<PAGE> 1
Registration No. 2-89338
ICA No. 811-03961
AS FILED ON APRIL 24, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 15 /x/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 20 /x/
JOHN HANCOCK CAPITAL GROWTH FUND
(Formerly Transamerica Capital Growth Fund)
(Exact Name of Registrant as Specified in Articles of Incorporation)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 375-1700
Thomas H. Drohan, Esq.
John Hancock Advisers, Inc.
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
__________________________
Copies to:
Jeffrey N. Carp, Esq. Thomas J. Press, Esq.
Hale and Dorr John Hancock Advisers, Inc. (Houston)
60 State Street 1000 Louisiana Street
Boston, Massachusetts, 02109 Houston, Texas 77002-5098
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
- ---
X on May 1, 1995 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)
- ---
on [date] pursuant to paragraph (a) of rule 485
- ---
Registrant has previously elected, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, to register an indefinite number of its shares
of beneficial interest for sale under the Securities Act of 1933 and filed its
Rule 24f-2 Notice on or about February 23, 1995.
<PAGE> 2
JOHN HANCOCK CAPITAL GROWTH FUND
(formerly Transamerica Capital Growth Fund
CROSS-REFERENCE SHEET
Form N-1A
Item
<TABLE>
<CAPTION>
Part A Caption Prospectus
<S> <C> <C>
1... Cover Page Cover Page
2... Synopsis/Summary of Fund Expense Information; The Fund's Expenses;
Expenses Share Price
3... Condensed Financial The Fund's Financial Highlights
Information
4... General Description Investment Objective and Policies;
of Registrant Organization and Management of the Fund
5. Management of the Fund Organization and Management of the Fund;
The Fund's Expenses; Back Cover Page
6... Capital Stock and Organization and Management of the Fund;
Other Securities Dividends and Taxes; How to Buy Shares; How to
Redeem Shares; Additional Services and
Programs
7... Purchase of Securities How To Buy Shares; Share Price; Additional
Being Offered Services and Programs; Alternative Purchase
Arrangements; The Fund's Expenses; Back
Cover Page
8... Redemption or Repurchase How To Redeem Shares
9... Pending Legal Proceedings Not applicable
<CAPTION>
Part B Caption Statement of Additional Information
<S> <C> <C>
10... Cover Page Cover Page
11... Table of Contents Table of Contents
12... General Information Those Responsible For Management
and History
13... Investment Objectives Investment Objective and Policies;
and Policies Special Investment Techniques
14... Management of the Fund Those Responsible For Management
15... Control Persons and Those Responsible For Management
Principal Holders of
Securities
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
16... Investment Advisory and Investment Advisory and Other Services
Other Services
17... Brokerage Allocation Brokerage Allocation
18... Capital Stock and Additional Information
Other Securities
19... Purchase, Redemption and Purchase of Shares; Distribution Contract;
Pricing of Securities Net Asset Value; Additional Services and Programs
Being Offered Deferred Sales Charge On Class B Shares
20... Tax Status Tax Status
21... Underwriters Distribution Contract
22... Calculation of Calculation of Performance
Performance Data
23... Financial Statements Financial Statements
</TABLE>
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
iii
<PAGE> 4
JOHN HANCOCK
CAPITAL GROWTH
FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MAY 1, 1995
<TABLE>
- --------------------------------------------------------------------------------------------
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Expense Information................................................................... 2
The Fund's Financial Highlights....................................................... 3
Investment Objective and Policies..................................................... 5
Organization and Management of the Fund............................................... 7
Alternative Purchase Arrangements..................................................... 8
The Fund's Expenses................................................................... 10
Dividends and Taxes................................................................... 10
Performance........................................................................... 12
How to Buy Shares..................................................................... 13
Share Price........................................................................... 14
How to Redeem Shares.................................................................. 21
Additional Services and Programs...................................................... 23
Investments, Techniques and Risk Factors.............................................. 26
</TABLE>
This Prospectus sets forth the information about John Hancock Capital Growth
Fund (the "Fund"), a diversified fund, that you should know before investing.
Please read and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Fund's Statement
of Additional Information, dated May 1, 1995 and incorporated by reference into
this Prospectus, free of charge by writing or telephoning: John Hancock Investor
Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 5
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's fiscal
year ended December 31, 1994 adjusted to reflect certain current expenses.
Actual fees and expenses in the future may be greater or less than those
indicated.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price).................... 5.00% None
Maximum sales charge imposed on reinvested dividends............................................. None None
Maximum deferred sales charge.................................................................... None* 5.00%
Redemption fee+.................................................................................. None None
Exchange fee..................................................................................... None None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management fee................................................................................... 0.63% 0.63%
12b-1 fee***..................................................................................... 0.25% 1.00%
Other expenses**................................................................................. 0.71% 0.71%
Total Fund operating expenses.................................................................... 1.59% 2.34%
<FN>
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed, as described below under the caption "Share Price,"
in the event of certain redemption transactions within one year of purchase.
** Other Expenses include transfer agent, legal, audit, custody and other
expenses.
*** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Fund's average net assets, and the remaining portion will be
used to cover distribution expenses.
+ Redemption by wire fee (currently $4.00) not included.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical
$1,000 investment, assuming 5% annual return
Class A Shares...................................................................... $ 65 $ 98 $ 132 $229
Class B Shares
-- Assuming complete redemption at end of period................................ $ 74 $ 103 $ 145 $249
-- Assuming no redemption....................................................... $ 24 $ 73 $ 125 $249
(This example should not be considered a representation of past or future expenses. Actual expenses may be greater or lesser than
those shown.)
</TABLE>
The Fund's payment of a distribution fee may result in a long-term shareholder
indirectly paying more than the economic equivalent of the maximum front-end
sales charge permitted under the National Association of Securities Dealers,
Inc.'s Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
2
<PAGE> 6
<TABLE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of financial highlights has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose unqualified report is included in
the Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to shareholders
which may be obtained free of charge by writing or telephoning John Hancock
Investor Services Corporation ("Investor Services"), at the address or telephone
number listed on the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each period is
as follows:
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1994(1)(2) 1993(2) 1992(2) 1991(2) 1990(2)(3) 1989(2)(3) 1988(2)(3)
---------- ------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE INCOME AND CAPITAL
CHANGES FOR A SHARE
OUTSTANDING DURING EACH
PERIOD:
Net asset value, beginning of
period...................... $ 12.66 $ 11.90 $ 11.47 $ 9.82 $ 10.65 $ 9.00 $ 7.52
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss)...................... (0.02) (0.11) (0.14) (0.13) (0.09) 0.05 0.09
Net realized and unrealized
gain (loss) on
investments................. (1.42) 0.87 0.76 3.73 (0.60) 1.82 1.45
------- ------- ------- ------- ------- ------- ------
Total from Investment
Operations.................. (1.44) 0.76 0.62 3.60 (0.69) 1.87 1.54
LESS DISTRIBUTIONS
Dividends from net investment
income...................... -- -- -- -- (0.01) (0.07) (0.06)
Distributions from realized
gains....................... (0.29) -- (0.19) (1.95) (0.13) (0.15) --
------- ------- ------- ------- ------- ------- ------
Total Distributions.......... (0.29) -- (0.19) (1.95) (0.14) (0.22) (0.06)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period...................... $ 10.93 $ 12.66 $ 11.90 $ 11.47 $ 9.82 $ 10.65 $ 9.00
======= ======= ======= ======= ======= ======= ======
TOTAL RETURN(5).............. (11.34)% 6.39% 5.48% 38.00% (6.37)% 20.71% 20.42%
======= ======= ======= ======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average
net assets.................. 1.59% 1.46% 1.41% 1.68% 1.54% 1.83% 3.87%
Ratio of expense
reimbursement to average net
assets...................... -- -- -- -- -- -- (1.37)%
------- ------- ------- ------- ------- ------- ------
Ratio of net expenses to
average net assets.......... 1.59% 1.46% 1.41% 1.68% 1.54% 1.83% 2.50%
======= ======= ======= ======= ======= ======= ======
Ratio of net investment
income (loss) to average net
assets...................... (0.14)% (0.92)% (1.20)% (1.04)% (0.82)% 0.46% 1.01%
Portfolio turnover........... 290% 159% 70% 139% 152% 108% 220%
Net Assets, end of period
(in thousands).............. $70,090 $85,553 $94,861 $89,008 $56,794 $59,357 $5,851
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1987(2)(3) 1986(3) 1985(4)(3)
---------- ------- -------------
<S> <C> <C> <C>
PER SHARE INCOME AND CAPITAL
CHANGES FOR A SHARE
OUTSTANDING DURING EACH
PERIOD:
Net asset value, beginning of
period...................... $ 6.87 $ 6.56 $ 5.45
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss)...................... (0.08) (0.06) (0.03)
Net realized and unrealized
gain (loss) on
investments................. 1.69 1.83 1.14
----- ------- -----
Total from Investment
Operations.................. 1.61 1.77 1.11
LESS DISTRIBUTIONS
Dividends from net investment
income...................... -- -- --
Distributions from realized
gains....................... (0.96) (1.46) --
----- ------- -----
Total Distributions.......... (0.96) (1.46) --
----- ------- -----
Net asset value, end of
period...................... $ 7.52 $ 6.87 $ 6.56
====== ======= ======
TOTAL RETURN(5).............. 22.43% 27.10% 20.50%
====== ======= ======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average
net assets.................. 5.57% 20.94% 4.43%
Ratio of expense
reimbursement to average net
assets...................... (3.07)% (19.45)% (3.84)%
----- ------- -----
Ratio of net expenses to
average net assets.......... 2.50% 1.49% 0.59%
====== ======= ======
Ratio of net investment
income (loss) to average net
assets...................... (0.88)% (1.11)% (0.52)%
Portfolio turnover........... 272% 267% 36%
Net Assets, end of period
(in thousands).............. $3,910 $ 208 $ 164
<FN>
- ---------------
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser. Prior to this date, Transamerica Fund Management Company was the
investment adviser.
(2) Per share information has been calculated using the average number of shares
outstanding.
(3) Per share information has been adjusted retroactively for the 2 for 1 stock
split to shareholders of record on September 10, 1990.
(4) Financial highlights, including total return, are for the period September
26, 1985 (date that the Fund's initial registration statement under the
Securities Act of 1933 became effective) to December 31, 1985 and have not
been annualized.
(5) Total return does not include the effect of the initial sales charge for
Class A Shares.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
CLASS B SHARES
-----------------------------------
PERIOD FROM
YEAR ENDED JUNE 30, 1993
DECEMBER 31, TO DECEMBER 31,
1994(1)(2) 1993(2)(3)
------------- ---------------
<S> <C> <C>
Per share income and capital changes for a share outstanding during each period:
Net asset value, beginning of period.................................................... $ 12.59 $11.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............................................................ (0.09) (0.07)
Net realized and unrealized gain (loss) on investments.................................. (1.41) 1.38
------ ------
Total from Investment Operations........................................................ (1.50) 1.31
LESS DISTRIBUTIONS
Dividends from net investment income.................................................... -- --
Distributions from realized gains....................................................... (0.29) --
------ ------
Total Distributions..................................................................... (0.29) --
------ ------
Net asset value, end of period.......................................................... $ 10.80 $12.59
======= =======
Total Return(4)......................................................................... (11.88)% 11.61%
======= =======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net assets................................................. 2.34% 1.06%
Ratio of expense reimbursement to average net assets.................................... -- --
------ ------
Ratio of net expenses to average net assets............................................. 2.34% 1.06%
======= =======
Ratio of net investment income (loss) to average net assets............................. (0.89)% (0.54)%
Portfolio turnover...................................................................... 290% 159%
Net Assets, end of period (in thousands)................................................ $16,652 $ 440
<FN>
- ---------------
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser. Prior to this date, Transamerica Fund Management Company was the
investment adviser.
(2) Per share information has been calculated using the average number of shares
outstanding.
(3) Financial highlights, including total return, have not been annualized.
Portfolio turnover is for the year ended December 31, 1993.
(4) Total return does not include the effect of the contingent deferred sales
charge for Class B Shares.
</TABLE>
4
<PAGE> 8
INVESTMENT OBJECTIVE AND POLICIES
The Fund's primary objective is capital appreciation. Current income may be
incidental and is not an important factor in the selection of portfolio
securities. In normal circumstances, at least 65% of the Fund's total assets
will be invested in domestic or foreign equity securities (i.e., both dividend
and non-dividend paying common stocks or securities which are convertible or
exchangeable for such stocks including warrants). While investment in equity
securities for long-term capital appreciation will be emphasized, investments
for short-term capital appreciation may be made from time to time when such
action is believed by John Hancock Advisers Inc. (the "Adviser") to be desirable
and consistent with sound investment practice. The Fund maintains a flexible
investment approach toward types of companies as well as types of industries and
market sectors depending upon such factors as the economic and industry
environment, market conditions and the relative attractiveness of various market
sectors and industries. See "Investments, Techniques and Risk Factors" for a
discussion of the risks of investing in foreign securities.
- -------------------------------------------------------------------------------
THE FUND'S PRIMARY OBJECTIVE IS CAPITAL
APPRECIATION.
- -------------------------------------------------------------------------------
Under favorable economic and market conditions, as determined by the Adviser,
the Fund will pursue its investment objective aggressively. For example, a
substantial portion of the Fund's portfolio may at times be fully invested in
equity securities that the Adviser believes to have the greatest potential for
capital appreciation and which, therefore, may be more volatile over the short
and medium terms than other types of investments. Under less favorable economic,
industry and market conditions, the Fund would employ a less aggressive
investment management strategy.
The Fund's investments, at any given time, may include or emphasize securities
of smaller, less well established companies as well as those of larger or better
established companies and may include securities traded over-the-counter as well
as those traded on a primary exchange. Because these smaller, rapidly growing
companies may still be in an early developmental stage, they are subject to
additional risks, and their securities will typically have more market
volatility than the equity securities of larger, well-established companies.
Developing companies often have limited product lines, markets or financial
resources or they may be dependent upon a limited management group. The Fund may
invest in newly issued securities of startup companies or companies whose
securities have not previously been publicly traded, provided that no more than
10% of the Fund's total assets will be invested in securities of companies
having a record, together with predecessors, of less than three years continuous
operation. Such unseasoned issuers share similar risks to developing companies
described above.
The Fund will ordinarily diversify its investments among various industries;
however, the Fund has as an investment restriction that, even at times when it
emphasizes its investments in a limited number of industries, no more than 25%
of its assets will be invested in any one industry. To the extent the Fund
invests in a group of industries which has common characteristics, the Fund will
be subject to the similar risks affecting that group. Groups of industries
include, but are not
5
<PAGE> 9
limited to, construction, energy, health care, financial services, consumer
products/services, technology and transportation.
Since the Fund may pursue its goal of capital appreciation aggressively, the
Fund may emphasize those industries which have not reached maturity of product
development or growth in demand or market segmentation. In addition, the Fund's
diversification policy permits more than 25% of the Fund's assets to be held in
a group of similar industries (i.e., certain industries overlap in particular
respects, creating a "sector.") For example, the biotechnology, electronics,
computer and telecommunications industries include companies whose products,
processes or services are derived from or applied to commercial utilization of
technological or scientific advancements. Although the Fund will be required to
invest in at least four industries, when the Fund should emphasize investment in
a sector characterized by the common elements held by a group of industries, the
Fund will be especially subject to the particular common risks affecting that
group. Companies in the technology sector, for example, face the lack of
commercial acceptance of a new product or process from technological change or
obsolescence.
OTHER INVESTMENTS. Under normal circumstances, up to 35% of the Fund's assets
may be invested in investment grade debt securities and preferred stocks which
are believed to offer opportunities for long-term capital appreciation (e.g.,
where interest rates are expected to decline or the credit rating of the issuer
is expected to improve). For defensive purposes of preserving capital, the Fund
may temporarily invest without limit in investment grade debt securities,
repurchase agreements or preferred stocks or hold its assets in cash. During
such times, the Fund would not be pursuing its investment objective. Bonds rated
BBB or lower by Standard & Poor's Ratings Group ("S&P") or Baa by Moody's
Investor Services, Inc. ("Moody's"), although of investment quality, may have
speculative characteristics as well. The prices of fixed-income securities in
which the Fund may invest will generally increase as market rates of interest
fall and will decrease as market rates of interest rise. The amount of the
increase or decrease in the price of a fixed-income security in response to a
given change in interest rates is typically dependent upon the maturity of the
security, with longer term securities being more volatile than shorter term
securities such as money market instruments.
The Fund may purchase and write (sell) options on securities in which it may
invest and on securities indices and may purchase and sell securities index
futures and options on such futures. Options and futures contracts are generally
considered to be "derivative" instruments because they derive their value from
the performance of an underlying asset, index or other economic benchmark. See
"Investments, Techniques and Risk Factors" for additional discussion of
derivative instruments.
- -------------------------------------------------------------------------------
THE FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVE.
- -------------------------------------------------------------------------------
The Fund may invest without limitation in securities of foreign issuers and in
connection with such investments may enter into contracts to purchase and sell
foreign currency, may lend its portfolio securities, enter into repurchase
agreements and reverse repurchase agreements, purchase restricted and illiquid
securities and purchase securities on a when-issued or delayed delivery basis.
The Fund may, from time to time, engage in leverage, a practice which involves
borrowing
6
<PAGE> 10
money from banks for investing in portfolio securities. The use of leverage,
whether through direct borrowing from banks or engaging in reverse repurchase
agreements, is considered a speculative investment technique. See "Investments,
Techniques and Risk Factors" for more information about the Fund's investments.
The Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information where they are classified as
fundamental or nonfundamental. Those restrictions designated as fundamental may
not be changed without shareholder approval. The Fund's investment objective and
its investment policies may be changed by a vote of the Trustees without
shareholder approval. Shareholders will be given 60 days advance written notice
of a change to the Fund's investment objective and its policy to invest, under
normal market conditions, 65% of its assets in equity securities of domestic and
foreign issuers. Notwithstanding the Fund's fundamental investment restriction
prohibiting investments in other investment companies, the Fund may, pursuant to
an order granted by the SEC, invest in other investment companies in connection
with a deferred compensation plan for the non-interested trustees of the John
Hancock Group of Funds. There can be no assurance that the Fund will achieve its
investment objective.
- -------------------------------------------------------------------------------
THE FUND FOLLOWS CERTAIN POLICIES WHICH
MAY HELP TO REDUCE INVESTMENT RISK.
- -------------------------------------------------------------------------------
RISK FACTORS. The Fund's investments will be subject to market fluctuation and
other risks inherent in all securities. The return and price volatility of the
Fund depend on the type and quality of its investments as well as market and
other factors. In addition, the Fund's potential investments and management
techniques may entail specific risks. There can be no assurance that the Fund
will achieve its investment objective. For additional information about risks
associated with an investment in the Fund, see "Investments, Techniques and Risk
Factors."
The primary consideration in choosing brokerage firms to carry out the Fund's
transactions is execution at the most favorable prices, taking into account the
broker's professional ability and quality of service. Consideration may also be
given to the broker's sales of Fund shares. Pursuant to procedures determined by
the Trustees, the Adviser may place securities transactions with brokers
affiliated with the Adviser. The brokers include Tucker Anthony Incorporated,
Sutro and Company, Inc. and John Hancock Distributors, Inc., which are
indirectly owned by the John Hancock Mutual Life Insurance Company (the "Life
Company"), which in turn indirectly owns the Adviser.
- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified open-end management investment company organized as a
Massachusetts business trust in 1984. The Fund reserves the right to create and
issue a number of series of shares, or funds or classes thereof, which are
separately managed and have different investment objectives. The Fund is not
required to and does not intend to hold annual meetings of shareholders,
although special meetings may be held for such purposes as electing or removing
Trustees, changing fundamental policies or approving a management contract. The
Fund, under certain circumstances, will assist in shareholder communications
with other shareholders.
- -------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE
INVESTMENT ADVISER WHO IS RESPONSIBLE FOR
THE DAY-TO-DAY OPERATIONS OF THE FUND,
SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
- -------------------------------------------------------------------------------
7
<PAGE> 11
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Fund,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds, Inc.
("John Hancock Funds") distributes shares for all of the John Hancock mutual
funds through Selling Brokers. Certain Fund officers are also officers of the
Adviser and John Hancock Funds. Investment decisions are made primarily by the
portfolio manager, Ben Hock. Mr. Hock has served as the Fund's portfolio manager
since August 1993. Prior to managing the Fund, Mr. Hock was senior vice-
president at Securities Management Research and at Interfirst Investment
Management.
- -------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF APPROXIMATELY $13 BILLION.
- -------------------------------------------------------------------------------
In order to avoid any conflict with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. Some of these restrictions are:
preclearance for all personal trades and a ban on the purchase of initial public
offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative,"
Class A shares) or on a contingent deferred basis (the "Contingent Deferred
Sales Charge Alternative," Class B shares). If you do not specify on your
account application the class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
- -------------------------------------------------------------------------------
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless the amount of your purchase is $1 million or more.
If you purchase $1 million or more of Class A shares, you will not be subject to
an initial sales charge, but you will incur a sales charge if you redeem your
shares within one year of purchase. Class A shares are subject to ongoing
distribution and service fees at a combined annual rate of up to 0.25% of the
Fund's average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Share Price -- Qualifying for a Reduced Sales Charge."
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT
TO AN INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
six years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all of
your dollars to work from the time you make your investment, but the higher
ongoing distribution fee will cause these shares to have higher expenses than
those of Class A shares. To the extent that any dividends are paid by the Fund,
these higher expenses will also result in lower dividends than those paid on
Class A shares.
- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS B SHARES ARE SUBJECT
TO A CONTINGENT DEFERRED SALES CHARGE.
- -------------------------------------------------------------------------------
8
<PAGE> 12
Class B shares are not available for full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase
arrangement allows you to choose the most beneficial way to buy shares, given
the amount of your purchase, the length of time you expect to hold your shares
and other circumstances. You should consider whether, during the anticipated
life of your Fund investment, the CDSC and accumulated fees on Class B shares
would be less than the initial sales charge and accumulated fees on Class A
shares purchased at the same time, and to what extent this differential would be
offset by the Class A shares' lower expenses. To help you make this
determination, the table under the caption "Expense Information" on the inside
cover page of this Prospectus shows examples of the charges applicable to each
class of shares. Class A shares will normally be more beneficial if you qualify
for reduced sales charges. See "Share Price -- Qualifying for a Reduced Sales
Charge."
- -------------------------------------------------------------------------------
YOU SHOULD CONSIDER WHICH CLASS OF SHARES
WOULD BE MORE BENEFICIAL TO YOU.
- -------------------------------------------------------------------------------
Class A shares are subject to lower distribution fees and, accordingly, pay
correspondingly higher dividends per share, to the extent any dividends are
paid. However, because initial sales charges are deducted at the time of
purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares. This is because
the accumulated distribution and service charges on Class B shares may exceed
the initial sales charge and accumulated distribution and service charges on
Class A shares during the life of your investment.
Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all of your funds invested initially. However, you will
be subject to higher distribution and service fees and, for a six-year period, a
CDSC.
In the case of Class A shares, the distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and ongoing distribution and service fees. In the
case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees, as well as from the CDSC incurred upon
redemption within six years of purchase. The purpose and function of the Class B
shares' CDSC and ongoing distribution and service fees are the same as those of
the Class A shares' initial sales charge and ongoing distribution and service
fees. Sales personnel distributing the Fund's shares may receive different
compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day. They also will be in the same
amount, except for differences resulting from each class bearing only its own
9
<PAGE> 13
distribution and service fees, shareholder meeting expenses and any incremental
transfer agency costs. See "Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays to the Adviser a
monthly fee of .625% of the Fund's average daily net assets.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Under these Plans, the Fund will pay distribution and service fees
at an aggregate annual rate of up to 0.25% of the Class A shares' average daily
net assets and an aggregate annual rate of 1.00% of the Class B shares' average
daily net assets. In each case, up to 0.25% is for service expenses and the
remaining amount is for distribution expenses. The distribution fees will be
used to reimburse John Hancock Funds for its distribution expenses, including
but not limited to: (i) initial and ongoing sales compensation to Selling
Brokers and others (including affiliates of John Hancock Funds) engaged in the
sale of Fund shares; (ii) marketing, promotional and overhead expenses incurred
in connection with the distribution of Fund shares; (iii) unreimbursed
distribution expenses under the Fund's prior distribution plans; (iv)
distribution expenses incurred by other investment companies which sell all or
substantially all of their assets to, merge or otherwise engage in a
reorganization transaction with the Fund; and (v) with respect to Class B shares
only, interest expenses on unreimbursed distribution expenses. The service fees
will be used to compensate Selling Brokers for providing personal and account
maintenance services to shareholders.
- -------------------------------------------------------------------------------
THE FUND PAYS DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
- -------------------------------------------------------------------------------
In the event John Hancock Funds is not fully reimbursed for payments it makes or
expenses it incurs under the Class A Plan, these expenses will not be carried
beyond one year from the date they were incurred. Unreimbursed expenses under
the Class B Plan will be carried forward together with interest on the balance
of these unreimbursed expenses. For the fiscal year ended December 31, 1994, an
aggregate of $13,713 of distribution expenses or .08% 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.
Information on the Fund's total expenses is in the Financial Highlights section
of this Prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares and distributes dividends representing
all or substantially all of its net investment income, if any, annually. The
fund will distribute realized net short-term or long-term capital gains, if any,
annual after the close of the fiscal year (December 31).
Dividends are reinvested in additional shares of your class unless you elect the
option to receive them in cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
10
<PAGE> 14
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividends on these shares will be lower than those on the Class A
shares. See "Share Price."
TAXATION. Dividends from the Fund's net investment income, certain net foreign
currency gains and the Fund's net short-term capital gains are taxable to you as
ordinary income. Dividends from the Fund's net long-term capital gains are
taxable as long-term capital gains. These dividends are taxable, whether
received in cash or reinvested in additional shares. Certain dividends may be
paid by the Fund in January of a given year but may be taxable to you as if you
received them the previous December. Corporate shareholders may be entitled to
take the corporate dividends received deduction for dividends received from the
Fund that are attributable to dividends received by the Fund from U.S. domestic
corporations, subject to certain restrictions under the Internal Revenue Code of
1986, as amended (the "Code"). The Fund will send you a statement by January 31
showing the tax status of the dividends you received for the prior year.
- -------------------------------------------------------------------------------
YOU SHOULD KEEP YOUR ACCOUNT STATEMENTS
RECEIVED FROM THE FUND FOR YOUR PERSONAL
TAX RECORDS.
- -------------------------------------------------------------------------------
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to Federal income tax on any net
investment income or net realized capital gains distributed to its shareholders
within the time period prescribed by the Code. When you redeem (sell) or
exchange shares, you may realize a taxable gain or loss.
On the account application, you must certify that the social security or other
tax-payer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your taxable dividends, the proceeds of redemptions
or exchanges.
The Fund may be subject to foreign withholding taxes or other foreign taxes on
income (possibly including capital gains) on certain of its foreign investments,
if any, which will reduce the yield or return from those investments. The Fund
expects that it will generally not qualify to pass such taxes through to its
shareholders, who consequently will generally not include them in income or be
entitled to associated foreign tax credits or deductions.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investment in and distributions from the Fund. A
state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the Fund's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax treatment not described above. You should consult
your tax adviser for specific advice.
11
<PAGE> 15
PERFORMANCE
The Fund's total return shows the overall dollar or percentage change in value
of a hypothetical investment in the Fund, assuming the reinvestment of all
dividends. Cumulative total return shows the Fund's performance over a period of
time. Average annual total return shows the cumulative return divided over the
number of years included in the period. Because average annual total return
tends to smooth out variations in the Fund's performance, you should recognize
that it is not the same as actual year-to-year results.
- -------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS TOTAL RETURN.
- -------------------------------------------------------------------------------
Total return calculations are based on the overall change in value of a
hypothetical investment in the Fund. Both total return calculations for Class A
shares generally include the effect of paying the maximum sales charge (except
as shown in "The Fund's Financial Highlights"). Investments at a lower sales
charge would result in higher performance figures. Total return for Class B
shares reflects the deduction of the applicable CDSC imposed on a redemption of
shares held for the applicable period. All calculations assume that all
dividends are reinvested at net asset value on the reinvestment dates during the
periods. Total return of Class A and Class B shares will be calculated
separately and, because each class is subject to different expenses, the total
return may differ with respect to that class for the same period. The relative
performance of the Class A and Class B shares will be affected by a variety of
factors, including the higher operating expenses attributable to the Class B
shares, whether the Fund's investment performance is better in the earlier or
later portions of the period measured and the level of net assets of the Classes
during the period. The Fund will include the total return of Class A and Class B
shares in any advertisement or promotional materials including Fund performance
data. The value of Fund shares, when redeemed, may be more or less than their
original cost. Total return is a historical calculation, and are not an
indication of future performance. See "Factors to Consider in Choosing an
Alternative."
12
<PAGE> 16
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The minimum initial investment in Class A and Class B shares is $1,000
($250 for group investments and retirement plans). Complete the Account
Application attached to this Prospectus. Indicate whether you are
purchasing Class A or Class B shares. If you do not specify which class of
shares you are purchasing, Investor Services will assume that you are
investing in Class A shares.
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT
- -------------------------------------------------------------------------------
<TABLE>
- ---------------------------------------------------------------------------------
<S> <C>
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation,
P.O. Box 9115, Boston, MA 02205-9115.
2. Deliver the completed application and check to your registered
representative, or broker with an agreement with John Hancock
Funds ("Selling Broker") or mail it directly to Investor
Services.
- ---------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Capital Growth Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker or mail it directly to
Investor Services.
- ---------------------------------------------------------------------------------
MONTHLY 1. Complete the "Automatic Investing" and "Bank Information"
AUTOMATIC sections on the Account Privileges Application designating a
ACCUMULATION bank account from which funds may be drawn.
- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B
SHARES
- -------------------------------------------------------------------------------
PROGRAM 2. The amount you elect to invest will be automatically withdrawn
from your bank
(MAAP) or credit union account.
- ---------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 17
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class of shares you own, your account
number and the name(s) in which the account is registered.
- -------------------------------------------------------------------------------
BUYING ADDITIONAL
CLASS A AND CLASS B
SHARES (CONTINUED)
- -------------------------------------------------------------------------------
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- ---------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Capital Growth Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
- ---------------------------------------------------------------------------------
</TABLE>
Other Requirements: All purchases must be made in U.S. dollars. Checks
written on foreign banks will delay purchases until U.S. funds are
received, and a collection charge may be imposed. Shares of the Fund are
priced at the offering price based on the net asset value computed after
Investor Services receives notification of the dollar equivalent from the
Fund's custodian bank. Wire purchases normally take two or more hours to
complete and, to be accepted the same day, must be received by 4:00 P.M.,
New York time. Your bank may charge a fee to wire funds. Telephone
transactions are recorded to verify information. Certificates are not
issued unless a request is made in writing to Investor Services.
- -------------------------------------------------------------------------------
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------
SHARE PRICE
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV of each class can differ. Securities in the Fund's
portfolio are valued on the basis of market quotations, valuations provided by
independent pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt investments
maturing within 60 days are valued at amortized cost which approximates market
value. Foreign securities are valued on the basis of quotations from the primary
market in which they are traded and are translated from the local currency into
U.S. dollars using current exchange rates. If quotations are not readily
available, assets are valued by a method that the Trustees believe accurately
reflects fair value.
- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR
NET ASSET VALUE PLUS A SALES CHARGE, IF
APPLICABLE, WHICH WILL VARY WITH THE
PURCHASE ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------
The NAV is calculated once daily as of the close of regular trading on the New
York Stock Exchange (the "Exchange") (generally at 4:00 P.M., New York time) on
each day that the Exchange is open.
14
<PAGE> 18
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the Exchange and
transmit it to John Hancock Funds before its close of business to receive that
day's offering price.
<TABLE>
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<CAPTION>
COMBINED
SALES CHARGE AS REALLOWANCE REALLOWANCE TO
AMOUNT INVESTED SALES CHARGE AS A PERCENTAGE OF AND SERVICE FEE AS SELLING BROKERS AS
(INCLUDING SALES A PERCENTAGE OF THE AMOUNT A PERCENTAGE OF A PERCENTAGE OF
CHARGE) OFFERING PRICE INVESTED OFFERING PRICE(+) THE OFFERING PRICE(*)
- ------------------- --------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.25% 4.01%
$50,000 to $99,999 4.50% 4.71% 3.75% 3.51%
$100,000 to $249,999 3.50% 3.63% 2.85% 2.61%
$250,000 to $499,999 2.50% 2.56% 2.10% 1.86%
$500,000 to $999,999 2.00% 2.04% 1.60% 1.36%
$1,000,000 and over 0.00%(**) 0.00%(**) (***) 0.00%(***)
<FN>
(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. In addition to the reallowance allowed to all selling Brokers,
John Hancock Funds will pay the following: Round trip airfare to a resort
will be offered to each registered representative of a Selling Broker (if
the Selling Broker has agreed to participate) who sells certain amounts of
shares of John Hancock funds. John Hancock Funds will make these incentive
payments out of its own resources. A Selling Broker to whom substantially
the entire sales charge is reallowed or who receives these incentives may
be deemed to be an underwriter under the Securities Act of 1933. Other
than distribution and service fees, the Fund does not bear distribution
expenses.
(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions within one year of purchase.
(***) John Hancock Funds may pay a commission and the first year's service fee
(as described in (+) below) to Selling Brokers who initiate and are
responsible for purchases of $1 million or more in aggregate as follows:
1% on sales to $4,999,999, 0.50% on the next $5 million and 0.25% on
amounts over $10 million.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.
</TABLE>
15
<PAGE> 19
Sales charges ARE NOT APPLIED to any dividends that are reinvested in additional
Class A shares of the Fund.
In addition, John Hancock Funds will pay certain affiliated Selling Brokers at
an annual rate of up to 0.05% of the daily net assets of accounts attributable
to these brokers.
Under certain circumstances described below, investors in Class A shares may be
entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."
<TABLE>
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS A
SHARES. Purchases of $1 million or more of Class A shares will be made at net
asset value with no initial sales charge, but if the shares are redeemed within
12 months after the end of the calendar month in which the purchase was made
(the CDSC period), a CDSC will be imposed. The rate of the CDSC will depend on
the amount invested as follows:
<CAPTION>
AMOUNT INVESTED CDSC RATE
- --------------------------------------------------------------------- ---------
<S> <C>
$1 million to $4,999,999............................................. 1.00%
Next $5 million to $9,999,999........................................ 0.50%
Amounts of $10 million and over...................................... 0.25%
</TABLE>
Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994 and participant directed defined
contribution plans with at least 100 eligible employees at the inception of the
Fund account may purchase Class A shares with no initial sales charge. However,
if the shares are redeemed within 12 months after the end of the calendar year
in which the purchase was made, a CDSC will be imposed at the above rate.
The CDSC will be assessed on an amount equal to the lesser of the current market
value or the original purchase cost of the redeemed Class A shares. Accordingly,
no CDSC will be imposed on increases in account value above the initial purchase
price, including any distributions which have been reinvested in additional
Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that the redemption is first made from any shares
in your account that are not subject to the CDSC. The CDSC is waived on
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $50,000 in Class
A shares of the Fund or a combination of funds within the John Hancock family of
funds (except money market funds), you may qualify for a reduced sales charge on
your investments in Class A shares through a LETTER OF INTENTION. You may also
be able to use the ACCUMULATION PRIVILEGE and the COMBINATION PRIVILEGE to take
advantage of the value of your previous investments in Class A shares of the
John Hancock funds in meeting the breakpoints for a reduced sales charge. For
the ACCUMULATION PRIVILEGE and COMBINATION PRIVILEGE, the applicable sales
charge will be based on the total of:
- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE
ON YOUR INVESTMENT IN CLASS A SHARES.
- -------------------------------------------------------------------------------
16
<PAGE> 20
1. Your current purchase of Class A shares of the Fund.
2. The net asset value (at the close of business on the previous day) of (a) all
Class A shares of the Fund you hold, and (b) all Class A shares of any other
John Hancock funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$20,000 and, subsequently, invest $30,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 4.50% and not 5.00% (the
rate that would otherwise be applicable to investments of less than $50,000. See
"Initial Sales Charge alternative -- Class A Shares.")
- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A
SALES CHARGE TO CERTAIN INDIVIDUALS AND
ORGANIZATIONS.
- -------------------------------------------------------------------------------
If you are in one of the following categories, you may purchase Class A shares
of the Fund without paying a sales charge:
- - A Trustee/Director or officer of the Fund; a Director or officer of the
Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family of any of
the foregoing; or any Fund, pension, profit sharing or other benefit plan for
the individuals described above.
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any registered
investment management company.*
- - A bank, trust company, credit union, savings institution or other type of
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer or registered investment adviser that has entered into an
agreement with John Hancock Funds providing specifically for the use of Fund
shares in fee-based investment products made available to their clients.
- - A former participant in an employee benefit plan with John Hancock Funds, when
he/she withdraws from his/her plan and transfers any or all of his/her plan
distributions directly to the Fund.
- ------------------
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
Class A Shares of the Fund may be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
17
<PAGE> 21
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without a sales charge so that your
entire initial investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the rates set forth below. This charge will be assessed on an amount equal to
the lesser of the current market value or the original purchase cost of the
shares being redeemed. Accordingly, you will not be assessed a CDSC on increases
in account value above the initial purchase price, including shares derived from
dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
reinvestment of dividends, and next from the shares you have held the longest
during the six-year period. The CDSC is waived on redemptions in certain
circumstances. See the discussion "Waiver of Contingent Deferred Sales Charge"
below.
<TABLE>
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share $ 600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 X $12) -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 X
$2) - 80
------
- - Amount subject to CDSC $ 400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
part of them to defray its expenses related to providing the Fund with
distribution services connected to the sale of Class B shares, such as
compensating Selling Brokers for selling these shares. The combination of the
CDSC and the distribution and service fees makes it possible for the Fund to
sell Class B shares without deducting a sales charge at the time of the
purchase.
18
<PAGE> 22
<TABLE>
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase your Class B shares until the time you redeem them. Solely
for the purposes of determining this holding period, any payments you make
during the month will be aggregated and deemed to have been made on the last day
of the month.
<CAPTION>
YEAR IN WHICH
CLASS B SHARES CONTINGENT DEFERRED SALES
REDEEMED FOLLOWING CHARGE AS A PERCENTAGE OF
PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC
------------------ -----------------------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC,
unless indicated otherwise, in these circumstances:
- - Redemptions of Class B shares made under Systematic Withdrawal Plan (see "How
to Redeem Shares"), as long as your annual redemptions do not exceed 10% of
your original account value plus 10% of the value of your subsequent
investments (less redemptions) in that account at the time you notify Investor
Services. This waiver does not apply to Systematic Withdrawal Plan redemptions
of Class A shares that are subject to a CDSC.
- -------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON
CLASS B AND CLASS A SHARE REDEMPTIONS WILL
BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
the life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.
- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
Section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
- - Redemptions due to death or disability.
- - Redemptions made under the Reinvestment Privilege, as described in "Additional
Services and Programs" of this Prospectus.
19
<PAGE> 23
- - Redemptions made pursuant to the Fund's right to liquidate your account if you
have less than $100 invested in the Fund.
- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans that purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur no later than the month following eight years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into the Fund from another John Hancock
fund, the calculation will be based on the time you purchased the shares in the
original fund. The Fund has been advised that the conversion of Class B Shares
to Class A Shares should not be taxable for Federal income tax purposes and
should not change a shareholder's tax basis or tax holding period for the
converted shares.
20
<PAGE> 24
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services, less any applicable CDSC. The Fund
may hold payment until it is reasonably satisfied that investments recently made
by check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION
REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- -------------------------------------------------------------------------------
Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss depending usually on the difference between what you paid for them and what
you receive for them, subject to certain tax rules. Under unusual circumstances,
the Fund may suspend redemptions or postpone payment for up to seven days or
longer, as permitted by Federal securities laws.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemption privilege. Call 1-800-225-5291, from
8:00 A.M. to 4:00 P.M. (New York time), Monday through
Friday, excluding days on which the Exchange is closed.
Investor Services employs the following procedures to
confirm that instructions received by telephone are
genuine. Your name, the account number, taxpayer
identification number applicable to the account and other
relevant information may be requested. In addition,
telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address
on the account must not have changed for the last thirty
days. A check will be mailed to the exact name(s) and
address shown on the account.
If reasonable procedures, such as those described above,
are not followed, the Fund may be liable for any loss due
to unauthorized or fraudulent telephone instructions. In
all other cases, neither the Fund nor Investor Services
will be liable for any loss or expense for acting upon
telephone instructions made in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of the Fund that
are in certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times, you
should consider placing redemption requests in writing or
use EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- ---------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired on
the next business day to your designated bank account, and
a fee (currently $4.00) will be deducted. You may also use
electronic funds transfer to your assigned bank account,
and the funds are usually collectible after two business
days. Your bank may or may not charge a fee for this
service. Redemptions of less than $1,000 will be sent by
check or electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
included with this Prospectus.
- ---------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, class of shares, your
account number and the additional requirements listed below
that apply to your particular account.
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
--------------------------------- --------------------------------------------
<S> <C>
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaran-
teed.
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed.
Trusts A letter of instruction signed by the
trustee(s) with the signature(s) guaranteed.
(If the trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
</TABLE>
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
---------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Fund
by verifying the signature on your request. It may not be provided by a
notary public. If the net asset value of the shares redeemed is $100,000 or
less, John Hancock Funds may guarantee the signature. The following
institutions may provide you with a signature guarantee, provided that the
institution meets credit standards established by Investor Services: (i) a
bank; (ii) a securities broker or dealer, including a government or
municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union
having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency.
- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption.
Contact your broker for instructions.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your
stock power or a letter of instructions. Unless you specify to the
contrary, any outstanding Class A shares will be redeemed before Class B
shares. You may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining small accounts, the
Fund reserves the right to redeem at net asset value all shares in an
account which holds less than $100 (except accounts under retirement plans)
and to mail the proceeds to the shareholder, or the transfer agent may
impose an annual fee of $10.00. No account will be involuntarily
redeemed or additional fee imposed, if the value of the account is in
excess of the Fund's minimum initial investment. No CDSC will be imposed on
involuntary redemptions of shares.
Shareholders will be notified before these redemptions are to be made or
this fee is imposed, and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number
of shares acquired by further purchases and dividend reinvestments, if any,
exceeds the number of shares redeemed, repeated redemptions from a smaller
account may eventually trigger this policy.
- -------------------------------------------------------------------------------
22
<PAGE> 26
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A, whether or not they have been so designated.
- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND ONLY
FOR SHARES OF THE SAME CLASS OF ANOTHER
JOHN HANCOCK FUND.
- -------------------------------------------------------------------------------
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. Class B shares of the Fund that are subject to a CDSC may be exchanged
into Class B shares of another John Hancock fund without incurring the CDSC;
however, these shares will be subject to the CDSC schedule of the shares
acquired (except that exchanges into John Hancock Short-Term Strategic Income
Fund, John Hancock Limited-Term Government Fund and John Hancock Adjustable U.S.
Government Trust will be subject to the initial fund's CDSC). For purposes of
computing the CDSC payable upon redemption of shares acquired in an exchange,
the holding period of the original shares is added to the holding period of the
shares acquired in an exchange. However, if you exchange Class B shares
purchased prior to January 1, 1994 for Class B shares of any other John Hancock
Fund, you will be subject to the CDSC schedule in effect on your initial
purchase date.
You may exchange Class B shares of the Fund into shares of a John Hancock Money
Market fund at net asset value; however, you will continue to be subject to a
CDSC upon redemption. The rate of the CDSC will be the rate in effect for the
original Fund at the time of exchange.
The Fund reserves the right to require you to keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted to
execute a new exchange. The Fund may also terminate or alter the terms of the
exchange privilege, upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares in another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
23
<PAGE> 27
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you complete the application for your initial purchase of Fund shares,
you automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
IN WRITING
1. In a letter, request an exchange and list the following:
-- the name and class of the Fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
24
<PAGE> 28
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares reinvested in
shares of any John Hancock fund that is otherwise subject to a sales charge
as long as you reinvest within 120 days from the redemption date. If you paid
a CDSC upon a redemption, you may reinvest at net asset value in the same
class of shares from which you redeemed within 120 days. Your account will be
credited with the amount of the CDSC previously charged, and the reinvested
shares will continue to be subject to a CDSC. For purposes of computing the
CDSC payable upon a subsequent redemption, the holding period of the shares
acquired through reinvestment will include the holding period of the redeemed
shares.
- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF THE FUND, YOU MAY
BE ABLE TO REINVEST ALL OR PART OF THE
PROCEEDS IN SHARES OF THIS FUND OR ANOTHER
JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------
2. Any portion of your redemption may be reinvested in Fund shares or in shares
of any of the other John Hancock funds, subject to the minimum investment
limit of that fund.
3. To reinvest, you must notify Investor Services in writing. Include the Fund's
name, the account number and class from which your shares were originally
redeemed.
SYSTEMATIC WITHDRAWAL PLAN
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain this application by calling your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
annually or on a selected monthly basis to yourself or any other designated
payee.
- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR
ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS OF
FUNDS FROM YOUR RETIREMENT ACCOUNT TO
COMPLY WITH IRS REGULATIONS.
- -------------------------------------------------------------------------------
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares, because you may be
subject to initial sales charges on your purchases of Class A shares or to a
CDSC on your redemptions of Class B shares. In addition, your redemptions are
taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks or if deposits to a bank account are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You can authorize an investment to be automatically withdrawn each month from
your bank, for investment in Fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------
25
<PAGE> 29
2. You can also authorize automatic investment through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You can terminate your Monthly Automatic Accumulation Program plan at any
time.
4. There is no charge to you for this program, and there is no cost to the Fund.
5. If you have payments being withdrawn from a bank account and we are notified
that the account has been closed, your withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS
MAY ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
RETIREMENT PLANS
1. You can use the Fund as a funding medium for various types of qualified
retirement plans, including Individual Retirement Accounts, Keogh Plans (H.R.
10), Pension and Profit Sharing Plans (including 401(k) plans), Tax Sheltered
Annuity Retirement Plans (403(b) plans) and 457 Plans.
2. The initial investment minimum or aggregate minimum for any of the above
plans is $500. However, accounts being established as Group IRA, SEP, SARSEP,
TSA, 401(k) and 457 Plans will be accepted without an initial minimum
investment.
INVESTMENTS, TECHNIQUES AND RISK FACTORS
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its net
assets in illiquid investments, which include repurchase agreements maturing in
more than seven days, restricted securities and securities not readily
marketable.
LENDING OF SECURITIES AND REPURCHASE AGREEMENTS. For the purpose of realizing
additional (taxable) income, the Fund may lend to broker-dealers portfolio
securities amounting to not more than 33% of its total assets taken at current
value or may enter into repurchase agreements. In a repurchase agreement, the
Fund buys a security subject to the right and obligation to sell it back to the
issuer at the same price plus accrued interest. These transactions must be fully
collateralized at all times. The Fund may reinvest any cash collateral in
short-term highly liquid debt securities. However, they may involve some credit
risk to the
26
<PAGE> 30
Fund if the other party should default on its obligation and the Fund is delayed
in or prevented from recovering the collateral. Securities loaned by the Fund
will remain subject to fluctuations of market value.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase securities
on a forward or "when-issued" basis and may purchase or sell securities on a
forward commitment basis to hedge against anticipated changes in interest rates
and prices. When the Fund engages in such transactions, it relies on the seller
or the buyer, as the case may be, to consummate the transaction. Failure to
consummate the transaction may result in the Fund's losing the opportunity to
obtain an advantageous price and yield. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition or dispose of
its right to deliver or receive against a forward commitment, it can incur a
taxable gain or a loss.
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. Short term trading may have the effect of
increasing portfolio turnover and may increase net short-term capital gains,
distributions from which would be taxable to shareholders as ordinary income.
The Fund does not intend to invest for the purpose of seeking short-term
profits. The Fund's portfolio securities may be changed, however, without regard
to the holding period of these securities (subject to certain tax restrictions),
when the Adviser deems that this action will help achieve the Fund's objective
given a change in an issuer's operations or changes in general market
conditions. A turnover rate of 100% would occur if the value of the lesser of
purchases and sales of portfolio securities for a particular year equaled the
average monthly value of portfolio securities owned during the year (excluding
short-term securities). A high rate of portfolio turnover (100% or more)
involves a correspondingly greater amount of brokerage commissions and other
costs which must be borne directly by the Fund and thus indirectly its
shareholders. It may also result in the realization of larger amounts of net
short-term capital gains, distributions from which are taxable to shareholders
as ordinary income and may, under certain circumstances, make it more difficult
for the Fund to qualify as a regulated investment company under the Code. The
Fund's portfolio turnover rate is set forth in the table under the caption
"Financial Highlights."
OPTIONS AND FUTURES TRANSACTIONS. The Fund may buy and sell options contracts
on securities and stock indices, stock index futures contracts and options on
such futures contracts. Options and futures contracts are bought and sold to
manage the Fund's exposure to changing interest rates and security prices. Some
options and futures strategies, including selling futures, buying puts and
writing calls, tend to hedge a Fund's investment against price fluctuations.
Other strategies, including buying futures, writing puts, and buying calls, tend
to increase market exposure. Options and futures may be combined with each other
or with forward contracts in order to adjust the risk and return characteristics
of the overall strategy. The Fund may invest in options and futures based on
securities and securities indices. The Fund may enter into transactions in
over-the-counter (OTC) options under the
27
<PAGE> 31
same circumstances in which it may effect transactions in exchange traded
options.
Options and futures can be volatile investments and involve certain risks.
Options and futures do not pay interest, but may produce taxable capital gains
or losses. The Fund will not engage in a transaction in futures or options on
futures if, immediately thereafter, the sum of initial margin deposits and
premiums paid for all options on securities and securities indices exceeds 5% of
the Fund's net assets, or required to establish positions in futures contracts
and options on futures would exceed 10% of the Fund's net assets. The Fund may
not write options on securities or securities indices with aggregate exercise
prices in excess of 30% of the Fund's total net assets measured at the time the
option is written. The Fund's transactions in options and futures contracts may
be limited by the requirements of the Code for qualification as a regulated
investment company. See the Statement of Additional Information for further
discussion of options and futures transactions, including tax effects and
investment risks.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements which involve the sale of securities held in its portfolio to a bank
or securities firm 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. The Fund will use proceeds obtained
from the sale of securities pursuant to reverse repurchase agreements to
purchase other investments. The use of borrowed funds to make investments is a
practice known as "leverage," which is considered speculative. The Fund will
enter into a reverse repurchase agreement only when the Adviser determines that
the interest income to be earned from the investment of the proceeds is greater
than the interest expense of the transaction. However, there is a risk that
interest expense will nevertheless exceed the income earned. 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
would also continue to be subject to the risk of a decline in the market value
of the securities sold under the agreements because it will reacquire those
securities upon effecting their repurchase. To minimize risks associated with
reverse repurchase agreements, the Fund would establish and maintain with the
Fund's custodian a separate account consisting of highly liquid, marketable
securities in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. The Fund
would not enter into reverse repurchase agreements exceeding in the aggregate
more than 33 1/3% of the value of its total net assets (including for this
purpose other borrowings of the Fund). The Fund will enter into reverse
repurchase agreements only with selected registered broker/dealers or with
federally insured banks or savings and loan associations which are approved in
advance as being creditworthy by the Board of Trustees. Under procedures
established by the Board of Trustees, the Adviser will monitor the
creditworthiness of the firms involved.
28
<PAGE> 32
LEVERAGE. In seeking to enhance investment performance, the Fund may, from time
to time, borrow money from banks for investment in portfolio securities. The
Fund may borrow only from banks and only if the value of the Fund's assets
(including the loan proceeds) less other liabilities of the Fund are at least
three (3) times the amount of the bank borrowing. This speculative practice may
help the Fund increase the net asset value of its shares in an amount greater
than would otherwise be the case when the market values of the securities
purchased through borrowing increase. However, if the return on the investment
of borrowed monies does not fully recover the costs of such borrowings to the
Fund, the net asset value of the Fund would fall in an amount greater than would
otherwise be the case. The time and extent to which the Fund may employ leverage
will be determined by the Adviser in light of changing facts and circumstances,
including general economic and market conditions. Under the 1940 Act, the value
of the Fund's assets, including the proceeds of the loan, less other liabilities
of the Fund, must be at least three times the proposed bank borrowing. If, due
to market conditions or other reasons, the value of the Fund's assets falls
below such requirement, the Fund must within three business days, reduce such
borrowings to satisfy such requirement. To do this, the Fund may have to sell a
portion of its investments at a time when it may be disadvantageous to do so.
RISKS OF FOREIGN INVESTMENTS. The Fund may invest without limitation in
securities issued by foreign companies and principally traded in securities
markets outside the United States; however, the Fund does not intend to invest
more than 25% of its assets in securities issued by companies located in any one
country outside of the United States. There are certain risks associated with
investments in foreign securities. Foreign investments may be affected favorably
or unfavorably by changes in currency rates and exchange control regulations and
costs will be incurred in connection with conversions between various
currencies. There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Securities of some foreign
companies may be less liquid or more volatile than securities of U.S. companies,
and foreign brokerage commissions and custodian fees are generally higher than
in the U.S. In addition, there is generally less government regulation of stock
exchanges, brokers and listed companies abroad than in the U.S. Investments in
foreign securities may also be subject to other risks different from those
affecting U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, the possible difficulty in obtaining
and enforcing judgments against a foreign issuer, and imposition of withholding
taxes on dividend or interest payments. Foreign securities, like other assets of
the Fund, will be held by the Fund's custodian or by any sub-custodian which may
hereafter be appointed in accordance with applicable requirements of the 1940
Act and the rules thereunder.
Generally, the Fund's foreign currency exchange transactions will be conducted
on a spot basis (i.e., cash basis) at the spot rate for purchasing or selling
currency prevailing in the foreign currency exchange market. However, in order
to hedge against possible variations in foreign exchange rates pending the
settlement of
29
<PAGE> 33
transactions in foreign securities or during the time the Fund holds the foreign
security, the Fund may enter into forward foreign currency contracts. This is
accomplished through agreements to purchase or sell a specified currency at a
specified date and price in amounts corresponding to specific payables or
receivables arising out of the purchase or sale of foreign securities. However,
such hedging transactions may not eliminate fluctuations in the prices of
portfolio securities due to factors other than currency fluctuations or prevent
losses if the prices of securities decline. In addition, such hedging
transactions preclude the opportunity for gain if the value of the hedged
security should rise due to changes in currency values. The Fund will not
speculate in forward foreign exchange transactions and will not effect a
position hedging transaction (i.e., the sale of forward foreign currency with
respect to a portfolio security denominated in such foreign currency) if as a
result more than 15% of the value of the Fund's total assets (exclusive of the
proceeds of any borrowings) would be committed to the consummation of such
contracts.
DERIVATIVE CONTRACTS. The Fund may purchase or enter into derivative contracts
to hedge against fluctuations in interest rates or securities prices or as a
substitute for the purchase or sale of securities. The Fund's transactions in
derivative contracts may include the purchase or sale of futures contracts on
securities or indices; options on futures contracts; and options on securities
or indices. All of the Funds' transactions in derivative contracts involve a
risk of loss or depreciation due to unanticipated adverse changes in interest
rates or securities prices. The loss on derivative contracts may exceed the
Fund's initial investment in these contracts. In addition, the Fund may lose the
entire premium paid for purchased options that expire before they can be
profitably exercised by the Fund.
RISKS ASSOCIATED WITH DERIVATIVE CONTRACTS. The risks associated with the
Fund's transactions in derivative contracts may include some or all of the
following:
Market Risk. Entering into a derivative contract involves a risk that the
applicable market will move against the Fund's position and that the Fund will
incur a loss. For derivative contracts other than purchased options, this loss
may exceed the amount of the initial investment made or the premium received by
the Fund.
Leverage and Volatility Risk. Derivative contracts may sometimes increase or
leverage the Fund's exposure to a particular market risk. Leverage enhances the
price volatility of derivative contracts held by the Fund. The Fund may
partially offset the leverage inherent in derivative contracts by maintaining a
segregated account consisting of cash and liquid, high grade debt securities, by
holding offsetting portfolio securities or contracts or by covering written
options.
Correlation Risk. A Fund's success in using derivative contracts to hedge
portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Fund's portfolio assets.
30
<PAGE> 34
Credit Risk. Over-the-counter derivative contracts involve a risk that the
issuer or counterparty will fail to perform its contractual obligations.
Liquidity and Valuation Risk. Some derivative securities are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, a commodity or exchange may suspend
or limit trading in an exchange-traded derivative contract, which may make the
contract temporarily illiquid and difficult to price. The staff of the
Securities and Exchange Commission ("SEC") takes the position that certain
over-the-counter options are subject to the Fund's 10% limit on illiquid
investments. The Fund's ability to terminate over-the-counter derivative
contracts may depend on the cooperation of the counterparties to such contracts.
For thinly traded derivative securities and contracts, the only source of price
quotations may be the selling dealer or counterparty.
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<PAGE> 35
JOHN HANCOCK
CAPITAL GROWTH FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank
& Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For Service Information
For Telephone Exchange call
1-800-225-5291
For Investment-by-Phone
For Telephone Redemption
For TDD call 1-800-554-6713
JOHN HANCOCK
CAPITAL
GROWTH FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MAY 1, 1995
A MUTUAL FUND SEEKING
CAPITAL APPRECIATION
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
[LOGO] Printed on Recycled Paper
<PAGE> 36
JOHN HANCOCK CAPITAL GROWTH FUND
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
This Statement of Additional Information is not a Prospectus, but is
intended to provide additional information regarding the activities and
operations of the John Hancock Capital Growth Fund (the "Fund") and should be
read in conjunction with the Prospectus.
A Prospectus for the Fund, dated May 1, 1995, which provides the basic
information an investor should know before investing may be obtained without
charge from:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-5291
1-800-225-5291
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Special Investment Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Those Responsible for Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Distribution Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Deferred Sales Charge on Class B Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Additional Services and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Brokerage Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Transfer Agent Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Calculation of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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<PAGE> 37
INVESTMENT OBJECTIVE AND POLICIES
PRIOR TO THE APPROVAL OF JOHN HANCOCK ADVISERS, INC. (THE "INVESTMENT ADVISER")
AS THE FUND'S ADVISER EFFECTIVE DECEMBER 22, 1994, THE FUND WAS MANAGED BY
TRANSAMERICA FUND MANAGEMENT COMPANY.
INVESTMENT OBJECTIVE. As discussed under "Investment Objective and
Policies" in the Prospectus, the primary investment objective of the Fund is
capital appreciation. The Fund seeks to achieve its objective by investing
primarily in equity securities of domestic and foreign companies. The Fund may
also, from time to time, in pursuit of its investment objective, engage in
leveraging and in a variety of special investment techniques in seeking to
hedge against changes in the prices of securities held in its portfolio or
which it intends to purchase such as the purchase and sale of standardized
stock options as well as options on stock indexes, stock index futures and
options on such futures. The investment policies and techniques employed by
the Fund involve a greater degree of risk than those inherent with more
conservative investment approaches.
LEVERAGE. As discussed under "Investment Objectives and Policies" in
the Prospectus, the Fund may from time to time borrow money from banks for
investment in portfolio securities. The time and extent to which the Fund may
engage in such borrowing will be determined by the Investment Adviser in light
of changing facts and circumstances, including general economic and market
conditions. Under the Investment Company Act of 1940, the Fund may borrow
money only from banks, and only if the value of the Fund's assets, including
the proceeds of the loan, less other liabilities of the Fund, are at least
three times the proposed bank borrowing. The amount of borrowing will also be
limited by applicable margin limitations imposed by the Federal Reserve Board.
In order to generate additional income, the Fund may, from time to
time, lend securities from its portfolios to brokers, dealers and financial
institutions such as banks and trust companies. Such loans will be secured by
collateral consisting of cash or U.S. Government securities which will be
maintained in an amount equal to at least 100% of the current market value of
the loaned securities. During the period of the loan, the fund will receive
the income on both the loaned securities and the collateral and thereby
increase its return. Cash collateral will be invested in short-term high
quality debt securities, which will increase the current income of the Fund.
The loans will be terminable by the Fund at any time and by the borrower on one
day's notice. The Fund will have the right to regain record ownership of
loaned securities to exercise beneficial rights such as rights to interest or
other distributions or voting rights on important issues. The Fund may pay
reasonable fees to persons unaffiliated with the Fund for services in arranging
such loans. Lending of portfolio securities involves a risk of failure by the
borrower to return the loaned securities, in which event the Fund may incur a
loss.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may enter into forward
contracts to purchase or sell foreign currencies as a hedge against possible
variations in foreign exchange rates. A forward foreign currency contract is
an agreement between the contracting parties to exchange an amount of currency
at some future time at an agreed upon rate. The rate can be higher or lower
than the spot rate between the currencies that are the subject of the contract.
A forward contract generally has no deposit requirement and such transactions
do not involve commissions. By entering into a forward contract for the
purchase or sale of the amount of foreign currency invested in a foreign
security transaction, the Fund can hedge against possible variations in the
value of the dollar versus the subject currency either between the date the
foreign security is purchased or sold and the date on which payment is made or
received or during the time the Fund holds the foreign
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<PAGE> 38
security. If the Fund enters into a "position hedging transaction," which is
the sale of forward foreign currency with respect to a portfolio security
denominated in such foreign currency, its custodian bank will place cash or
liquid equity or debt securities in a separate account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
such forward contract. If the value of the securities placed in the separate
account declines, additional cash or securities will be placed in the account
so that the value of the account will equal the amount of the Fund's commitment
with respect to such contracts. The Investment Adviser does not intend to
enter into position hedging transactions on a regular or continuous basis and
will not do so if as a result more than 15% of the value of the Fund's total
assets would be committed to the consummation of such contracts. In addition,
the Fund will not enter into a forward contract if as a result the Fund would
be obligated to deliver an amount of foreign currency to consummate the
contract in excess of the value of the Fund's portfolio securities or other
assets denominated in that currency.
STOCK OPTIONS. A call option gives the purchaser of the option, in
return for a premium paid, the right to buy the security underlying the option
at a specified price at any point during the term of the option. The seller
("writer") of the call option who receives the premium has the obligation to
sell the underlying security to the purchaser at the exercise price during the
option period, if assigned an exercise notice. A put option gives the
purchaser thereof the right to sell and the writer the obligation to buy the
security underlying the option at the exercise price upon exercise of the
option during the option period.
A writer of an option may terminate the obligation to purchase or sell
prior to expiration of the option by making an offsetting purchase of an
identical option ("closing purchase transaction"). Similarly, the buyer of an
option may, prior to expiration, make an offsetting sale of an identical option
("closing sale transaction"). A closing purchase or sale transaction cancels
out an investor's previous position as the holder or the writer of an option.
An option may be exercised at any time from the day on which it is
bought until the last trading day before it expires. To exercise an option the
holder must direct his broker to give exercise instructions to the Options
Clearing Corporation ("OCC"). On the business day following receipt of an
exercise instruction, OCC randomly assigns the exercise to a Clearing Member
account that reflects the writing of an option or options identical to the
exercised option. The brokerage firm to which the exercise notice is assigned
must then allocate the assignment to a customer maintaining a position as an
option writer, whether on a random selection basis or on a "first-in,
first-out" basis. Brokers are required to inform their customers which
allocation method is used and how it works.
An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although the
Fund will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option at any
particular time. In such event it might not be possible to effect closing
transactions in particular options with the result that the Fund would have to
exercise its options in order to realize any profit. This would result in the
Fund incurring brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying securities acquired through the
exercise of call options or upon
3
<PAGE> 39
the purchase of underlying securities for the exercise of put options. If the
Fund as a covered call option writer is unable to effect a closing purchase
transaction in a secondary market, unless the Fund is required to deliver the
stock pursuant to the assignment of an exercise notice, it will not be able to
sell the underlying security until the option expires.
Reasons for the potential 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 or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a 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)
in which event the secondary market on that exchange (or in the class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at a particular time, render certain of the
facilities of any of the clearing corporations inadequate and thereby result in
the institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders. However, the Options Clearing
Corporation, based on forecasts provided by the U.S. exchanges, believes that
its facilities are adequate to handle the volume of reasonably anticipated
options transactions, and such exchanges have advised such clearing corporation
that they believe their facilities will also be adequate to handle reasonably
anticipated volume.
INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental
investment restrictions. Under these investment restrictions, the Fund may
not:
(1) Invest more than 5% of its assets (taken at market value at
the time of each investment) in the securities of any one
issuer or purchase more than 10% of the outstanding voting
securities of any one company or more than 10% of any class of
a company's outstanding securities, except that these
restrictions shall not apply to U.S. government securities.
(2) Invest more than 10% of its total assets (taken at market
value at the time of each investment) in securities of
companies having a record, together with predecessors, of less
than three years of continuous operations, except that this
restriction shall not apply to U.S. government securities.
(3) Make short sales of securities.
(4) Purchase securities on margin or borrow money, except as set
forth in the Prospectus and Statement of Additional
Information under "Leverage" provided however, that the Fund
may borrow money from a bank for temporary or emergency
purposes in amounts not exceeding 5% (taken at the lower of
cost or market) of the Fund's total assets (not including the
proceeds of any borrowings). The borrowing restriction does
not prohibit the use of reverse repurchase agreements, in an
amount, (including any borrowings) not to exceed 33 1/3% of
its net assets.
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<PAGE> 40
(5) Engage in the underwriting of securities except insofar as the
Fund may be deemed an underwriter under the Securities Act of
1933 in disposing of a portfolio security.
(6) Purchase or sell commodities or commodity futures contracts
except stock index futures and options on such futures for
hedging purposes under policies developed by the Fund's Board
of Trustees and forward foreign currency contracts as
described in the Prospectus and Statement of Additional
Information.
(7) Make loans, except through loans of portfolio securities, the
purchase of fixed income securities and by entering into
repurchase agreements. For the purpose of this restriction,
collateral arrangements with respect to stock options, options
on stock indices, stock index futures and options on such
futures are not deemed to be a loan of assets.
(8) Engage in arbitrage transactions or purchase oil, gas or other
mineral leases, rights or royalty contracts or exploration or
development programs, except that the Fund may invest in the
securities of companies which invest in or sponsor such
programs.
(9) Purchase securities of other investment companies in an amount
exceeding the limitations set forth in Section 12(d) of the
Investment Company Act of 1940 and the rules thereunder,
except in connection with a merger, consolidation,
reorganization or acquisition of assets.
(10) Invest for the purpose of exercising control or management of
another company.
(11) Invest in securities of any company if, to the knowledge of
the Fund, any officer or trustee or director of the Fund or of
the Investment Adviser owns more than 1/2 of 1% of the
outstanding securities of such company, and such officers and
trustees or directors who own 1/2 of 1% in the aggregate more
than 5% of the outstanding securities of such company.
(12) Issue senior securities, as defined in the Investment Company
Act, except that the Fund may enter into repurchase
agreements, lend its portfolio securities, and may borrow
money from banks.
(13) Purchase any security or enter into a repurchase agreement if
as a result more than 10% of the value of the Fund's total
assets (taken at market value at the time of each investment)
would be invested in any combination of: securities that are
subject to legal or contractual restrictions on resale
("restricted securities"); securities for which there are no
readily available market quotations; or repurchase agreements
maturing in more than seven days.
(14) Invest in real estate or interests therein.
5
<PAGE> 41
(15) Invest more than 5% of its total assets in warrants, including
not more than 2% of such assets in warrants not listed on
either the NYSE or American Stock Exchange. However, the
acquisition of warrants attached to other securities is not
subject to this restriction.
The fundamental investment restrictions set forth above may not be
changed without the prior approval by the holders of a majority of the
outstanding shares of the Fund as defined in the Investment Company Act of 1940
(the "Act"). A majority for this purpose means: (a) more than 50% of the
outstanding shares, or (b) 67% or more of the shares represented at a meeting
where more than 50% of the outstanding shares are represented, whichever is
less.
The Fund's Board of Trustees has approved the following
non-fundamental investment policy pursuant to an order of the SEC:
Notwithstanding any investment restriction to the contrary, the Fund may, in
connection with the John Hancock Group of Funds Deferred Compensation Plan for
Independent Trustees/Directors, purchase securities of other investment
companies within the John Hancock Group of Funds provided that, as a result,
(i) no more than 10% of the Fund's assets would be invested in securities of
all other investment companies, (ii) such purchase would not result in more
than 3% of the total outstanding voting securities of any one such investment
company being held by the Fund and (iii) no more than 5% of the Fund's assets
would be invested in any one such investment company.
SPECIAL INVESTMENT TECHNIQUES
REGULATORY MATTERS. The Fund has undertaken with the Commodity
Futures Trading Commission ("CFTC") staff that its transactions in futures and
in options on futures will be exclusively for hedging purposes and that it will
adhere to all limitations in the manner and extent to which it may effect
transactions in futures and options on such futures currently imposed by the
CFTC as conditions for exemption of a mutual fund or investment advisers thereto
from registration as a commodity pool operator.
OPTIONS ON STOCK INDEXES AND ITS' RISKS. As discussed under "Special
Investment Techniques - Options on Stock Indexes" in the Prospectus, the Fund's
purchase and sale of options on stock indexes will be subject to risks
applicable to options transactions generally. In addition, the distinctive
characteristics of options on indexes create certain risks that are not present
with stock options.
A stock index is a method of reflecting in a single number of the
market value of many different stocks. An index may be designed to be
representative of the market as a whole, of a broad market segment (e.g.,
industrials), or of a particular industry (e.g., computers). A stock index
assigns relative values to the stocks included in the index and the index
fluctuates with changes in the market values of those stocks . Options on
stock indexes are similar to options on stock except that when an index option
is exercised, the exercise is settled by the payment of cash rather than by the
delivery of stock. The writer of an option, when assigned an exercise notice
is obligated to pay the exercising holder an amount of cash if the closing
level of the index upon which the option is based is greater, in the case of a
call, or lesser, in the case of a put, than the exercise price of the option.
This amount of cash is equal to the difference between the closing level of the
underlying index on the exercise date and the exercise price of the option
multiplied by a specified index "multiplier."
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<PAGE> 42
Index prices may be distorted if trading of certain stocks included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances such as if trading were halted in a substantial number of
stocks included in the index or if dissemination of the current level of an
underlying index is interrupted. If this occurred, the Fund would not be able
to close out options which it had purchased and, if restrictions on exercise
were imposed, may be unable to exercise an option it holds, which could result
in losses to the Fund if the underlying index moves adversely before trading
resumes. However, it is the Fund's policy to purchase options only on indexes
which include a sufficient number of stocks so that the likelihood of a trading
halt in the index is minimized.
The purchaser of an index option may also be subject to a timing risk.
If an option is exercised by the Fund before final determination of the closing
index value for that day, the risk exists that the level of the underlying
index may subsequently change. If such a change caused the exercised option to
fall out-of-the-money (that is, the exercising of the option would result in a
loss, not a gain), the Fund would be required to pay the difference between the
closing index value and the exercise price of the option (times the applicable
multiple) to the assigned writer. Although the Fund may be able to minimize
this risk by withholding exercise instructions until just before the daily
cutoff time, it may not be possible to eliminate this risk entirely because the
exercise cutoff times for index options may be earlier than those fixed for
other types of options and may occur before definitive closing index values are
announced. Alternatively, when the index level is close to the exercise price
the Fund may sell rather than exercise the option.
Although the markets for certain index option contracts have developed
rapidly, the markets for other index options are still relatively illiquid.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until in
the Investment Adviser's opinion the market for such options has developed
sufficiently that such risk in connection with such transactions is not greater
than such risk in connection with options on stocks.
LIMITATION ON TRANSACTIONS IN STOCK INDEX OPTIONS. The Fund will
write put options on indexes only if they are covered by segregating with the
Fund's custodian an amount of cash or short-term investments equal to the
aggregate exercise price of the puts. In addition, the Fund will write call
options on indexes only if, on the date of which any such option is written, it
holds securities qualified to serve as "cover" under applicable rules of the
national securities exchanges with a value at least equal to the value of the
index times the multiplier or maintains in a segregated account an amount of
cash or short-term investments equal to the aggregate exercise price of such
call options. In the case of both put and call options on indexes, the Fund
will satisfy the foregoing conditions while such options are outstanding.
STOCK INDEX FUTURES CHARACTERISTICS. Currently, stock index futures
contracts can be purchased or sold with respect to several different stock
indexes, each based on a different measure of market performance. A
determination as to which of the index contracts would be appropriate for
purchase or sale by the Fund will be based upon, among other things, the
liquidity offered by such contracts and the volatility of the underlying index.
Prior to effecting a transaction in stock index futures or options thereon, the
Investment Adviser will determine the total value of the
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<PAGE> 43
Fund's stock portfolio which it desires to hedge and, by computer program or
otherwise, determine the stock index whose performance most accurately tracks
that portfolio at such time. Positions in futures on the index so identified
or options on such futures will be established unless the trading market for
futures or options on the index is not believed by the Investment Adviser to be
sufficiently liquid, in which case positions will be established on the index
next most closely tracking the portfolio and which is appropriately liquid.
Positions will be established in an amount which correlates to the market value
of the Fund's stock portfolio which the Investment Adviser wishes to hedge,
taking into account the relative volatility of the Fund's stock portfolio to
the index. As the portion of the Fund's assets invested in stocks is reduced,
a corresponding portion of the hedge will be lifted (i.e., will be closed out).
Unlike when the Fund purchases or sells a security, no price is paid
or received by the Fund upon the purchase or sale of a futures contract.
Instead, the Fund will be required to deposit with its broker an amount of cash
or U.S. treasury bills equal to approximately 5% of the contract amount. This
is called "initial margin." Such initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract assuming all contractual
obligations have been satisfied. In addition, because under current futures
industry practice daily variations in gains and losses on open contracts are
required to be reflected in cash in the form of variation margin payments, the
Fund may be required to make additional payments during the term of the
contract to its broker. Such payments would be required where, during the term
of a stock index futures contract purchased by the Fund, the price of the
underlying stock index declined, thereby making the Fund's position less
valuable. In all instances involving the purchase of stock index futures
contracts by the Fund, an amount of cash together with such other securities as
permitted by applicable regulatory authorities to be utilized for such purpose,
at least equal to the market value of the futures contracts, will be deposited
in a segregated account with the Fund's Custodian to collateralize the
position. At any time prior to the expiration of a futures contract, the Fund
may elect to close its position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract.
Where futures are purchased to hedge against a possible increase in
the price of a security before the Fund is able in an orderly fashion to invest
in the security, it is possible that the market may decline instead. If the
Fund, as a result, concluded not to make the planned investment at that time
because of concern as to possible further market decline or for other reasons,
the Fund would realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation or no correlation at all between movements in the stock index
futures and the portion of the portfolio being hedged, the price of stock index
futures may not correlate perfectly with movements in the stock index due to
certain market distortions. All participants in the futures market are subject
to margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
index itself and the value of a future. Moreover, the deposit requirements in
the future market are less onerous than margin requirements in the securities
market and may therefor cause increased participation by speculators in the
futures market. Such increased participation may also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and because of the imperfect correlation between movements in stock indexes and
movements in the prices of stock index futures, the value of stock index
futures contracts as a hedging device may be reduced.
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<PAGE> 44
In addition, if the Fund has insufficient available cash it may at
times have to sell securities to meet variation margin requirements. Such
sales may have to be effected at a time when it may be disadvantageous to do
so.
RISKS OF TRANSACTIONS IN STOCK INDEX FUTURES. As discussed under
"Special Investment Techniques", there are several risks in connection with the
use of stock index futures by the Fund as a hedging device. One risk arises
because of the imperfect correlation between movements in the price of the
stock index future and movement in the prices of the securities which are the
subject of the hedge. The risk of imperfect correlation increases as the
composition of the Fund's securities portfolio diverges from the securities
included in the applicable stock index. The price of a stock index future may
move more than or less than the price of the securities being hedged. If the
price of the stock index future moves less than the price of the securities
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged at
all. If the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially or totally offset by the losses on
the corresponding futures positions. If the price of the future moves more
than the price of the stock, the Fund will experience either a loss or a gain
on the future which will not be completely offset by movement in the price of
the securities which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price
of securities being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts in a greater
dollar amount than the dollar amount of securities being hedged if the
historical volatility of the prices of such securities has been greater than
the historical volatility of the index. Conversely, the Fund may buy or sell
fewer stock index futures contracts if the historical volatility of the prices
of such securities has been less than the historical volatility of the stock
index. It is also possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of securities held in the Fund's portfolio may decline. If this occurred, the
Fund would lose money on the future and also experience a decline in value in
its portfolio securities. However, while this could occur for a very brief
period or to a very small degree, over time the value of a diversified
portfolio will tend to move in the same direction as the market indexes upon
which the futures are based.
Positions in stock index futures may be closed out only on an exchange
or board of trade which provides a secondary market for such futures. Although
the Fund intends to purchase or sell futures only on exchanges or boards of
trade where there appears to be an active secondary market, as with stock
options there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract or at any particular
time. In such event, it may not be possible to close a futures position and,
in the event of adverse price movements, the Fund would continue to be required
to make daily cash payments of variation margin. In such circumstances, an
increase in the price of securities which are the subject of the hedge, if any,
may partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
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<PAGE> 45
THOSE RESPONSIBLE FOR MANAGEMENT
The overall direction and supervision of the Fund is the
responsibility of the Board of Trustees which has the primary duty of seeing
that the Fund's general investment policies and programs are carried out and
properly administered. The officers of the Fund are responsible for the
day-to-day administration of the Fund. Several of the officers and Trustees of
the Fund are also officers and directors of the Investment Adviser or officers
and directors of the Fund's Distributor.
Set forth below is information with respect to each of the Fund's
officers and Trustees. The officers and Trustees may be contacted at 101
Huntington Avenue, Boston, MA 02199-7603. Their affiliations represent their
principal occupations during the past five years.
EDWARD J. BOUDREAU, JR., Trustee, Chairman and Chief Executive Officer.
Chairman and Chief Executive Officer, the Investment Adviser and The
Berkeley Financial Group ("The Berkeley Group"); Chairman, NM Capital
Management, Inc. ("NM Capital"); John Hancock Advisers International
Limited ("Advisers International"); John Hancock Funds, Inc; John
Hancock Investor Services Corporation ("Investor Services"); and
Sovereign Asset Management Corporation ("SAMCorp"); (hereinafter the
Investment Adviser, the Berkeley Group, NM Capital, Advisers
International, John Hancock Funds, Inc., Investor Services and SAMCorp
are collectively referred to as the "Affiliated Companies"); Chairman,
First Signature Bank & Trust; Director, John Hancock Freedom Securities
Corporation, John Hancock Capital Corporation, New England/Canada
Business Council; Member, Investment Company Institute Board of
Governors; Trustee, Museum of Science; President, the Investment
Adviser (until July 1992); Trustee or Director of other investment
companies managed by the Investment Adviser; and Chairman, John Hancock
Distributors, Inc. (until April, 1994).
JAMES F. CARLIN, Trustee. Chairman and CEO, Carlin Consolidated, Inc.
(insurance); Director, Arbella Mutual Insurance Company (insurance),
Consolidated Group Trust (group health plan), Carlin Insurance Agency,
Inc. and West Insurance Agency, Inc.; Receiver, the City of Chelsea
(until August 1992); and Trustee or Director of other investment
companies managed by the Investment Adviser.
WILLIAM H. CUNNINGHAM, Trustee. Chancellor, University of Texas System and
former President of the University of Texas, Austin, Texas; Regents
Chair in Higher Education Leadership; James L. Bayless Chair for Free
Enterprise; Professor of Marketing and Dean College of Business
Administration/Graduate School of Business (1983-1985); Centennial
Chair in Business Education Leadership, 1983-1985; Director, LaQuinta
Motor Inns, Inc. (hotel management company); Director, Jefferson-Pilot
Corporation (diversified life insurance company); Director,
Freeport-McMoran Inc. (oil and gas company); Director, Barton Creek
Properties, Inc. (1988-1990) (real estate development) and LBJ
Foundation Board (education foundation); and Advisory Director, Texas
Commerce Bank - Austin.
CHARLES L. LADNER, Trustee. Director, Energy North, Inc. (public utility
holding company); Senior Vice President, Finance UGI Corp (public
utility holding company) (until 1992); and Trustee or Director of other
investment companies managed by the Investment Adviser.
10
<PAGE> 46
LEO E. LINBECK, JR., Trustee. Chairman, President, Chief Executive Officer and
Director, Linbeck Corporation (a holding company engaged in various
phases of the construction industry and warehousing interests);
Director and Chairman, Federal Reserve Bank of Dallas; Chairman of the
Board and Chief Executive Officer, Linbeck Construction Corporation;
Director, Panhandle Eastern Corporation (a diversified energy company);
Director, Daniel Industries, Inc. (manufacturer of gas measuring
products and energy related equipment); Director, GeoQuest
International, Inc. (a geophysical consulting firm); and Director,
Greater Houston Partnership.
PATRICIA P. MCCARTER, Trustee. Director and Secretary, the McCarter Corp.
(machine manufacturer); and Trustee or Director of other investment
companies managed by the Investment Adviser.
STEVEN R. PRUCHANSKY, Trustee. Director and Treasurer, Mast Holdings, Inc.;
Director, First Signature Bank & Trust Company (until August 1991);
General Partner, Mast Realty Trust; President, Maxwell Building Corp.
(until 1991); and Trustee or Director of other investment companies
managed by the Investment Adviser.
NORMAN H. SMITH, Trustee. Lieutenant General, USMC, Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired
1991); and Trustee or Director of other investment companies managed
by the Investment Adviser.
JOHN P. TOOLAN, Trustee. Director, The Smith Barney Muni Bond Funds, The Smith
Barney Tax-Free Money Fund, Inc., Vantage Money Market Funds (mutual
funds), The Inefficient-Market Fund, Inc. (closed-end investment
company) and Smith Barney Trust Company of Florida; Chairman, Smith
Barney Trust Company (retired December, 1991); Director, Smith Barney,
Inc., Mutual Management Company and Smith, Barney Advisers, Inc.
(investment advisers) (retired 1991); and Senior Executive Vice
President, Director and member of the Executive Committee, Smith
Barney, Harris Upham & Co, Incorporated (investment bankers) (until
1991); and Trustee or Director of other investment companies managed
by the Investment Adviser.
*ROBERT G. FREEDMAN, Vice Chairman and Chief Investment Officer. President and
Chief Investment Officer, the Investment Adviser.
*ANNE C. HODSDON, Executive Vice President. President and Chief Operations
Officer, the Investment Adviser.
*JAMES B. LITTLE, Senior Vice President and Chief Financial Officer. Senior
Vice President, the Investment Adviser.
*THOMAS H. DROHAN, Senior Vice President and Secretary. Senior Vice President
and Secretary, the Investment Adviser.
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
11
<PAGE> 47
*MICHAEL P. DICARLO, Senior Vice President. Senior Vice President, the
Investment Adviser.
*EDGAR LARSEN, Senior Vice President. Senior Vice President, the Investment
Adviser.
*B.J. WILLINGHAM, Senior Vice President. Senior Vice President, the Investment
Adviser. Formerly, Director and Chief Investment Officer of
Transamerica Fund Management Company.
*JAMES J. STOKOWSKI, Vice President and Treasurer. Vice President, the
Investment Adviser.
*SUSAN S. NEWTON, Vice President and Compliance Officer. Vice President and
Assistant Secretary, the Investment Adviser.
*JOHN A. MORIN, Vice President. Vice President, the Investment Adviser.
*THOMAS J. PRESS, Vice President and Assistant Secretary. Vice President and
Assistant Secretary, the Investment Adviser. Formerly, General Counsel
and Secretary, Transamerica Management Company; Secretary and
Treasurer, Transamerica Asset Management Group, Inc.; and Secretary,
Transamerica Funds Distributors, Inc.
As of April 6, 1995, there were 7,007,983 shares of the Fund
outstanding and officers and trustees of the Fund as a group beneficially owned
less than 1% of these outstanding shares. As of such date, Continental Trust
Company, Chicago, IL held of record 866,725 Class B Shares representing 79% of
the Fund's Class B Shares. Such ownership represents separate interests of
more than 25% of the outstanding Class B Shares of the Fund resulting in the
presumption of "control" as defined under the Investment Company Act of 1940
and has the likely result that each such shareholder can materially affect a
positive or negative vote on any matters which require the vote of all
shareholders of the Fund. At such date no other person owned of record or
beneficially as much as 5% of the outstanding shares of the Fund. At such
date, no person owned of record or was known by the Fund to own beneficially as
much as 5% of the outstanding shares of the Fund.
As of December 22, 1994, the Trustees have established an Advisory
Board which acts to facilitate a smooth transition of management over a
two-year period (between Transamerica Fund Management Company ("TFMC"), the
prior investment adviser, and the Investment Adviser). The members of the
Advisory Board are distinct from the Board of Trustees, do not serve the Fund
in any other capacity and are persons who have no power to determine what
securities are purchased or sold and behalf of the Fund. Each member of the
Advisory Board may be contacted at 101 Huntington Avenue, Boston, Massachusetts
02199.
Members of the Advisory Board and their respective principal occupations
during the past five years are as follows:
R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.
* An "interested person" of the Fund, as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
12
<PAGE> 48
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas;
co-founder, Houston Parents' League; former board member of various
civic and cultural organizations in Houston, including the Houston
Symphony, Museum of Fine Arts and YWCA. Mrs. Bentsen is presently
active in various civic and cultural activities in the Washington,
D.C. area, including membership on the Area Board for The March of
Dimes and is a National Trustee for the Botanic Gardens of Washington,
D. C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce
Bank; Trustee, Memorial Hospital System; Chairman of the Board of
Regents of Baylor University; Member, Board of Governors, National
Association of Securities Dealers, Inc.; Formerly, Chairman, Investment
Company Institute; formerly, President, Houston Chapter of Financial
Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation);
Member, Board of Managers, Harris County Hospital District; Advisory
Director, Commercial State Bank, El Campo; Advisory Director, First
National Bank of Bryan; Advisory Director, Sterling Bancshares; Former
Director and Vice Chairman, Texas Commerce Bancshares; and Vice
Chairman, Texas Commerce Bank.
COMPENSATION OF THE BOARD OF TRUSTEES AND ADVISORY BOARD. The
following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees and the Advisory Board members for their services. Mr.
Boudreau, a non-Independent Trustee, and each of the officers of the Funds are
interested persons of the Investment Adviser, are compensated by the
Investment Adviser and received no compensation from the Funds for their
services.
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Trustees from the Fund Fund's Expenses Trustees**
- -------- ------------- --------------- ------------------
<S> <C> <C> <C>
James F. Carlin $ 0 $0 $ 60,450
William H. Cunningham $ 3,500 * $0 $ 0
Charles L. Ladner $ 0 $0 $ 60,450
Leo E. Linbeck, Jr. $ 4,700 * $0 $ 0
Patricia P. McCarter $ 0 $0 $ 60,200
Steven R. Pruchansky $ 0 $0 $ 62,450
Norman H. Smith $ 0 $0 $ 62,450
John P. Toolan $ 0 $0 $ 60,450
</TABLE>
13
<PAGE> 49
* Compensation made pursuant to different compensation arrangements then
in effect.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees was $366,450 as of the calendar year ended
December 31, 1994. All Trustees/Directors except Messrs. Cunningham
and Linbeck are Trustees/Directors of 39 funds in the John Hancock
Fund Complex. Messrs. Cunningham and Linbeck are Trustees of 21
funds.(The Fund was not part of the John Hancock Fund Complex until
December 22, 1994 and Messrs. Cunningham and Linbeck were not trustees
or directors of any funds in the John Hancock Fund Complex prior to
December 22, 1994.)
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Advisory Board*** from the Fund Fund's Expenses Advisory
Board*** ------------- ---------------- ------------------
- -----------------
<S> <C> <C>
R. Trent Campbell $ 3,176 $ 54,000
Mrs. Lloyd Bentsen $ 3,176 $ 54,000
Thomas R. Powers $ 3,176 $ 54,000
Thomas B. McDade $ 3,176 $ 54,000
TOTAL $12,704 $216,000
</TABLE>
*** Estimated for the Fund's current fiscal year ending December 31, 1995.
Advisory Board members receive compensation from 17 Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
Each of the Trustees and principal officers affiliated with the Fund
who is also an affiliated person of the Investment Adviser is named above,
together with the capacity in which such person is affiliated with the Fund or
the Investment Adviser.
The Investment Adviser, located at 101 Huntington Avenue, Boston,
Massachusetts 02199-7603, was organized in 1968 and has more than $13 billion
in assets under management in its capacity as investment adviser to the Fund
and the other mutual funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 1,000,000 shareholders.
The Investment Adviser is a wholly-owned subsidiary of The Berkeley Financial
Group, which is in turn a wholly-owned subsidiary of John Hancock Subsidiaries,
Inc., which is in turn a wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"), one of the nation's oldest and largest
financial services companies. With total assets under management of over $80
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries Standard & Poor's and A.M. Best's highest
ratings. Founded in 1862, the Life Company has been serving clients for over
130 years.
The Fund has entered into an investment management contract with the
14
<PAGE> 50
Investment Adviser. Under the investment management contract, the Investment
Adviser provides the Fund with (i) a continuous investment program, consistent
with the Fund's stated investment objective and policies, (ii) supervision of
all aspects of the Fund's operations except those that are delegated to a
custodian, transfer agent or other agent and (iii) such executive,
administrative and clerical personnel, officers and equipment as are necessary
for the conduct of its business. See "Organization and Management of the Fund"
and "The Fund's Expenses" in the Prospectus for a description of certain
information concerning the Fund's investment management contract.
No person other than the Investment Adviser and its directors and
employees regularly furnishes advice to the Fund with respect to the
desirability of the Fund investing in, purchasing or selling securities. The
Investment Adviser may from time to time receive statistical or other similar
factual information, and information regarding general economic factors and
trends, from the Life Company and its affiliates.
Under the terms of the investment management contract with the Fund,
the Investment Adviser provides the Fund with office space, equipment and
supplies and other facilities and personnel required for the business of the
Fund. The Investment Adviser pays the compensation of all officers and
employees of the Fund and Trustees of the Fund affiliated with the Investment
Adviser, the office expenses of the Fund, including those of the Fund's
Treasurer and Secretary, and other expenses incurred by the Investment Adviser
in connection with the performance of its duties. All expenses which are not
specifically paid by the Investment Adviser and which are incurred in the
operation of the Fund including, but not limited to, (i) the fees of the
Trustees of the Fund who are not "interested persons," as such term is defined
in the 1940 Act (the "Independent Trustees"), (ii) the fees of the members of
the Fund's Advisory Board (described above) and (iii) the continuous public
offering of the shares of the Fund are borne by the Fund.
As provided by the investment management contract, the Fund pays the
Investment Adviser an investment management fee, which is accrued daily and
paid monthly in arrears, equal on an annual basis to a 0.625% of the Fund's
average daily net asset value. See "Organization and Management of the Fund"
in the Prospectus.
The Investment Adviser may voluntarily and temporarily reduce its
advisory fee or make other arrangements to limit the Fund's expenses to a
specified percentage of average daily net assets. The Investment Adviser
retains the right to re-impose the advisory fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any state limit
where the Fund is registered to sell shares of beneficial interest, the fee
payable to the Investment Adviser will be reduced to the extent required by
law. At this time, the most restrictive limit on expenses imposed by a state
requires that expenses charged to the Fund in any fiscal year
15
<PAGE> 51
not exceed 2.5% of the first $30,000,000 of the Fund's average daily net asset
value, 2% of the next $70,000,000 and 1.5% of the remaining average daily net
asset value. When calculating the limit above, the Fund may exclude interest,
brokerage commissions and extraordinary expenses.
Pursuant to the investment management contract, the Investment Adviser
is not liable to the Fund or its shareholders for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which the contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the performance of its duties or from reckless disregard of the
obligations and duties under the applicable contract.
The investment management contract initially expires on December 22,
1996 and will continue in effect from year to year thereafter if approved
annually by a vote of a majority of the Trustees of the Fund who are not
interested persons of one of the parties to the contract, cast in person at a
meeting called for the purpose of voting on such approval, and by either a
majority of the Trustees or the holders of a majority of the Fund's outstanding
voting securities. The investment management contract may, on 60 days' written
notice, be terminated at any time without the payment of any penalty by the
Fund by vote of a majority of the outstanding voting securities of the Fund, by
the Trustees or by the Investment Adviser. The investment management contract
terminates automatically in the event of its assignment.
Securities held by the Fund may also be held by other funds or
investment advisory clients for which the Investment Adviser or its affiliates
provide investment advice. Because of different investment objectives or
other factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Investment Adviser or for other funds or
clients for which the Investment 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 Investment Adviser or its affiliates may increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price.
Under the investment management contract, the Fund may use the name
"John Hancock" or any name derived from or similar to it only as long as the
investment management contract or any extension, renewal or amendment thereof
remains in effect. If the Fund's investment management contract is no longer
in effect, the Fund (to the extent that it lawfully can) will cease to use such
name or any other name indicating that it is advised by or otherwise connected
with the Investment Adviser. In addition, the Investment Adviser or the Life
Company may grant the non-exclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.
16
<PAGE> 52
For the fiscal years ended December 31, 1992, 1993 and 1994 advisory
fees payable by the Fund to TFMC, the Fund's former investment adviser,
amounted to $558,156, $544,746 and $539,809, respectively. For the period from
December 22, 1994 to December 31, 1994, advisory fees payable by the Fund were
paid to the Investment Adviser.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund was a party to an
administrative services agreement with TFMC (the "Services Agreement"),
pursuant to which TFMC performed bookkeeping and accounting services and
functions, including preparing and maintaining various accounting books,
records and other documents and keeping such general ledgers and portfolio
accounts as are reasonably necessary for the operation of the Fund. Other
administrative services included communications in response to shareholder
inquiries and certain printing expenses of various financial reports. In
addition, such staff and office space, facilities and equipment was provided as
necessary to provide administrative services to the Fund. The Services
Agreement was amended in connection with the appointment of the Investment
Adviser as adviser to the Fund to permit services under the Agreement to be
provided to the Fund by the Investment Adviser and its affiliates. The
Services Agreement was terminated during the current fiscal year.
For the fiscal years ended December 31, 1992, 1993 and 1994, the Fund
paid to TFMC (pursuant to the Services Agreement) $86,996, $113,187 and
$115,878, respectively, of which $86,996, $99,121 and $101,838, respectively,
was paid to TFMC and $0, $14,066 and $14,040, respectively, were paid for
certain data processing and pricing information services.
PURCHASE OF 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 will be issued for full shares. The Board of Trustees reserves
the right to change or waive the minimum investment requirements and to reject
any order to purchase shares (including purchase by exchange) when in the
judgment of the Investment Adviser such rejection is in the Fund's best
interest.
INITIAL SALES CHARGE ON CLASS A SHARES. The sales charges applicable
to purchases of Class A Shares of the Fund are described in the Fund's Class A
and Class B 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, the investor is
entitled to cumulate current purchases with the greater of the current value
(at offering price) of the Class A Shares of the Fund, or if Investor Services
is notified by the investor's dealer or the investor at the time of the
purchase, the cost of the Class A Shares owned.
17
<PAGE> 53
COMBINED PURCHASES. In calculating the sales charge applicable to
purchases of Class A Shares made at one time, the purchases will be combined if
made by (a) an individual, his or her spouse and their children under the age
of 21 purchasing securities for his or her own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.
WITHOUT SALES CHARGE. As described in the Class A and Class B
Prospectus, Class A Shares of the Fund may be sold without a sales charge to
certain persons described in the Prospectus.
ACCUMULATION PRIVILEGE. Investors (including investors combining
purchases) who are already Class A Shareholders may also obtain the benefit of
the reduced sales charge by taking into account not only the amount then being
invested but also the purchase price or value of the Class A Shares already
held by such person.
COMBINATION PRIVILEGE. Reduced sales charges (according to the
schedule set forth in the Class A and Class B Prospectus) also are available to
an investor based on the aggregate amount of his concurrent and prior
investments in Class A Shares of the Fund and shares of all other John Hancock
funds which carry a sales charge.
LETTER OF INTENTION. The reduced sales loads are also applicable to
investments made over a specified period pursuant to a Letter of Intention
("LOI"), which should be read carefully prior to its execution by an investor.
Thy Fund offers two options regarding the specified period for making
investments under the LOI. All investors have the option of making their
investments over a period of thirteen (13) months. Investors who are using the
Fund as a funding medium for a qualified retirement plan, however, may opt to
make the necessary investments called for by the LOI over a forty-eight (48)
month period. These qualified retirement plans include IRA's, SEP, SARSEP,
TSA, 401(k) plans, TSA plans and 457 plans. Such an investment (including
accumulations and combinations) must aggregate $50,000 or more invested during
the specified period from the date of the LOI or from a date within ninety (90)
days prior thereto, upon written request to Investor Services. The sales
charge applicable to all amounts invested under the LOI is computed as if the
aggregate amount intended to be invested had been invested immediately. If
such aggregate amount is not actually invested, the difference in the sales
charge actually paid and the sales charge payable had the LOI not been in
effect is due from the investor. However, for the purchases actually made with
the specified period (either 13 or 48 months), the sales charge applicable will
not be higher than that which would have been applied (including accumulations
and combinations) had the LOI been for the amount actually invested.
DISTRIBUTION CONTRACT
As discussed in the Prospectus, the Fund's shares are sold on a
continuous basis at the public offering price. The Distributor, a wholly-owned
subsidiary of
18
<PAGE> 54
the Investment Adviser, has the exclusive right, pursuant to the Distribution
Agreement dated December 22, 1994 (the "Distribution Agreement"), to purchase
shares from the Fund at net asset value for resale to the public or to
broker-dealers at the public offering price. Upon notice to all broker-dealers
("Selling Brokers") with whom it has sales agreements, the Distributor may allow
such Selling Brokers up to the full applicable sales charge during periods
specified in such notice. During these periods, such Selling Brokers may be
deemed to be underwriters as that term is defined in the Securities Act of 1933.
The Distribution Agreement was initially adopted by the affirmative
vote of the Fund's Board of Trustees including the vote a majority of Trustees
who are not parties to the agreement or interested persons of any such party,
cast in person at a meeting called for such purpose. The Distribution
Agreement shall continue in effect until December 22, 1994 and from year to
year if approved by either the vote of the Fund's shareholders or the Board of
Trustees including the vote of a majority of Trustees who are not parties to
the agreement or interested persons of any such party, cast in person at a
meeting called for such purpose. The Distribution Agreement may be terminated
at any time, without penalty, by either party upon sixty (60) days' written
notice or by a vote of a majority of the outstanding voting securities of the
Fund and terminates automatically in the case of an assignment by the
Distributor.
Total underwriting commissions for sales of the Fund's Class A Shares
for the fiscal years ended December 31, 1992, 1993 and 1994, respectively,
were $570,463, $168,662 and $89,913, respectively. Of such amounts $60,449,
$17,932 and $8,567, respectively, were retained by the Fund's former
distributor, Transamerica Fund Distributors, Inc. and the remainder was
reallowed to dealers. For the period from December 22, 1994 to December 31,
1994, underwriting commissions were paid to the Distributor.
DISTRIBUTION PLAN. The Board of Trustees, including the Independent
Trustees of the Fund, approved new distribution plans pursuant to Rule 12b-1
under the 1940 Act for Class A Shares ("Class A Plan") and Class B Shares
("Class B Plan"). Such Plans were approved by a majority of the outstanding
shares of each respective class on December 16, 1994 and became effective on
December 22, 1994.
Under the Class A Plan, the distribution or service fee will not
exceed an annual rate of 0.25% of the average daily net asset value of the
Class A Shares of the Fund (determined in accordance with such Fund's
Prospectus as from time to time in effect). Any expenses under the Class A
Plan not reimbursed within 12 months of being presented to the Fund for
repayment are forfeited and not carried over to future years. Under the Class
B Plan, the distribution or service fee to be paid by the Fund will not exceed
an annual rate of 1.00% of the average daily net assets of the Class B Shares
of the Fund (determined in accordance with such Fund's prospectus as from time
to time in effect); provided that the portion of such fee used to cover Service
Expenses (described below) shall not exceed an annual rate of 0.25% of the
average daily net asset value of
19
<PAGE> 55
the Class B Shares of the Fund. Under the Class B Plan, the fee covers the
Distribution and Service Expenses (described below) and interest expenses on
unreimbursed distribution expenses. In accordance with generally accepted
accounting principles, the Fund does not treat distribution fees in excess of
0.75% of the Fund's net assets attributable to Class B Shares as a liability of
the Fund and does not reduce the current net assets of Class B by such amount
although the amount may be payable in the future.
Under the Plans, expenditures shall be calculated and accrued daily
and paid monthly or at such other intervals as the Trustees shall determine.
The fee may be spent by the Distributor on Distribution Expenses or Service
Expenses. "Distribution Expenses" include any activities or expenses primarily
intended to result in the sale of shares of the relevant class of the Fund,
including, but not limited to: (i) initial and ongoing sales compensation
payable out of such fee as such compensation is received by the Distributor or
by Selling Brokers, (ii) direct out-of-pocket expenses incurred in connection
with the distribution of shares, including expenses related to printing of
prospectuses and reports; (iii) preparation, printing and distribution of sales
literature and advertising material; (iv) an allocation of overhead and other
branch office expenses of the Distributor related to the distribution of Fund
Shares (v) distribution expenses that were incurred by the Fund's former
distributor and not recovered through payments under the Class A or Class B
former plans or through receipt of contingent deferred sales charges; and (vi)
in the event that any other investment company (the "Acquired Fund") sells all
or substantially all of its assets, merges or otherwise engages in a
combination with the Fund, distribution expenses originally incurred in
connection with the distribution of the Acquired Fund's shares. Service
Expenses under the Plans include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of the Distributor)
and others who furnish personal and shareholder account maintenance services to
shareholders of the relevant class of the Fund.
During the fiscal year ended December 31, 1994, total payments made by
the Fund under the former Class A Rule 12b-1 plan to the former distributor
amounted to $193,470, and of such amount $23,705, $44,492, $15,078, $99,050 and
$11,145 represented payments for (1) the cost of printing and distribution
prospectuses and financial reports to investors, (2) various sales literature,
(3) advertising expenses, (4) distribution and/or administrative services and
(5) service fees, respectively. During the period from December 22, 1994 to
December 31, 1994, payment under the Class A Plan was made to the Distributor.
During the fiscal year ended December 31, 1994, total payments made by
the Fund under the former Class B Rule 12b-1 plan to the former distributor
amounted to $89,720 of which:
** (1) $22,615 represented service fees which were comprised of
$1,213 for distribution and/or administrative services
provided by the Fund's former distributor and $21,402 for
service fees paid to broker/dealers.
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<PAGE> 56
(2) $67,105 represented as the total of distribution fees paid to
the former distributor which are comprised of:
<TABLE>
<S> <C>
a) $51,909 for dealer commission payments;
b) $12,977 for underwriting fees; and
c) $2,219 for interest or carrying charges.
</TABLE>
For the fiscal year ended December 31, 1994, the former distributor
received $8,342 in contingent deferred sales charges from redemption of the
Fund's Class B shares. For the period from December 22, 1994 to December 31,
1994, the Distributor received fees under the Class B Plan and contingent
deferred sales charges from redemptions of Class B shares.
Each of the Plans provides that it will continue in effect only so
long as its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may
be terminated (a) at any time by vote of a majority of the Trustees, a majority
of the Independent Trustees, or a majority of the respective Class' outstanding
voting securities or (b) by the Distributor on 60 days' notice in writing to
the Fund. Each of the Plans further provides that it may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of
the Fund which has voting rights with respect to the Plan. Each of the Plans
provides that no material amendment to the Plan will, in any event, be
effective unless it is approved by a majority vote of the Trustees and the
Independent Trustees of the Fund. The holders of Class A Shares and Class B
Shares have exclusive voting rights with respect to the Plan applicable to
their respective class of shares. The Board of Trustees, including the
Trustees who are not interested in the Fund and have no direct or indirect
interest in the Plans, has determined 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.
Information regarding the services rendered under the Plans and the
Distribution Agreement and the amounts paid therefore by the respective Class
of the Fund are provided to, and reviewed by, the Board of Trustees on a
quarterly basis. In its quarterly review, the Board of Trustees considers the
continued appropriateness of the Plans and the Distribution Agreement and the
level of compensation provided therein.
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
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<PAGE> 57
NASDAQ National Market Issues are generally valued at last sale price on the day
of valuation. Securities in the aforementioned category for which no sales are
reported and other securities traded over-the-counter are generally valued at
the mean between the current closing bid and asked prices.
Equity securities traded on a principal exchange or NASDAQ National
Market Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.
Short-term debt investments which have a remaining maturity of 60 days
or less are generally valued at amortized cost which approximates market value.
If market quotations are not readily available or if in the opinion of the
Investment Adviser any quotation or price is not representative of true market
value, the fair value of the security may be determined in good faith in
accordance with procedures approved by the Trustees.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars by the custodian bank based on London currency
exchange quotations as of 5:00 p.m., London time (12:00 noon, New York time) on
the date of any determination of a Fund's NAV.
A Fund will not price its securities on the following national
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. On any day
an international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
redeemable securities may be significantly affected on days when a shareholder
has no access to the Fund.
DEFERRED SALES CHARGE ON CLASS B SHARES
CONTINGENT DEFERRED SALES CHARGE. Investments in Class B shares are
purchased at net asset value per share without the imposition of a sales charge
so that the Fund will receive the full amount of the purchase payment. Class B
Shares which are redeemed within six years of purchase will be subject to a
contingent deferred sales charge ("CDSC") at the rates set forth in the Class A
and Class B Prospectus as a percentage of the dollar amount subject to the
CDSC. The charge will be assessed on an amount equal to the lesser of the
current market value or the original purchase cost of the Class B Shares being
redeemed. Accordingly, no CDSC will be imposed on increases in account value
above the initial purchase prices, including Class B Shares derived from
reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years
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<PAGE> 58
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 purchases of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month.
Proceeds from the CDSC are paid to the Distributor and are used in
whole or in part by the Distributor to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B Shares, such as the payment of compensation to select Selling Brokers
for selling Class B Shares. The combination of the CDSC and the distribution
and service fees facilitates the ability of the Fund to sell the Class B Shares
without a sales charge being deducted at the time of the purchase. See the
Class A and Class B Prospectus for additional information regarding the CDSC.
SPECIAL REDEMPTIONS. Although it is the Fund's present policy to make
payment of redemption proceeds in cash, if the Board of Trustees determines
that a material adverse effect would otherwise be experienced by remaining
investors, redemption proceeds may be paid in whole or in part by a
distribution in kind of securities from the Fund in conformity with rules of
the Securities and Exchange Commission, valuing such securities in the same
manner they are valued in determining NAV, and selecting the securities in such
manner as the Board may deem fair and equitable. If such a distribution
occurs, investors receiving securities and selling them before their maturity
could receive less than the redemption value of such securities and, in
addition, could incur certain transaction costs. Such a redemption is not as
liquid as a redemption paid in cash or federal funds. The Fund has elected to
be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund during any 90 day period for any one account.
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE. As described more fully in the Prospectus, the
Fund permits exchanges of shares of any class of the Fund for shares of the
same class in any other John Hancock fund offering that class.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Class A and
Class B Prospectus, the Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. Since the redemption price of Fund shares may be
more or less than the shareholder's cost, depending upon the market value of
the securities owned by the Fund at the time of redemption, the distribution of
cash pursuant to this plan may result in realization of gain or loss for
purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional Class A or
Class B Shares of the Fund could be disadvantageous to a shareholder
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<PAGE> 59
because of the initial sales charge payable on such purchases of Class A Shares
and the CDSC imposed on redemptions of Class B Shares and because redemptions
are taxable events. Therefore, a shareholder should not purchase Fund shares
at the same time as a Systematic Withdrawal Plan is in effect. The Fund
reserves the right to modify or discontinue the Systematic Withdrawal Plan of
any shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Fund Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM ("MAAP"). This program is
explained fully in the Fund's Class A and Class B Prospectus and the Account
Privileges Application. The program, as it relates to automatic investment
checks, is subject to the following conditions;
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice
if any investment is not honored by the shareholder's bank. The bank shall be
under no obligation to notify the shareholder as to the non-payment of any
check.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Fund shares
may, within 120 days after the date of redemption, reinvest without payment of
a sales charge any part of the redemption proceeds in shares of the same class
of the Fund or another John Hancock mutual fund, subject to the minimum
investment limit in that fund. The proceeds from the redemption of Class A
Shares may be reinvested at net asset value without paying a sales charge in
Class A Shares of the Fund or in Class A Shares of another John Hancock mutual
fund. If a CDSC was paid upon a redemption, a shareholder may reinvest the
proceeds from that redemption at net asset value in additional shares of the
class from which the redemption was made. The shareholder's account will be
credited with the amount of any CDSC charged upon the prior redemption and the
new shares will continue to be subject to the CDSC. The holding period of the
shares acquired through reinvestment will, for purposes of computing the CDSC
payable upon a subsequent redemption, include the holding period of the
redeemed shares. The Fund may modify or terminate the reinvestment privilege
at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised,
and any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Dividends, Distributions and Tax Status."
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<PAGE> 60
TAX STATUS
The Fund 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 so qualify in the future. As
such and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions, and the diversification
of its assets, the Fund will not be subject to Federal income tax on taxable
income (including net short-term and long-term capital gains which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.
The Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements.
The Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P"), as computed for Federal income tax purposes, will be taxable
as described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital
gains for shareholders who hold their shares as capital assets. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for Federal income tax purposes in each share so received equal to
the amount of cash they would have received had they elected to receive the
distributions in cash, divided by the number of shares received.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election would require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return from
these investments.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency denominated debt
securities, foreign currency forward contracts, foreign currencies, or payables
or receivables denominated in a foreign
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<PAGE> 61
currency are subject to Section 988 of the Code, which generally causes such
gains and losses to be treated as ordinary income and losses and may affect the
amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to the Fund's investment in stock or
securities may increase the amount of gain it is deemed to recognize from the
sale of certain investments held for less than three months, which gain is
limited under the Code to less than 30% of its annual gross income, and could
under future Treasury regulations produce income not among the types of
"qualifying income" from which the Fund must derive at least 90% of its annual
gross income.
The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. It is possible, but not generally anticipated, that investors may be
entitled to claim U.S. foreign tax credits with respect to such taxes, subject
to certain provisions and limitations contained in the Code. Specifically, in
the unusual event that more than 50% of the value of the Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received)
their pro rata shares of foreign income taxes paid by the Fund even though not
actually received by them, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able
to deduct their pro rata portion of foreign income taxes paid by the Fund,
although such shareholders will be required to include their share of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from the
Fund as a separate category of income for purposes of computing the limitations
on the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit
from this election. Each year, if any, that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the Fund and (ii)
the portion of Fund dividends which represents income from each foreign
country.
The amount of the Fund's net short-term and long-term capital gains,
if any, in any given year will vary depending upon the Adviser's current
investment strategy and whether the Adviser believes it to be in the best
interest of the Fund to dispose of portfolio securities or enter into options
or futures transactions that will generate capital gains. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or,
to undistributed taxable income of the Fund. Consequently, subsequent
distributions from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions in reality represent a return of a
26
<PAGE> 62
portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the shareholder's hands and
will be long-term or short-term, depending upon the shareholder's tax holding
period for the shares. A sales charge paid in purchasing Class A shares of the
Fund cannot be taken into account for purposes of determining gain or loss on
the redemption or exchange of such shares within 90 days after their purchase
to the extent shares of the Fund or another John Hancock Fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. Such disregarded load will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange will be disallowed to the extent the
shares disposed of are replaced with other shares of the Fund within a period
of 61 days beginning 30 days before and ending 30 days after the shares are
disposed of, such as pursuant to an election to reinvest dividends in
additional shares. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized upon the redemption
of shares with a tax holding period of six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain," which is 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 gain realized in any year to the extent that a
capital loss is carried forward from prior years against such gain. To the
extent such excess was retained and not exhausted by the carryforward of prior
years' capital losses, it would be subject to Federal income tax in the hands
of the Fund. Each shareholder would be treated for Federal income tax purposes
as if the Fund had distributed to him on the last day of its taxable year his
pro rata share of such excess, and he had paid his pro rata share of the taxes
paid by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his return for his taxable year in which the last day of
the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or to a refund of, his pro rata share of the taxes paid by the
Fund, and (c) be entitled to increase the adjusted tax basis for his shares in
the Fund by the difference between his pro rata share of such excess and his
pro rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry
forward a net capital loss in any year to offset its capital gains, if any,
during the eight years following the year of the loss. To the extent
subsequent 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. The Fund has $7,349,795 of capital
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<PAGE> 63
loss carry forwards, which expire in 2002, available to offset future capital
gains.
For purposes of the dividends received deduction available to
corporation, dividends received by the Fund from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) and distributed and designated by the Fund may be treated as
qualifying dividends. Corporate shareholders must meet the minimum holding
period requirement stated above (46 or 91 days) with respect to their shares of
the Fund in order to qualify for the deduction and, if they borrow to acquire
such shares, may be denied a portion of the dividends received deduction. The
entire qualifying dividend, including the otherwise deductible amount, will be
included in determining the excess (if any) of a corporate shareholder's
adjusted current earnings over its alternative minimum taxable income, which
may increase its alternative minimum tax liability. Additionally, any
corporate shareholder should consult its tax adviser regarding the possibility
that its basis in its shares may be reduced, for Federal income tax purposes,
by reason of "extraordinary dividends" received with respect to the shares, for
the purpose of computing its gain or loss on redemption or other disposition of
the shares.
If the Fund invests in certain PIKS, zero coupon securities or certain
increasing rate securities (and, in general, any other securities with original
issue discount or with market discount if the Fund elects to include accrued
market discount in income currently), the Fund must accrue income on such
investments prior to the receipt of the corresponding cash payments. However,
the Fund must distribute, at least annually, all or substantially all of its
net income, including such accrued income, to shareholders to qualify as a
regulated investment company under the Code and avoid Federal income and excise
taxes. Therefore, the Fund may have to dispose of its portfolio securities
under disadvantageous circumstances to generate cash, or may have to leverage
itself by borrowing the cash, to satisfy distribution requirements.
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 futures, options and
foreign currency forward transactions.
Certain options, futures and foreign currency forward transactions
undertaken by the Fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated
and affect the character as long- term or short-term (or, in the case of
certain currency forwards, as ordinary income or loss) and timing of some
capital gains and losses realized by the Fund. Also, certain of the Fund's
losses on its transactions involving options or futures contracts and/or
offsetting portfolio positions may be deferred rather than being taken into
account currently in calculating the Fund's income and/or gains. These
transactions may therefore affect the amount, timing and character of the
Fund's distributions to
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shareholders. Certain of the applicable tax rules may be modified if the Fund
is eligible and chooses to make one or more of certain tax elections that may be
available. The Fund will take into account the special tax rules (including
consideration of available elections) applicable to options, futures or forward
contracts in order to minimize any potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and
ownership of or gains realized on the redemption (including an exchange) of
Fund shares may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above.
These investors may be subject to nonresident alien withholding tax at the rate
of 30% (or a lower rate under an applicable tax treaty) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company
under the Code, it will also not be required to pay any Massachusetts income
tax.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by the Investment Adviser and
officers of the Fund pursuant to recommendations made by an investment
committee of the Investment Adviser, which consists of officers and directors
of the Investment Adviser and affiliates and officers and Trustees who are
interested persons of the Fund. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the 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
makers reflect a "spread." Investments in debt securities are generally traded
on a net basis through dealers acting for their own account as principals and
not as brokers;
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<PAGE> 65
no brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the NASD and other policies that
the Trustees may determine, the Investment 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
Investment Adviser of the Fund, and their value and expected contribution to
the performance of the Fund. It is not possible to place a dollar value on
information and services to be received from brokers and dealers, since it is
only supplementary to the research efforts of the Investment Adviser. The
receipt of research information is not expected to reduce significantly the
expenses of the Investment Adviser. The research information and statistical
assistance furnished by brokers and dealers may benefit the Life Company or
other advisory clients of the Investment Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Investment
Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitments to allocate
portfolio transactions upon any prescribed basis. While the Fund's officers
will be primarily responsible for the allocation of the Fund's brokerage
business, their policies and practices in this regard must be consistent with
the foregoing and will at all times be subject to review by the Trustees. For
the fiscal years ended December 31, 1994, 1993 and 1992, the aggregate
brokerage commissions paid by the Fund on portfolio transactions were $784,456,
$ , and $103,742, 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 the
price is reasonable in light of the services provided and to policies that the
Trustees may adopt from time to time. During the fiscal year ended December
31, 1994, the Fund did not pay commissions as compensation to any brokers for
research services such as industry, economic and company reviews and
evaluations of securities.
The Investment Adviser's indirect parent, the Life Company, is the
indirect sole shareholder of John Hancock Freedom Securities Corporation and
its subsidiaries, three of which, Tucker Anthony Incorporated ("Tucker
Anthony") John Hancock Distributors, Inc. ("John Hancock Distributors") and
Sutro & Company, Inc. ("Sutro"), are broker-dealers ("Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent with the above
policy of obtaining best net results, the Fund may execute
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portfolio transactions with or through Tucker Anthony, Sutro or John Hancock
Distributors. During the year ended December 31, 1994, the Fund did not execute
any portfolio transactions with then affiliated brokers.
Any of the Affiliated Brokers may act as broker for the Fund on
exchange transactions, subject, however, to the general policy of the Fund set
forth above and the procedures adopted by the Trustees pursuant to the 1940
Act. Commissions paid to an Affiliated Broker must be at least as favorable as
those which the Trustees believe to be contemporaneously charged by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold. A transaction would not be placed with an Affiliated
Broker if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
1940 Act) of the Fund, the Investment Adviser or the Affiliated Brokers.
Because the Investment Adviser, which is affiliated with the Affiliated
Brokers, has, as an investment adviser to the Fund, the obligation to provide
investment management services, which includes elements of research and related
investment skills, such research and related skills will not be used by the
Affiliated Brokers as a basis for negotiating commissions at a rate higher than
that determined in accordance with the above criteria. The Fund will not
effect principal transactions with Affiliated Brokers.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Investor
Services a monthly transfer agent fee of $19 per account for the Class A Shares
and $22.50 per account for the Class B Shares, plus out-of-pocket expenses.
ADDITIONAL INFORMATION
SHARES OF THE FUND. Ownership of the Fund is represented by
transferable shares of beneficial interest. The Declaration of Trust permits
the Trustees to create an unlimited number of series and classes of shares of
the Fund and, with respect to each series and class, to issue an unlimited
number of full or fractional shares and to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests of the Fund.
Each share of each series or class of the Fund represents an equal
proportionate interest with each other in that series or class, none having
priority or preference over
31
<PAGE> 67
other shares of the same series or class. The interest of investors in the
various series or classes of the Fund is separate and distinct. All
consideration received for the sales of shares of a particular series or class
of the Fund, all assets in which such consideration is invested and all income,
earnings and profits derived from such investments will be allocated to and
belong to that series or class. As such, each such share is entitled to
dividends and distributions out of the net income belonging to that series or
class as declared by the Board of Trustees. Shares of the Fund have a par value
of $0.01 per share. The assets of each series are segregated on the Fund's
books and are charged with the liabilities of that series and with a share of
the Fund's general liabilities. The Board of Trustees determines those assets
and liabilities deemed to be general assets or liabilities of the Fund, and
these items are allocated among each series in proportion to the relative total
net assets of each series. In the unlikely event that the liabilities allocable
to a series exceed the assets of that series, all or a portion of such
liabilities may have to be borne by the other series.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional classes
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of two classes of shares of the Fund designated as Class A and Class B. Class
A and Class B Shares of the Fund represent an equal proportionate interest in
the aggregate net asset values attributable to that class of the Fund. Holders
of Class A Shares and Class B Shares each have certain exclusive voting rights
on matters relating to the Class A Plan and the Class B Plan, respectively.
The different classes of the Fund may bear different expenses relating to the
cost of holding shareholder meetings necessitated by the exclusive voting
rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except for differences caused by the fact
that (i) Class B Shares will pay higher distribution and service fees than
Class A Shares and (ii) each of Class A Shares and Class B Shares will bear any
class expenses properly allocable to such class of shares, subject to the
conditions set forth in a private letter ruling that the Fund has received from
the Internal Revenue Service relating to its multiple-class structure.
Similarly, the net asset value per share may vary depending whether Class A
Shares or Class B Shares are purchased.
VOTING RIGHTS. Shareholders are entitled to a full vote for each full
share held. The Trustees themselves have the power to alter the number and the
terms of office of Trustees, and they may at any time lengthen their own terms
or make their terms of unlimited duration (subject to certain removal
procedures) and appoint their own successors, provided that at all times at
least a majority of the Trustees have been elected by shareholders. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees. Although the Fund need not hold annual meetings of shareholders,
32
<PAGE> 68
the trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act or the Declaration of Trust. Also, a
shareholder's meeting must be called if so requested in writing by the holders
of record of 10% or more of the outstanding shares of the Fund. In addition, the
Trustees may be removed by the action of the holders of record of two-thirds or
more of the outstanding shares.
SHAREHOLDER LIABILITY. The Declaration of Trust provides that no
Trustee, officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability
may arise from his or its own bad faith, willful misfeasance, gross negligence
or reckless disregard of his duties. It also provides that all third persons
shall look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
As a Massachusetts business trust, the Fund is not required to issue
share certificates. The Fund shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning termination by action
of the shareholders.
INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street,
Boston, Massachusetts 02116, has been selected as the independent auditors of
the Fund. The financial statements of the Fund included in the Prospectus and
this Statement of Additional Information have been audited by Ernst & Young
LLP for the periods indicated in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
CUSTODIAN. Investor Bank and Trust ("IBT") 24 Federal Street, Boston,
Massachusetts, serves as custodian of the cash and investment securities of the
Fund. IBT is also responsible for, among other things, receipt and delivery of
the Fund's investment securities in accordance with procedures and conditions
specified in the custody agreement.
REPORTS TO SHAREHOLDERS. Shareholders of the Fund will receive annual
and semi-annual reports showing diversification of investments, securities
owned and other information regarding the Fund's activities. The financial
statements of the Fund are audited at least once a year by the Fund's
independent auditors.
REGISTRATION STATEMENT. This Statement of Additional Information and
the Prospectus do not contain all of the information set forth in the Fund's
Registration Statement filed with the Securities and Exchange Commission. The
complete Registration Statement may be obtained from the Securities and
Exchange Commission upon payment of the fee prescribed by the rules and
regulations of the Commission.
33
<PAGE> 69
CALCULATION OF PERFORMANCE
As of December 31, 1994 the average annual total returns of the Class
A Shares of the Fund for the one year period, five year period and life of the
Fund were (16.42)%, 3.91% and 13.76%, respectively. As of December 31, 1994,
the average annual returns for the Fund's Class B Shares for the one year
period and since inception were (16.88)% and (3.80)%, respectively.
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1-year, 5-year, and 10-year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:
P(1+T)N = ERV
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 and life-of-fund periods.
In the case of Class A Shares or Class B Shares, this calculation
assumes the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period. This calculation also assumes that
all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during
the period stated by the maximum offering price or net asset value at the end
of the period.
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as
a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be quoted with or without taking the Fund's
maximum sales charge on Class A Shares or the CDSC on Class B Shares into
account. Excluding the Fund's sales charge on Class A Shares and the CDSC on
Class B Shares from a total return calculation produces a higher total return
figure.
From time to time, in reports and promotional literature, the Fund's
yield and total return will be compared to indices of mutual funds and bank
deposit vehicles such as Lipper Analytical Systems, Ibottson and Associates, CDA
Weisenberger and F.C. Towers. The Russell and Wilshire Indices are also used for
comparison purposes.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
34
<PAGE> 70
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, etc. will
also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function
of many factors including its earnings, expenses and number of outstanding
shares. Fluctuating market conditions; purchases, sales and maturities of
portfolio securities; sales and redemptions of shares of beneficial interest;
and changes in operating expenses are all examples of items that can increase
or decrease the Fund's performance.
ADDITIONAL PERFORMANCE INFORMATION. The Fund may use comparative
performance information from certain industry research materials and/or
published in various periodicals. The characteristics of the investments in
such comparisons may be different from those investments of the Fund's
portfolio. In addition, the formula used to calculate the performance
statistics of such investments may not be identical to the formula used by the
Fund to calculate its performance figures. From time to time, advertisements
or information for the Fund may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
information may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail in the communication.
The following publications, indexes, averages and investments which
may be used in advertisements or information concerning the Fund for
dissemination to investors or shareholders, include, but are not limited, to:
a) Dow Jones Composite Average or its component averages -an
unmanaged index composed of 30 blue-chip industrial corporation stocks
(Dow Jones Industrial Average), 15 utilities company stocks (Dow Jones
Utilities Average), and 20 transportation company stocks. Comparisons
of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation, and
finance stocks listed on the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the
market value of all common equity securities of which daily pricing is
available. Comparisons of performance assume reinvestment of
dividends.
35
<PAGE> 71
e) Lipper - Mutual Fund Performance Analysis, Lipper
- Fixed Income Analysis, and Lipper Mutual Fund indices - measure
total return and average current yield for the mutual fund industry.
Ranks individual mutual fund performance over specified time periods
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
f) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total
return, and average rate of return (average annual compounded growth
rate) over specified time periods for the mutual fund industry.
g) Mutual Fund Source Book and other similar rating publications
by Morningstar, Inc. - independent performance monitor of equity and
fixed income mutual funds. Morningstar ratings (ranging from one star
for lowest and five stars for highest) are based on analysis of a
fund's ratio, i.e., price yield, risk (volatility) and total return,
including all loads and fees, compared with similar funds for three-,
five- and ten-year periods.
h) Financial publications: Barrons, Business Week, Personal
Finance, Financial World, Forbes, Fortune, "The Wall Street Journal",
"New York Times", Weisenberger Investment Companies Service,
Institutional Investor, and Money - rate fund performance over
specified time periods and provide other relative performance or
industry information.
i) Consumer Price Index (or Cost of Living Index), published by
the U. S. Bureau of Labor Statistics - a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson
Associates - historical measure of yield, price, and total return for
common and small company stock, long-term government bonds, Treasure
bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in
the U. S. Savings & Loan League Fact Book.
l) Salomon Brothers Broad Bond Index or its component indices -
The Broad Index measures yield, price and total return for Treasury,
Agency, Corporate, and Mortgage bonds.
m) Salomon Brothers Composite High Yield Index or its component
indices - The High Yield Index measures yield, price and total return
for Long-Term High-Yield Index, Intermediate-Term High-Yield index and
Long-Term Utility High-Yield Index.
n) Shearson Lehman Brothers Aggregate Bond index or its component
indices (including Municipal Bond Index) - The Aggregate Bond Index
measures yield, price and total return for Treasury, Agency,
Corporate, Mortgage, and Yankee bonds.
36
<PAGE> 72
o) Standard & Poor's Bond Indices - measure yield and price of
Corporate, Municipal, and government bonds.
p) Other taxable investments, including certificates of deposit
(CDs), money market deposit accounts (MMDAs), checking accounts,
savings accounts, money market mutual funds, and repurchase
agreements.
q) Historical data supplied by the research departments of
Shearson Lehman Hutton, First Boston Corporation, Morgan Stanley,
Salomon Brothers, Merrill Lynch, and Donaldson Lufkin and Jenrette.
r) Donoghues's Money Fund Report - industry averages for 7-day
annualized and compounded yields of taxable, tax-free and government
money funds.
s) Russell 2000 (small capitalization stock index), Bond Buyer 25
Revenue Bond Index and other indices as may from time to time become
available.
t) The Value Line Mutual Fund Survey, published by Value Line,
assigns rankings of 1 (best) to 5 (worst) in terms of risk adjusted
performance covering more than 2,000 equity and fixed income mutual
funds.
From time to time, in reports and promotional literature, the Fund's
performance will be compared to other mutual funds and investment vehicles such
as F.C. Towers.
In addition, advertisements and sales materials may from time to time,
contain hypothetical performance examples for purposes of illustrating
reinvestment (or "compounding") of dividends at fixed rates of return or tax
advantages to be derived from deferring payment of federal (and state) income
taxes (at maximum rates) as compared to taxable investments assuming fixed
rates of return. Illustrations may also include (1) hypothetical investments
in various retirement plans, such as IRAs, made by investors of various ages or
(2) comparisons to retirement plans funded by annuity or bank products.
In assessing such comparisons, an investor should consider the
following factors:
a) It is generally either not possible or not practicable to
invest in an average or index of certain investments.
b) Certificates of deposit issued by banks and other depository
institutions represent an alternative income producing product.
Certificates of deposit may offer fixed or variable interest rates and
principal is guaranteed and may be insured. Withdrawal of deposits
prior to maturity will normally be subject to a penalty. Rates
offered by banks and other depository institutions are subject to
change at any time specified by the issuing institution.
37
<PAGE> 73
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in the Prospectus:
Financial Highlights
Included in Part B are as follows:
Schedule of Investments as of December 31, 1994.
Statement of Assets and Liabilities as of December 31, 1994.
Statements of Operations for the year ended December 31, 1994.
Statements of Changes in Net Assets for each of the two years
in the period ended December 31, 1994.
Notes to Financial Statements
Financial Highlights for the year ended December 31, 1994.
Included in Part C:
None
(b) Exhibits:
(1) (a) Declaration of Trust *
(b) Amendment to Declaration of Trust dated December 23,
1994
(2) Amended Bylaws of Registrant
(3) Not Applicable
(4) Specimen Share Certificates for Class A Shares and
Class B Shares To be filed by Post-Effective Amendment
(5)(a) Investment Advisory Agreement between John Hancock
Advisers, Inc. and the Registrant.
(b) Administrative Services Agreement between John Hancock
Advisers, Inc. and the Registrant.
(6)(a) Distribution Agreement between John Hancock Funds, Inc.
and the Registrant.
(b) Soliciting Dealer Agreement between John Hancock Funds,
Inc and the John Hancock funds.
(c) Financial Institution Sales and Service Agreement
between John Hancock Funds, Inc. and the John Hancock
funds.
(7) Not Applicable
* Previously filed with Pre-effective Amendment #1 and incorporated herein by
reference.
C-1
<PAGE> 74
(8) Master Custodian Agreement between the John Hancock
funds and State Street Bank.
(9) Transfer Agency Agreement*
(10) Opinion and consent of counsel was filed with the
Securities and Exchange Commission on February 23,
1995, pursuant to Rule 24f-2 and incorporated herein
by reference.
(11) Consent of Independent Auditors.
(12) 1994 Annual Report to Shareholders.
(13) Not Applicable
(14) Not Applicable
(15) (a) 12b-1 Plan for Class A Shares.
(b) 12b-1 Plan for Class B Shares.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22.*
* Previously filed with Pre-effective Amendment #1 and incorporated
herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
No person is presently controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Shares of Beneficial Interest As of April 1, 1995
----------------------------- ------------------------
<S> <C>
John Hancock Capital Growth Fund - Class A 11,626
John Hancock Capital Growth Fund - Class B 235
</TABLE>
Item 27. Indemnification
(a) The Registrant's Bylaws at Section 7.09 provide for indemnification of
Registrant's officers, directors, agents and employees as permitted by
Maryland and Federal law.
(b) Under the Distribution Agreement. Under Section 12 of the
Distribution Agreement, John Hancock Funds, Inc. ("John Hancock
Funds") has agreed to indemnify the Registrant and its Trustees,
officers and controlling persons against claims arising out of certain
acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of the Insurance Company provides, in effect,
that the Insurance Company will, subject to limitations of law, indemnify
each present and former director, officer and employee of the Insurance
Company who serves as a Trustee or officer of the Registrant at
C-2
<PAGE> 75
the direction or request of the Insurance Company against laitigation expenses
and liabilities incurred while acting as such, except that such indemnification
does not cover any expense or liability incurred or imposed in connection with
any matter as to which such person shall be finally adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the Insurance Company. In addition, no such person will be
indemnified by the Insurance Company in respect of any liability or expense
incurred in connection with any matter settled without final adjudication unless
such settlement shall have been approved as in the best interests of the
Incurance Company either by vote of the Board of Directors at a metting 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 torepay such payment if he should be
determined to be entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and the Adviser
provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a 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 of the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any ohter right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation, Article 10.1 of the Registrant's By-Laws, The Underwriting
Agreement, the By-Laws of John Hancock Funds, the Adviser, or the Insurance
Company or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
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.
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
C-3
<PAGE> 76
Trustee, officer or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication.
Item 28. Business and Other Connections of Investment Adviser
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Investment
Adviser, is set forth in the Adviser's Form ADV (File No. 801-8124 filed
under the Investment Advisers Act of 1940, herein incorporated by reference.
Item 29. Principal Underwriter
(a) John Hancock Funds, Inc. acts as principal underwriter for the
Registrant and also serves as principal underwriter or
distributor of shares for John Hancock Cash Reserve, Inc., John
Hancock Bond Fund, John Hancock Capital Growth Fund, John Hancock
Current Interest, John Hancock Series, Inc., John Hancock
Tax-Free Bond Fund, John Hancock California Tax-Free Income Fund,
John Hancock Capital Series, John Hancock Limited Term Government
Fund, John Hancock Tax-Exempt Fund, John Hancock Sovereign
Investors Fund, John Hancock Cash Management Fund, John Hancock
Special Equities Fund, John Hancock Bond Fund, John Hancock
Tax-Exempt Series Fund, John Hancock Strategic Series, John
Hancock Technology Series and World Fund, John Hancock Freedom
Investment Trust, John Hancock Freedom Investment Trust II and
John Hancock Investment Trust III.
(b) The following table lists, for each director and officer of John
Hancock Funds, Inc., the information indicated.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- ----------------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Sr. Vice President None
101 Huntington Avenue
Boston, Massachusetts
C. Troy Shaver, Jr. President, Chief Executive None
101 Huntington Avenue Officer and Director
Boston, Massachusetts
Robert G. Freedman Director Chief Investment
101 Huntington Avenue Officer
Boston, Massachusetts
</TABLE>
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<PAGE> 77
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- ---------------------
<S> <C> <C>
James W. McLaughlin Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Stephen M. Blair Senior Vice President - Sales None
101 Huntington Avenue
Boston, Massachusetts
Thomas H. Drohan Senior Vice President Senior Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
David A. King Senior Vice President None
101 Huntington Avenue Operations
Boston, Massachusetts
James B. Little Senior Vice President Senior vice president
101 Huntington Avenue and Chief Financial
Boston, Massachusetts Officer
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President,
101 Huntington Avenue and Secretary Compliance Officer and
Boston, Massachusetts Assistant Secretary
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
C-5
<PAGE> 78
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- ----------------------
<S> <C> <C>
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 None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Hugh A. Dunlap, Jr. Director None
101 Huntington Avenue
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
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<PAGE> 79
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records required to be maintained by it under Rules
31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment Company Act of 1940 as
its principal executive offices at 101 Huntington Avenue, Boston, Massachusetts
02199-7603. Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant hereby undertakes to assist shareholders with any
communication by them in accordance with the provision of Section
16 of the Investment Company Act of 1940.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
C-7
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Boston, and the Commonwealth of Massachusetts on the 21ST day of April 1995.
JOHN HANCOCK CAPITAL GROWTH FUND
By: *
_______________________________
Edward J. Boudreau, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman
______________________ (Principal Executive
Edward J. Boudreau, Jr. Officer)
Senior Vice President and Chief
Financial Officer April 21, 1995
______________________ (Principal Financial and
James B. Little Accounting Officer)
*
______________________ Trustee
James F. Carlin
*
______________________ Trustee
William H. Cunningham
*
______________________ Trustee
Charles L. Ladner
*
______________________ Trustee
Leo E. Linbeck, Jr.
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
______________________ Trustee
Patricia P. McCarter
*
______________________ Trustee
Steven R. Pruchansky
*
______________________ Trustee
Norman H. Smith
*
______________________ Trustee
John P. Toolan
*By: April 21, 1995
______________________
Thomas H. Drohan
(Attorney-in-Fact)
</TABLE>
<PAGE> 82
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 13th day of December, 1994.
/s/William H. Cunningham
___________________________________
William H. Cunningham
<PAGE> 83
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Norman H. Smith
_____________________________
Norman H. Smith
<PAGE> 84
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/James F. Carlin
________________________________
James F. Carlin
<PAGE> 85
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Charles L. Ladner
_________________________________
Charles L. Ladner
<PAGE> 86
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/John P. Toolan
________________________________
John P. Toolan
<PAGE> 87
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman and James B. Little, and each acting singly, to be my true, sufficient
and lawful attorneys, with full power to each of them, and each acting singly,
to sign for me, in my name and in the capacity indicated below, any
Registration Statement on Form N-1A and any Registration Statement on Form N-14
to be filed by the Trust or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Steven R. Pruchansky
________________________________
Steven R. Pruchansky
<PAGE> 88
INDEX
Exhibits:
(1) (a) Declaration of Trust *
(b) Amendment to Declaration of Trust dated December 23, 1994
(2) Amended Bylaws of Registrant
(3) Not Applicable
(4) Specimen Share Certificates for Class A Shares and Class B Shares
To be filed by Post-Effective Amendment
(5) (a) Investment Advisory Agreement between John Hancock Advisers, Inc.
and the Registrant.
(b) Administrative Services Agreement between John Hancock Advisers,
Inc. and the Registrant.
(6) (a) Distribution Agreement between John Hancock Funds, Inc. and the
Registrant.
(b) Soliciting Dealer Agreement between John Hancock Funds, Inc and the
John Hancock funds.
(c) Financial Institution Sales and Service Agreement between John
Hancock Funds, Inc. and the John Hancock funds.
(7) Not Applicable
(8) Master Custodian Agreement between the John Hancock funds and State
Street Bank.
(9) Transfer Agency Agreement*
(10) Opinion and consent of counsel was filed with the Securities and
Exchange Commission on February 23, 1995, pursuant to Rule 24f-2 and
incorporated herein by reference.
(11) Consent of Independent Auditors.
(12) 1994 Annual Report to Shareholders.
(13) Not Applicable
(14) Not Applicable
(15) (a) 12b-1 Plan for Class A Shares.
(b) 12b-1 Plan for Class B Shares.
(16) Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22.*
* Previously filed with Pre-effective Amendment #1 and incorporated herein
by reference.
<PAGE> 1
EXHIBIT 1(b)
TRANSAMERICA CAPITAL GROWTH FUND
AMENDMENT TO THE DECLARATION OF TRUST
AMENDMENT TO DECLARATION OF TRUST TO CHANGE THE NAME OF THE TRUST.
I.
Pursuant to Article XI, Section 11.3(a) of the Declaration of Trust,
each of the undersigned hereby executes this instrument in connection with a
change in the name of the Trust and for that purpose adopts the following
resolution:
RESOLVED, that pursuant to Article XI, Section 11.3 of the Declaration
of Trust, the name of the Trust is hereby changed to "John Hancock Capital
Growth Fund".
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to be executed this 16th day of December, 1994.
- --------------------------------- -----------------------------
R. Trent Campbell, as Trustee Thomas B. McDade, as Trustee
5005 Riverway, Ste #240 5276 Cedar Creek
Houston, TX 77027 Houston, TX 77056
- --------------------------------- -----------------------------
Mrs. Lloyd Bentsen, as Trustee Leo Linbeck, Jr. as Trustee
1810 Kalorama Square, N.W. P.O. Box 22500
Washington, D.C. 20008 Houston, TX 77027
- --------------------------------- -----------------------------
William H. Cunningham, as Trustee Thomas M. Simmons, as Trustee
601 Colorado Street 1000 Louisiana Street
O. Henry Hall Houston, TX 77002
Austin, TX 78701
- ---------------------------------
Thomas R. Powers, Trustee
210 Hedwig
Houston, TX 77024
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
JOHN HANCOCK CAPITAL GROWTH FUND
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Declaration of Trust of John Hancock Capital Growth Fund, as amended or
restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust shall be in Boston, Massachusetts.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within The Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a
Series or Class thereof shall be held as provided in the Declaration of Trust
at such place within or without The Commonwealth of Massachusetts as the
Trustees shall designate. The holders of a majority the Outstanding Shares of
the Trust or a Series or Class thereof present in person or by proxy and
entitled to vote shall constitute a quorum at any meeting of the Shareholders
of the Trust or a Series or Class thereof.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail or telegraphic means to each Shareholder at his
address as recorded on the register of the Trust mailed at least (10) days and
not more than sixty (60) days before the meeting, provided, however, that
notice of a meeting need not be given to a Shareholder to whom such notice
need not be given under the proxy rules of the Commission under the 1940 Act
and the Securities Exchange Act of 1934, as amended. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any
adjourned meeting
<PAGE> 2
may be held as adjourned without further notice. No notice need be given to
any Shareholder who shall have failed to inform the Trust of his current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is filed with the
records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time close the transfer books for
such period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
sixty (60) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes.
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with
the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting or telegraphic
transmission) by the shareholder or the shareholder's attorney-in-fact.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if
more than one of them shall be present at such meeting in person or by proxy,
and such joint owners or their proxies so present disagree as to any vote to
be cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Outstanding
Shares entitled to vote on the matter (or such larger proportion thereof as
shall be required by law) consent to the action in writing and the written
consents are filed with the records of the meetings of Shareholders. Such
consents shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE IV
TRUSTEES
<PAGE> 3
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the
President, the Chairman or by any one of the Trustees, at the time being in
office. Notice of the time and place of each meeting other than regular or
stated meetings shall be given by the Secretary or an Assistant Secretary or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be given by telephone,
cable or wireless to each Trustee at his business address, or personally
delivered to him at least one day before the meeting. Such notice may,
however, be waived by any Trustee. Notice of a meeting need not be given to
any Trustee if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice need not specify the
purpose of any meeting. The Trustees may meet by means of a telephone
conference circuit or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall be deemed to have been held at a place
designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if a majority of the Trustees consent
to the action in writing and the written consents are filed with the records
of the Trustees' meetings. Such consents shall be treated as a vote for all
purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees
in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by law, the Declaration of Trust or
these By-laws) the act of a majority of the Trustees present at any such
meeting, at which a quorum is present, shall be the act of the Trustees. In
the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current
and ordinary business of the Trust while the Trustees are not in session,
including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust or a Series
thereof, and such other powers of the Trustees as the Trustees may, from time
to time, delegate to them except those powers which by law, the Declaration of
Trust or these By-laws they are prohibited from delegating. The Trustees may
also elect from
<PAGE> 4
their own number other Committees from time to time; the number composing such
Committees, the powers conferred upon the same (subject to the same
limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees
may designate a chairman of any such Committee. In the absence of such
designation the Committee may elect its own Chairman.
Section 2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investments shall be purchased, sold or otherwise disposed
of by the Trust. The number of persons constituting any such advisory
committee may receive compensation for their services and may be allowed such
fees and expenses for the attendance at such meeting as the Trustees may from
time to time determine to be appropriate.
Section 3. Meetings, Quorum and Manner of Acting. The Trustees may
(1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers
delegated to such Committee, (4) authorize the making of decisions to exercise
specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (5) authorize the members of a Committee to
meet by means of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in
a book designated for that purpose and kept in the office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be
Chairman, a President, a Treasurer and a Secretary, who shall be elected by
the Trustees. The Trustees may elect or appoint such other officers or agents
as the business of the Trust may require, including one or more Vice
Presidents, one or more Assistant Secretaries, and one or more Assistant
Treasurers. The Trustees may delegate to any officer or committee the power
to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust or these By-laws, the President, the
Treasurer, the Secretary and any other officer shall each hold office at the
pleasure of the Board of Trustees or until his successor shall have been duly
elected and qualified. The Secretary and the Treasurer may be the same
person. A Vice President and the Treasurer or a Vice President and the
Secretary may be the same person, but the offices of Vice President, Secretary
and Treasurer shall not be held by the same person. The President shall hold
no other office. Except as above provided, any two offices may be held by the
same person. Any officer may be but none need be a Trustee or Shareholder.
<PAGE> 5
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or committee may be removed with or without cause by such appointing
officer or committee.
Section 4. Powers and Duties of the Chairman. The Trustees may, but
need not, appoint from among their number a Chairman and chief executive
officer. When present he shall preside at the meetings of the Shareholders
and of the Trustees. He may call meetings of the Trustees and of any
committee thereof whenever he deems it necessary. He shall be an executive
officer of the Trust and shall have, with the President, general supervision
over the business and policies of the Trust, subject to the limitations
imposed upon the President, as provided in Section 5 of this Article VI. The
Chairman shall have the authority to appoint officers of the Trust.
Section 5. Powers and Duties of the Vice Chairman. The Trustees may,
but need not, appoint a Vice Chairman of the Trust. The Vice Chairman may,
but need not, be a Trustee. The Vice Chairman shall have such powers and
duties as the Trustees shall determine from time to time. In the absence of
any such determination, the Vice Chairman shall have the same powers as a vice
president.
Section 6. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to
the control of the Trustees and to the control of any Committees of the
Trustees, within their respective spheres, as provided by the Trustees, he
shall at all times exercise a general supervision and direction over the
affairs of the Trust. He shall have the power to employ attorneys and counsel
for the Trust or any Series or Class thereof and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact
the business of the Trust or any Series or Class thereof. He shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust or any Series thereof. The President shall have such
other powers and duties, as from time to time may be conferred upon or
assigned to him by the Trustees.
Section 7. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform
all the duties and may exercise any of the powers of the President, subject to
the control of the Trustees. Each Vice President shall perform such other
duties as may be assigned to him from time to time by the Trustees and the
President.
Section 8. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust or any Series or Class thereof which may come into his
hands to such Custodian as the Trustees may employ. He shall render a
statement of condition of the finances of the Trust or any Series or Class
thereof to the Trustees as often as they shall require the same and he shall
in general perform all the duties incident to the office of a Treasurer and
such other duties as from time to time may be assigned to him by the Trustees.
The
<PAGE> 6
Treasurer shall give a bond for the faithful discharge of his duties, if
required so to do by the Trustees, in such sum and with such surety or
sureties as the Trustees shall require.
Section 9. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he shall have custody of the seal of the
Trust; he shall have charge of the Share transfer books, lists and records
unless the same are in the charge of a transfer agent. He shall attend to the
giving and serving of all notices by the Trust in accordance with the
provisions of these By-laws and as required by law; and subject to these By-
laws, he shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Trustees.
Section 10. Powers and Duties of Assistant Officers. In the absence or
disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to
do by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
Section 11. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 12. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration of
Trust, the compensation of the officers and Trustees and members of an
advisory board shall be fixed from time to time by the Trustees or, in the
case of officers, by any Committee or officer upon whom such power may be
conferred by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
INDEMNIFICATIONS
Section 1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust or any Series thereof. No Trustee, officer, employee or agent of
the Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its Shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the 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
<PAGE> 7
of the Trust. If any Shareholder, Trustee, officer, employee, or agent, as
such, of the Trust or any Series thereof, is made a party to any suit or
proceeding to enforce any such liability of the Trust or any Series thereof,
he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such
Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) out of the Trust
Property for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
assets of the one or more Series whose Shares were held by said Shareholder at
the time the act or event occurred which gave rise to the claim against or
liability of said Shareholder. The rights accruing to a Shareholder under this
Section 1 of Article VII shall not impair any other right to which such
shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust or any Series thereof to indemnify or
reimburse a shareholder in any appropriate situation even though not
specifically provided herein.
Section 2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust or any Series thereof shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without limitation
the failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer, employee
or agent of the Trust (including any individual who serves at its request
as director, officer, partner, trustee or the like of another
organization in which it has any interest as a shareholder, creditor or
otherwise) shall be indemnified by the Trust, or by one or more Series
thereof if the claim arises from his or her conduct with respect to only
such Series, to the fullest extent permitted by law against all liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved
as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal, or
other, including appeals), actual or threatened; and the words
"liability" and "expenses " shall include, without limitation, attorneys
fees, costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
<PAGE> 8
(i) against any liability to the Trust, a Series thereof or the
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or a Series
thereof;
(iii) in the event of a settlement or other disposition not involving
a final adjudication as provided in paragraph (b)(ii) resulting in a
payment by a Trustee or officer, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition;
(B) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the Non-
interested Trustees acting on the matter (provided that a majority
of the Non-interested Trustees then in office act on the matter) or
(y) written opinion of independent legal counsel; or
(C) a vote of a majority of the Shares outstanding and
entitled to vote (excluding shares owned of record or beneficially
by such individual).
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be entitled,
shall continue as to a person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors, administrators and assigns
of such a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust or any Series thereof other
than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 3 of Article VII may be advanced by the Trust or a Series thereof
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately determined
that he is not entitled to indemnification under this Section 3, provided that
either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or Series
thereof shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-interested Trustees act on the
matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to
<PAGE> 9
indemnification.
As used in this Section 3 of Article VII, a "Non-interested Trustee" is
one who (i) is not an "Interested Person" of the Trust (including anyone who
has been exempted from being an "Interested Person" by any rule, regulation or
order of the Commission), and (ii) is not involved in the claim, action, suit
or proceeding.
Section 4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, transfer agent or other Person
dealing with the Trustees or any officer, employee or agent of the Trust or a
Series thereof shall be bound to make any inquiry concerning the validity of
any transaction purporting to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property paid,
loaned, or delivered to or on the order of the Trustees or of said officer,
employee or agent. Every obligation, contract, instrument, certificate,
Share, other security of the Trust or a Series thereof or undertaking, and
every other act or thing whatsoever executed in connection with the Trust
shall be conclusively presumed to have been executed or done by the executors
thereof only in their capacity as Trustees under this Declaration or in their
capacity as officers, employees or agents of the Trust or a Series thereof.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking made or issued by the
Trustees may recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations
of the Trust or a Series thereof under any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the Trust
Property or the Trust Property of the applicable Series, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees
shall at all times maintain insurance for the protection of the Trust Property
or the Trust Property of the applicable Series, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 6. Reliance on Experts, Etc. Each Trustee, officer or employee
of the Trust or a Series thereof shall, in the performance of his duties, be
fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Trust or a Series thereof, upon an opinion of counsel,
or upon reports made to the Trust or a Series thereof by any of its officers
or employees or by the Investment Adviser, the Administrator, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or
employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VIII
<PAGE> 10
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the last day of December in each year, provided,
however, that the Trustees may from time to time change the fiscal year. The
taxable year of each Series of the Trust shall be as determined by the
Trustees from time to time.
ARTICLE IX
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe but
the absence of a seal shall not impair the validity or execution of any
document.
ARTICLE X
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. A notice shall be
deemed to have been sent by mail, telegraph, cable or wireless for the
purposes of these By-laws when it has been delivered to a representative of
any company holding itself out as capable of sending notice by such means with
instructions that it be so sent.
ARTICLE XI
AMENDMENTS
These By-laws may be amended, altered or repealed or new By-laws may be
adopted (a) by a Majority Shareholder Vote (as defined in the Declaration of
Trust), or by the Trustees; provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration of Trust or the By-Laws, a vote of
the Shareholders. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration of Trust, and any apparent inconsistency shall
be construed in favor of the related provisions of the Declaration of Trust.
END OF BY-LAWS
<PAGE> 1
Exhibit 5(a)
JOHN HANCOCK CAPITAL GROWTH FUND
Investment Management Contract
Dated: December __, 1994
<PAGE> 2
JOHN HANCOCK CAPITAL GROWTH FUND
Boston, Massachusetts
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
Ladies and Gentlemen:
John Hancock Capital Growth Fund (the "Fund") has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company. The Fund's shares of beneficial
interest may be classified in the future into series representing the entire
undivided interest in separate portfolios operated as separate investment
companies.
The Trustees of the Fund (the "Trustees") have selected John Hancock
Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and you are willing to provide such advice, management and
services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. Delivery of Documents. The Fund has furnished you with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Declaration of Trust, dated December 19, 1984, as amended from
time to time (the "Declaration of Trust");
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as
investment adviser for the Fund and approving the form of this
Agreement; and
(d) Commitments, limitations and undertakings made by the Fund to
state securities or "blue sky" authorities for the purpose of
qualifying shares of the Fund for sale in such states. The
Fund will furnish you from time to time with copies, properly
certified or otherwise authenticated, of all amendments of or
<PAGE> 3
supplements to the foregoing, if any.
2. Investment and Management Services. You will use your best efforts to
provide to the Fund continuing and suitable investment programs with respect to
investments, consistent with the investment policies, objectives and
restrictions of the Fund. In the performance of the Adviser's duties
hereunder, subject always (x) to the provisions contained in the documents
delivered to the Adviser pursuant to Section 1, as each of the same may from
time to time be amended or supplemented, and (y) to the limitations set forth
in the registration statement of the Fund as in effect from time to time under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent
with the investment policies, objectives and restrictions of
the Fund, with respect to the purchase, holding and
disposition of portfolio securities;
(b) advise the Fund in connection with policy decisions to be made
by the Trustees or any committee thereof with respect to the
Fund's investments and, as requested, furnish the Fund with
research, economic and statistical data in connection with the
Fund's investments and investment policies;
(c) provide administration of the day-to-day investment operations
of the Fund;
(d) submit such reports relating to the valuation of the Fund's
securities as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's
investments with issuers, investment banking firms, securities
brokers or dealers and other institutions or investors;
(f) consistent with the provisions of Section 6 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by you, provided
that in connection with the placing of such orders and the
selection of such brokers or dealers you shall seek to obtain
execution and pricing within the policy guidelines determined
by the Trustees and set forth in the Prospectus and Statement
of Additional Information of the Fund as in effect from time
to time;
(g) provide office space and equipment and supplies, the use of
accounting equipment when required, and necessary executive,
clerical and secretarial personnel for the administration of
the affairs of the Fund;
(h) from time to time or at any time requested by the Trustees,
make reports to the Trust of your performance of the foregoing
services and furnish advice and recommendations with respect
to other aspects of the business and affairs of the Fund;
(i) maintain and preserve the records required by the Investment
Company Act of
<PAGE> 4
1940, as amended (the "1940 Act"), to be maintained and
preserved by the Fund (you agree that such records are the
property of the Fund and will be surrendered to the Fund
promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as
you may deem necessary or useful in the discharge of your
duties hereunder;
(k) oversee, and use your best efforts to assure the performance
of the activities and services of the custodian, transfer
agent or other similar agents retained by the Fund; and
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment
of cash for the account of the Fund.
The Adviser may engage one or more investment advisers which are
either registered as such or specifically exempt from registration under the
Investment Advisers Act of 1940, as amended, to act as subadvisers to provide
with respect to the Fund certain services set forth in Section 2 of this
Agreement, all as shall be set forth in a written contract, which contract
shall be subject to approval by the vote of a majority of the Trustees of the
Fund who are not interested persons of the Adviser, the subadviser or the Fund,
cast in person at a meeting called for the purpose of voting on such approval
and by the vote of a majority of the outstanding voting securities of the Fund
and otherwise consistent with the terms of the 1940 Act. Any fee, compensation
or expense to be paid to any subadviser shall be paid by the Adviser, and no
obligation to the subadviser shall be incurred on the Fund's behalf, except as
agreed upon by the Trustees of the Fund and otherwise consistent with the terms
of the 1940 Act.
3. Expenses of the Fund. You will pay:
(a) the compensation and expenses of all officers and employees of
the Fund;
(b) the expenses of office rent, telephone and other utilities,
office furniture, equipment, supplies and other office
expenses of the Fund;
(c) any other expenses incurred by you in connection with the
performance of your duties hereunder; and
(d) premiums for such insurance as may be agreed upon by you and
the Trustees.
4. Expenses of the Fund Not Paid by You. You will not be required to pay
any expenses which this Agreement does not expressly make payable by you. In
particular, and without limiting the generality of the foregoing but subject to
the provisions of Section 3, you will not be required to pay:
<PAGE> 5
(a) any and all expenses, taxes and governmental fees incurred by
the Fund prior to the effective date of this Agreement;
(b) without limiting the generality of the foregoing clause (a),
the expenses of organizing the Fund (including without
limitation, legal, accounting and auditing fees and expenses
incurred in connection with the matters referred to in this
clause (b)), of initially registering the shares of the Fund
under the Securities Act of 1933, as amended, and of
qualifying the shares for sale under state securities laws for
the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not
interested persons (as used in this Agreement, such term shall
have the meaning specified in the 1940 Act) of you, and of
independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through you;
(d) legal, accounting and auditing fees and expenses of the Fund;
(e) the fees or disbursements of custodians and depositories of
the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(f) taxes and governmental fees assessed against the Fund's assets
and payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the
Fund;
(h) brokers' commissions and underwriting fees; and
(i) the expense of periodic calculations of the net asset value of
the shares of the Fund.
5. Compensation of the Adviser. For all services to be rendered,
facilities furnished and expenses paid or assumed by you as herein provided,
the Fund will pay you monthly, a fee at the annual rate of 0.625% of the Fund's
average daily net assets.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by a state where the Fund is registered to sell shares of common stock,
the fee payable to the Adviser will be reduced to the extent of such excess and
the Adviser will make any arrangements necessary to eliminate any remaining
excess expenses.
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither your nor any
investment management subsidiary of yours, nor any of your or their directors,
officers or employees will act as principal or agent or receive any commission.
If any occasion shall arise in which you advise persons concerning the shares
of the Fund, you will act solely on your own behalf and not in any way on
behalf of the Fund.
<PAGE> 6
7. No Partnership or Joint Venture. The Fund and you are not partners of
or joint venturers with each other and nothing herein shall be construed so as
to make them such partners or joint venturers or impose any liability as such
on any of them.
8. Name of the Fund. The Fund may use the name "John Hancock" or any
name derived from or similar to the name "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" only for so long as this Agreement
remains in effect. At such time as this Agreement shall no longer be in
effect, the Fund will (to the extent they lawfully can) cease to use such a
name or any other name indicating that the Fund is advised by or otherwise
connected with you. The Fund acknowledges that it has adopted the name "John
Hancock Capital Growth Fund" through permission of John Hancock Mutual Life
Insurance Company, a Massachusetts insurance company, and agrees that John
Hancock Mutual Life Insurance Company reserves to itself and any successor to
its business the right to grant the non-exclusive right to use the name "John
Hancock" or any similar name to any other corporation or entity, including but
not limited to any investment company of which John Hancock Mutual Life
Insurance Company or any subsidiary or affiliate thereof shall be the
investment adviser.
9. Limitation of Liability of the Adviser. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the the
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on your
part in the performance of your duties or from reckless disregard by you of
your obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Fund shall
be deemed, when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as your employee or
agent.
10. Duration and Termination of this Agreement. This Agreement shall
remain in force until the second anniversary of the date upon which this
Agreement was executed by the parties hereto, and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by (a) a majority of the Trustees who are not interested persons of you or
(other than as trustees) of the Fund, cast in person at a meeting called for
the purpose of voting on such approval, and (b) either (i) the Trustees or (ii)
a majority of the outstanding voting securities of the Fund. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty by the Fund by vote of a majority of the outstanding voting
securities of the Fund, by the Trustees or by you. Termination of this
Agreement with respect to the Fund shall not be deemed to terminate or
otherwise invalidate any provisions of any contract between you and any other
series of the Fund. This Agreement shall automatically terminate in the event
of its assignment. In interpreting the provisions of this Section 10, the
definitions contained in Section 2(a) of the 1940 Act (particularly the
definitions of "assignment," "interested person" and "voting security") shall
be applied.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be
<PAGE> 7
effective until approved by (a) the Trustees, including a majority of the
Trustees who are not interested persons of you or (other than as Trustees) of
the Fund, cast in person at a meeting called for the purpose of voting on such
approval, and (b) a majority of the outstanding voting securities of the Fund,
as defined in the 1940 Act.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Capital Growth Fund is the
designation of the Trustees under the Declaration of Trust, dated December 19,
1984 as amended from time to time. The Declaration of Trust and all amendments
thereto have been filed with the Secretary of State of The Commonwealth of
Massachusetts. The obligations of the Fund are not personally binding upon,
nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Fund, but only the Fund's
property shall be bound. The Fund shall not be liable for the obligations of
any other future series, if any, of the Fund.
Very truly yours,
JOHN HANCOCK CAPITAL GROWTH FUND
By:
-------------------------------
Thomas M. Simmons
President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By:
--------------------------
Anne C. Hodsdon
Executive Vice President
<PAGE> 1
Exhibit 5(b)
AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of December,
1994 by and between John Hancock Capital Growth Fund, a Massachusetts business
trust (the "Trust"), and Transamerica Fund Management Company, a Delaware
corporation (the "Investment Adviser"), and Transamerica Fund Distributors,
Inc., a Maryland corporation (the "Distributor"):
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, each of the Investment Adviser and the Distributor are
registered as an investment adviser under the Investment Advisers Act of 1940,
and engages in the business of acting as Investment Adviser or Distributor and
providing certain other services to certain investment companies, including the
Trust; and
WHEREAS, each of the Investment Adviser and the Distributor are
registered as broker dealers under the Securities Exchange Act of 1934, as
amended, and serves as the principal underwriter of the shares of each of the
investment companies for which the Investment Adviser and the Distributor serve
as investment advisers; and
WHEREAS, the Trust desires to retain the Investment Adviser and the
Distributor to render certain additional services to the Trust regarding
certain bookkeeping, accounting and administrative services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, each of the Investment Adviser and the Distributor desires to
be retained to perform such services on said terms and conditions;
Now, Therefore, this agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Trust and each of the Investment Adviser and the Distributor
agree as follows:
1. The Trust hereby retains each of the Investment Adviser and
the Distributor, as the case may be, to provide to the Trust:
A) such accounting and bookkeeping services and
functions as are reasonably necessary for the operation of the Trust.
Such services shall include, but shall not be limited to, preparation
and maintenance of the following books, records and other documents:
(1) journals containing daily itemized records of all purchases and
sales, and receipts and deliveries of securities and all receipts and
disbursements of cash and all other debits and credits, in the form
required by Rule 31a-1(b)(1)
<PAGE> 2
under the Act; (2) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, in the form
required by Rules 31a-1(b)(2)(i)-(iii) under the Act; (3) a securities
record or ledger reflecting separately for each portfolio security as
of trade date all "long" and "short" positions carried by the Trust
for the account of the Trust, if any, and showing the location of all
securities long and the off-setting position to all securities short,
in the form required by Rule 31a-1(b)(3) under the Act; (4) a record
of all portfolio purchases or sales, in the form required by Rule
31a-1(b)(6) under the Act; (5) a record of all puts, calls, spreads,
straddles and all other options, if any, in which the Trust has any
direct or indirect interest or which the Trust has granted or
guaranteed, in the form required by Rule 31a-1(b)(7) under the Act;
(6) a record of the proof of money balances in all ledger accounts
maintained pursuant to this Agreement, in the form required by Rule
31a-1(b)(8) under the Act; and (7) price make-up sheets and such
records as are necessary to reflect the determination of the Trust's
net asset value. The foregoing books and records shall be maintained
by the Investment Adviser in accordance with and for the time periods
specified by applicable rules and regulations, including Rule 31a-2
under the Act. All such books and records shall be the property of
the Trust and upon request therefor, the Investment Adviser shall
surrender to the Trust such of the books and records so requested; and
B) certain administrative services including, but not limited to,
administrative services to shareholders of the Trust to respond to
inquiries related to shareholder accounts, processing confirmed
purchase and redemption transactions, processing certain shareholder
transactions, and maintaining dealer information related to
shareholder accounts and typesetting and other financial printing
services for the Trust.
2. Each of the Investment Adviser and the Distributor shall, at
its own expense, maintain such staff and employ or retain such personnel and
consult with such other persons as it shall from time to time determine to be
necessary or useful to the performance of its obligations under this Agreement.
Without limiting the generality of the foregoing, such staff and personnel
shall be deemed to include officers of the Investment Adviser, the Distributor
and persons employed or otherwise retained by the Investment Adviser and the
Distributor to provide or assist in providing of the services to the Trust.
3. Each of the Investment Adviser and the Distributor, as the
case may be, shall provide such office space, facilities and equipment
(including, but not limited to, telecommunication equipment and general office
supplies) and such clerical help and other services as shall be necessary to
provide the services to the Trust. In addition, each of the Investment Adviser
and the Distributor, as the case may be, may arrange on behalf of the Trust to
obtain: (1) data processing or other services, subject to approval by a
majority of the Trust's Board of Trustees, as necessary to assist it in
providing the Services to the Trust, (2) pricing information regarding the
Trust's investment securities from such company or companies as are approved by
a majority of the Trust's Board of Trustees and (3) computer and
telecommunication lines and equipment used to provide the aforementioned
services to the Trust, subject to approval by a majority of the Trust's Board
of Trustees and the Trust shall be financially responsible to such company or
companies as aforesaid, for the reasonable cost of such services.
4. The Trust will, from time to time, furnish or otherwise make
available to each
<PAGE> 3
of the Investment Adviser and the Distributor, as the case may be, such
information relating to the business and affairs of the Trust as the Investment
Adviser and the Distributor, as the case may be, may each reasonably require in
order to discharge its duties and obligations hereunder.
5. The Trust shall reimburse the Investment Adviser and the
Distributor, as the case may be, for: (1) a portion of the compensation,
including all benefits, of officers and employees of the Investment Adviser and
the Distributor, as the case may be, based upon the amount of time that such
persons actually spend in providing or assisting in providing the Services to
the Trust (including necessary supervision and review); and (2) such other
direct expenses, including, but not limited to, those listed in paragraph 3
above, incurred on behalf of the Trust that are associated with the providing
of the Services. In addition the Company will pay the Investment Adviser and
the Distributor a per account Administrative Fee based on the shareholder
service and recordkeeping duties performed. Such fees will be approved by a
majority of the Trust's Board of Trustees (See Schedule A). In no event,
however, shall such reimbursement exceed levels that are fair and reasonable in
light of the usual and customary charges made by others for services of the
same nature and quality. Compensation under this Agreement shall be calculated
and paid monthly.
6. The Investment Adviser and the Distributor will each permit
representatives of the Trust, including the Trust's independent auditors, to
have reasonable access to the personnel and records of the Investment Adviser
and the Distributor in order to enable such representatives to monitor the
quality of services being provided and the determination of reimbursements due
the Investment Adviser and the Distributor pursuant to this Agreement. In
addition, the Investment Adviser and the Distributor shall promptly deliver to
the Board of Trustees of the Trust such information as may reasonably be
requested from time to time to permit the Board of Trustees to make an informed
determination regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
7. The Investment Adviser and the Distributor each will use its
best efforts in providing the Services, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, neither the Investment Adviser nor the Distributor shall
be liable to the Trust or any of the Trust investors for any error or judgment
or mistake of law or any act of omission either by the Investment Adviser or
the Distributor or for any losses sustained by the Trust or the Trust
investors.
8. The Investment Adviser and the Distributor each may assign all
or any part of their respective obligations under this Agreement, and any such
assignment will not cause this Agreement to terminate. Notwithstanding any
such assignment, the Investment Adviser and the Distributor shall remain
responsible for the performance of their respective obligations hereunder.
9. This Agreement shall remain in effect until no later than
December 20, 1996 and from year to year thereafter provided such continuance is
approved at least annually by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; and further provided,
however, that (a) the Trust may, at any time and without the payment of any
penalty, terminate this
<PAGE> 4
Agreement upon thirty days written notice to the Investment Adviser or the
Distributor and (b) either the Investment Adviser or the Distributor may
terminate this Agreement without payment of penalty on sixty days' written
notice to the Trust. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed post-paid, to the other party at
the principal office of such party.
10. This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the Act.
To the extent the applicable law of The Commonwealth of Massachusetts or any of
the provisions herein conflict with the applicable provisions of the Act, the
latter shall control.
11. The Trustees have authorized the execution of this Agreement
in their capacity as Trustees and not individually and the Investment Adviser
and the Distributor agree that neither the shareholders of the Trust nor the
Trustees nor any officer, employee, representative or agent of the Trust shall
be personally liable upon, nor shall resort be had to their private property
for the satisfaction of, obligations given, executed or delivered on behalf of
or by the Trust; that the shareholders, Trustees, officers, employees,
representatives and agents of the Trust shall not be personally liable
hereunder; and that they shall look solely to the property of that Trust for
the satisfaction of any claim hereunder.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
TRANSAMERICA FUND MANAGEMENT JOHN HANCOCK CAPITAL
COMPANY GROWTH FUND
By: By:
---------------------------- ---------------------------
Anne C. Hodsdon Thomas M. Simmons
President President
TRANSAMERICA FUND DISTRIBUTORS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 5
Schedule A
Reimbursement for shareholder and other activities under Section 1.B of the
Administrative Services Agreements.
<TABLE>
<CAPTION>
Reimbursement
Amount per
Fund Account per Year
- ---- ----------------
<S> <C>
John Hancock Capital Growth Fund $4
John Hancock California Tax-Free Income Fund,
Class A & Class B $4
John Hancock Cash Reserve, Inc. $3
John Hancock Tax-Free Bond Fund, Class A & Class B $4
John Hancock Bond Fund
John Hancock Investment Quality Bond Fund $4
John Hancock Government Securities Trust $4
John Hancock U.S. Government Trust $4
John Hancock Intermediate Government Trust $4
John Hancock Adjustable U.S. Government Fund $4
John Hancock Adjustable U.S. Government Trust,
Class A & Class B $4
John Hancock Investment Trust
John Hancock Growth and Income Fund, Class A & Class B $4
John Hancock Series. Inc.
John Hancock Money Market Fund B $4
John Hancock Government Income Fund $4
John Hancock High Yield Tax-Free Fund $4
John Hancock High Yield Bond Fund $4
John Hancock Emerging Growth Fund,
Class A & Class B $4
John Hancock Global Resources Fund $4
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve $3
</TABLE>
<PAGE> 6
Additional Duties to be Performed Under Section 1.B of the Administrative
Services Agreement:
In addition to responding to inquiries related to shareholder accounts,
Transamerica Fund Management Co. ("TFMC") or Transamerica Fund Distributors,
Inc. ("TFD"), as the case may be, will also process shareholder telephone
requests for exchanges, Fed wire purchases and telephone redemptions. TFMC and
TFD, as the case may be, will also process shareholder wire order purchases and
redemption requests placed through dealers. In addition, TFMC and TFD, as the
case may be, will maintain dealer, branch, and representative data on the
transfer agency system for all shareholder accounts.
<PAGE> 1
Exhibit 6(a)
December __, 1994
John Hancock Broker Distribution Services, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Distribution Agreement
Dear Sir:
JOHN HANCOCK CAPITAL GROWTH FUND (the "Fund") has been organized as a business
trust under the laws of The Commonwealth of Massachusetts to engage in the
business of an investment company. The Fund's Board of Trustees has selected
you to act as principal underwriter (as such term is defined in Section
2(a)(29) of the Investment Company Act of 1940, as amended) of the shares of
beneficial interest ("shares") of the Fund and you are willing, as agent for
the Fund, to sell the shares to the public, to broker-dealers or to both, in
the manner and on the conditions hereinafter set forth. Accordingly, the Fund
hereby agrees with you as follows:
1. Delivery of Documents. The Fund will furnish you promptly with
copies, properly certified or otherwise authenticated, of any registration
statements filed by it with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, together with any financial statements and exhibits included therein,
and all amendments or supplements thereto hereafter filed.
2. Registration and Sale of Additional Shares. The Fund will from time
to time use its best efforts to register under the Securities Act of 1933, as
amended, such shares not already so registered as you may reasonably be
expected to sell as agent on behalf of the Fund. This Agreement relates to the
issue and sale of shares that are duly authorized and registered and available
for sale by the Fund if, but only if, the Fund sees fit to sell them. You and
the Fund will cooperate in taking such action as may be necessary from time to
time to qualify shares for sale in Massachusetts and in any other states
mutually agreeable to you and the Fund, and to maintain such qualification if
and so long as such shares are duly registered under the Securities Act of
1933, as amended.
3. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from investors unconditional
orders for shares authorized for issue by the Fund and registered under the
Securities Act of 1933, as amended, provided that you may in your discretion
refuse to accept orders for such shares from any particular applicant.
4. Sale of Shares. Subject to the provisions of Sections 5 and 6 hereof
and to such minimum purchase requirements as may from time to time be currently
indicated in the Fund's prospectus, you are authorized to sell as agent on
behalf of the Fund authorized and issued shares registered under the Securities
Act of 1933, as amended. Such sales may be made by you on behalf of the Fund
by accepting unconditional orders to purchase such shares placed with your
investors. The sales price to the public of such shares shall be the public
offering
<PAGE> 2
price as defined in Section 6 hereof.
5. Sale of Shares to Investors by the Fund. Any right granted to you to
accept orders for shares or make sales on behalf of the Fund will not apply to
shares issued in connection with the merger or consolidation of any other
investment company with the Fund or the Fund's acquisition, by purchase or
otherwise, of all or substantially all the assets of any investment company or
substantially all the outstanding shares of any such company, and such right
shall not apply to shares that may be offered or otherwise issued by the Fund
to shareholders by virtue of their being shareholders of the Fund.
6. Public Offering Price. All shares sold by you as agent for the Fund
will be sold at the public offering price, which will be determined in the
manner provided in the Fund's prospectus or statement of additional
information, as now in effect or as it may be amended.
7. No Sales Discount. The Fund shall receive the applicable net asset
value on all sales of shares by you as agent of the Fund.
8. Delivery of Payments. You will deliver to the Fund's transfer agent
all payments made pursuant to orders accepted by you, and accompanied by proper
applications for the purchase of shares, no later than the first business day
following the receipt by you in your home office of such payments and
applications.
9. Suspension of Sales. If and whenever a suspension of the right of
redemption or a postponement of the date of payment or redemption has been
declared pursuant to the Fund's Declaration of Trust and has become effective,
then, until such suspension or postponement is terminated, no further orders
for shares shall be accepted by you except such unconditional orders placed
with you before you have knowledge of the suspension. The Fund reserves the
right to suspend the sale of shares and your authority to accept orders for
shares on behalf of the Fund if in the judgment of a majority of the Fund's
Board of Trustees, it is in the best interests of the Fund to do so, such
suspension to continue for such period as may be determined by such majority;
and in that event, no shares will be sold by the Fund or by you on behalf of
the Fund while such suspension remains in effect except for shares necessary to
cover unconditional orders accepted by you before you had knowledge of the
suspension.
10. Expenses. The Fund will pay (or will enter into arrangements
providing that persons other than you will pay) all fees and expenses in
connection with the preparation and filing of any registration statement and
prospectus or amendments thereto under the Securities Act of 1933, as amended,
covering the issue and sale of shares and in connection with the qualification
of shares for sale in the various states in which the Fund shall determine it
advisable to qualify such shares for sale. It will also pay the issue taxes or
(in the case of shares redeemed) any initial transfer taxes thereon. You will
pay all expenses of printing prospectuses and other sales literature, all fees
and expenses in connection with your qualification as a dealer in various
states, and all other expenses in connection with the sale and offering for
sale of the shares of the Fund which have not been herein specifically
allocated to the Fund.
11. Conformity with Law. You agree that in selling the shares you will
duly conform in all respects with the laws of the United States and any state
in which such shares may be offered for sale by you pursuant to this Agreement.
<PAGE> 3
12. Indemnification. You agree to indemnify and hold harmless the Fund
and each of its Trustees and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the Securities Act of 1933, as
amended, against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Fund or such Trustees,
officers or controlling person may become subject under such Act, under any
other statute, at common law or otherwise, arising out of the acquisition of
any shares by any person which (a) may be based upon any wrongful act by you or
any of your employees or representatives or (b) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus or statement of additional information
covering shares of a Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by you, or (c) may be incurred or arise by
reason of your acting as the Fund's agent instead of purchasing and reselling
shares as principal in distributing shares to the public, provided that in no
case is your indemnity in favor of a Trustee or officer of the Fund or any
other person deemed to protect such Trustee or officer of the Fund or other
person against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of obligations
and duties under this Agreement.
You are not authorized to give any information or to make any
representations on behalf of the Fund or in connection with the sale of shares
other than the information and representations contained in a registration
statement, prospectus, or statement of additional information covering shares,
as such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time. No person other
than you is authorized to act as principal underwriter for the Fund.
13. Duration and Termination of this Agreement. This Agreement shall
remain in force until two years from the date hereof and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) a majority of the Board of Trustees of the Fund who are
not interested persons of you (other than as Trustees) or of the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
either (i) the Board of Trustees of the Fund, or (ii) a majority of the
outstanding voting securities of the Fund. This Agreement may, on 60 days'
written notice, be terminated at any time, without the payment of any penalty,
by the Board of Trustees of the Fund, by a vote of a majority of the
outstanding voting securities of the Fund, or by you. This Agreement will
automatically terminate in the event of its assignment by you. In interpreting
the provisions of this Section 13, the definitions contained in Section 2(a) of
the Investment Company Act of 1940, as amended (particularly the definitions of
"interested person," "assignment" and "voting security"), shall be applied.
14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. If the Fund should at any time deem it
necessary or advisable in the best interests of the Fund that any amendment of
this agreement be made in order to comply with the recommendations or
<PAGE> 4
requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to assent to such amendment, the Fund may terminate this
Agreement forthwith. If you should at any time request that a change be made
in the Fund's Declaration of Trust or By-Laws, or in its methods of doing
business, in order to comply with any requirements of federal law or
regulations of the Securities and Exchange Commission or of a national
securities association of which you are or may be a member, relating to the
sale of shares, and the Fund should not make such necessary change within a
reasonable time, you may terminate this Agreement forthwith.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
trustees, shareholders, officers, employees or agents of the Fund, but only the
Fund's property shall be bound.
Very truly yours,
JOHN HANCOCK CAPITAL GROWTH FUND
By:
----------------------------------
Thomas M. Simmons
President
The foregoing Agreement is hereby
accepted as of the date hereof
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By:
-------------------------------------------
C. Troy Shaver, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 6(b)
SOLICITING DEALER AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston -- Massachusetts -- 02199-7603
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
SOLICITING DEALER AGREEMENT
Date
------------------------------
John Hancock Funds, Inc. ("the Distributor" or "Distributor") is the
principal distributor of the shares of beneficial interest (the "securities")
of each of the John Hancock Funds, ("We" or "us"), (the "Funds"). Such Funds
are those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You represent that you are a member
of the National Association of Securities Dealers, Inc., (the "NASD") and,
accordingly, we invite you to become a non-exclusive soliciting dealer to
distribute the securities of the Funds and you agree to solicit orders for the
purchase of the securities on the following terms. Securities are offered
pursuant to each Fund's prospectus and statement of additional information, as
such prospectus and statement of additional information may be amended from
time to time. To the extent that the prospectus or statement of additional
information contains provisions that are inconsistent with the terms of this
Agreement, the terms of the prospectus or statement of additional information
shall be controlling.
OFFERINGS
1. You agree to abide by the Rules of Fair Practice of the NASD and to all
other rules and regulations that are now or may become applicable to
transactions hereunder.
2. As principal distributor of the Funds, we shall have full authority to
take such action as we deem advisable in respect of all matters pertaining to
the distribution. This offer of shares of the Funds to you is made only in
such jurisdictions in which we may lawfully sell such shares of the Funds.
3. You shall not make any representation concerning the Funds or their
securities except those contained in the then- current prospectus or
statement of additional information for each Fund.
4. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by the Distributor or the
Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
5. You are not authorized to act as our agent. Nothing shall constitute you
as a syndicate, association, joint venture, partnership, unincorporated
business, or other separate entity or otherwise partners with us, but you shall
be liable for your proportionate share of any tax, liability or expense based
on any claim arising from the sale of shares of the Funds under this Agreement.
We shall not be under any liability to you, except for obligations expressly
assumed by us in this Agreement and liabilities under Section 11(f) of the
Securities Act of 1933, and no obligations on our part shall be implied or
inferred herefrom.
-2-
<PAGE> 3
6. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All dealers offering shares of
the Funds and their associated persons agree to comply with these general
suitability and compliance standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your registered representatives in light of all the facts and circumstances, to
ascertain that the class of shares to be purchased by each investor is
appropriate and suitable. These recommendations should be based on several
factors, including but not limited to:
(A) the amount of money to be invested initially and over a period of
time;
(B) the current level of front-end sales load or back-end sales load
imposed by the Fund;
(C) the period of time over which the client expects to retain the
investment;
(D) the anticipated level of yield from fixed income funds' Class A and
Class B shares;
(E) any other relevant circumstances such as the availability of
reduced sales charges under letters of intent and/or rights of
accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Soliciting Dealer Agreement for compliance with the foregoing standards.
In certain instances, it may be appropriate to discuss the purchase with the
registered representatives involved or to review the advantages and
disadvantages of selecting one class of shares over another with the client.
The Distributor will not accept orders for Class B Shares in any Fund from you
for accounts maintained in street name. Trades for Class B Shares will only be
accepted in the name of the shareholder.
7. CLASS C SHARES - Certain mutual funds distributed by the Distributor may be
offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
8. Orders for securities received by you from investors will be for the sale
of the securities at the public offering price, which will be the net asset
value per share as determined in the manner provided in the relevant Fund's
prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then- current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
-3-
<PAGE> 4
In addition to the foregoing, you acknowledge and agree to the initial
and subsequent investment minimums, which may vary from year to year, as
described in the then-current prospectus for each Fund.
9. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
10. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then-current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
11. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by a registered representative in your employ and remitted to us
promptly by you, (b) where a subsequent investment is made to an account
established by a registered representative in your employ or (c) where a
subsequent investment is made to an account established by a broker/dealer
other than you and is accompanied by a signed request from the account
shareholder that your registered representative receive the Reallowance for
that investment and/or for subsequent investments made in such account. If for
any reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
12. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the the prospectus). To the
extent you provide distribution and marketing services in the promotion of the
sale of shares of these Funds, including furnishing services and assistance to
your customers who invest in and own shares of such Funds and including, but
not limited to, answering routine inquiries regarding such Funds and assisting
in changing distribution options, account designations and addresses, you may
be entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
13. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
14. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
15. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
-4-
<PAGE> 5
INDEMNIFICATION
16. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
17. NSCC INDEMNITY - SHAREHOLDER AND HOUSE ACCOUNTS - In consideration of the
Distributor and John Hancock Investor Services Corporation ("Investor
Services") liquidating, exchanging, and/or transferring unissued shares of the
Funds for your customers without the use of original or underlying
documentation supporting such instructions (e.g., a signed stock power or
signature guarantee), you hereby agree to indemnify the Distributor, Investor
Services and each respective Fund against any losses, including reasonable
attorney's fees, that may arise from such liquidation exchange, and/or
transfer of unissued shares upon your direction. This indemnification shall
apply only to the liquidation, exchange and/or transfer of unissued shares in
shareholder and house accounts executed as wire orders transmitted via NSCC's
Fund/SERVsystem. You represent and warrant to the Funds, the Distributor and
Investor Services that all such transactions shall be properly authorized by
your customers.
The indemnification in this Section 16 shall not apply to any losses
(including attorney's fees) caused by a failure of the Distributor, Investor
Services or a Fund to comply with any of your instructions governing any of the
above transactions, or any negligent act or omission of the Distributor,
Investor Services or a Fund, or any of their directors, officers, employees or
agents. All transactions shall be settled upon your confirmation through NSCC
transmission to Investor Services.
The Distributor, Investor Services or you may revoke the indemnity
contained in this Section 16 upon prior written notice to each of the other
parties hereto, and in the case of such revocation, this indemnity agreement
shall remain effective as to trades made prior to such revocation.
MISCELLANEOUS
18. We will supply to you at our expense additional copies of the prospectus
and statement of additional information for each of the Funds and any printed
information supplemental to such material in reasonable quantities upon
request.
19. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
20. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
21. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 6
SOLICITING DEALER
-------------------------------------------------
Name of Organization
By:-------------------------------------------------
Authorized Signature of Soliciting Dealer
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the following
information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
-------------------------------- ------------------------------
<TABLE>
<S> <C>
TO BE COMPLETED BY: TO BE COMPLETED BY:
JOHN HANCOCK FUNDS, INC. JOHN HANCOCK INVESTOR
SERVICES CORPORATION
BY: BY:
------------------------------------------- -------------------------------------------
- ---------------------------------------------- ----------------------------------------------
TITLE TITLE
</TABLE>
DEALER NUMBER:
------------------------------------
-6-
<PAGE> 7
JOHN HANCOCK
MUTUAL FUNDS
John Hancock Broker Distrubution Services, Inc.
101 Huntington Avenue Boston, MA 02199-7608 1-800-225-5291
/s/ John Hancock
<PAGE> 8
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Resources Fund
John Hancock Limited-Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government Securities Fund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Government Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, Inc., as principal distributor of the
John Hancock funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
*Closed to new investors as of 9/30/94
<PAGE> 9
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to the selling Brokers for sales of John Hancock
Funds is set forth in each Fund's then- current prospectus. No Commission will
be paid on sales of John Hancock Cash Management Fund or any John Hancock Fund
that is without a sales charge. Purchases of Class A shares of $1 million or
more, or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no initial
sales charge. On purchases of this type, John Hancock Funds, Inc. will pay a
commission as set forth in each Fund's then-current prospectus. John Hancock
Funds, Inc. will pay Brokers for sales of Class B shares of the Funds a
marketing fee as set forth in each Fund's then-current prospectus.
<PAGE> 10
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEES
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, John Hancock Funds, Inc. will advance to you a First Year
Service Fee related to the purchase of Class A shares (only if subject to sales
charge) or Class B shares of any of the Funds, as the case may be, sold by your
firm. This Service Fee will be compensation for your personal service and/or
the maintenance of shareholder accounts ("Customer Servicing") during the
twelve-month period immediately following the purchase of such shares, in the
amount not to exceed .25 of 1% of net assets invested in Class A shares or
Class B shares of the Fund, as the case may be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your firm has under management
with the Funds combined average daily net assets for the preceding quarter of
no less than $1 million, or an individual representative of your firm has under
management with the Funds combined average daily net assets for the preceding
quarter of no less than $250,000 (an "Eligible Firm").
<PAGE> 11
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
SCHEDULE D
DATED JULY 1, 1992 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK MUTUAL FUNDS
No broker/dealer shall represent the FUnds or Distribution Services in any
written communications without prior receipt of written approval from John
Hancock Broker Distribution Services, Inc. This includes but is not limited to
all advertising, public relations, marketing and sales literature, and media
contacts.
Further, subsequent to the creation of such materialsbefore written
approval from JHBDS will be given, a copy of the NASD review document
applicable to such materials must be furnished to John Hancock Broker
Distribution Services, Inc. for its review and files.
FOR PURPOSES OF THIS SCHEDULE D, THE FOLLOWING TERMS ARE DEFINED:
Advertising:
materials designed for the mass market, e.g. print ads, radio and tv
commercials, billboards, etc.
Sales literature:
materials designed for a directed market, e.g. prospecting letters,
brochures, mailers, stuffers, etc.
Coop Advertising:
advertising materials (as defined above) used by selling group members
for which John Hancock pays some or all of the costs of publication
whether the materials were developed by JHBDS Marketing or not.
John Hancock Broker Distribution Services, Inc. Approval of Advertising:
Approval has four meanings:approval of the material itself from a
marketing perspective (JHBDS product managers), proactive compliance
officer), parent company corporate advertising approval (John Hancock
Mutual Life Insurance Company Advertising Dept. personnel) and
approval for use and related cost-sharing arrangements (national sales
coordinators).
NASD Filing:
Materials created by JHBDS will be filed with the NASD by the JHBDS
Compliance Department. Materials not created by JHBDS but to be
included in the coop program will be filed with the NASD by the
broker-dealer creating the materials. However, prior to use of the
materials in our coop program, we will need a copy of the final
version of the material as well as the NASD comment letter. When this
is received, the above approvals can be obtained.
<PAGE> 1
EXHIBIT 6(c)
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston - Massachusetts - 02199-7603
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
Date
--------------------------------
John Hancock Funds, Inc. ("The Distributor", or "Distributor"), ("We" or
"us"), is the principal distributor of the shares of beneficial interest (the
"securities") of each of the John Hancock Funds (the "Funds"). Such Funds are
those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You hereby represent that you are a
"bank" as defined in Section 3(a)(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction in shares of
the Funds, are not required to register as a broker/dealer under the Exchange
Act or regulations thereunder. We invite you to become a non-exclusive
soliciting financial institution ("Financial Institution") to distribute the
securities of the Funds and you agree to solicit orders for the purchase of the
securities on the following terms. Securities are offered pursuant to each
Fund's prospectus and statement of additional information, as such prospectus
and statement of additional information may be amended from time to time. To
the extent that the prospectus or statement of additional information contains
provisions that are inconsistent with the terms of this Agreement, the terms of
the prospectus or statement of additional information shall be controlling.
OFFERINGS
1. You represent and warrant that you will use your best efforts to ensure
that any purchase of shares of the Funds by your customers constitutes a
suitable investment for such customers. You acknowledge that you will base
such a decision of suitability on all the facts you have gathered about your
customer's financial situation, investment objectives, risk tolerance and
sophistication.
2. You represent and warrant that a copy of the then-current prospectus of a
Fund will be delivered to your customer before any purchase of shares of that
Fund are effected for that customer. You shall not effect any transaction in,
or induce any purchase or sale of, any shares of the Funds by means of any
manipulative, deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with respect to
transactions in shares of a Fund.
3. You represent and warrant that you will not make shares of any Fund
available to your customers, including your fiduciary customers, except in
compliance with all Federal and state laws and rules and regulations of
regulatory agencies or authorities applicable to you, or any of your affiliates
engaging in such activity, which may affect your business practices. You
confirm that you are not in violation of any banking law or regulations as to
which you are subject. You agree that you will comply with the requirements of
Banking Circular 274 issued by the Office of the Comptroller of the Currency in
offering shares of the Funds to your customers. We agree that we will comply
with all Federal and state laws and rules and regulations of regulatory
agencies or authorities applicable to us. We and you acknowledge and agree
that the offering of shares of the Funds pursuant to this agreement is subject
to the oversight of your management and the regulatory authorities by which you
are subject to review, and that appropriate records and materials relating to
any activity by you or us undertaken pursuant to this agreement may be accessed
by bank examiners in the due course of any regulatory review to which you may
be subject.
4. As principal distributor of the Funds, we shall have full authority to take
such action as we deem advisable in respect of all matters pertaining to the
distribution. This offer of shares of the Funds to you is made only in such
jurisdictions in which we may lawfully sell such shares of the Funds.
-2-
<PAGE> 3
5. You shall not make any representation concerning the Funds or their
securities except those contained in the then-current prospectus or statement
of additional information for each Fund.
6. We will supply to you at our expense additional copies of the then-current
prospectus and statement of additional information for each of the Funds and
any printed information supplemental to such material in reasonable quantities
upon request. It shall be your obligation to ensure that all such information
and materials are distributed to your customers who own or seek to own shares
of the Funds in accordance with securities and/or banking law and regulations
and any other applicable regulations.
7. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by us the Distributor or
the Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
8. You are not authorized to act as our agent. In making available shares of
the Funds under this Financial Institution Sales and Service Agreement, nothing
herein shall be construed to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or employee of the
Funds, and you shall not make any representations to the contrary. Nothing
shall constitute you as a syndicate, association, unincorporated business, or
other separate entity or partners with us, but you shall be liable for your
proportionate share of any tax, liability or expense based on any claim arising
from the sale of shares of the Funds under this Agreement. We shall not be
under any liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under Section 11(f) of the Securities Act of
1933, and no obligations on our part shall be implied or inferred herefrom.
9. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All soliciting financial
institutions offering shares of the Funds and their agents, employees and
representatives agree to comply with these general suitability and compliance
standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your agents, employees and representatives in light of all the facts and
circumstances, to ascertain that the class of shares to be purchased by each
investor is appropriate and suitable. These recommendations should be based on
several factors, including but not limited to:
(A) the amount of money to be invested initially and over
a period of time;
(B) the current level of front-end sales load or back-end
sales load imposed by the Fund;
(C) the period of time over which the customer expects to
retain the investment;
(D) the anticipated level of yield from fixed income
funds' Class A and Class B shares;
(E) any other relevant circumstances such as the
availability of reduced sales charges under letters
of intent and/or rights of accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
-3-
<PAGE> 4
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Financial Institution Sales and Service Agreement for compliance with the
foregoing standards. In certain instances, it may be appropriate to discuss
the purchase with the agents, employees and representatives involved or to
review the advantages and disadvantages of selecting one class of shares over
another with the client. The Distributor will not accept orders for Class B
Shares in any Fund from you for accounts maintained in your name or in the name
of your nominee for the benefit of certain of your customers. Trades for Class
B Shares will only be accepted in the name of the shareholder.
10. CLASS C SHARES - Certain mutual funds distributed by the Distributor may
be offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
11. With respect to any and all transactions in the shares of any Fund
pursuant to this Financial Institution Sales and Service Agreement it is
understood and agreed in each case that: (a) you shall be acting solely as
agent for the account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute transactions only
upon receiving instructions from you acting as agent for your customer or upon
receiving instructions directly from your customer; (d) as between you and your
customer, your customer will have full beneficial ownership of all shares; (c)
each transaction shall be for the account of your customer and not for your
account; and (f) unless otherwise agreed in writing we will serve as a clearing
broker for you on a fully disclosed basis, and you shall serve as the
introducing agent for your customers' accounts. Subject to the foregoing,
however, and except for Class B shares, as described in Section 8 above, you
may maintain record ownership of such customers' shares in an account
registered in your name or the name of your nominee, for the benefit of such
customers. Each transaction shall be without recourse to you provided that you
act in accordance with the terms of this Financial Institution Sales and
Service Agreement. You represent and warrant to us that you will have full
right, power and authority to effect transactions (including, without
limitation, any purchases and redemptions) in shares of the Funds on behalf of
all customer accounts provided by you.
12. Orders for securities received by you from your customers will be for the
sale of the securities at the public offering price, which will be the net
asset value per share as determined in the manner provided in the relevant
Fund's prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then-current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
In addition to the foregoing, you acknowledge and agree to the initial and
subsequent investment minimums, which may vary from year to year, as described
in the then-current prospectus for each Fund.
13. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
14. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then- current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
15. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by you and remitted to us promptly by you, (b) where a subsequent
investment is made to an account established by you or (c) where a subsequent
investment is made to an account established by a financial institution or
-4-
<PAGE> 5
registered broker/dealer other than you and is accompanied by a signed request
from the account shareholder that you receive the Reallowance for that
investment and/or for subsequent investments made in such account. If for any
reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
16. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the prospectus). To the extent
you provide distribution and marketing services in the promotion of the sale of
shares of these Funds, including furnishing services and assistance to your
customers who invest in and own shares of such Funds and including, but not
limited to, answering routine inquiries regarding such Funds and assisting in
changing distribution options, account designations and addresses, you may be
entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
17. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
18. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
19. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
INDEMNIFICATION
20. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
MISCELLANEOUS
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as most recently furnished to us by you.
22. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
23. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 6
FINANCIAL INSTITUTION
-------------------------------------------------
Financial Institution
By:
-------------------------------------------------
Authorized Signature of Financial Institution
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the
following information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
--------------------- ----------------------------
TO BE COMPLETED BY: JOHN HANCOCK INVESTOR
JOHN HANCOCK FUNDS, INC. SERVICES CORPORATION
By: By:
--------------------------------- ------------------------------------
- ------------------------------------ ------------------------------------
Title Title
TO BE COMPLETED BY:
FINANCIAL INSTITUTION NUMBER:
----------------------------------------------
-6-
<PAGE> 7
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Rescources Fund
John Hancock Limited Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government Securities Fund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Governtment Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, as principal distributor of the
John Hancock Funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
* Closed to new invstors as of 9/30/94.
<PAGE> 8
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to Financial Institutions for sales of John Hancock
Funds is the same as that paid to Selling Brokers described and set forth
in each Fund's then-current prospectus. No Commission will be paid on
sales of John Hancock Cash Management Fund or any John Hancock Fund that is
without a sales charge. Purchases of Class A shares of $1 million or more,
or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no
initial sales charge. On purchases of this type, the Distributor will pay a
commission as set forth in each Fund's then-current prospectus. John
Hancock Funds, Inc. will pay Financial Institutions for sales of Class B
shares of the Funds a marketing fee as set forth in each Fund's then-
current prospectus for Selling Brokers.
<PAGE> 9
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DISTRIBUTION PLAN SCHEDULE OF COMPENSATION
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEE
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will advance to you a First Year Service
Fee related to the purchase of Class A shares (only if subject to sales charge)
or Class B shares of any of the Funds, as the case maybe, sold by your firm on
or after July 1, 1993. This Service Fee will be compensation for your personal
service and/or the maintenance of shareholder accounts ("Customer Servicing")
during the twelve-month period immediately following the purchase of such
shares, in an amount not to exceed .25 of 1% of the average daily net assets
attributable to Class A shares or Class B shares of the Fund, as the case may
be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve-month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your Financial Institution has
under management with the Funds combined average daily net assets for the
preceding quarter of no less than $1 million, or an individual representative
of your Financial Institution has under management with the Funds combined
average daily net assets for the preceding quarter of no less than $250,000 (an
"Eligible Financial Institution").
<PAGE> 1
EXHIBIT 8
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be held by it . . . . . . . . . . . . . . . 3-4
3. Duties of the Custodian with Respect toProperty of the Fund . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8
C. Registration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
E. Payments for Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 9
F. Investment and Availability of Federal Funds . . . . . . . . . . . . . . . . . . 9
G. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10
H. Payment of Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12
I. Liability for Payment in Advance of Receipt of Securities Purchased . . . . 12-13
J. Payments for Repurchases of Redemptions of Shares of the Fund . . . . . . . . 13
K. Appointment of Agents by the Custodian . . . . . . . . . . . . . . . . . . . . 13
L. Deposit of Fund Portfolio Securities in Securities Systems . . . . . . . . . 13-16
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . . . . . . . . . . 16-18
N. Segregated Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19
O. Ownership Certificates for Tax Purposes . . . . . . . . . . . . . . . . . . . 19
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Q. Communications Relating to Fund Portfolio Securities . . . . . . . . . . . . 19-20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
R. Exercise of Rights; Tender Offers . . . . . . . . . . . . . . . . . . . . . . 20
S. Depository Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
T. Interest Bearing Call or Time Deposits . . . . . . . . . . . . . . . . . . . . 21
U. Options, Futures Contracts and Foreign Currency Transactions . . . . . . . . 21-23
V. Actions Permitted Without Express Authority . . . . . . . . . . . . . . . . 23-24
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . . . . . . . . . . . . 24-25
6. Opinion of Fund`s Independent Public Accountants . . . . . . . . . . . . . . . . . . 25
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . . . . . . . . . . . 25-26
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-27
9. Persons Having Access to Assets of the Fund . . . . . . . . . . . . . . . . . . . . 27
10. Effective Period, Termination and Amendment; Successor Custodian . . . . . . . . . 27-28
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . . . . . . . 28-29
12. Certification as to Authorized Officers . . . . . . . . . . . . . . . . . . . . . . 29
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15. Adoption of the Agreement by the Fund . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 4
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of December 15, 1992 between each investment
company advised by John Hancock Advisers, Inc. which has adopted this Agreement
in the manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of
the Trust: The Chairman of the Board of Trustees, the President, a Vice
President, the Secretary, the Treasurer or Assistant Secretary or Assistant
Treasurer, or any other officer of the Trust duly authorized to sign by
appropriate resolution of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
<PAGE> 5
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository
but only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart O of
Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the
book-entry regulations of federal agencies substantially in the form of Subpart
O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but
only if the Custodian has received a certified copy of a vote of the Board
approving the participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by John Hancock
Advisers, Inc. to the Custodian through the John Hancock equity trading system
and the John Hancock fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for
different purposes. A certified copy of a vote of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of any
such person to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be general or
specific in terms and, where appropriate, may be standing instructions. Unless
the vote delegating authority to any person or persons to give a particular
class of instructions specifically requires that the approval of any person,
persons or committee shall first have been obtained before the Custodian may
act on instructions of that class, the Custodian shall be under no obligation
to question the right of the person or persons giving such instructions in so
doing. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund
shall cause all oral
<PAGE> 6
instructions to be confirmed in writing. The Fund authorizes the Custodian to
tape record any and all telephonic or other oral instructions given to the
Custodian. Upon receipt of a certificate signed by two officers of the Fund as
to the authorization by the President and the Treasurer of the Fund accompanied
by a detailed description of the communication procedures approved by the
President and the Treasurer of the Fund, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Fund and the Custodian
are satisfied that such procedures afford adequate safeguards for the Fund's
assets. In performing its duties generally, and more particularly in
connection with the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may take cognizance of the provisions of the governing
documents and registration statement of the Fund as the same may from time to
time be in effect (and votes, resolutions or proceedings of the shareholders or
the Board), but, nevertheless, except as otherwise expressly provided herein,
the Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with or
in any way contrary to any provisions of such governing documents and
registration statement, or votes, resolutions or proceedings of the
shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and Agent
in accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian.
Any foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the
Board and shall be in accordance with and subject to the provisions of said
Rule. For the
<PAGE> 7
purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian, (2)
held by any subcustodian referred to in Section 2 hereof or by any
agent referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book-Entry
System or in an Approved Foreign Securities Depository, each of
which from time to time is referred to herein as a "Securities
System", and (4) held by the Custodian or by any subcustodian
referred to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, but only against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
<PAGE> 8
security (i) upon the exercise of an option written by the
Fund and (ii) upon the failure by the Fund to make a
successful bid with respect to a portfolio security, the
continued holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number
of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities or
participation interests are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the Fund
from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the
broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
<PAGE> 9
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender
of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement), but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities.
10) For delivery as security in connection with any borrowings
by the Fund requiring a pledge or hypothecation of assets
by the Fund (if then permitted under circumstances
described in the current registration statement of the
Fund), provided, that the securities shall be released
only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Fund, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a subcustodian
employed pursuant to Section 2 hereof), and a futures
commission merchant, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or
of any
<PAGE> 10
contract market or commodities exchange or similar
organization, regarding futures margin account deposits or
payments in connection with futures transactions by the
Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose
to be proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in the
name or nominee name of any agent appointed pursuant to Paragraph
K hereof, or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants Trust Company
or Approved Clearing Agency or Federal Book-Entry System or
Approved Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the Fund
or only assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a fiduciary
capacity for customers. All certificates for securities accepted
by the Custodian or any such agent or subcustodian on behalf of
the Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting in pursuant to the terms of
this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Fund other than cash maintained by the Fund
in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved in writing by two
officers of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to
withdrawal only by the Custodian in that capacity.
<PAGE> 11
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the principal
underwriter of the Fund to enable the Custodian to make certain it
promptly receives the cash or other consideration due to the Fund
for such new or treasury Shares as may be issued or sold from time
to time by the Fund, in accordance with the governing documents
and offering prospectus and statement of additional information of
the Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Fund.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall promptly
collect all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Fund
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
<PAGE> 12
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action
for collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options
on futures contracts purchased for the account of the Fund
but only (a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for
transfer or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a
member or by any bank, banking institution or trust
company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940 to act as a custodian and which has been designated
by the Custodian as its agent for this purpose or by the
agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the
case of a purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper, upon
<PAGE> 13
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Fund and another bank or a broker-
dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Fund as set forth
in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of Paragraph
J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent and
legal fees, and other operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions to
holders of Shares declared or authorized by the Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions signed by two officers of the Fund
to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the
securities had been received by the Custodian; except that in the
case of a repurchase agreement
<PAGE> 14
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the securities in
certificate form subject to such repurchase agreement or (ii)
written evidence that the securities subject to such repurchase
agreement have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with the
Federal Reserve Bank of Boston or (iii) the safekeeping receipt,
provided that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are to
be purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or repurchased
by the Fund or for the Fund's account by its transfer agent or
principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such checking
account and such special checks shall be subject to such rules and
regulations as the Custodian and the Fund may from time to time
adopt. The Custodian or the Fund may suspend or terminate use of
such checking account or such special checks (either generally or
for one or more shareholders) at any time. The Custodian and the
Fund shall notify the other immediately of any such suspension or
termination.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company Act
of 1940 to act as a custodian or is itself an eligible foreign
custodian within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties and
functions of the Custodian described in this Section 3 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of any of its responsibilities or liabilities hereunder, and as
between the Fund and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent. For the
purposes of this Agreement, any property of the Fund held by any
such agent shall be deemed to be held by the Custodian hereunder.
<PAGE> 15
L. Deposit of Fund Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities of
the Fund in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in the Securities System which
shall not include any assets of the Custodian or such subcustodian
or any other person other than assets held by the Custodian or
such subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of notice
or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of any entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund only upon (i)
receipt of notice or advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all notices or advises from the Securities System of
transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request.
<PAGE> 16
The Custodian shall promptly send to the Fund confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice of each such transaction, and shall
furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account
of the Fund on the next busines day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly
send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and
the Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times during
regular business hours be open to the inspection of the Fund's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of a certificate of an officer of the Fund that the
Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed and
approved the continued use by the Fund of each Securities System,
so long as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund shall
promptly notify the Custodian if the use of a Securities System is
to be discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election
of the Fund, it shall be entitled to be
<PAGE> 17
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if
and to the extent that the Fund has not been made whole for any
such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System for
Commercial Paper Upon receipt of proper instructions with respect to
each issue of direct issue commercial paper purchased by the Fund, the
Custodian may deposit and/or maintain direct issue commercial paper
owned by the Fund in any Approved Book-Entry System for Commercial
Paper, in each case only in accordance with applicable Securities and
Exchange Commission rules, regulations, and no-action correspondence,
and at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or subcustodian
on behalf of an issuer with which the Custodian or
subcustodian has entered into a book-entry agreement and
provided further that such paper is maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in an Approved Book-Entry System for
Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other
than assets held by the Custodian or such subcustodian as
a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System and
shall at all times during regular business hours be open
for inspection by authorized officers, employees or agents
of the Fund. The Custodian shall be fully and completely
responsible for maintaining a recordkeeping system capable
of accurately and currently stating the Fund's holdings of
commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
<PAGE> 18
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer or redemption and
payment for the account of the Fund. Copies of all
notices, advises and confirmations of transfers of
commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be promptly provided to the Fund at its
request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of each
such transaction, and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund on
the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Fund any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall
ensure that any agent appointed pursuant to Paragraph K
hereof or any subcustodian employed pursuant to Section 2
hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to
such agent's or subcustodian's internal accounting
controls and procedures for safeguarding securities
deposited in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the
Fund that the Board has approved the use of a particular
Approved Book-Entry System for Commercial Paper; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed
and approved the continued use by the Fund of each
Approved Book-Entry System for Commercial Paper, so long
as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund
shall promptly notify the Custodian if the use of an
Approved Book-Entry System for Commercial Paper is to
be discontinued; at the request of the Fund, the Custodian
will terminate the use of any such System as promptly as
practicable.
<PAGE> 19
(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Fund
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund
for any loss or damage to the Fund resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as
a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market or
commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements
in connection with transactions by the Fund (ii) for purposes
of segregating cash or U.S. Government securities in connection
with options purchased, sold or written by the Fund or futures
contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a certificate
signed by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
<PAGE> 20
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other notices
or announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may be
required. Neither the Custodian nor its nominee shall vote upon
any of the securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by proper
instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons relating
to the securities and participation interests being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information
received by the Custodian from issuers and other persons relating
to the securities and participation interests whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to securities
and participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for promptly
notifying the Fund of all such offers in accordance with the
standard of reasonable care set forth in Section 8 hereof. For
all such offers for which the Custodian is responsible as provided
in this Paragraph R, the Fund shall have responsibility for
providing the Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the Custodian shall
timely deliver to the issuer or trustee thereof, or to the agent
of either, warrants, puts, calls, rights or similar
<PAGE> 21
securities for the purpose of being exercised or sold upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon receipt
of proper instructions, the Custodian shall timely deposit
securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the consideration to be paid or delivered or
the tendered securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the contrary,
the Custodian shall take all necessary action, unless otherwise
directed to the contrary by proper instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Fund in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts, European Depository Receipts or International
Depository Receipts (hereinafter collectively referred to as
"ADRs") for such securities,
against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that
the depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee of
the Custodian or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, for delivery to the
Custodian or such subcustodian at such place as the Custodian or
such subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to the
issuer thereof against a written receipt therefor adequately
describing the ADRs surrendered and written evidence satisfactory
to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian or to a
subcustodian employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed term
and call deposits with the banking department of such banking
institution (other than the Custodian) and in such amounts as the
Fund may designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to
the amount and currency of each such deposit, the accepting
banking institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Custodian by the banking
<PAGE> 22
institution. Such deposits shall be deemed portfolio securities
of the applicable Fund for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of income from
such accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security, securities index, currency or other financial
instrument or index by the Fund; deposit and maintain in
a segregated account for each Fund separately, either
physically or by book-entry in a Securities System,
securities subject to a covered call option written by
the Fund; and release and/or transfer such securities or
other assets only in accordance with a notice or other
communication evidencing the expiration, termination or
exercise of such covered option furnished by the Options
Clearing Corporation, the securities or options exchange
on which such covered option is traded or such other
organization as may be responsible for handling such o
ptions transactions. The Custodian and the broker-dealer
shall be responsible for the sufficiency of assets held
in each Fund's segregated account in compliance with
applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract
by the Fund; deposit and maintain in a segregated account,
for the benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or
variation "margin" deposits (including mark-to-market
payments) intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold
or any options on futures contracts written by Fund, in
accordance with the provisions of any agreement or
agreements among the Fund, the Custodian and such futures
commission merchant, designed to comply with the rules of
the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin accounts
only in
<PAGE> 23
accordance with any such agreements or rules. The
Custodian and the futures commission merchant shall be
responsible for the sufficiency of assets held in the
segregated account in compliance with the applicable
margin maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly, the
responsibility of the Custodian therefor shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund. The
Custodian shall be responsible for the transmittal to and
receipt of cash from the currency broker or banking or
financial institution with which the contract or option is
made, the maintenance of proper records with respect to
the transaction and the maintenance of any segregated
account required in connection with the transaction. The
Custodian shall have no duty with respect to the selection
of the currency brokers or banking or financial
institutions with which the Fund deals or for their
failure to comply with the terms of any contract or
option. Without limiting the foregoing, it is agreed that
upon receipt of proper instructions and insofar as funds
are made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Fund) make free outgoing payments of cash
in the form of U.S. dollars or foreign currency before
receiving confirmation of a foreign exchange contract or
swap or confirmation that the countervalue currency
completing the foreign exchange contract or swap has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may
be incurred by the Fund or the Custodian as a result of
the failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless
be held to the standard of care set forth in, and shall be
liable to the Fund in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian may in its
discretion, without express authority from the Fund:
<PAGE> 24
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of Net
Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such books
of account and render as at the close of business on each day a detailed
statement of the amounts received or paid out and of securities received or
delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any authorized officer
of the Fund; and shall compute and determine, as of the close of regular
trading on the New York Stock Exchange, or at such other time or times as the
Board may determine, the net asset value of a Share in the Fund, such
computation and determination to be made in accordance with the governing
documents of the Fund and the votes and instructions of the Board at the time
in force and applicable, and promptly notify the Fund and its investment
adviser and such other persons as the Fund may request of the result of such
computation and determination. In computing the net asset value the Custodian
may rely upon security quotations received by telephone or otherwise from
sources or pricing services designated by the Fund by proper instructions, and
may further rely upon information furnished to it by any authorized officer of
the Fund relative (a) to liabilities of the Fund not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the
valuation of portfolio securities, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interest or other asset or property for which market
quotations are not readily available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund
<PAGE> 25
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state
tax laws and any other law or administrative rules or procedures which may be
applicable to the Fund. All books of account and records maintained by the
Bank in connection with the performance of its duties under this Agreement
shall be the property of the Fund, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Fund, and in the event of termination of this
Agreement shall be delivered to the Fund or to such other person or persons as
shall be designated by the Fund. Disposition of any account or record after
any required period of preservation shall be only in accordance with specific
instructions received from the Fund. The Bank shall assist generally in the
preparation of reports to shareholders, audits of accounts, and other
ministerial matters of like nature; and, upon request, shall furnish the Fund's
auditors with an attested inventory of securities held with appropriate
information as to securities in transit or in the process of purchase or sale
and with such other information as said auditors may from time to time request.
The Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof, and
shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for which it
is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall entitled to receive from the Fund on demand reimbursement
for its cash disbursements, expenses and charges, including counsel fees, in
connection with its duties as Custodian and Agent hereunder, but excluding
salaries and usual overhead expenses.
<PAGE> 26
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement but shall be liable only
for its own negligent or bad faith acts or failures to act. Notwithstanding
the foregoing, nothing contained in this paragraph is intended to nor shall it
be construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from,
or caused by, the direction of or authorization by the Fund to maintain custody
of any securities or cash of the Fund in a foreign county including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Bank, result in the Bank or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be authorized
or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any
such person. No officer or director, employee or agent of
the Custodian who holds any similar position with the Fund
or the
<PAGE> 27
investment adviser of the Fund shall have access to the
assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to
the Fund's independent public accountants in connection
with their auditing duties performed on behalf of the
Fund.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Fund or of the investment adviser
of the Fund from giving instructions to the Custodian or
executing a certificate so long as it does not result in
delivery of or access to assets of the Fund prohibited by
paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; provided, that the Fund may at
any time by action of its Board, (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other qualifications
for custodians set forth in the Investment Company Act of 1940, the Board
shall, forthwith, upon giving or receiving notice of termination of this
Agreement, appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been
<PAGE> 28
adopted by the shareholders and that no written order designating a successor
custodian shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative
thereto. Thereafter such bank or trust company shall be the successor of the
Custodian under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition
to the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.
12. Certification as to Authorized Officers
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the authorized officers of each fund, it being
understood that upon the occurence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or ommitted
names or signatures. The Bank shall be entitled to rely and act upon any
officers named in the most recent certification.
13. Notices
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to Investors Bank & Trust Company,
24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have been
properly delivered or given hereunder to the respective addressees.
<PAGE> 29
14. Massachusetts Law to Apply; Limitations on Liability
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
Each Fund, and each series or portfolio of a Fund, shall be liable only for its
own obligations to the Custodian under this Agreement and shall not be jointly
or severally liable for the obligations of any other Fund, series or portfolio
hereunder.
<PAGE> 30
15. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * *
<PAGE> 31
In Witness Whereof, the parties hereto have caused this agreement to be
executed in duplicate as of the date first written above by their respective
officers thereunto duly authorized.
John Hancock Mutual Funds
by: /s/ Robert G. Freedman
---------------------------
Attest:
/s/Avery P. Maher
- -------------------
Investors Bank & Trust Company
by: /s/ Henry M. Joyce
---------------------------
Attest:
/s/ JM Keenan
- -------------------
<PAGE> 32
Page 1 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Limited Term Government Fund
John Hancock Capital Series
John Hancock Special Value Fund
John Hancock Growth Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Sovereign Bond Fund
John Hancock Sovereign Investors Fund, Inc.
John Hancock Sovereign Investors Fund
John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Independence Diversified Core Equity Fund
John Hancock Strategic Income Fund
John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock Tax-Exempt Series Fund
California Portfolio
Massachusetts Portfolio
New York Portfolio
John Hancock Technology Series, Inc.
John Hancock National Aviation & Technology Fund
John Hancock Global Technology Fund
Freedom Investment Trust
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign U.S. Government Income Fund
John Hancock Managed Tax-Exempt Fund
John Hancock Sovereign Achievers Fund
Freedom Investment Trust II
John Hancock Special Opportunities Fund
Freedom Investment Trust III
John Hancock Discovery Fund
<PAGE> 33
Page 2 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Series, Inc.
John Hancock Emerging Growth Fund
John Hancock Global Resources Fund
John Hancock Government Income Fund
John Hancock High Yield Bond Fund
John Hancock High Yield Tax-Free Fund
John Hancock Money Market Fund B
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
John Hancock Capital Growth Fund
John Hancock Investment Trust
John Hancock Growth and Income Fund
John Hancock California Tax-Free Income Fund
John Hancock Tax-Free Bond Fund
John Hancock Bond Fund
John Hancock Investment Quality Bond Fund
John Hancock Government Securities Trust
John Hancock U.S. Government Trust
John Hancock Adjustable U.S. Government Trust
John Hancock Adjustable U.S. Government Fund
John Hancock Intermediate Government Trust
John Hancock Institutional Series Trust
John Hancock Berkeley Dividend Performers Fund
John Hancock Berkeley Bond Fund
John Hancock Berkeley Fundamental Value Fund
John Hancock Berkeley Sector Opportunity Fund
John Hancock Independence Diversified Core Equity Fund II
John Hancock Independence Value Fund
John Hancock Independence Growth Fund
John Hancock Independence Medium Capitalization Fund
John Hancock Independence Balanced Fund
<PAGE> 1
Exhibit 11
[ERNST & YOUNG LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We consent to the references made to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
February 3, 1995 in Post-Effective Amendment No. 15 to the Registration
Statement (Form N-1A No. 2-89338) of John Hancock Capital Growth Fund.
ERNST & YOUNG LLP
April 19, 1995
<PAGE> 1
Exhibit 12
JOHN HANCOCK
CAPITAL GROWTH
FUND
ANNUAL REPORT
December 31, 1994
Seeks Long-Term Capital
Appreciation By Investing Its
Assets Primarily In Equity
Securities.
[LOGO]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
[Back Cover]
In upper left corner, return address: John Hancock Capital Growth Fund, John
Hancock Funds Shareholder Services, P.O. Box 9656, Providence, RI 02940-9656.
In upper right corner, postage information: Bulk Rate U.S. Postage Paid Permit
No. 6011, Houston, Texas. In lower left corner, 3/8" x 3/8" John Hancock Funds
logo. A box sectioned in quadrants with a triangle in upper left, a circle in
upper right, a cube in lower left and a diamond in lower right.
<PAGE> 2
Chairman's Message
Page 1
A 2" x 2 7/16" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, centered at top of page with copy wrapped around photo.
Dear Shareholders,
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following
a favorable shareholder vote. At that time, all of the Transamerica mutual
funds became part of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $13 billion in assets under management and more than 1 million
shareholders. Now with 50 open-end funds, 8 closed-end funds and a full array
of retirement and private account services, John Hancock Funds offers you a
broader selection of investment choices to meet your long-term financial needs.
What's more, the union of the John Hancock and Transamerica investment teams
gives you access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way
we work with you. Not only do we strive to ensure that your investments are
well managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
In mid-May, we anticipate that all of the Transamerica funds will be
fully integrated into John Hancock's internal shareholder service organization,
John Hancock Investor Services. At that time, not only will you gain exchange
privileges into all John Hancock funds, but your account will be handled by one
of the top-rated service organizations in the industry. To show you how
seriously we take our commitment to quality, you will have access to our
service guarantee. If we make an error in processing a transaction in your
account, we will deposit $25 into it. Or, if you have a retirement account, we
will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
John Hancock Funds
1
<PAGE> 3
BY BEN A. HOCK, JR., PORTFOLIO MANAGER
JOHN HANCOCK CAPITAL GROWTH FUND
HIGHER INTEREST RATES JAR STOCK MARKET, BUT STRONG ECONOMY
AND EARNINGS MAKE LONG-TERM OUTLOOK POSITIVE
The stock market moved through several distinct phases from December 31, 1993
to December 31, 1994, as a result of the abrupt change in Federal Reserve Board
policy beginning in February.
The period started with a robust market and economy. When the Federal
Reserve began raising short-term interest rates in early February, investors
altered their outlook and strategy on fears of rising inflation. Sharp swings in
investor sentiment created ongoing group rotation and an overall downward trend
for the market during the year.
Virtually no sector escaped the market's downturn. Stocks of companies in
the automobile, machinery and transportation sectors were particularly hard hit
as investors lost conviction that companies tied to continued economic growth
could continue to do well in a higher interest rate environment.
ECONOMICALLY-SENSITIVE ORIENTATION HURT FUND PERFORMANCE
The Fund's economically-sensitive orientation performed well early in 1994, but
eventually succumbed to the weight of successive interest-rate increases. For
the 12-month period ended December 31, 1994, Class A and Class B Shares posted
returns of -11.34% and -11.88%, respectively, at net asset value. During the
same period, the average growth fund had a total return of -2.15%, according to
Lipper Analytical Services.*
In December 1994, the Fund distributed $0.293 in long-term capital gains
that resulted primarily from the sale of Paramount. The stock increased
substantially when Paramount was acquired by Viacom. The rest of the gain
resulted from our ongoing efforts to divest the portfolio of the small
capitalization issues that are not in line with current strategy.
BASIC STRATEGY REMAINED STEADY
The hallmark of our strategy remained our stock selection process. We are
committed to finding stocks with superior earnings growth, consistency and
resiliency. We favored mid-size companies with established product lines,
experienced management teams and exceptional financial resources. We sought to
build a portfolio with approximately 30 to 40 of these issues.
The identification of a catalyst continued to be particularly important to
our selection process. A catalyst is a specific characteristic or event that
should propel the stock to a much higher value by providing substantial sales
and earnings growth potential to the company.
During the year, we changed the sector weighting of the portfolio. We
decreased our exposure to transportation issues because these
economically-sensitive stocks were battered by higher rates. At the same time,
we looked for companies with superior export potential which should benefit
from the current global economic expansion. Many of these companies were in the
technology sector. The U.S. is without a doubt the leading exporter of
technology, and companies in this sector stand to grow as they satisfy the
world's demand.
Silicon Graphics, for example, is at the forefront of designing and
producing visual computing systems for the scientific, technical and corporate
workplace.** The
2
<PAGE> 4
company, a recognized leader in both applications and new
product development, has enjoyed considerable success from its broad product
line. Over the past five years, sales growth has been 25.5% annually, and
earnings growth a stellar 26.5%. The company is well capitalized and capable of
sustaining future growth.
We also increased our health care holdings. This sector is undergoing a
consolidation, which should result in stronger earnings for the remaining
companies. Of particular interest are companies such as Manor Care, an
acknowledged leader in the nursing home industry and a player in the lodging
industry. The nursing home sector accounts for over 75% of the company's
revenues and profits. Over the last five years, revenues have advanced 13%
annually and earnings have grown at a 17% annual rate. An aging U.S. population
should provide a positive operating environment for this company. Results in
the lodging sector should also benefit from improved occupancy rates and
stronger pricing.
The Fund maintained its position in the energy sector, which did not
perform well. Earnings for companies such as Enron Oil and Gas were hurt as
mild winter weather weakened demand and gas prices. Despite the short-term
setback, Enron's long-term prospects are positive. Almost all of its reserves
are located in North America, its financial position is strong, and it is well
positioned to generate higher sales and earnings once demand and pricing firm.
FAVORABLE OUTLOOK
Our market outlook remains positive, although our enthusiasm remains tempered
by the rise in short-term interest rates and the prospects for an eventual
economic slowdown. We anticipate that the U.S. economy will slow down in the
spring of 1995 and return to a more normal growth rate in the range of 2.5% to
3.0%.
Going forward, we believe that increased export activity will be an
important source of growth for businesses and that will help keep the U.S.
economy on track. We do not believe that rising inflation will be a problem, as
higher rates should keep it at bay.
Against the backdrop of a steadily growing economy and strong business
activity, stocks of mid-size companies should do well. Once investors move
beyond the fear created by higher rates and focus on the long-term story of
growing earnings, stocks should begin performing better. Of course, there is no
way of knowing when this will occur, but we believe the market is in an
excellent position to advance in 1995.
* Figures from Lipper Analytical Services include reinvested distributions and
do not take into account sales charges. Actual load-adjusted performance would
be lower.
** Stock of Silicon Graphics, Inc. and other companies noted or discussed in
this report were acquired at varying and different times and in varying and
different amounts; reference to such securities herein does not constitute a
recommendation to purchase any of such securities.
Page 3
A box with heading: "Top Five Common Stock Holdings" following the footnote in
the middle of the second (right) column. Box lists the following: 1. Silicon
Graphics, Inc., 3.92%. 2. Marriott International Inc., 3.89%. 3. Manor Care,
Inc., 3.79%. 4. EMC Corp., 3.49%. 5. Sterling Software, Inc., 3.39%. The
footnote below states: "As a percentage of total net assets on December 31,
1994."
Page 3
Table entitled "Scorecard" following the "Top Five Common Stock Holdings" box.
The header for the left column is "Investments;" the header for the right
column is "Recent performance...and what's behind the numbers." The first
listing is Silicon Graphics followed by an up arrow and the phrase "Strong
sales growth." The second listing is Manor Care followed by an up arrow and
the phrase "Growing nursing home business." The third listing is Enron Oil and
Gas followed by a down arrow and the phrase "Falling natural gas prices."
Page 3
Bar chart with heading "Fund Performance" following the "Scorecard." Under the
heading is the note: "For the year ended December 31, 1994." The horizontal
chart is scaled in increments of 4% from -12% at the left and 12% at the
right. Within the chart, there are three solid bars. The first represents the
- -11.34% total return for John Hancock Capital Growth Fund Class A. The second
represents the -11.88% total return for John Hancock Capital Growth Fund Class
B. The third represents the -2.15% total return for the Lipper Average Growth
Fund. The footnote below states: "Total returns for John Hancock Capital
Growth Fund are at net asset value with all distributions reinvested. The
average growth company fund is tracked by Lipper Analytical Services.* See the
following page for historical performance information."
3
<PAGE> 5
JOHN HANCOCK CAPITAL GROWTH FUND
LONG-TERM PERFORMANCE REVIEW
If you had invested $10,000 in John Hancock Capital Growth Fund on September
26, 1985 (Class A inception) and reinvested all dividends, your investment,
upon redemption, would have grown more than two times to $33,031 as of December
31, 1994.* Class B Shares, which were introduced on June 30, 1993, would have
declined slightly to $9,436.
The chart compares the Fund's performance to the S&P 500 Index. The S&P 500
is an unmanaged index of large capitalization stocks and is not available as an
investment vehicle.
Returns for Class A Shares (including the Fund's average annual total
returns for the one- and five-year and since inception periods ended December
31, 1994, as shown in the inset box) reflect the maximum 5.75% sales charge.
Returns for Class B Shares (for one-year and since inception, as shown in the
box) reflect expenses and the applicable contingent deferred sales charge which
declines yearly as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Return for the S&P 500
does not reflect a sales charge. If you were to purchase individual stocks of
companies represented in the S&P 500, any sales charges that you would pay
would reduce your return accordingly.
Your investment return will fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Past performance is not a
guarantee of future results.
* Prior to April 1991, the Fund emphasized investments in the technology sector
and pursued an objective of long-term growth of capital. Without expense
reimbursement, return would have been lower.
Page 4
Boxed line chart at top right corner of page with heading "Transamerica/John
Hancock Capital Growth Fund A vs. S&P 500." Note below states" "Growth of
$10,000 Investment Since Inception, 9/26/85 - 12/31/94." The chart is scaled
in $5,000 increments from $10,000 to $40,000 at the left. The chart is scaled
at the bottom from 9/26/85 at the left to 1994 at the right. Within the chart
are two lines. The solid line represents the value of a hypothetical $10,000
investment in the Transamerica/John Hancock Capital Growth Fund Class A on
September 26, 1985 including 5.75% front load sales charge that is equal to
$33,031 on December 31, 1994. The dotted line represents the value of a
hypothetical $10,000 investment in the S&P 500 on September 25, 1985 and is
equal to $34,008 on December 31, 1994. In the upper left corner of the chart,
is a box with the heading "Average Annual Total Return." Text for the box
reads from left: "1 year, 5 year, Inception" on the first line and from left
on the second line, "-16.42%, 3.91% and 13.76%."
Page 4
Boxed line chart at bottom right corner of page with heading
"Transamerica/John Hancock Capital Growth Fund B vs. S&P 500." Note below
states" "Growth of $10,000 Investment Since Inception, 6/30/93 - 12/31/94."
The chart is scaled in $5,000 increments from $0,000 to $15,000 at the left.
The chart is scaled at the bottom from 6/30/93 at the left to 12/94 at the
right. Within the chart are two lines. The solid line represents the value of
a hypothetical $10,000 investment in the Transamerica/John Hancock Capital
Growth Fund Class B on June 30, 1993 including the applicable 5.00% contingent
deferred sales charge and expenses that is equal to $9,436 on December 31,
1994. The dotted line represents the value of a hypothetical $10,000
investment in the S&P 500 on June 30, 1993 and is equal to $10,637 on December
31, 1994. In the center of the chart, is a box with the heading
"Average Annual Total Return." Text for the box reads from left: "1 year, 5
year, Inception" on the first line and from left on the second line, "-16.88%,
N/A and -3.80%."
4
<PAGE> 6
STRATEGIES TO HELP YOUR INVESTMENT PROGRAM REALIZE
ITS POTENTIAL.
The key to investment success is to develop a sensible long-range investment
plan and stick with it. An affordable investment program won't make you wealthy
overnight, but it can help you reach your investment goals.
Once you've set your investment objectives, there are some simple,
time-tested strategies that you can use in your plan to help maximize your
investment success.
PAY YOURSELF FIRST
The first step to achieving financial independence does not involve picking the
right investments. It's more important to develop the habit of paying yourself
first.
Write a check to an investment account before you pay your monthly bills.
Increase the amount each time your salary increases. To make investing easier,
you can arrange to have an amount transferred automatically from your checking
account into your investment account through bank drafts.
DIVERSIFY TO HELP REDUCE RISK
Having a balanced, diversified investment program is smart. It leaves you less
vulnerable to a major decline in any one market or industry. When the markets
are volatile, some investments may lose value while others may register
significant gains.
One mutual fund, however, is not a complete investment program. To be well
diversified, you need investments from more than one fund category.
For example, if you own stocks, bonds and money market instruments, you
won't be as vulnerable to a decline in the stock market as an investor who owns
only stocks. With thorough diversification, you'll have the opportunity for
some holdings to perform relatively well no matter what happens in the markets.
Remember: no single investment can fit all your needs through every part of
your life. That's why it's important to develop a flexible, diversified program
that can be modified as you grow older.
HERE'S A SIMPLE ILLUSTRATION TO HELP EXPLAIN THE BENEFITS OF DIVERSIFICATION.
Grab a pencil and break it using both hands. That task is fairly easy. Now,
take nine smaller pencils, place them together and attempt to break them in the
same manner. It's virtually impossible.
Imagine those pencils are your investments. If all your investments had
been concentrated in that one pencil, you would have been devastated when the
pencil broke. However, by spreading your assets among many investments, you
have a "strong" position that protects you from the "weak pencil."
Page 14
Illustration of a group of pencils tied with a piece of string centered at the
bottom of the page.
5
<PAGE> 7
This illustrates the benefits of a mutual fund. Mutual funds are an
excellent way to diversify because they invest your assets in a large number of
securities.
REINVEST YOUR EARNINGS
Do you really need any income generated by your investment?
If not, put the income "back to work" -- immediately and automatically.
Most mutual funds allow you to reinvest dividends or capital gains
distributions automatically. When you reinvest, you buy additional shares.
These shares, in turn, can generate more income or capital gains. You increase
the opportunity for greater return when you reinvest. The chart at right
demonstrates the power of compounding through reinvestment with the added
benefit of a regular investment program.
KEEP A LONG-TERM PERSPECTIVE
In investing, patience can be a real virtue.
Remember, over the short term, financial markets rise and fall in response
to a number of factors. Attempting to "time" these market moves for quick gains
is extremely difficult. It's also risky. That's why many successful investors
take the long-term approach to reach their financial goals. The longer you stay
with an investment, riding out market fluctuations, the greater your
opportunity to reduce risk and achieve higher returns.
Page 15
Boxed line chart with heading "The Power Of Compounding" that illustrates the
growth of a hypothetical $10,000 initial investment and subsequent monthly
investments of $200 over a 30-year period at 6%, 8% and 10% fixed rates of
return. The chart is scaled in $100,000 increments from $0 to $700,000 on the
left. The chart is scaled at the bottom in five year increments from 1 to 30.
The first line represents the value of the investment at a 6% annual rate that
is equal to $260,929 in the thirtieth year. The second represents the value of
the investment at an 8% annual rate that is equal to $407,229 in the thirtieth
year. The third represents the value of the investment at a 10% annual rate
that is equal to $650,272 in the thirtieth year. Footnote below states: "This
table shows the effects of compounding monthly at different interest rates
over various time periods, assuming an initial investment of $10,000 and
subsequent investments of $200 on the same day each month. This table is for
illustrative purposes only and should not be construed as an indication of the
performance of a specific investment or the availability of any rate of return
over any specific time period."
6
<PAGE> 8
STATEMENT OF NET ASSETS
December 31, 1994
<TABLE>
<CAPTION>
COMPANY SHARES VALUE
- ------- -------- ---------
<S> <C> <C>
COMMON STOCKS-92.68%
- -------------------
COMPUTERS AND OFFICE
EQUIPMENT-22.07%
Corel Corp.*................................. 170,000 $ 2,348,125
EMC Corp.*................................... 140,000 3,027,500
LEGENT Co.*.................................. 50,000 1,437,500
Paychex, Inc. ............................... 70,000 2,835,000
Silicon Graphics, Inc.*...................... 110,000 3,396,250
Sterling Software, Inc.*..................... 80,000 2,940,000
Sun Microsystems Inc.*....................... 40,000 1,420,000
SyBase Inc.*................................. 25,000 1,300,000
VMARK Software Inc.*......................... 25,000 443,750
-----------
19,148,125
CONSUMER CYCLICALS-3.97%
Men's Wearhouse Inc.*........................ 70,000 1,575,000
Rite Aid Corp................................ 80,000 1,870,000
-----------
3,445,000
CONSUMER GOODS &
SERVICES-9.20%
Landry's Seafood
Restaurants Inc.*.......................... 40,000 1,135,000
Marriott International Inc................... 120,000 3,375,000
Outback Steakhouse Inc.*..................... 60,000 1,410,000
Sysco Corp................................... 80,000 2,060,000
-----------
7,980,000
ENERGY-4.45%
Enron Oil & Gas Co........................... 60,000 1,125,000
Noble Drilling Corp.*........................ 75,000 440,625
Phillips Petroleum Co........................ 70,000 2,292,500
-----------
3,858,125
HEALTH CARE-19.07%
Columbia/HCA
Healthcare Corp.............................. 75,000 2,737,500
Envoy Corp.*................................. 60,000 1,230,000
Humana Inc.*................................. 90,000 2,036,250
Manor Care, Inc.............................. 120,000 3,285,000
Merck & Co., Inc............................. 75,000 2,859,375
Schering-Plough Corp......................... 35,000 2,590,000
United Healthcare Corp....................... 40,000 1,805,000
-----------
16,543,125
INDUSTRIAL-10.60%
Allwaste Inc.*............................... 200,000 1,125,000
Cognex Corp.*................................ 40,000 1,030,000
Eastman Chemical Co.......................... 50,000 2,525,000
Federal Paper Board Co., Inc................. 95,000 2,755,000
Union Carbide Corp........................... 60,000 1,762,500
-----------
9,197,500
MEDIA & LEISURE-4.03%
Brassie Golf Corp.*.......................... 315,000 1,023,750
Harcourt General Inc......................... 70,000 2,467,500
-----------
3,491,250
TECHNOLOGY- RELATED - 14.23%
E-Systems Inc. .............................. 20,000 832,500
Lithium Technology Corp.*.................... 2,611,890 365,664
Millipore Corp. ............................. 40,000 1,935,000
Molex, Inc. ................................. 75,000 2,587,500
Motorola, Inc. .............................. 50,000 2,893,750
Tektronix, Inc. ............................. 50,000 1,712,500
Thomas & Betts Corp. ........................ 30,000 2,013,750
-----------
12,340,664
TELECOMMUNICATIONS - 5.06%
Ericsson (L.M.) Telephone, Co. Class B....... 50,000 2,756,250
Tele-Communications, Inc. Class A*.......... 75,000 1,631,250
-----------
4,387,500
-----------
TOTAL COMMON STOCKS
(Cost $77,128,322)........................... 80,391,289
</TABLE>
7
<PAGE> 9
STATEMENT OF NET ASSETS
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ---------- -----------
<S> <C> <C>
SHORT-TERM
OBLIGATIONS--11.92%
COMMERCIAL PAPER--8.64%
CONSUMER CYCLICALS--2.30%
Warner Lambert Co.
5.900% due 01/03/95........................ $2,000,000 1,999,344
CONSUMER GOODS &
SERVICES--4.61%
McDonald's Corp.
5.800% due 01/05/95........................ 4,000,000 3,997,422
TELECOMMUNICATIONS--1.73%
American Telephone &
Telegraph Co.
5.850% due 01/09/95...................... 1,500,000 1,498,050
-----------
TOTAL COMMERCIAL PAPER
(Cost $7,494,816)............................ 7,494,816
REPURCHASE
AGREEMENT--3.28%
Lehman Brothers 5.500% due
01/03/95 (dated 12/30/94).
Collateralized by
$2,910,755 value, U.S.
Treasury Bonds 8.125%
due 08/15/21. (Repurchase
proceeds $2,850,741)
(Cost $2,849,871)............................ 2,849,000 2,849,871
-----------
TOTAL SHORT-TERM
OBLIGATIONS
(Cost $10,344,687)........................... 10,344,687
-----------
TOTAL INVESTMENTS--104.60%
(Cost $87,473,009)........................... 90,735,976
CASH AND OTHER ASSETS,
LESS LIABILITIES--(4.60)%.................... (3,994,365)
-----------
NET ASSETS, at value,
equivalent to $10.93 per
share for 6,411,229 Class A
Shares ($.01 par value)
outstanding and $10.80 per
share for 1,542,392 Class B
Shares ($.01 par value)
outstanding-- 100.00%...................... $86,741,611
===========
*Non-income producing.
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 10
STATEMENT OF OPERATIONS / STATEMENTS OF CHANGES IN NET ASSETS
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends ...................... $ 1,062,137
Interest ....................... 186,714
-----------
1,248,851
EXPENSES
Management fees ................ $539,809
Transfer agent fees ............ 323,567
Distribution expenses
(see Note D) ................. 283,190
Administrative service fees .... 115,878
Custodian fees ................. 49,605
Audit and legal fees ........... 38,998
Shareholder reports ............ 28,222
Registration fees .............. 24,313
Trustees' fees and expenses .... 23,216
Miscellaneous .................. 12,386 1,439,184
-------- -----------
NET INVESTMENT LOSS .......... (190,333)
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain on
investments .................. 2,453,497
Net change in unrealized
appreciation of investments .. (12,203,891)
------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS .......... (9,750,394)
------------
DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .... $ (9,940,727)
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<Captions>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment loss ........... $ (190,333) $ (804,875)
Net realized gain on
investments ................. 2,453,497 919,090
Net change in unrealized
appreciation of
investments ................. (12,203,891) 4,715,305
------------ ------------
Increase (decrease) in net
assets resulting from
operations .................. (9,940,727) 4,829,520
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net realized gain on
investments-
Class A ...................... (1,798,987) -
Class B ...................... (429,429) -
------------ ------------
Total distributions to
shareholders ................ (2,228,416) -
SHARE TRANSACTIONS
Increase (decrease) in
shares outstanding .......... 12,917,743 (13,697,388)
------------ ------------
Increase (decrease) in
net assets .................. 748,600 (8,867,868)
NET ASSETS
Beginning of year ............. 85,993,011 94,860,879
------------ ------------
End of year ................... $ 86,741,611 $ 85,993,011
============ ============
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 11
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------- ------------------------------
Year Period From
Year Ended December 31 Ended June 30, 1993
------------------------------------------- December 31, to December 31,
1994(1) 1993 1992 1991 1990(2) 1994(1) 1993(3)
------- ------- ------- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital changes
for a share outstanding during
each period:(4)
Net asset value, beginning of period...... $ 12.66 $ 11.90 $ 11.47 $ 9.82 $ 10.65 $ 12.59 $11.28
INCOME FROM INVESTMENT OPERATIONS
Net investment loss....................... (0.02) (0.11) (0.14) (0.13) (0.09) (0.09) (0.07)
Net realized and unrealized gain (loss)
on investments.......................... (1.42) 0.87 0.76 3.73 (0.60) (1.41) 1.38
------- ------- ------- ------- ------- ------- ------
Total from Investment Operations........ (1.44) 0.76 0.62 3.60 (0.69) (1.50) 1.31
LESS DISTRIBUTIONS
Dividends from net investment income...... -- -- -- -- (0.01) -- --
Distributions from realized gains......... (0.29) -- (0.19) (1.95) (0.13) (0.29) --
------- ------- ------- ------- ------- ------- ------
Total Distributions..................... (0.29) -- (0.19) (1.95) (0.14) (0.29) --
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period............ $ 10.93 $ 12.66 $ 11.90 $ 11.47 $ 9.82 $ 10.80 $12.59
======= ======= ======= ======= ======= ======= ======
TOTAL RETURN(5)........................... (11.34)% 6.39% 5.48% 38.00% (6.37)% (11.88)% 11.61%
======= ======= ======= ======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net assets... 1.59% 1.46% 1.41% 1.68% 1.54% 2.34% 1.06%
Ratio of net investment loss to average
net assets.............................. (0.14)% (0.92)% (1.20)% (1.04)% (0.82)% (0.89)% (0.54)%
Portfolio turnover........................ 290% 159% 70% 139% 152% 290% 159%
Net Assets, end of period (in thousands).. $70,090 $85,553 $94,861 $89,008 $56,794 $16,652 $ 440
======= ======= ======= ======= ======= ======= ======
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the Investment
Adviser. Prior to this date, Transamerica Fund Management Company was the
Investment Adviser.
(2) Per share information has been adjusted retroactively for the 2 for 1
stock split to shareholders of record on September 10, 1990.
(3) Financial highlights, including total return, have not been annualized.
Portfolio turnover is for the year ended December 31, 1993.
(4) Per share information has been calculated using the average number of
shares outstanding.
(5) Total return does not include the effect of the initial sales charge for
Class A Shares nor the contingent deferred sales charge for Class B Shares.
See Notes to Financial Statements.
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
John Hancock Capital Growth Fund (the ``Fund''), formerly Transamerica
Capital Growth Fund, is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. On December
16, 1994, the shareholders of each of the mutual funds managed by Transamerica
Fund Management Company (TFMC) voted to approve new Investment Advisory
contracts with John Hancock Advisers, Inc. Each such approval was subject to
the acquisition of TFMC by The Berkeley Financial Group (known beginning
January 1, 1995 as John Hancock Funds), the parent company of John Hancock
Advisers, Inc. The acquisition became effective on December 22, 1994. The
Fund's name change was also effective on this date.
The Fund offers two classes of shares to the public. Class A Shares are
subject to an initial sales charge of up to 5.75% and a 12b-1 distribution
plan. Class B Shares are subject to a contingent deferred sales charge and a
separate 12b-1 distribution plan. The following is a summary of significant
accounting policies consistently followed by the Fund.
(1) Securities traded on stock exchanges or in the over-the-counter
market are valued at the last sale price on the primary exchange or market on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the mean between the most
recent closing bid and asked prices. Securities for which market quotations are
not readily available are valued at a fair value as determined in good faith by
the Fund's Board of Trustees. Short-term investments are valued at amortized
cost (original cost plus amortized discount or accrued interest).
(2) Security transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date for both financial reporting and
federal income tax purposes. Interest income on investments is accrued daily.
Realized gains and losses from security transactions are determined on the
basis of identified cost for both financial reporting and federal income tax
purposes.
(3) No provision for federal income taxes has been made since it is the
Fund's intention to distribute all of its taxable income and profits to its
shareholders and to comply with the requirements applicable to regulated
investment companies and the minimum distribution requirements of the Internal
Revenue Code.
(4) The Fund reports custodian fees net of credits and charges
resulting from cash positions in the custodial accounts greater than or less
than the amounts required to settle portfolio transactions. For the year ended
December 31, 1994, these amounts were $4,810 and $14,037, respectively.
(5) Dividends and other distributions are recorded by the Fund on the
ex-dividend date and may be reinvested at net asset value. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Distributions payable to shareholders at December 31, 1994 were $232,814.
(6) On a daily basis, income, unrealized and realized gains and losses,
and expenses which are not class specific are allocated to each class based on
their respective relative net assets. Class specific expenses, such as
distribution expenses, are applied to the class to which they are attributed.
NOTE B - MANAGEMENT FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
From January 1, 1994 through December 21, 1994, TFMC acted as the Investment
Adviser to the Fund. On December 22, 1994, John Hancock Advisers, Inc., a
wholly-owned subsidiary of John Hancock Funds, became the Investment Adviser
following the approval of the Fund's shareholders. Throughout these financial
statement notes, TFMC and John Hancock Advisers, Inc. are referred to
collectively as the ``Investment Adviser'', as each acted in this capacity
during the time periods noted above. TFMC was, prior to December 22, 1994, a
subsidiary of Transamerica Corporation.
The Fund's management fee is payable monthly and is calculated based on
the monthly average daily net assets of the Fund at an annual rate of 0.625%.
At December 31, 1994, the management fee payable to the Investment Adviser was
$43,133.
The Investment Adviser also provided administrative services to the
Fund pursuant to an administrative service agreement. During the year ended
December 31, 1994, the Fund paid or accrued $101,838 to the Investment Adviser
for these services, of which $17,669 was payable at December 31, 1994.
During the year ended December 31, 1994, Transamerica Fund
Distributors, Inc., an affiliate of TFMC and principal underwriter of the Fund
through December 22,
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
Continued
NOTE B (Continued)
1994 and John Hancock Funds, Inc., an affiliate of John Hancock Advisers,
Inc. and principal underwriter since December 22, 1994, retained $8,567 as
their portion of the commissions charged on sales of Class A Shares of the
Fund. Throughout these financial statement notes, Transamerica Fund
Distributors, Inc. and John Hancock Funds, Inc. are referred to collectively as
the "Distributor", as each acted in this capacity during the time periods noted
above. At December 31, 1994, receivables from and payables to the Distributor
for Fund share transactions were $22,505 and $37,968, respectively.
The Fund paid no compensation directly to any officer. Certain officers
of the Fund are affiliated with the Investment Adviser.
During the year ended December 31, 1994, the Fund paid legal fees of
$12,034 to Baker & Botts. A partner with Baker & Botts was an officer of the
Fund until December 22, 1994.
NOTE C - COST, PURCHASES AND SALES OF
INVESTMENT SECURITIES
During the year ended December 31, 1994, purchases and sales of securities,
other than short-term obligations, aggregated $248,472,504 and $243,300,663,
respectively. At December 31, 1994, receivables from and payables to brokers
for securities sold and purchased were $1,859,500 and $5,583,708,
respectively.
The identified cost of total investments owned is the same for both
financial reporting and federal income tax purposes. At December 31, 1994, the
gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes were $5,197,025 and $1,934,058, respectively.
NOTE D - PLAN OF DISTRIBUTION
Pursuant to Rule 12b-1 of the Investment Company Act of 1940, the Fund is
authorized under separate distribution plans to finance activities
related to the distribution of its Class A and Class B Shares (the ``Class A
Plan'' and the ``Class B Plan,'' respectively). The distribution plans,
together with the initial sales charge on Class A Shares and the contingent
deferred sales charge on Class B Shares, comply with the regulations covering
maximum sales charges assessed by mutual funds distributed through securities
dealers that are NASD members.
The Class A Plan and the Class B Plan permit each class to make
payments to the Distributor up to 0.25% annually of average daily net assets
for certain distribution costs such as service fees paid to dealers, production
and distribution of prospectuses to prospective investors, services provided to
new and existing shareholders and other distribution related activities. During
the year ended December 31, 1994, Class A and Class B made payments to the
Distributor of $193,470 or 0.25% and $22,615 or 0.25%, respectively, related to
these activities.
The Class B Plan also permits Class B to reimburse the Distributor up
to 0.75% annually of average daily net assets for costs related to compensation
paid to securities dealers, in place of an initial sales charge to investors,
on the sale of Class B Shares. These costs are based upon a commission payment
charge of 5% of the value of Class B Shares sold (excluding shares acquired
through reinvestment), reduced by the amount of contingent deferred sales
charges (CDSC) that have been received by the Distributor on redemptions of
Class B Shares. These costs also include a charge of interest (carrying charge)
at an annual rate of 1% over the prevailing prime rate to the extent cumulative
commission payment charges, plus any previous carrying charges, less CDSC
received by the Distributor, have not been paid in full by the Fund. For the
year ended December 31, 1994, Class B reimbursed the Distributor $67,105 or
0.75% for such costs. For the year ended December 31, 1994, the Distributor
received $8,342 in CDSC.
At December 31, 1994, Class A had $74,119 and Class B had $17,603
payable to the Distributor pursuant to the above distribution plans.
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Continued
NOTE E - SHARE AND RELATED TRANSACTIONS
A summary of share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1994 1993(1)
----------------------- -----------------------
Shares Dollars Shares Dollars
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold - Class A........................................... 3,163,337 $ 37,415,876 2,167,638 $ 25,193,278
Shares sold - Class B........................................... 2,312,014 27,133,045 36,251 449,933
Shares issued in reinvestment of distributions - Class A........ 150,788 1,640,574 -- --
Shares issued in reinvestment of distributions - Class B........ 33,057 355,028 -- --
Shares redeemed - Class A....................................... (3,660,949) (43,573,191) (3,377,746) (39,325,285)
Shares redeemed - Class B....................................... (837,605) (10,053,589) (1,325) (15,314)
--------- ------------ ---------- ------------
Net increase (decrease) in shares outstanding................... 1,160,642 $ 12,917,743 (1,175,182) $(13,697,388)
========= ============ ========== ============
</TABLE>
___________
(1) Class B Share transactions are for the period June 30, 1993 to
December 31, 1993.
The components of net assets at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Capital paid-in (unlimited number of shares authorized)................... $83,428,097
Accumulated net realized gain on investments.............................. 50,547
Net unrealized appreciation of investments................................ 3,262,967
-----------
Net Assets................................................................ $86,741,611
===========
</TABLE>
13
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
John Hancock Capital Growth Fund
We have audited the accompanying statement of net assets of John Hancock
Capital Growth Fund, formerly Transamerica Capital Growth Fund, as of
December 31, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of John Hancock Capital Growth Fund at December 31, 1994, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated periods, in conformity with generally accepted
accounting principles.
Houston, Texas
February 3, 1995
14
<PAGE> 16
FUND INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
OFFICERS
Edward J. Boudreau, Jr., Chairman and
Chief Executive Officer
Robert G. Freedman, Vice Chairman and
Chief Investment Officer
Thomas M. Simmons, President
Anne C. Hodsdon, Executive Vice President
James B. Little, Senior Vice President and
Chief Financial Officer
Thomas H. Drohan, Senior Vice President and Secretary
Warren Schmalenberger, Senior Vice President
Michael P. DiCarlo, Senior Vice President
B.J. Willingham, Senior Vice President
Edgar Larson, Senior Vice President
James J. Stokowski, Vice President and Treasurer
Susan S. Newton, Vice President and Compliance Officer
John A. Morin, Vice President
Thomas J. Press, Vice President and Assistant Secretary
TRUSTEES
James F. Carlin
William H. Cunningham
Charles L. Ladner
Leo E. Linbeck
Patricia P. McCarter
Steven R. Pruchansky
Norman H. Smith
John P. Toolan
DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
TRANSFER AGENT
The Shareholder Services Group, Inc.
P.O. Box 9656
Providence, RI 02940-9656
1-800-343-6840
This material is not authorized for distribution unless preceded or
accompanied by a current prospectus.
The performance information referred to in this report is historical and
does not represent a guarantee of similar future results. The investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
IMPORTANT TAX INFORMATION
The distributions paid by John Hancock Capital Growth Fund during the
year ended December 31, 1994 were from long-term capital gains of $0.293.
The federal tax status of all 1994 distributions paid by the Fund were
reported on Form 1099 in early 1995.
15
<PAGE> 1
EXHIBIT 15(E)
(A)
JOHN HANCOCK CAPITAL GROWTH FUND
Distribution Plan
Class A Shares
December 22, 1994
ARTICLE I. THIS PLAN
This Distribution Plan (the "Plan") sets forth the terms and conditions on
which John Hancock Capital Growth Fund (the "Fund") will, after the effective
date hereof, pay certain amounts to John Hancock Broker Distribution Services,
Inc. ("Broker Services") in connection with the provision by Broker Services of
certain services to the Fund and its Class A shareholders, as set forth herein.
Certain of such payments by the Trust may, under Rule 12b-1 of the Securities
and Exchange Commission, as from time to time amended (the "Rule"), under the
Investment Company Act of 1940, as amended (the "Act"), be deemed to constitute
the financing of distribution by the Fund of its shares. This Plan describes all
material aspects of such financing as contemplated by the Rule and shall be
administered and interpreted, and implemented and continued, in a manner
consistent with the Rule. The Fund and Broker Services have entered into a
Distribution Agreement of even date herewith, as amended from time to time (the
"Agreement"), the terms of which, as heretofore and from time to time continued,
are incorporated herein by reference.
ARTICLE II. DISTRIBUTION AND SERVICE EXPENSES
The Fund shall pay to Broker Services a fee in the amount specified in
Article III hereof. Such fee may be spent by Broker Services on any activities
or expenses primarily intended to result in the sale of Class A shares of the
Fund, including, but not limited to the payment of Distribution Expenses (as
defined below) and Service Expenses (as defined below). Distribution Expenses
include, but are not limited to, (a) initial and ongoing sales compensation
payable out of such fee as it is received by Broker Services or other
broker-dealers ("Selling Brokers") that have entered into an agreement with
Broker Services for the sale of Class A shares of the Fund, (b) direct
out-of-pocket expenses incurred in connection with the distribution of Class A
shares of the Fund, including expenses related to printing of prospectuses and
reports to other than existing Class A shareholders of the Fund, and
preparation, printing and distribution of sales literature and advertising
materials, (c) an allocation of overhead and other branch office expenses of
Broker Services related to the distribution of Class A shares of the Fund, (d)
distribution expenses incurred by Transamerica Fund Distributors, Inc. in
connection with the Class A shares of the Fund, and (e) distribution expenses
incurred in connection with the distribution
<PAGE> 2
of a corresponding class of any open-end, registered investment company which
sells all or substantially all of its assets to the Fund or which merges or
otherwise combines with the Fund.
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of Broker Services)
and others who furnish personal and shareholder account maintenance services to
Class A shareholders of the Fund.
ARTICLE III. MAXIMUM EXPENDITURES
The expenditures to be made by the Fund, pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed an annual rate of 0.25% of
the average daily net asset value of the Class A shares of the Fund (determined
in accordance with the Fund's prospectus as from time to time in effect) to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover Service Expenses may only constitute up to an annual rate
of 0.25% of the average daily net asset value of the Class A shares of the Fund
payable annually pursuant to the Plan. Such expenditures shall be calculated and
accrued daily and paid monthly or at such other intervals as the Trustees shall
determine. In the event Broker Services is not fully reimbursed for payments
made or other expenses incurred by it under this Plan, such expenses will not be
carried beyond one year from the date such expenses were incurred. Any fees paid
to Broker Services under this Plan during any fiscal year of the Fund and not
expended or allocated by Broker Services for actual or budgeted Distribution
Expenses and Service Expenses during such fiscal year will be promptly returned
to the Fund.
ARTICLE IV. EXPENSES BORNE BY THE FUND
Notwithstanding any other provision of this Plan, the Fund and its
investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear the
respective expenses to be borne by them under the Investment Management Contract
dated December _, 1994, as from time to time continued and amended (the
"Management Contract"), and under the Fund's current prospectus as it is from
time to time in effect. Except as otherwise contemplated by this Plan, the Fund
shall not, directly or indirectly, engage in financing any activity which is
primarily intended to or should reasonably result in the sale of shares of the
Fund.
ARTICLE V. APPROVAL BY TRUSTEES
This Plan shall not take effect until it has been approved, together with
any related agreements, by votes, cast in person at a meeting called for the
purpose of voting on this Plan or such agreements, of a majority (or whatever
greater percentage may,
<PAGE> 3
from time to time, be required by Section 12(b) of the Act or the rules and
regulations thereunder) of (a) all of the Trustees of the Fund and (b) those
Trustees of the Fund who are not "interested persons" of the Fund, as such term
may be from time to time defined under the Act, and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Independent Trustees").
ARTICLE VI. CONTINUANCE
This Plan and any related agreements shall continue in effect for so long
as such continuance is specifically approved at least annually in advance in the
manner provided for the approval of this Plan in Article V.
ARTICLE VII. INFORMATION
Broker Services shall furnish the Fund and its Trustees quarterly, or at
such other intervals as the Fund shall specify, a written report of amounts
expended or incurred for Distribution Expenses and Service Expenses pursuant to
this Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
ARTICLE VIII. TERMINATION
This Plan may be terminated (a) at any time by vote of a majority of the
Trustees, a majority of the Independent Trustees, or a majority of the Fund's
outstanding voting Class A shares, or (b) by Broker Services on 60 days' notice
in writing to the Fund.
ARTICLE IX. AGREEMENTS
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the Fund's then
outstanding voting Class A shares.
(b) That such agreement shall terminate automatically in the event of its
assignment.
ARTICLE X. AMENDMENTS
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class A shares of the Fund. No material amendment to the Plan
shall, in any event, be
<PAGE> 4
effective unless it is approved in the same manner as is provided for approval
of this Plan in Article V.
ARTICLE XI. LIMITATION OF LIABILITY
The obligations of the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall be
bound.
<PAGE> 5
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan effective
as of the day of December, 1994 in Boston, Massachusetts.
JOHN HANCOCK CAPITAL GROWTH FUND
By:
-----------------------------------
Thomas M. Simmons
President
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By:
-----------------------------------------------
C. Troy Shaver, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 15(B)
JOHN HANCOCK CAPITAL GROWTH FUND
Distribution Plan
Class B Shares
December ____, 1994
ARTICLE I. THIS PLAN
This Distribution Plan (the "Plan") sets forth the terms and conditions on
which John Hancock Capital Growth Fund (the "Fund"), on behalf of its Class B
shares, will, after the effective date hereof, pay certain amounts to John
Hancock Broker Distribution Services, Inc. ("Broker Services") in connection
with the provision by Broker Services of certain services to the Fund and its
Class B shareholders, as set forth herein. Certain of such payments by the Fund
may, under Rule 12b-1 of the Securities and Exchange Commission, as from time to
time amended (the "Rule"), under the Investment Company Act of 1940, as amended
(the "Act"), be deemed to constitute the financing of distribution by the Fund
of its shares. This Plan describes all material aspects of such financing as
contemplated by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule. The Fund and
Broker Services have entered into a Distribution Agreement of even date
herewith, as amended from time to time (the "Agreement"), the terms of which, as
heretofore and from time to time continued, are incorporated herein by
reference.
ARTICLE II. DISTRIBUTION AND SERVICE EXPENSES
The Fund shall pay to Broker Services a fee in the amount specified in
Article III hereof. Such fee may be spent by Broker Services on any activities
or expenses primarily intended to result in the sale of Class B shares of the
Fund, including, but not limited to the payment of Distribution Expenses (as
defined below) and Service Expenses (as defined below). Distribution Expenses
include but are not limited to, (a) initial and ongoing sales compensation out
of such fee as it is received by Broker Services or other broker-dealers
("Selling Brokers") that have entered into an agreement with Broker Services for
the sale of Class B shares of the Fund, (b) direct out-of-pocket expenses
incurred in connection with the distribution of Class B shares of the Fund,
including expenses related to printing of prospectuses and reports to other than
existing Class B shareholders of the Fund, and preparation, printing and
distribution of sales literature and advertising materials, (c) an allocation of
overhead and other branch office expenses of Broker Services related to the
distribution of Class B shares of the Fund, (d) distribution expenses incurred
by Transamerica Fund Distributors, Inc. in connection with the Class B shares of
the
<PAGE> 2
Fund, (e) distribution expenses incurred in connection with the distribution of
a corresponding class of any open-end, registered investment company which sells
all or substantially all of its assets to the Fund or which merges or otherwise
combines with the Fund and (f) interest expenses on unreimbursed distribution
expenses related to Class B shares as described in Article III hereof.
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of Broker Services)
and others who furnish personal and shareholder account maintenance services to
Class B shareholders of the Fund.
ARTICLE III. MAXIMUM EXPENDITURES
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed an annual rate of 1.00% of
the average daily net asset value of the Class B shares of the Fund (determined
in accordance with the Fund's prospectus as from time to time in effect) to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover service expenses shall not exceed an annual rate of up to
0.25% of the average daily net asset value of the Class B shares of the Fund.
Such expenditures shall be calculated and accrued daily and paid monthly or at
such other intervals as the Trustees shall determine. In the event Broker
Services is not fully reimbursed for payments made or other expenses incurred by
it under this Plan, Broker Services shall be entitled to carry forward such
expenses to subsequent fiscal years for submission to the Class B shares of the
Fund for payment, subject always to the annual maximum expenditures set forth in
this Article III; provided, however, that nothing herein shall prohibit or limit
the Trustees from terminating this Plan and all payments hereunder at any time
pursuant to Article VIII hereof.
ARTICLE IV. EXPENSES BORNE BY THE FUND
Notwithstanding any other provision of this Plan, the Fund and its
investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear the
respective expenses to be borne by them under the Investment Management Contract
dated December _, 1994, as from time to time continued and amended (the
"Management Contract"), and under the Fund's current prospectus as it is from
time to time in effect. Except as otherwise contemplated by this Plan, the Fund
shall not, directly or indirectly, engage in financing any activity which is
primarily intended to or should reasonably result in the sale of Class B shares
of the Fund.
<PAGE> 3
ARTICLE V. APPROVAL BY TRUSTEES
This Plan shall not take effect until it has been approved, together with
any related agreements, by votes, cast in person at a meeting called for the
purpose of voting on this Plan or such agreements, of a majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Act or the rules and regulations thereunder) of (a) all of the Trustees of the
Fund and (b) those Trustees of the Fund who are not "interested persons" of the
Fund, as such term may be from time to time defined under the Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Independent Trustees").
ARTICLE VI. CONTINUANCE
This Plan and any related agreements shall continue in effect for so long
as such continuance is specifically approved at least annually in advance in the
manner provided for the approval of this Plan in Article V.
ARTICLE VII. INFORMATION
Broker Services shall furnish the Fund and its Trustees quarterly, or at
such other intervals as the Fund shall specify, a written report of amounts
expended or incurred for Distribution Expenses and Service Expenses pursuant to
this Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
ARTICLE VIII. TERMINATION
This Plan may be terminated (a) at any time by vote of a majority of the
Trustees, a majority of the Independent Trustees, or a majority of the Fund's
outstanding voting Class B shares, or (b) by Broker Services on 60 days' notice
in writing to the Fund.
ARTICLE IX. AGREEMENTS
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of
the Independent Trustees or by vote of a majority of the Fund's then
outstanding voting Class B shares.
(b) That such agreement shall terminate automatically in the event of its
assignment.
<PAGE> 4
ARTICLE X. AMENDMENTS
This Plan may not be amended to increase the maximum amount of the fees
payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class B shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved in the same manner as is
provided for approval of this Plan in Article V.
ARTICLE XI. LIMITATION OF LIABILITY
The obligations of the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall be
bound.
<PAGE> 5
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan effective
as of the____ day of December, 1994 in Boston, Massachusetts.
JOHN HANCOCK CAPITAL GROWTH FUND
By:____________________________________________
Thomas M. Simmons
President
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By:____________________________________________
C. Troy Shaver, Jr.
President and Chief Executive Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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