shares and Class B Shares of
Beneficial Interest of Registrant dated August 27, 1996.***
99.(a).2 Establishment and Designation of Class C Shares of Beneficial Interest
for Registrant dated March 10, 1998.****
99.(a).3 Instrument Amending manner of acting by written consent dated
December 3, 1996.****
99.(a).4 Instrument Changing Name of Series of Shares of the Trust effective
May 1, 1999.*****
99.(a).5 Instrument Fixing the Number of Trustees and Appointing Individual to
Fill Vacancy dated June 8, 1999.******
99.(b) By-Laws. Amended and Restated By-Laws dated December 3, 1996.***
99.(c) Instruments Defining Rights of Securities Holders. See exhibits
99.(a) and 99.(b).
99.(d) Investment Advisory Contracts. Investment Advisory Agreement between
Registrant and John Hancock Advisers, Inc. dated August 30, 1996.****
99.(d).1 Sub-Investment Advisory Contract between Registrant and John Hancock
Advisers, Inc. dated August 30, 1996***
99.(e) Underwriting Contracts. Distribution Agreement between John Hancock
Funds, Inc. (formerly named John Hancock Broker Distribution Services,
Inc. and the Registrant dated August 1, 1991.*
99.(e).1 Amendment No.1 to Distribution Agreement with Registrant and John
Hancock Broker Distribution Services, Inc.*
99.(e).2 Form of Soliciting Dealer Agreement between John Hancock Funds, Inc.
and Selected Dealers.****
99.(e).3 Form of Financial Institution Sales and Service Agreement between John
Hancock Funds, Inc. and the John Hancock funds.*
99.(e)4 Amendment to Distribution Agreement between Registrant and John
Hancock Funds, Inc. dated August 30, 1996.***
99.(f) Bonus or Profit Sharing Contracts. Not Applicable.
99.(g) Custodian Agreements. Amended and Restated Master Custodian Agreement
between John Hancock Mutual Funds and Investors Bank and Trust Company
dated March 9, 1999.*****
99.(h) Other Material Contracts. Amended and Restated Master Transfer Agency
and Service Agreement between John Hancock funds and John Hancock
Signature Services, Inc. dated June 1, 1998.****
99.(h).1 Accounting and Legal Services Agreement between John Hancock Advisers,
Inc. and Registrant as of January 1 1996.**
99.(i) Legal Opinion.******
99.(j) Other Opinions. Auditor's Consent.+
99.(k) Omitted Financial Statements. Not Applicable.
99.(l) Initial Capital Agreements. Not Applicable.
99.(m) Rule 12b-1 Plans. Class And Class B Distribution Plan between
Registrant and John Hancock Funds, Inc. dated August 30, 1996.***
99.(m).1 Class C Distribution Plan between Registrant and John Hancock Funds,
Inc. dated May 1, 1998.****
99.(n) Rule 18f-3 Plan. John Hancock Funds Class A, Class B and Class C
amended and restated Multiple Class Plan pursuant to Rule 18f-3 for
Registrant dated May 1, 1998.****
99.(p) Code of Ethics. John Hancock Funds, Inc. and Independence Investment
Associates, Inc.+
C-9
<PAGE>
* Previously filed electronically with Registration Statement and/or
post-effective amendment no. 44 file nos. 811-1677 and 2-29502 on
April 26, 1995, accession number 0000950146-95-000180.
** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 47 file nos. 811-1677 and 2-29502 on
June 14, 1996, accession number 000101521-96-000007.
*** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 48 file nos. 811-1677 and 2-92502 on
February 27, 1997, accession number 000101521-97-000229.
**** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 52 file nos. 811-1677 and 2-92502 on
February 22, 1999, accession number 0001010521-99-000135.
***** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 53 file nos. 811-1677 and 2-92502 on
April 27, 1999, accession number 0001010521-99-000195.
****** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 54 file nos. 811-1677 and 2-92502 on
February 29, 2000, accession number 0001010521-00-000204.
+ Filed herewith
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Post-Effective Amendment No. 55 to the
registration statement on Form N-1A ("Registration Statement") of our report
dated February 11, 2000, relating to the financial statements and financial
highlights of John Hancock Core Equity Fund (formerly John Hancock Independence
Equity Fund), which appears in such Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Auditors" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 27, 2000
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
and SUBSIDIARIES
CODE OF ETHICS
Independence Investment Associates, Inc. ("Independence Investment"), together
with its subsidiaries Independence International Associates, Inc. ("Independence
International") and Independence Fixed Income Associates, Inc. ("Independence
Fixed Income") (collectively, "Independence"), is committed to the highest
ethical and professional standards. This Code of Ethics provides guidance to
officers and employees of Independence (collectively referred to as "employees")
when they conduct any personal investment transactions. Employees are expected
to place the interests of clients ahead of their personal interests and to treat
all client accounts in a fair and equitable manner.
Employees are encouraged to raise any questions concerning the Code of Ethics
with Patricia Thompson, Vice President and Compliance Officer (the "Compliance
Officer").
CODE PROVISIONS
1. Ban on Transactions in Securities of Companies on the Working Lists and
Ban on Transactions in Corporate Fixed Income Securities
No employee of Independence or "family member"1 of such an employee may trade
in: (i) securities of companies on the Independence Investment domestic equity
and real estate working lists (collectively, "the Domestic Working Lists"), or
any securities or derivatives that derive their value principally from the value
of securities of companies on the Domestic Working Lists; (ii) securities of
companies on the Independence International international and Canadian working
lists (collectively, the "International Working Lists"), or any securities or
derivatives that derive their value principally from the value of securities of
companies on the International Working Lists; or (iii) any corporate fixed
income securities, domestic or international, or any securities or derivatives
that derive their value principally from any corporate fixed income securities.
Copies of the Domestic and International Working Lists are available from the
Compliance Office. Exemptions may be requested by contacting the Compliance
Office in writing. Exemptions may be granted for securities held at the time of
employment, held at the time of an employee becoming subject to one of the above
restrictions, held prior to a security being placed on a Working List or for
other compelling reasons. The securities referenced in footnote 2 below are
excluded from the bans contained in this section.
- ---------------------------
1 For the purposes of this Code, the term "family member" means an employee's
"significant other", spouse or other relative, whether related by blood,
marriage or otherwise, who either (i) shares the same home, or (ii) is
financially dependent upon the employee, or (iii) whose investments are
controlled by the employee. The term also includes any unrelated individual for
whom an employee controls investments and materially contributes to the
individual's financial support.
<PAGE>
2. Pre-Clearance
Independence requires that all permitted personal trades for employees and their
"family members", as defined in this Code, be pre-cleared. This requirement for
pre-clearance approval applies to all transactions in debt and equity
securities2 and derivatives which are not otherwise banned pursuant to this Code
and includes private placements (including 144A's) whether described in footnote
2 below or not, in order to avoid any perception of favored treatment from other
industry personnel or companies. Transactions in publicly-registered,
tax-exempt, domestic debt securities (municipal bonds) are excluded from this
pre-clearance requirement. A request for pre-clearance should be submitted in
writing to the Compliance Office using the electronic pre-clearance system or a
written equivalent and should contain:
a) The employee's name and name of individual trading, if different,
b) Name of security and ticker symbol, if publicly traded,
c) CUSIP number, if publicly traded,
d) Whether sale or purchase,
e) If sale, date of purchase,
f) If a private placement, the seller and/or the broker and whether or
not the seller and/or the broker is one with whom the associate does
business on a regular basis,
g) The date of the request,
h) The type of security and the appropriate trading room(s) for
pre-clear,
i) A statement that the employee has checked with the appropriate
trading room(s) and that no trades of the security have been
placed for client accounts and remain open, and
j) The initialed approval of the appropriate trading room(s).
At present, there are five trading rooms: the Independence Investment domestic
equity trading room, the Independence International international trading room,
the Independence Investment corporate fixed income trading room, the
Independence Investment global fixed income trading room and the Independence
Fixed Income trading room in McLean, Virginia. Clearance of private placements
or other transactions may be denied if the transaction would raise issues
regarding the appearance of impropriety. A sample form for pre-clearance is
attached. Please note that approval is effective only for the date granted.
- --------------------------
2 Excludes (i) direct obligations of the Government of the United States; (ii)
bankers' acceptances, bank certificates of deposit, commercial paper and high
quality (one of the two highest rating categories by a Nationally Recognized
Statistical Rating Organization) short-term debt instruments (maturity at
issuance of less than 366 days), including repurchase agreements; and (iii)
shares issued by registered open-end investment companies (mutual funds).
<PAGE>
3. No Purchases of Initial Public Offerings (IPOs)
In addition to the bans contained in Section 1, no employee or "family member"
may purchase any newly issued publicly-offered securities until the next
business (trading) day after the offering date and after receipt of
pre-clearance approval. No purchase should be at other than the market price
prevailing on, or subsequent to, such business day.
See also the prohibition on such purchases contained in a separate Independence
policy, the Company Conflict and Business Practice Policy.
4. Dealing with Brokers and Vendors
Independence employees should consult the Company Conflict and Business Practice
Policy regarding business dealings with brokers and vendors. Certain activities
may require the approval of the President of Independence and the General
Counsel of John Hancock Life Insurance Company. Employees are reminded that any
dealings with and/or potential expenditures involving public officials are
further limited by Section X of the Company Conflict and Business Practice
Policy.
5. Service as Director
Employees should refer to the Company Conflict and Business Practice Policy
regarding service on boards of publicly traded companies as well as service on
certain privately held company, non-profit or association boards.
6. Access Persons: Initial and Annual Disclosures of Personal Holdings
For purposes of Rule 17j-1 under the Investment Company Act of 1940,
Independence has decided to treat all directors, officers and employees of
Independence as though they were "access persons." Therefore, all directors,
officers and employees of Independence, within 10 days after becoming an "access
person" and annually thereafter, must disclose all securities in which they have
any direct or indirect beneficial ownership, and the name of any broker, dealer
or bank with whom the individual maintained an account in which any securities
were held for the direct or indirect benefit of the individual. Any securities
referenced in footnote 2, above, are exempted from this disclosure, as are any
accounts over which the "access person" has no direct or indirect influence or
control. Both "initial" and "annual" reports furnished under this section must
contain the information required by Rule 17j-1(d)(1).
<PAGE>
7. Quarterly Reports
Independence requires all directors, officers and employees to file Individual
Securities Transactions Reports ("Quarterlies") by the 10th day of the month
following the close of a quarter. These are required of directors, officers and
certain employees by Rule 204-2(a)(12) under the Investment Advisers Act of 1940
and by Rule 17j-1(d)(1) under the Investment Company Act of 1940 and must
contain all of the information required by those rules. All securities
transactions in which the individual has any direct or indirect beneficial
ownership must be disclosed except for (i) transactions effected in any account
over which the individual has no direct or indirect influence or control; and
(ii) transactions in the securities referenced in footnote 2 above. The format
for these reports has changed and each individual should carefully review the
information requested and be sure that all required information has been
disclosed.
8. Inside Information Policy and Procedures
Please refer to a separate Independence policy, the Company Inside Information
Policy and Procedures. In addition to the reporting requirements under this Code
of Ethics, employees are subject to certain reporting obligations under the
Company Inside Information Policy and Procedures. These include reporting
accounts over which the employee has investment discretion and a requirement
that notice of each transaction in such an account be sent to the Compliance
Officer within 10 days of a transaction.
The Standards of Practice Handbook (AIMR 1999), noted below, contains a useful
discussion on the prohibition against the use of material, non-public
information.
9. Conflict of Interest and Business Practice Policy
As required by its parent company, Independence has adopted the Company Conflict
and Business Practice Policy which is distributed annually to each employee for
review and certification of compliance. The provisions of the Company Conflict
and Business Practice Policy, therefore, are not incorporated within this Code
of Ethics.
10. Annual Report to the Board
Independence will be required to report annually to its Board of Directors that
all employees have received a copy of this Code of Ethics and have certified
their compliance.
Independence will summarize for the Board existing procedures and any changes
made during the past year or recommended to be made, and will identify to the
Board, and may identify to the Board of Directors of any registered investment
company advised by Independence, any violations requiring significant remedial
action during the past year.
<PAGE>
11. Association for Investment Management and Research ("AIMR")
Standards of Practice Handbook (9th Ed. 1999)
At Independence, some employees have earned the Chartered Financial Analyst
designation ("CFA(R)") and are subject to the Code of Ethics and Standards of
Professional Conduct contained in the AIMR Standards of Practice Handbook.
Employees are reminded that the Handbook is an excellent resource for
information on professional conduct. Copies are available from the Compliance
Officer.
12. Code of Ethics Enforcement
Employees are required annually to certify their compliance with this Code of
Ethics. The Compliance Officer may grant exemptions/exceptions to the
requirements of the Code on a case by case basis if the proposed conduct appears
to involve no opportunity for abuse. All exceptions/exemptions shall be in
writing and copies shall be maintained with a copy of the Code. A record shall
be maintained of any decision to grant pre-clearance to a private placement
transaction, or to grant an exemption to the ban on purchases of IPO's, together
with the reasons supporting the decision. The Compliance Office will conduct
post-trade monitoring and other audit procedures reasonably designed to assure
compliance with the Code of Ethics. Employees are advised that the Code's
procedures will be monitored and enforced, with potential sanctions for
violations including a written warning, disgorgement of profits, fines,
suspension, termination and, where required, reports to the AIMR or the
appropriate regulatory authority. Copies of all reports filed, records of
violations and copies of letters or other records of sanctions imposed will be
maintained in a compliance file. Significant violations of the Code may be
referred by the Compliance Officer to the Independence Board of Directors for
review and/or appropriate action.
Adopted by the Independence Board of Directors on November 21, 1994. Amended and
restated on February 27, 1996. Amended and restated as of January 15, 1997.
Amended and restated as of May 12, 1998. Amended and restated as of February 28,
2000.
CODE OF ETHICS.DOC
JOHN HANCOCK FUNDS
and
JOHN HANCOCK INVESTMENT COMPANIES
CODE OF ETHICS
CONCEPT
The conduct of officers, directors, trustees and employees of John
Hancock Funds, its subsidiaries and sub-advisers on behalf of all registered
investment companies and advisory accounts (the "Funds") is governed by one
basic principle: the interests of the shareholders of the Funds are paramount.
The personal interests of the officers, directors, trustees and employees must
be subordinated to those of the shareholders and investors (collectively the
"shareholders"). Thus, no John Hancock Funds officer, director, trustee or
employee may make personal use of information available by reason of his or her
position with John Hancock Funds until after the Funds have acted upon the
information. In addition, each investment opportunity which comes to the
attention of any such officer, director, trustee or employee and which is
appropriate for consideration by any of the Funds must be first made available
for the benefit of such Fund before the officer, director, trustee or employee
can take any personal advantage of the opportunity. A conflict between the
interest of an individual and that of one of the Funds can arise when the
individual by virtue of his or her association with John Hancock Funds
anticipates action on the part of the Fund and places himself or herself in a
position to profit by the Fund's action. A conflict can also arise when an
individual by reason of a pre-existing securities position in a personal
account, has an interest in whether the Fund buys, sells or holds a particular
security. The following guidelines are designed to assist those affiliated with
John Hancock Funds in their personal transactions by clearly specifying some,
but not all, of the areas where personal investment transactions might raise
questions of conflict with the best interests of the Funds and the shareholders.
APPLICATION OF THE CODE OF ETHICS
This Code of Ethics applies to everyone who is a director, officer,
trustee or employee, whether full- or part-time, of John Hancock Funds. In
addition, the Code applies to each employee of John Hancock Mutual Life
Insurance Company or of any of its direct or indirect subsidiaries who, in
connection with the employee's regular functions or duties makes, participates
in, or obtains information regarding, the purchase or sale of a security by any
of the Funds, or whose functions relate to the making of any recommendations
with respect to such purchases or sales, and to anyone who obtains information
concerning recommendations made to such Fund with regard to the purchase or sale
of a security and has the power to exercise a controlling influence over the
management or policies of either Hancock or any of its subsidiaries unless such
power is solely the result of an official position with Hancock or the
subsidiary. Sub-advisers to John Hancock Funds affiliates, either by the
adoption of this Code of Ethics or procedures consistent with the Code's intent,
are required to protect the interests of the shareholders.
<PAGE>
GUIDELINES
An employee ("associate") or person considered an associate under this
Code of Ethics should observe the following rules:
1. PRE-CLEARANCE FOR ALL TRADES
- ALL ASSOCIATES AND FAMILY MEMBERS1
Pre-clearance for Public Securities2:
Any personal trades, whether equity or debt, MUST be approved in advance.
This requirement applies to all associates and "access" trustees3. The
pre-clearance policy governs trades for all associates' personal
accounts, those of a spouse, "significant other" or family members
sharing a household, as well as all accounts over which the associate has
discretion or gives advice or information. The procedures for
pre-clearance are contained in a document attached to the Code of Ethics.
Given these pre-clearance restrictions, John Hancock Funds does not
permit employee participation in investment clubs.
Employees may invest in derivatives or sell short provided:
- they submit pre-clearance requests, receive pre-clearance approval
and
- the transaction period exceeds the 91 day holding period.
The procedures for pre-clearance for derivatives, including futures and
options, and selling short are attached.
1 For purposes of this Code, the term "family" or "family member" means an
associate's "significant other", spouse or other relative, whether related by
blood, marriage or otherwise, who either (i) shares the same home, or (ii) is
financially dependent upon the associate, or (iii) whose investments are
controlled by the associate. The term also includes any unrelated individual for
whom an associate controls investments and materially contributes to the
individual's financial support.
2 Excludes U.S. Government securities, bank Certificates of Deposit, commercial
paper, open-end mutual funds and physical commodities other than gold. Employees
must obtain pre-clear approval before trading in closed-end funds, unit
investment trusts, or Real Estate Investment Trusts ("REIT's").
3 "Access" trustees include outside trustees of the Funds who have been deemed
to have access to fund transactions or proprietary information. Susan S. Newton,
Chief Legal Officer/Funds and Private Accounts is the principal authority on who
is deemed to be an "access" trustee consistent with the Investment Company Act
of 1940 and the Advisors Act of 1940.
<PAGE>
YOU MAY NOT TRADE UNTIL CLEARANCE IS RECEIVED. Clearance
approval is valid only for the date granted.
Clearance for Private Placements and Derivatives:
Clearance for purchase of private placement securities and derivatives
may be obtained by contacting Investment Compliance via Microsoft Outlook
in writing. The procedures for private placement and derivatives
pre-clearance are contained in a document attached to the Code of Ethics.
Clearance of a private placement or a derivative may be denied if the
transaction would raise issues regarding the appearance of impropriety.
2. BAN ON SHORT-TERM TRADING PROFITS
Effective April 15, 1994, associates and their family members cannot
profit
from the purchase and sale or the sale and purchase of the same or
equivalent securities held 91 or fewer days. A gift from an associate is
considered a sale. Any profits realized on such short-term trades must be
disgorged and contributed to a charity approved by the Executive
Committee of John Hancock Funds. This restriction assures that personal
trading is for investment purposes. Any investments in an associate's or
family member's account prior to April 15, 1994 are not subject to this
ban.
3. Purchase of Initial Public Offerings ("IPO's")
No associate nor any member of his or her family acting on advice or
information from the associate should purchase any newly issued or
publicly-offered securities4 until the next business (trading) day after
the offering date and after receipt of pre-clearance approval. No
purchase should be at other than the market price prevailing on, or
subsequent to, such business day. This restriction shall apply also to
anyone with whom the associate or family member covered by this Code has
any contract, understanding, relationship, agreement or other arrangement
providing benefits substantially equivalent to those of ownership of the
securities in question and to any owner of securities in which the
associate or family member has the right to vest or revest title at once
or at some future time , and also to any trust of which the associate or
family member is an income beneficiary or remainderman and over which the
associate or family member has any direct influence or control
("controlled trust").
4. Proprietary Information
Investment opportunities and ideas brought to John Hancock Funds are
considered proprietary to John Hancock Funds and its Funds. Associates
have an obligation to share any proprietary information in their
possession with the Investment Staff prior to submitting a request for
pre-clearance. All written credit or company reports produced by John
Hancock Funds associates are also considered proprietary. This
information should not be used for personal trading until pre-clearance
has been received. An associate cannot make available to others any
4 This provision applies to all initial public offerings except those defined in
Footnote 2. Employees cannot invest in "when-issued" bonds as these are
considered initial offerings.
<PAGE>
information acquired solely by reason of his or her position with John
Hancock Funds even though the associate may have conflicting duties as a
director, trustee or agent of another entity with portfolio management or
investment responsibilities. Information not generally available and
obtained through an associate's position is not available to another
person or entity and may not be used in discharging duties to the other
person or entity.
5. Dealings with Brokers
No associate nor any family member, controlled trust or nominee shall
seek or accept favors or preferential treatment from securities brokers
or dealers or other organizations with which John Hancock Funds might
transact business. Occasional participation in lunches, dinners, cocktail
parties, sporting activities or similar gatherings conducted for business
purposes is not prohibited. For the protection of both the associate and
John Hancock Funds, however, the appearance of a possible conflict of
interest must be avoided. Caution is to be exercised in any instance in
which business travel and lodging are paid for by other than John Hancock
Funds. Associates, their family members, controlled trusts or nominees
may subscribe to private offerings placed through a securities firm or to
public offerings made to a restricted or limited number of investors,
subject to the pre-clearance provisions in Section 1 and the initial
public offering bar in Section 3. Compliance with Section 5 on Dealings
with Brokers minimizes the basis for any charge that John Hancock Funds
associates use their John Hancock Funds position to obtain for themselves
issues and opportunities which otherwise would not be offered to them.
6. Quarterly Reports
Associates deemed to be "advisory representatives"5 and others so
designated are required quarterly to file a report of individual security
transactions not otherwise excepted. See exceptions set forth below.6 An
advisory representative is not required to report transactions for an
account over which the advisory representative has no direct or indirect
influence or control. The report is due not later than 10 days after the
end of each calendar quarter in which a transaction to which the report
relates was effected. The quarterly reports of each of the trustees who
are not "interested persons" should be filed with the Chairman of
5 The definition of "advisory representative" is contained in Rule
204-2(a)(12)(A) of the Advisers Act of 1940. "Advisory representatives" include
any employee who makes any recommendation, who participates in the determination
of which recommendation shall be made, or whose functions or duties relate to
the determination of which recommendation shall be made; any employee who, in
connection with his [or her] duties, obtains any information concerning which
securities are being recommended prior to the effective dissemination of such
recommendations or the information concerning such recommendations.
6 Securities exempted from individual security transaction reporting
("Quarterlies") are those which are direct obligations of the United States and
shares of non-affiliated registered open-end investment companies.
<PAGE>
Committee on Administration of the Funds.7 All other advisory
representatives should file their reports with John Hancock Adviser's
Legal Department. To the extent not otherwise required by a Securities
and Exchange Commission Rule or Regulation, the securities transaction
reports will be kept confidential. The reports are required to be
preserved for a period of not less than 5 years from the end of the
fiscal year in which they are made and must remain in an easily
accessible place for the first 2 years.
7. REPORT OF BOARD, TRUSTEE OR LEADERSHIP POSITIONS IN COMPANIES ISSUING
SECURITIES
Those deemed to be "advisory representatives" as noted in Section 6 must
report promptly to the Compliance Officer for the Code of Ethics any
board, trustee or leadership position the "advisory representative" holds
in a private, public or private non-profit company which issues or plans
to issue any security. The Compliance Officer for the Code of Ethics will
in turn report such positions to the Trustees of the Funds.
8. ANNUAL DISCLOSURE OF PERSONAL HOLDINGS
BY QUARTERLY REPORTING PERSONS
All those deemed to be "advisory representatives" as noted in Section 6
must disclose all personal securities holdings upon commencement of
employment and thereafter by March 15 for holdings as of December 31 of
the prior calendar year.
9. BLACKOUT PERIOD FOR PORTFOLIO MANAGERS
Portfolio managers, including those designated as portfolio managers in
the pre-clear system, are prohibited from buying or selling a security
within seven calendar days before and after an investment company that he
or she manages trades in that security. Any profits realized on trades
within the proscribed periods are required to be disgorged by making a
check payable to John Hancock Advisers, Inc. The money will be donated to
a charity approved by the Executive Committee of The Berkeley Financial
Group. The names of portfolio managers subject to this provision will be
submitted annually by the Chief Investment Officer to the Compliance
Office and updated as needed.
7 A trustee of a registered investment company who is not an "interested person"
within the meaning of the definition contained in the Investment Company Act of
1940 and who would be required to make a transaction report solely by reason of
being a trustee of the investment company, may dispense with the filing of a
report of a transaction in a security even where the investment company of which
she or he is a trustee purchased or sold such security or the company or John
Hancock Advisers, Inc. considered such purchase or sale, unless at the time of
the transaction the trustee knew or, in the ordinary course of fulfilling her or
his official duties as trustee, should have known that such purchase, sale or
consideration had occurred within 15 days before the transaction or would occur
within 15 days after it. 1 For purposes of these Guidelines, the term "family
member" means an associate's "significant other", spouse or other relative,
whether related by blood, marriage or otherwise, who either (i) shares the same
home, or (ii) is financially dependent upon the associate, or (iii) whose
investments are controlled by the associate. The term also includes any
unrelated individual for whom an associate controls investments and materially
contributes to the individual's financial support.
<PAGE>
10. INSIDE INFORMATION
All John Hancock Funds associates are subject to the Inside Information
Policies and Procedures. A copy may be obtained in "Public Folders" on MS
Mail under the heading "Compliance Policies".
11. CONFLICT OF INTEREST AND BUSINESS PRACTICE POLICY
Officer and letter grade employees are subject to the Conflict and
Business Practice Policy. A copy may be obtained in "Public Folders" on
MS Outlook under the heading "Compliance Policies".
INTERPRETATION AND ENFORCEMENT
The Code of Ethics cannot anticipate every situation in which personal
interests may be in conflict with the interests of the shareholders. Associates
should be responsive to the spirit and intent of the Code as well as its
specific provisions.
When any doubt exists regarding any provision of the Code or whether a
conflict of interest with shareholders might exist, the transaction should be
discussed beforehand with the Compliance Officer for the Code of Ethics, Thomas
H. Connors at (617) 375-1724 or Marcia Casey at (617) 572-9183.
The Code of Ethics is designed to detect and prevent fraud against fund
investors, and to avoid the appearance of impropriety. To provide assurance that
policies are effective, personal securities transaction reports will be
monitored and checked against fund portfolio transactions. Any deviations from
the policies will be reported to the Compliance Officer for the Code of Ethics.
In addition, other internal auditing procedures may be adopted from time to
time.
Violations of the Code will be referred by the Compliance Officer for the
Code of Ethics to the Executive Committee of John Hancock Funds or the
Administration Committee of the Fund or both for review and appropriate action.
The factors considered for a fine or other sanction for a Code violation
include:
- the employee's position and function;
- whether the employee is an officer, quarterly reporter or registered
person with the NASD;
- the amount of the trade;
- whether the funds or accounts hold the security and were trading the
same day;
- whether multiple violations occurred for the same transaction;
- whether the violation was by a "family member." Is the family member
employed in the securities industry and thus knowledgeable about
employee compliance requirements?
- whether the employee has had a prior violation and which Code provision
was involved.
<PAGE>
Code violations by NASD registered persons are reported to the NASD
Compliance Officer at John Hancock Mutual Life Insurance Company. Sanctions for
violations could include fines, suspension or termination of the violator's
position with John Hancock Funds and/or a report to the appropriate regulatory
authority.
Adopted by the boards of the companies of The Berkeley Financial Group on
October 19, 1994; revised and restated by the boards of the companies of The
Berkeley Financial Group on April 23, 1997; revised and restated by the boards
of the companies of The Berkeley Financial Group on October 1, 1998.
Adopted by the boards of the investment companies under the management
of John Hancock Advisers, Inc. on the following dates:
Panel A - September 27, 1994; Panel B - September 13, 1994; Panel C - September
27, 1994 and Southeastern Thrift and Bank Fund, Inc., on October 24, 1994.
Revised and restated by the boards of the investment companies under the
management of John Hancock Advisers, Inc., on the following dates:
Panel A - June 3, 1997; Panel B - June 2, 1997; and Southeastern Thrift and Bank
Fund, Inc., on May 1, 1997.
Revised and restated by the boards of the investment companies under the
management of John Hancock Advisers, Inc., on the following dates:
Panel A and Panel B - December 8, 1998; and Southeastern Thrift and Bank Fund,
Inc., on October 30, 1998.
<PAGE>
John Hancock Funds
Code of Ethics
PRE-CLEARANCE PROCEDURES
An employee ("associate") or person considered an associate under the
Code of Ethics should observe the following procedures:
PRE-CLEARANCE FOR ALL TRADES
- - ALL ASSOCIATES AND FAMILY MEMBERS1
Three categories of securities require pre-clearance: Public securities,
derivatives and private placements
1. Pre-clearance for Public Securities2:
Any personal trades, whether equity or debt, MUST be approved in
advance. This requirement applies to all associates and "access" Trustees3
("associates"). The pre-clearance policy governs trades for all associates'
personal accounts, or those of a spouse, "significant other" or other family
members sharing a household, as well as all accounts over which the associate
has discretion or gives advice or information.
Requests to pre-clear trades must be entered into the pre-clear
database on the day prior to the requested trade date. The database is located
in Microsoft Outlook under the Tools option, Preclear Personal Trades. It can be
accessed by entering your social security number in the appropriate field. If
Microsoft Outlook is unavailable, please contact the HELP Desk at 101 Huntington
Avenue at (617) 375-4357 for assistance.
<PAGE>
The following data must be entered:
- name of security to trade
- ticker symbol
- cusip number (9 alpha-numeric characters)
- trade type
- purchase date (required when selling a security)
- brokerage house
- brokerage account number
When all data has been entered, select SEND REQUEST which is located in
the top right corner of the screen. Associates will be notified by 11:00 A.M.
Boston time on the requested trade date via Microsoft Outlook as to whether
clearance has been granted.
If you have any questions or require assistance entering a trade,
please call Mary Ellen Logee at (617) 375-4967 or Fred Spring at (617) 375-4987
in the Internal Audit and Investment Compliance Department.
YOU MAY NOT TRADE UNTIL CLEARANCE IS RECEIVED. Clearance approval is valid only
for the date granted.
2. Pre-clearance Procedures for Derivatives, Futures, Options and Selling Short:
Clearance for the purchase, sale or related transactions for these securities
must be obtained by contacting Bill Sylva via Microsoft Outlook. The request
must include:
- the associate's name;
- the associate's John Hancock Funds' company;
- the date of request;
- the complete name of the security;
- a description of the security including its relationship to an
underlying common stock or stock index;
- the duration or description of the contract or exercise period;
- any potential conflict, present or future, with funds' trading
activity and whether the security might be offered an inducement to
later recommend publicly traded securities for any fund;
- the seller and whether or not the seller is one with whom the
associate does business on a regular basis.
<PAGE>
Clearance of such securities may be denied if the transaction would raise issues
regarding the appearance of impropriety.
3. Pre-clearance for Private Placements and Derivatives: Clearance for purchase
of private placement securities and derivatives may be obtained by contacting
Bill Sylva via Microsoft Outlook (please "cc." Mary Ellen Logee on all such
requests). The request must include:
- the associate's name;
- the associate's John Hancock Funds' company;
- the complete name of the security;
- the seller and whether or not the seller is one with whom the
associate does business on a regular basis;
- any potential conflict, present or future, with fund trading
activity and whether the security might be offered as inducement to
later recommend publicly traded securities for any fund; and
- the date of the request.
Clearance of private placements and derivatives may be denied if the
transaction would raise issues regarding the appearance of impropriety.
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