FILE NO. 2-92548
FILE NO. 811-4079
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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. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 13 [X]
(Check appropriate box or boxes)
JOHN HANCOCK SPECIAL EQUITIES FUND
(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Address of principal executive office)
Registrant's Telephone Number, including Area Code (617) 375-1700
Thomas H. Drohan
Senior Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
(Name and Address of Agent for Service)
It is proposed that this filing will become efective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on July 1, 1996 pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite number of securities under the Securities Act of
1933. The Registrant filed the notice required by Rule 24f-2 for its most recent
fiscal year on or about December 26, 1996.
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<PAGE>
<TABLE>
<CAPTION>
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Overview; Investor Expenses; *
3 Financial Highlights *
4 Overview; Goal and Strategy; Portfolio *
Securities; Risk Factors; Business
Structure; More About Risk
5 Overview; Business Structure; *
Manager/Subadviser; Investor Expenses
6 Choosing a Share Class; Buying Shares; *
Selling Shares; Transaction Policies;
Dividends and Account Policies;
Additional Investor Services
7 Choosing a Share Class; How Sales Charges *
are Calculated; Sales Charge Deductions
and Waivers; Opening an Account; Buying
Shares; Transaction Policies; Additional
Investor Services
8 Selling Shares; Transaction Policies; *
Dividends and Account Policies
9 Not Applicable *
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives and Policies;
Certain Investment Practices;
Investment Restrictions
14 * Those Responsible for Management
15 * Those Responsible for Management
16 * Investment Advisory; Subadvisory
and Other Services; Distribution
Contract; Transfer Agent Services;
Custody of Portfolio; Independent
Auditors
17 * Brokerage Allocation
18 * Description of Fund's Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE>
JOHN HANCOCK
GROWTH
FUNDS
[LOGO]
- -------------------------------------------------------------------------------
PROSPECTUS DISCIPLINED GROWTH FUND
JULY 1, 1996
DISCOVERY FUND
This prospectus gives vital information
about these funds. For your own benefit EMERGING GROWTH FUND
and protection, please read it before
you invest, and keep it on hand for GROWTH FUND
future reference.
REGIONAL BANK FUND
Please note that these funds:
* are not bank deposits SPECIAL EQUITIES FUND
* are not federally insured
* are not endorsed by any bank or SPECIAL OPPORTUNITIES FUND
government agency
* are not guaranteed to achieve
their goal(s)
Like all mutual fund shares, these
securities have not been approved
or disapproved by the Securities
and Exchange Commission or any
state securities commission, nor has
the Securities and Exchange
Commission or any state securities
commission passed upon the accuracy
or adequacy of this prospectus.
Any representation to the contrary [LOGO] JOHN HANCOCK FUNDS
is a criminal offense. A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avanue,
Boston, Massachusetts 02199-7603
<PAGE>
<TABLE>
CONTENTS
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<S> <C> <C>
A fund-by-fund look at goals, DISCIPLINED GROWTH FUND 4
strategies, risks, expenses and
financial history. DISCOVERY FUND 6
EMERGING GROWTH FUND 8
GROWTH FUND 10
REGIONAL BANK FUND 12
SPECIAL EQUITIES FUND 14
SPECIAL OPPORTUNITIES FUND 16
Policies and instructions for opening, YOUR ACCOUNT
maintaining and closing an account Choosing a share class 18
in any growth fund. How sales charges are calculated 18
Sales charge reductions and waivers 19
Opening an account 19
Buying shares 20
Selling shares 21
Transaction policies 22
Dividends and account policies 23
Additional investor services 24
Details that apply to the growth FUND DETAILS
funds as a group. Business structure 25
Sales compensation 26
More about risk 27
Higher risk securities and
practices 29
FOR MORE INFORMATION BACK COVER
</TABLE>
<PAGE>
OVERVIEW
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GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in common
stocks. Each fund employs its own strategy and has its own risk/reward profile.
Because you could lose money by investing in these funds, be sure to read all
risk disclosure carefully before investing.
WHO MAY WANT TO INVEST
John Hancock growth funds may be appropriate for:
- - investors with longer time horizons
- - investors willing to accept higher short-term risk in exchange for higher
potential long-term returns
- - investors who want to diversify their portfolios
- - investors seeking funds for the growth portion of an asset allocation
portfolio
- - retirement investors or others whose goals are many years in the future
Growth funds may NOT be appropriate if you:
- - are investing with a shorter time horizon in mind
- - are uncomfortable with an investment that will go up and down in value
PORTFOLIO MANAGEMENT
All John Hancock growth funds are managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Mutual Life Insurance Company and manages more than $16 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[A graphic image of a bullseye with an arrow in the middle of it.] GOAL AND
STRATEGY The fund's particular investment goals and the strategies it intends
to use in pursuing those goals.
[A graphic image of a black folder that contains a couple sheets of paper.]
PORTFOLIO SECURITIES The primary types of securities in which the fund invests.
Secondary investments are described in "More about risk" at the end of the
prospectus.
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] RISK FACTORS The major risk factors associated with the fund.
[A graphic image of a generic person.] PORTFOLIO MANAGER The individual or
group (including subadvisers, if any) designated by the investment adviser to
handle the fund's day-to-day management.
[A graphic image of a percent symbol.] EXPENSES The overall costs borne by an
investor in the fund, including sales charges and annual expenses.
[A graphic image of a dollar sign.] FINANCIAL HIGHLIGHTS A table showing the
fund's financial performance for up to ten years, by share class. There is also
a bar graph of year-by-year total return which is intended to show the fund's
volatility in recent years.
<PAGE>
DISCIPLINED GROWTH FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME:FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A:SVAAX CLASSB:FEQVX
- ----------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
established, growing companies that have demonstrated superior earnings growth
and stability. In normal circumstances the fund will invest at least 65% of its
assets in these companies, without concentration in any one industry. The fund
also looks for the following characteristics:
- - a low level of debt
- - seasoned management
- - a strong market position
The fund invests for income as a secondary goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities. The fund expects any foreign investments to remain below 10% of
assets. For liquidity and flexibility, the fund may place up to 15% of its net
assets in cash or in short-term investment-grade securities; in abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
To a limited extent, the fund also may invest in certain higher risk securities,
and may engage in other investment practices. For details, see "More about risk"
at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
with the performance of the stock market and the success or failure of the
fund's investment strategies. To the extent that the fund invests in restricted
securities, foreign securities, and junk bonds, it takes on additional risks
which could adversely affect its performance.
PORTFOLIO MANAGERS
[A graphic image of a generic person.] Thomas Weary and John Snyder III,
leaders of the fund's portfolio management team, are responsible for the
day-to-day investment management of the fund. A vice president of the investment
adviser, Mr. Weary has been a part of the fund's management team since 1992. He
joined John Hancock in 1983. Mr. Snyder is an executive vice president of the
investment adviser and has been a team member since 1992. He has been an
investment manager since 1971.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic symbol of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.40% 0.40%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.45% 2.15%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $64 $94 $125 $215
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $72 $97 $135 $231
- --------------------------------------------------------------------------------
Assuming no redemption $22 $67 $115 $231
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
4 DISCIPLINED GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS B [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<CAPTION>
==========================================================================================================
Class A - year ended October 31, 1992(1) 1993 1994 1995
==========================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.81 $10.99 $12.39 $12.02
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.06) 1.34 0.07 1.29
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 0.00 1.42 0.17 1.37
- ---------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.07) (0.02) (0.10) (0.10)
- ---------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments sold (1.74) -- (0.44) (0.52)
- ---------------------------------------------------------------------------------------------------------
Distributions from capital paid-in (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------
Total distributions (1.82) (0.02) (0.54) (0.62)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.99 $12.39 $12.02 $12.77
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 0.19(4) 12.97 1.35 12.21
- ---------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 1,771 23,372 23,292 27,692
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.73(5) 1.60 1.53 1.46
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets(%) 0.62(5) 0.64 0.83 0.69
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 246 71 60 65
- ---------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================================
Class B - year ended October 31, 1987(6) 1988 1989 1990 1991 1992 1993 1994 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.00 $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71 $ 10.97 $ 12.31 $ 11.95
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.06 0.13 0.19 0.18 0.07 0.01(2) 0.02(2) 0.03 0.01(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.70) 2.05 1.25 (2.00) 2.67 1.05 1.33 0.07 1.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations (1.64) 2.18 1.44 (1.82) 2.74 1.06 1.35 0.10 1.29
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment
income (0.02) (0.09) (0.12) (0.20) (0.20) (0.03) (0.01) (0.02) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold -- (0.14) (0.09) (0.28) (0.05) (1.76) -- (0.44) (0.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from capital
paid-in -- -- -- -- -- (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.02) (0.23) (0.21) (0.48) (0.25) (1.80) (0.01) (0.46) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71 $ 10.97 $ 12.31 $ 11.95 $ 12.69
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE(3) (%) (16.44)(4) 26.69 14.27 (16.46) 30.21 7.22 12.34 0.78 11.51
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 14,016 14,927 23,813 17,714 21,826 23,525 93,853 94,431 86,178
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 2.56(5,7) 2.61(7) 2.30 2.13 2.24 2.27 2.09 2.10 2.11
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 0.93(5,7) 1.46(7) 1.75 1.64 0.66 0.10 0.17 0.25 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 40(5) 54 94 165 217 246 71 60 65
- ---------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission
rate (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Class A shares commenced operations on January 3, 1992.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Class B shares commenced operations April 22, 1987.
(7) Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $.01 for the fiscal year ended
October 31, 1987.
</TABLE>
DISCIPLINED GROWTH FUND 5
<PAGE>
DISCOVERY FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST III TICKER SYMBOL CLASS A:FRDAX CLASS B:FRIDX
- -----------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
companies that appear to offer superior growth prospects. Under normal
circumstances, the fund will invest at least 65% of its assets in these
companies. The fund looks for companies that have broad market opportunities
and consistent or accelerating earnings growth. This may include companies that:
- - occupy a profitable market niche
- - have products or technologies that are new, unique or proprietary
- - are in an industry that has a favorable long-term growth outlook
- - have a capable management team with a significant equity stake
The fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The fund invests primarily in common stocks of U.S. companies and may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities.
For liquidity and flexibility, the fund may place up to 15% of its net assets in
cash or in short-term investment-grade securities; in abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The Fund may invest up to 25% of its assets in foreign securities, which carry
additional risks; however, foreign securities typically do not exceed 10% of its
assets. To a limited extent, the fund also may invest in certain higher-risk
securities, including foreign securities, and may engage in other investment
practices. For details, see "More about risk" at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart that depicts some peaks and valleys.] The
value of an investment in the fund will fluctuate with the performance of the
stock market. Small and medium-sized company stocks tend to be more volatile
than the market as a whole.
PORTFOLIO MANAGER
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since March 1994, is a senior vice president of the
investment adviser. She joined the investment adviser in 1991 and has worked as
an investment professional since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.80% 0.80%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.85% 2.55%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $68 $105 $145 $256
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $76 $109 $155 $271
- --------------------------------------------------------------------------------
Assuming no redemption $26 $ 79 $135 $271
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
6 DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below for the period ended July
31, 1992, were audited by the fund's former independent auditors, Price
Waterhouse LLP. Figures for the subsequent years have been audited by the fund's
current independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS B [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
================================================================================
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED JULY 31, 1992(1) 1993 1994 1995 1996(2)
====================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.40 $ 8.95 $ 10.81 $ 8.56 $ 12.95
- ----------------------------------------------------------------------------------------------------
Net investment income (loss) (0.05) (0.16) (0.16)(3) (0.17)(3) (0.10)(3)
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (0.40) 2.15 (0.43) 4.83 0.55
- ----------------------------------------------------------------------------------------------------
Total from investment operations (0.45) 1.99 (0.59) 4.66 0.45
- ----------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.95 $ 10.81 $ 8.56 $12.95 $ 13.27
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(4)(%) (4.79)(5) 22.33 (6.45) 55.80 3.52(5)
- ----------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 3,866 4,692 3,266 5,075 6,583
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.78(6) 2.17 2.01 2.10 1.74(6)
- ----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets(%) (1.20)(6) (1.61) (1.64) (1.73) (1.51)(6)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 138 148 108 118 73
- ----------------------------------------------------------------------------------------------------
Average brokerage commission rate(%) N/A N/A N/A N/A N/A
====================================================================================================
CLASS B - YEAR ENDED JULY 31, 1992(1) 1993 1994 1995 1996(2)
====================================================================================================
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.00 $ 8.87 $ 10.65 $ 8.34 $ 12.54
- ----------------------------------------------------------------------------------------------------
Net investment income (loss) (0.11) (0.23) (0.22)(3) (0.22)(3) (0.14)(3)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.98 2.14 (0.43) 4.69 0.53
- ----------------------------------------------------------------------------------------------------
Total from investment operations 0.87 1.91 (0.65) 4.47 0.39
- ----------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.87 $ 10.65 $ 8.34 $ 12.54 $ 12.80
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(4) (%) 10.88(5) 21.63 (7.18) 54.97 3.15(5)
- ----------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 34,636 38,672 26,537 31,645 34,452
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.56(6) 2.86 2.62 2.70 2.43(6)
- ----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets(%) (1.56)(6) (2.26) (2.24) (2.34) (2.20)(6)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 138 148 108 118 73
- ----------------------------------------------------------------------------------------------------
Average brokerage commission rate(%) N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
(1) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(2) Six months ended January 31, 1996 (unaudited).
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) Annualized.
</TABLE>
DISCOVERY FUND 7
<PAGE>
EMERGING GROWTH FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK SERIES, INC. TICKER SYMBOL CLASS A:TAEMX CLASS B:TSEGX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
emerging companies (market capitalization of less than $1 billion). In normal
circumstances the fund will invest at least 80% of its assets in a diversified
portfolio of these companies. The fund looks for companies that show rapid
growth but are not yet widely recognized. The fund also may invest in
established companies that, because of new management, products or
opportunities, offer the possibility of accelerating earnings. The fund does
not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The fund invests primarily in the common stocks of U.S. and foreign emerging
growth companies, although it may invest up to 20% of assets in other types of
companies. The fund may also invest in warrants, preferred stocks and
investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 20% in cash or in
short-term investment-grade securities; in abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. To a limited
extent, the fund also may invest in certain higher-risk securities, including
derivatives, and may engage in other investment practices. For details, see
"More about risk" at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
with the performance of the stock market. Stocks of emerging growth companies
carry higher risks than stocks of larger companies. This is because emerging
growth companies:
- - may be in the early stages of development
- - may be dependent on a small number of products or services
- - may lack substantial capital reserves
- - do not have proven track records
In addition, stocks of emerging companies are often traded in low volumes, which
can increase market and liquidity risks.
PORTFOLIO MANAGER
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since February 1996, is a senior vice president of
the investment adviser. She joined the investment adviser in 1991 and has
worked as an investment professional since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.25% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.40% 0.40%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.40% 2.15%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $64 $92 $123 $210
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $72 $97 $135 $229
- --------------------------------------------------------------------------------
Assuming no redemption $22 $67 $115 $229
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
8 EMERGING GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's current independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS B [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
====================================================================================================
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1991(1) 1992 1993 1994 1995(2)
====================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.12 $ 19.26 $ 20.60 $ 25.89 $ 26.82
- ----------------------------------------------------------------------------------------------------
Net investment income (loss)(3) (0.03) (0.20) (0.16) (0.18) (0.25)
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.17 1.60 5.45 1.11 9.52
- ----------------------------------------------------------------------------------------------------
Total from investment operations 1.14 1.40 5.29 0.93 9.27
- ----------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments sold -- (0.06) -- -- --
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE(4) (%) 6.29 7.32 25.68 3.59 34.56
- ----------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 38,859 46,137 81,263 131,053 179,481
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 0.33 1.67 1.40 1.44 1.38
- ----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets (%) (0.15) (1.03) (0.70) (0.71) (0.83)
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 66 48 29 25 23
- ----------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(5) 1988 1989 1990 1991 1992 1993 1994 1995(2)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.89 $ 7.89 $10.54 $ 12.76 $ 11.06 $ 19.22 $ 20.34 $ 25.33 $ 26.04
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(3) (0.0021) 0.09 (0.08) (0.22) (0.30) (0.38) (0.36) (0.36) (0.45)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.0021 2.56 2.83 (1.26) 8.46 1.56 5.35 1.07 9.20
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.0000 2.65 2.75 (1.48) 8.16 1.18 4.99 0.71 8.75
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- -- (0.04) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments sold -- -- (0.49) (0.22) -- (0.06) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.53) (0.22) -- (0.06) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.89 $10.54 $12.76 $ 11.06 $ 19.22 $ 20.34 $ 25.33 $ 26.04 $ 34.79
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(4) (%) 0.00 33.59 27.40 (11.82) 73.78 6.19 24.53 2.80 33.60
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 79 3,232 7,877 11,668 52,743 86,923 219,484 283,435 393,478
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 0.44 5.64 3.51 3.11 2.85 2.64 2.28 2.19 2.11
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expense reimbursement to
average net assets (%) (0.41) (2.59) (0.03) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to
average net assets (%) 0.03 3.05 3.48 3.11 2.85 2.64 2.28 2.19 2.11
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets (%) (0.03) 0.81 (0.67) (1.64) (1.83) (1.99) (1.58) (1.46) (1.55)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 0 252 90 82 66 48 29 25 23
- --------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
(1) Class A shares commenced operations on August 22, 1991. Financial
highlights, including total return, have not been annualized.
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Class B shares commenced operations on October 26, 1987. Financial
highlights, including total return, have not been annualized.
</TABLE>
EMERGING GROWTH FUND 9
<PAGE>
GROWTH FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A:JHNGX CLASS B:JHGNX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
stocks that are diversified with regard to industries and issuers. The fund
favors stocks of companies whose operating earnings and revenues have grown more
than twice as fast as the Gross Domestic Product (GDP) over the past five years,
although not all stocks in the fund's portfolio will meet this criterion.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The portfolio invests primarily in the common stocks of U.S. companies. It may
also invest in warrants, preferred stocks and convertible debt securities.
For liquidity and flexibility, the fund may invest up to 35% of its net assets
in short-term investment-grade securities; in abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. To a limited
extent, the fund may also invest in certain higher risk securities, and may
engage in other investment practices. For details, see "More about risk" at the
end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
with the performance of the stock market and the success or failure of the
fund's investment strategies. To the extent that the fund invests in restricted
securities, foreign securities, and junk bonds, it takes on additional risks
which could adversely affect its performance.
PORTFOLIO MANAGER
[A graphic image of a generic person.] Bernice S. Behar, leader of the fund's
portfolio management team since September 1995, is a senior vice president of
the investment adviser. She joined the investment adviser in 1991 and has worked
as an investment professional since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.80% 0.80%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.40% 0.40%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.50% 2.20%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $72 $99 $138 $236
- --------------------------------------------------------------------------------
Assuming no redemption $22 $69 $118 $236
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
10 GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
====================================================================================================================================
CLASS A - YEAR ENDED DECEMBER 31, 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.50 $ 14.03 $ 12.34 $ 13.33 $ 15.18 $ 12.93 $ 17.48 $ 17.32 $ 17.40 $ 15.89
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.11 0.22 0.23 0.28 0.16 0.04 (0.06) (0.11) (0.10) (0.09)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.79 0.64 1.16 3.81 (1.47) 5.36 1.10 2.33 (1.21) 4.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.90 0.86 1.39 4.09 (1.31) 5.40 1.04 2.22 (1.31) 4.31
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.17) (0.28) (0.23) (0.29) (0.16) (0.04) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain
on investments sold (2.20) (2.27) (0.17) (1.95) (0.78) (0.81) (1.20) (2.14) (0.20) (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.37) (2.55) (0.40) (2.24) (0.94) (0.85) (1.20) (2.14) (0.20) (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.03 $12.34 $13.33 $ 15.18 $ 12.93 $ 17.48 $ 17.32 $ 17.40 $ 15.89 $ 19.51
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(4) (%) 13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 87,468 86,426 101,497 105,014 102,416 145,287 153,057 162,937 146,466 241,700
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 1.03 1.00 1.06 0.96 1.46 1.44 1.60 1.56 1.65 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 0.77 1.41 1.76 1.73 1.12 0.27 (0.36) (0.67) (0.64) (0.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 62 68 47 61 102 82 71 68 52 68
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
===============================================================================
CLASS B - YEAR ENDED DECEMBER 31, 1994(2) 1995
===============================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $17.16(3) $ 15.83(1)
- -------------------------------------------------------------------------------
Net investment income (loss) (0.20)(1) (0.26)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (0.93) 4.37
- --------------------------------------------------------------------------------
Total from investment operations (1.13) 4.11
- --------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold (0.20) (0.69)
- --------------------------------------------------------------------------------
Net asset value, end of period $15.83 $ 19.25
- --------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4)(%) (6.56)(5) 26.01
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 3,807 15,913
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.38(6) 2.31
- --------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets (%) (1.25)(6) (1.39)
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 52 68
- --------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A
(1) Based on the average of the shares outstanding at the end of each month.
(2) Class B shares commenced operations on January 3, 1994.
(3) Initial price at commencement of operations.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) Annualized.
</TABLE>
GROWTH FUND 11
<PAGE>
REGIONAL BANK FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A:FRBAX CLASS B:FRBFX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
regional banks and lending institutions, including:
- - commercial and industrial banks
- - savings and loan associations
- - bank holding companies
These financial institutions provide full-service banking, have primarily
domestic assets, and are typically based outside of New York City and Chicago.
They may or may not be members of the Federal Reserve, and their deposits may or
may not be FDIC-insured. In normal circumstances the fund will invest at least
65% of its assets in these companies; it may invest up to 35% of assets in other
financial services companies, including lending companies and money center
banks. Because regional banks typically pay regular dividends, moderate income
is an investment goal.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The fund invests primarily in the common stocks of U.S. and foreign companies.
It may also invest in warrants, preferred stocks, and investment-grade
convertible debt securities.
For liquidity and flexibility, the fund may place up to 15% of its net assets in
cash or in short-term investment-grade securities; in abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
To a limited extent, the fund may also invest in certain higher risk securities,
including derivatives, and may engage in other investment practices. For
details, see "More about risk" at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate.
Because the fund concentrates in a single industry, its performance is largely
dependent on the industry's performance, which may differ in direction and
degree from that of the overall stock market. Falling interest rates or
deteriorating economic conditions can adversely affect the performance of bank
stocks, while rising interest rates will cause a decline in the value of any
debt securities the fund holds.
PORTFOLIO MANAGER
[A graphic image of a generic person.] James K. Schmidt joined John Hancock in
1985 and has served as the fund's portfolio manager since its inception that
year. A senior vice president of the investment adviser, he has worked as an
investment professional since 1974.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.78% 0.78%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.31% 0.31%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.39% 2.09%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $63 $92 $122 $209
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $71 $95 $132 $224
- --------------------------------------------------------------------------------
Assuming no redemption $21 $65 $112 $224
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
12 REGIONAL BANK FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the
fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS B [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
===================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
===================================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.47 $ 17.47 $ 21.62 $ 21.52
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.21 0.26(2) 0.39(2) 0.52(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.98 5.84 0.91 5.92
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.19 6.10 1.30 6.44
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.19) (0.26) (0.34) (0.48)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments sold -- (1.69) (1.06) (0.34)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.19) (1.95) (1.40) (0.82)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.47 $ 21.62 $ 21.52 $ 27.14
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 31.26(4) 37.45 6.44 31.00
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 31,306 94,158 216,978 486,631
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.41(5) 1.35 1.34 1.39
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.64(5) 1.29 1.78 2.23
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 53 35 13 14
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(6) 1987(7) 1988 1989 1990 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.51 $ 12.68 $ 10.02 $ 11.89 $ 13.00 $ 8.13 $ 13.76 $ 17.44 $ 21.56 $ 21.43
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.20 0.05 0.16 0.20 0.30 0.29 0.18 0.15(2) 0.23(2) 0.36(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment 1.74 (2.17) 3.12 2.02 (4.19) 5.68 4.56 5.83 0.91 5.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.94 (2.12) 3.28 2.22 (3.89) 5.97 4.74 5.98 1.14 6.25
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.26) (0.04) (0.15) (0.16) (0.19) (0.34) (0.28) (0.17) (0.21) (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain
on investments sold (1.51) (0.50) (1.26) (0.95) (0.76) -- (0.78) (1.69) (1.06) (0.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from capital paid-in -- -- -- -- (0.03) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.77) (0.54) (1.41) (1.11) (0.98) (0.34) (1.06) (1.86) (1.27) (0.66)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.68 $ 10.02 $ 11.89 $ 13.00 $ 8.13 $ 13.76 $ 17.44 $ 21.56 $ 21.43 $ 27.02
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(3) (%) 17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35 37.20 36.71 5.69 30.11
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted)($) 54,626 38,721 50,965 81,167 38,992 52,098 56,016 171,808 522,207 1,236,447
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 1.48 2.47(5) 2.17 1.99 1.99 2.04 1.96 1.88 2.06 2.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) 1.62 0.73(5) 1.50 1.67 2.51 2.65 1.21 0.76 1.07 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 89 58(5) 87 85 56 75 53 35 13 14
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
(1) Class A shares commenced operations on January 3, 1992.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Year ended March 31, 1987.
(7) For the period April 1, 1987 to October 31, 1987.
</TABLE>
REGIONAL BANK FUND 13
<PAGE>
SPECIAL EQUITIES FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND TICKER SYMBOL CLASS A:JHNSX CLASS B:SPQBX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
small-capitalization companies and companies in situations offering unusual or
non-recurring opportunities. In normal circumstances the fund will invest at
least 65% of its assets in a diversified portfolio of these companies. The fund
looks for companies that dominate an emerging industry or hold a growing market
share in a fragmented industry, and that have demonstrated earnings and revenue
growth of at least 25%, self-financing capabilities and strong management. The
fund does not invest for income.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The fund invests primarily in the common stocks of U.S. and foreign companies.
It may also invest in warrants, preferred stocks and investment-grade
convertible debt securities.
For liquidity and flexibility, the fund may place up to 35% of its net assets in
cash or in short-term investment-grade securities; in abnormal market
conditions, it may invest more than 35% in these securities as a defensive
tactic. To a limited extent, the fund also may invest in certain higher risk
securities, and may engage in other investment practices. For details, see "More
about risk" at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] As with any growth fund, the value of your investment will fluctuate
with the performance of the stock market. Stocks of small-capitalization and
special-situation companies carry higher risks than stocks of larger companies.
This is because these companies:
- - may lack proven track records
- - may be dependent on a small number of products or services
- - may be undercapitalized
- - may have highly priced stocks which are sensitive to adverse news
In addition, stocks of these companies are often traded in low volumes, which
can increase market and liquidity risks.
PORTFOLIO MANAGER
[A graphic image of a generic person.] Michael P. DiCarlo is responsible for the
fund's day-to-day investment management. He has served as the fund's portfolio
manager since 1988, and has worked as an investment professional since 1984. He
is currently one of three principals in DFS Advisors, LLC, which was founded in
1996 and serves as subadviser to the fund.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee(3) 0.82% 0.82%
- --------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.38% 0.40%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.50% 2.22%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $73 $99 $139 $237
- --------------------------------------------------------------------------------
Assuming no redemption $23 $69 $119 $237
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Includes a subadviser fee equal to 25% of the management fee.
(4) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
14 SPECIAL EQUITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited
by the fund's independent auditors, Ernst & Young LLP.
VOLATILITY, AS INDICATED BY CLASS A [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
====================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.21 $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(1) (0.03) (0.03) 0.04 0.01 (0.12) (0.10) (0.19)(2) (0.20)(2) (0.21)(2) (0.18)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.93 (1.26) 0.55 1.53 (1.27) 4.84 2.14 5.43 0.19 6.22
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.90 (1.29) 0.59 1.54 (1.39) 4.74 1.95 5.23 (0.02) 6.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.02) -- -- (0.05) (0.02) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain
on investments sold (0.01) (0.45) -- -- -- -- (0.67) (0.09) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from capital paid-in -- (0.04) -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.03) (0.49) -- (0.05) (0.02) -- (0.67) (0.09) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE(1,3) (%) 17.38 (28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) ($) 13,780 10,637 11,714 12,285 8,166 19,713 44,665 296,793 310,625 555,655
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets(1) (%) 1.50 1.50 1.50 1.50 2.63 2.75 2.24 1.84 1.62 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets(1) (%) (0.57) (0.57) 0.82 0.47 (1.58) (2.12) (1.91) (1.49) (1.40) (0.97)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 64 93 91 115 113 163 114 33 66 82
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
=========================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1993(4) 1994 1995
=========================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.30 $ 16.08 $ 15.97
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.18)(2) (0.30)(2) (0.31)(2)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.96 0.19 6.15
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 3.78 (0.11) 5.84
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.08 $ 15.97 $ 21.81
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 30.73(5) (0.68) 36.57
- ---------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 158,281 191,979 454,934
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.34(6) 2.25 2.20
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) (2.03)(6) (2.02) (1.69)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 33 66 82
- ---------------------------------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A N/A
(1) Reflects expense limitation in effect during the years ended October 31, 1986 through
1991 (see note B to the financial statements in the Statement of Additional Information).
As a result of such limitations, expenses of the Fund for the years ended October 31,
1986, 1987, 1988, 1989, 1990, and 1991 reflect reductions of $.09, $.04, $.07, $.03, $.02 and
$.002 respectively. Absent of such limitation, for the years ended October 31, 1986,
1987, 1988, 1989, 1990, and 1991, the ratio of net expenses would have been 3.47%, 2.23%,
2.94%, 2.57%, 2.95%, and 2.79% respectively, and the ratio of net investment income
(loss) to average net assets would have been (2.55%), (1.30%), (0.62%), (0.60%), (1.90%)
and (2.16%), respectively. Without the limitation, total investment return would be
lower.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Class B shares commenced operations on March 1, 1993.
(5) Not annualized.
(6) Annualized.
</TABLE>
SPECIAL EQUITIES FUND 15
<PAGE>
SPECIAL OPPORTUNITIES FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A:SPOAX CLASS B:SPOBX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks long-term capital appreciation. To pursue this goal, the fund invests in
those economic sectors that appear to have a higher earning potential.
Under normal circumstances, at least 90% of the fund's equity securities will be
invested within five or fewer sectors (e.g. financial services, energy,
technology). Up to 25% may be invested in any one sector. The inclusion and
weighting of any sector is determined on the basis of macroeconomic factors as
well as the outlook for that sector. The fund may add or drop sectors. Because
the fund may invest more than 5% of its assets in a single issuer, it is
classified as a non-diversified fund.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.]
The fund invests primarily in common stocks of U.S. and foreign companies of
any size. It may also invest in warrants, preferred stocks, convertible debt
securities, U.S. Government securities and corporate bonds rated at least
BBB/Baa, or equivalent.
To a limited extent, the fund also may invest in certain higher risk securities,
and may engage in other investment practices. For details, see "More about risk"
at the end of this prospectus.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] By focusing on a relatively small number of industries or issuers,
the fund runs the risk that any factor influencing those industries or issuers
will have a major effect on performance. The fund may invest in companies with
smaller market capitalizations, which represent higher near-term risks than
larger capitalization companies. The fund's use of derivatives could expose it
to losses substantially in excess of the purchase or sale price of the
derivative. These factors make the fund likely to experience higher volatility
than most other types of growth funds.
PORTFOLIO MANAGER
[A graphic image of a generic person.] Kevin R. Baker is leader of the portfolio
management for the fund. A second vice president of John Hancock Advisers, he
has been an active member of the fund's management team since joining the
investment adviser in 1994. He has worked as an investment professional since
1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
================================================================================
Shareholder transaction expenses Class A Class B
================================================================================
<S> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price) 5.00% none
- --------------------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends none none
- --------------------------------------------------------------------------------
Maximum deferred sales charge none(1) 5.00%
- --------------------------------------------------------------------------------
Redemption fee(2) none none
- --------------------------------------------------------------------------------
Exchange fee none none
- --------------------------------------------------------------------------------
================================================================================
Annual fund operating expenses (as a % of average net assets)
================================================================================
Management fee 0.80% 0.80%
- --------------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses 0.49% 0.49%
- --------------------------------------------------------------------------------
Total fund operating expenses 1.59% 2.29%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
================================================================================
Share class Year 1 Year 3 Year 5 Year 10
================================================================================
<S> <C> <C> <C> <C>
Class A shares $65 $ 98 $132 $229
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption at
end of period $73 $102 $143 $245
- --------------------------------------------------------------------------------
Assuming no redemption $23 $ 72 $123 $245
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) May include carry-over of reimbursable costs from previous year(s). Amounts
shown are the fund's current annual maximums for 12b-1 fees. Because of the
12b-1 fee, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales charge.
</TABLE>
16 SPECIAL OPPORTUNITIES FUND
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by
the fund's independent auditors, Price Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS A [BAR GRAPH]
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<TABLE>
<CAPTION>
==================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1994(1) 1995
==================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.50 $ 7.93
- ----------------------------------------------------------------------------------
Net investment income (loss) (0.03)(2) (0.07)(2)
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (0.54) 1.46
- ----------------------------------------------------------------------------------
Total from investment operations (0.57) 1.39
- ----------------------------------------------------------------------------------
Net asset value, end of period $ 7.93 $ 9.32
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) (6.71)(3) 17.53
- ----------------------------------------------------------------------------------
Total adjusted investment return at
net asset value(5) (%) (6.83)(6) --
- ----------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 92,325 101,562
- ----------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.50 1.59
- ----------------------------------------------------------------------------------
Ratio of adjusted expenses to average
net assets(5) (%) 1.62 --
- ----------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (0.41) (0.87)
- ----------------------------------------------------------------------------------
Ratio of adjusted net investment loss
to average net assets(5) (%) (0.53) --
- ----------------------------------------------------------------------------------
Portfolio turnover rate (%) 57 155
- ----------------------------------------------------------------------------------
Expense reimbursement per share (%) 0.01(2) --
- ----------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A
==================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1994(1) 1995
==================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.50 $ 7.87
- ----------------------------------------------------------------------------------
Net investment income (loss) (0.09)(2) (0.13)(2)
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (0.54) 1.45
- ----------------------------------------------------------------------------------
Total from investment operations (0.63) 1.32
- ----------------------------------------------------------------------------------
Net asset value, end of period $ 7.87 $ 9.19
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4)(%) (7.41)(3) 16.77
- ----------------------------------------------------------------------------------
Total adjusted investment return at
net asset value(5) (%) (7.53)(6) --
- ----------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 131,983 137,363
- ----------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 2.22 2.30
- ----------------------------------------------------------------------------------
Ratio of adjusted expenses to average
net assets(5) (%) 2.34 --
- ----------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to
average net assets (%) (1.13) (1.55)
- ----------------------------------------------------------------------------------
Ratio of adjusted net investment loss to
average net assets(5) (%) (1.25) --
- ----------------------------------------------------------------------------------
Portfolio turnover rate (%) 57 155
- ----------------------------------------------------------------------------------
Expense reimbursement per share (%) 0.01(2) --
- ----------------------------------------------------------------------------------
Average brokerage commission rate (%) N/A N/A
(1) Class A and B shares commenced operations on November 1, 1993.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Without the reimbursement, total investment return would be lower.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Unreimbursed, without expense reduction.
(6) An estimated total return calculation which takes into consideration fees
and expenses waived or borne by the adviser during the periods shown.
</TABLE>
SPECIAL OPPORTUNITIES FUND 17
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
<TABLE>
All John Hancock growth funds offer two classes of shares, Class A and Class B.
Each class has its own cost structure, allowing you to choose the one that best
meets your requirements. Your financial representative can help you decide.
<CAPTION>
================================================================================
CLASS A CLASS B
================================================================================
<S> <C>
- - Front-end sales charges, as - No front-end sales charge; all
described below. There are of your money goes to work for
several ways to reduce these you right away.
charges, also described below.
- Higher annual expenses than
- - Lower annual expenses than Class A shares.
Class B shares.
- A deferred sales charge on
shares you sell within six
years of purchase, as
described below.
- Automatic conversion to
Class A shares after eight
years, thus reducing
future annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
Special Equities Fund offers Class C shares, which have their own sales charge
and expense structure and are available to financial institutions only. Call
Investor Services or contact your financial representative for more information.
</TABLE>
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
<TABLE>
CLASS A Sales charges are as follows:
================================================================================
CLASS A SALES CHARGES
================================================================================
<CAPTION>
AS A % OF AS A % OF YOUR
YOUR INVESTMENTS OFFERING PRICE INVESTMENT
- --------------------------------------------------------------------------------
<S> <C> <C>
Up to $49,999 5.00% 5.26%
- --------------------------------------------------------------------------------
$50,000 - $99,999 4.50% 4.71%
- --------------------------------------------------------------------------------
$100,000 - $249,999 3.50% 3.63%
- --------------------------------------------------------------------------------
$250,000 - $499,999 2.50% 2.56%
- --------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04%
- --------------------------------------------------------------------------------
$1,000,000 and over See below
</TABLE>
<TABLE>
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no
front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any shares sold within one year of purchase, as follows:
================================================================================
CDSC ON $1 MILLION+ INVESTMENT
================================================================================
<CAPTION>
YOUR INVESTMENT CDSC ON SHARES BEING SOLD
- --------------------------------------------------------------------------------
<S> <C>
First $1M - $4,999,999 1.00%
- --------------------------------------------------------------------------------
Next $1 - $5M above that 0.50%
- --------------------------------------------------------------------------------
Next $1M or more above that 0.25%
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the first day of that month.
</TABLE>
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a contingent deferred sales charge
(CDSC) on shares you sell within six years of buying them. There is no CDSC on
shares acquired through reinvestment of dividends. The CDSC is based on the
original purchase cost or the current market value of the shares being sold,
whichever is less. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
<TABLE>
================================================================================
CLASS B DEFERRED CHARGES
================================================================================
<CAPTION>
YEARS AFTER PURCHASE CDSC ON SHARES BEING SOLD
- --------------------------------------------------------------------------------
<S> <C>
1 year 5.0%
- --------------------------------------------------------------------------------
2 years 4.0%
- --------------------------------------------------------------------------------
3 or 4 years 3.0%
- --------------------------------------------------------------------------------
5 years 2.0%
- --------------------------------------------------------------------------------
6 years 1.0%
- --------------------------------------------------------------------------------
7 or more years None
- --------------------------------------------------------------------------------
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the LAST day of that month.
</TABLE>
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
18 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares in John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
- - Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
- - Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
- - Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section on your application, or contact
your financial representative or Investor Services to add these options to an
existing account.
GROUP INVESTMENT PROGRAM Allows four or more accountholders to declare
themselves a group. Each has an individual account, but for sales charge
purposes, their investments are lumped together, making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250), and you may terminate the program at any time.
To utilize: contact your financial representative or Investor Services to find
out how to qualify.
CDSC WAIVERS In general, the CDSC for either share class may be waived on
shares you sell for the following reasons:
- - to make payments through certain Systematic Withdrawal Plans
- - to make distributions from a retirement plan
- - because of shareholder death or disability
To utilize: contact your financial representative or Investor Services.
REINSTATEMENT PRIVILEGE If you sell shares in a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
To utilize: contact your financial representative or Investor Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
- - government entities who are prohibited from paying mutual fund sales
charges
- - financial institutions or common trust funds investing $1 million or more
for non-discretionary accounts
- - selling brokers and their employees and sales representatives
- - financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
- - fund trustees and other individuals who are affiliated with these or other
John Hancock funds
- - individuals transferring assets to a John Hancock growth fund from an
employee benefit plan that has John Hancock funds
To utilize: if you think you may be eligible for a sales charge waiver, contact
Investor Services or consult the SAI (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock growth funds are as follows:
- non-retirement account: $1,000
- retirement account: $250
- group investments: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the Account Application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the Account Privileges Application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges
later on.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 19
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
BUYING SHARES
===============================================================================================================================
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
BY CHECK
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a blank check.]
- - Make out a check for the investment amount, payable - Make out a check for the investment amount payable
to "John Hancock Investor Services Corporation." to "John Hancock Investor Services Corporation."
- - Deliver the check and your completed application to - Fill out the detachable investment slip from an account
your financial representative, or mail to Investor Services statement. If no slip is available, include a note specifying
(address on next page). the fund name, your share class, your account number,
and the name(s) in which the account is registered.
- Deliver the check and your investment slip or note to
your financial representative, or mail to Investor Services
(address on next page).
- ---------------------------------------------------------------------------------------------------------------------------------
BY EXCHANGE
- ---------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a white arrow outlined in black that points to the right above a black that points to the left.]
- - Call your financial representative or Investor Services - Call Investor Services to request an exchange.
to request an exchange.
- ---------------------------------------------------------------------------------------------------------------------------------
BY WIRE
- ---------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a jagged white arrow outlined in black that points upwards at a 45 degree angle.]
- - Deliver your completed application to your financial - Instruct your bank to wire the amount of your
representative, or mail it to Investor Services. investment to:
First Signature Bank & Trust
- - Obtain your account number by calling your financial Account #900000260
representative or Investor Services. Routing #211475000
Specify the fund name, your share class, your account
- - Instruct your bank to wire the amount of your number, and the name(s) in which the account is registered.
investment to: Your bank may charge a fee to wire funds.
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class, the new
account number, and the name(s) in which the account is
registered. Your bank may charge a fee to wire funds.
- -------------------------------------------------------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a telephone.]
See "By wire" and "By exchange." - Verify that your bank or credit union is a member of
the Automated Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and "Bank Information"
sections on your Account Privileges Application.
- Call Investor Services to verify that these features are in
place on your account.
- Tell the Investor Services representative the fund name,
your share class, your account number, the name(s)
in which the account is registered, and the amount of
your investment.
To open or add to an account using the Monthly Automatic Accumulation Program, see "Additional investor services."
</TABLE>
20 YOUR ACCOUNT
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
SELLING SHARES
===============================================================================================================================
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
BY LETTER
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of the back of an envelope.]
- - Accounts of any type. - Write a letter of instruction or stock power indicating
the fund name, your share class, your account number,
- - Sales of any amount. the name(s) in which the account is registered, and the
dollar value or number of shares you wish to sell.
- Include all signatures and any additional documents
that may be required (see next page).
- Mail the materials to Investor Services.
- A check will be mailed to the name(s) and address in
which the account is registered, or otherwise according
to your letter of instruction.
- -------------------------------------------------------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a telephone.]
- - Most accounts. - For automated service 24 hours a day using your
Touch-Tone phone, call the John Hancock Funds
- - Sales of up to $100,000. EASI-Line at 1-800-338-8080.
- To place your order with a representative at John
Hancock Funds, call Investor Services between 8 a.m. and
4 p.m. on most business days.
- -------------------------------------------------------------------------------------------------------------------------------
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a jagged white arrow outlined in black that points upwards at a 45 degree angle.]
- - Requests by letter to sell any amount (accounts of - Fill out the "Telephone redemption" section of your
any type). new account application.
- - Requests by phone to sell up to $100,000 (accounts - To verify that the telephone redemption privilege is in
with telephone redemption privileges). place on an account, or to request the forms to add it
to an existing account, call Investor Services.
- Amounts of $1,000 or more will be wired on the next
business day. A $4 fee will be deducted from your
account.
- Amounts of less than $1,000 may be sent by EFT or by
check. Funds from EFT transactions are generally available
by the second business day. Your bank may charge
a fee for this service.
- -------------------------------------------------------------------------------------------------------------------------------
BY EXCHANGE
- -------------------------------------------------------------------------------------------------------------------------------
[A graphic image of a white arrow outlined in black that points to the right above a black that points to the left.]
- - Accounts of any type. - Obtain a current prospectus for the fund into which
you are exchanging by calling your financial representative
- - Sales of any amount. Investor Services.
- Call Investor Services to request an exchange.
============================================
Address for opening an account
John Hancock Investor Services Corporation
P.O. Box 9115 Boston, MA 02205-9115
Address for all other transactions
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
Phone number for all transactions
1-800-225-5291
Or contact your financial representative for To sell shares through a systematic withdrawal plan,
instructions and assistance see "Additional investor services."
============================================
</TABLE>
YOUR ACCOUNT 21
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will
need a signature guarantee if:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
- - you are an executor
You can generally obtain a signature guarantee from the following sources:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency
A notary public cannot provide a signature guarantee.
<TABLE>
<CAPTION>
===================================================================================================================================
SELLER REQUIREMENTS FOR WRITTEN REQUESTS [A graphic image of the back of
an envelope.]
===================================================================================================================================
<S> <C>
Owners of individual, joint, sole proprietorship, UGMA/UTMA - Letter of instruction
(custodial accounts for minors) or general partner accounts.
- On the letter, the signatures and titles of all persons authorized
to sign for the account, exactly as the account is registered.
- -----------------------------------------------------------------------------------------------------------------------------------
Owners of corporate or association accounts. - Letter of instruction.
- Corporate resolution.
- On the letter and the resolution, the signature of the
person(s) authorized to sign for the account.
- -----------------------------------------------------------------------------------------------------------------------------------
Owners or trustees of trust accounts. - Letter of instruction.
- On the letter, the signature(s) of the trustee(s).
- If the names of all trustees are not registered on the account,
please also provide a copy of the trust document certified
within the last 60 days.
- -----------------------------------------------------------------------------------------------------------------------------------
Joint tenancy shareholders whose co-tenants are deceased. - Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- -----------------------------------------------------------------------------------------------------------------------------------
Executors of shareholder estates. - Letter of instruction signed by executor.
- Copy of order appointing executor.
- -----------------------------------------------------------------------------------------------------------------------------------
Administrators, conservators, guardians and other sellers or - Call 1-800-225-5291 for instructions.
account types not listed above.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22 YOUR ACCOUNT
<PAGE>
- -------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 p.m. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges, as described earlier.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday-Friday. Buy and sell requests are executed
at the next NAV to be calculated after your request is accepted by Investor
Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Investor Services will take
measures to verify the identity of the caller, such as asking for name,
account number, Social Security or taxpayer ID number, and other relevant
information. If these measures are not taken, Investor Services is responsible
for any losses that may occur to any account due to an unauthorized telephone
call. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days.
Proceeds from telephone transactions can only be mailed to the address of
record.
EXCHANGES You may exchange shares of your John Hancock fund for shares of the
same class in any other John Hancock fund. You will not be charged any front-end
sales charges, and in general any CDSC calculations will be based on the date of
your original investment (although the CDSC will generally be that of the fund
with the higher rates). Class B shares that are exchanged into a fund that has
no CDSC will retain their original CDSC terms.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to
have certificates for your shares, please write to Investor Services.
Certificated shares can only be sold by returning the certificates to Investor
Services, along with a letter of instruction or a stock power and a signature
guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
FOREIGN CURRENCIES Purchases must be made in U.S. dollars. Purchases in foreign
currencies must be converted, which may result in a fee and delayed execution.
- -------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - after every transaction (except a dividend reinvestment) that affects your
account balance
- - after any changes of name or address of the registered owner(s)
- - every quarter during which there is a transaction, an automatic
investment/withdrawal plan activity or a dividend reinvestment
- - in all other circumstances, once a year
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The funds generally distribute most or all of their net earnings in
the form of dividends.Capital gains dividends, if any, are typically paid once
a year. Most of the funds do not typically pay income dividends, with the
exception of Disciplined Growth Fund and Regional Bank Fund, which typically
pay income dividends quarterly and semi-annually respectively.
YOUR ACCOUNT 23
<PAGE>
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, any dividends you receive from a fund, whether reinvested or taken
as cash, are considered taxable. Dividends from a fund's long-term capital gains
are taxable as capital gains; dividends from other sources are generally taxable
as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, your fund's transfer agent
may charge you $10 a year to maintain your account. You will not be charged a
CDSC if your account is closed for this reason, and your account will not be
closed if its drop in value is due to fund performance or the effects of sales
charges.
- -------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) Lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
- - Complete the appropriate parts of your Account Privileges Application.
- - If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Investor Services
Corporation" and deliver your check and application to your financial
services representative or Investor Services.
SYSTEMATIC WITHDRAWAL PLAN May be used for routine bill payment or periodic
withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they are
all on the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually, or in
certain selected months.
- - Fill out the relevant part of the Account Privileges Application. To add a
Systematic Withdrawal Plan to an existing account, contact your financial
representative or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, SARSEPs, TSAs, 401(k) plans, 403(b) plans, and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund with a low minimum investment of $250 or, for some group
plans, no minimum investment at all. To find out more, call Investor Services at
1-800-225-5291.
24 YOUR ACCOUNT
<PAGE>
FUND DETAILS
- -------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock growth fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a Board of Trustees or a Board of Directors, an
independent body which has ultimate responsibility for the fund's activities.
The board retains various companies to carry out the fund's operations,
including the investment adviser, custodian, transfer agent, and others (see
diagram). The board has the right, and the obligation, to terminate the fund's
relationship with any of these companies and to retain a different company if
the board believes that it is in the shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The boards of the John Hancock growth funds may include
individuals who are affiliated with the investment adviser. However, the
majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract, or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
[A flow chart that contains 9 rectangular-shaped boxes and illustrates the
hierarchy of how the funds are organized. Within the flowchart, there are 5
tiers. The tiers are connected by shaded lines.
Shareholders represent the first tier. There is a shaded vertical arrow on the
left-hand side of the page. The arrow has arrowheads on both ends and is
contained within two horizontal, shaded lines. This is meant to highlight
tiers two and three which focus on Distribution and Shareholder Services.
Financial Services Firms and their Representatives is shown on the second
tier. Principal Distributor and Transfer Agent are shown on the third tier.
A shaded vertical arrow on the right-hand side of the page denotes those
entities involved in Asset Management. The arrow has arrowheads on both ends
and is contained within two horizontal, shaded lines. This fourth tier
includes the Subadvisor, Investment Advisor and the Custodian.
The fifth tier contains the Trustees/Directors.]
FUND DETAILS 25
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 is estimated to be
0.01875% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may give preference to
brokerage firms that market the fund's shares or that are affiliated with John
Hancock Mutual Life Insurance Company, but only in cases where no other firm
appears to offer a better combination of quality execution (i.e., timeliness and
completeness) and favorable price.
<TABLE>
ADVERTISEMENT OF PERFORMANCE The funds may include figures for yield (where
appropriate) and total return in advertisements and other sales materials, as
follows:
<CAPTION>
===============================================================================
DEFINITIONS OF PERFORMANCE MEASURES
===============================================================================
Measure Definition
<S> <C>
Cumulative total Overall dollar or percentage change of a
return hypothetical investment over the stated time
period.
Average annual Cumulative total return divided by the
total return number of years in the period. The result is
an average and is not the same as the actual
year-to-year results.
Yield A measure of income, calculated by taking
the net investment income per share for a
30-day period, dividing it by the offering
price per share on the last day of the period
(if there is more than one offering price, the
highest price is used), and annualizing the
result. While this is the standard accounting
method for calculating yield, it does not
reflect the fund's actual bookkeeping; as a
result, the income reported or paid by the
fund may be different.
</TABLE>
All performance figures assume that dividends are reinvested, and show the
effect of all applicable sales charges. Class A performance figures generally
are calculated using the maximum sales charge. Because each share class has its
own sales charge structure, the classes have different performance results.
- -------------------------------------------------------------------------------
SALES COMPENSATION As part of their business strategies, the funds, along with
John Hancock Funds, pay compensation to financial services firms that sell the
funds' shares. These firms typically pass along a portion of this compensation
to your financial representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the fund in assets (the name refers to the
federal securities regulation that authorizes annual fees of this type). The
12b-1 fee rates vary by fund and by share class, according to Rule 12b-1 plans
adopted by the funds' respective boards. The sales charges and 12b-1 fees paid
by investors are detailed in the fund-by-fund information. The portions of these
expenses that are reallowed to financial services firms are shown below.
INITIAL COMPENSATION Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives
the first year's service fee at this time.
From time to time, as an additional incentive to these firms, John Hancock Funds
may increase the reallowance on Class A shares to as much as the entire
front-end sales charge.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears. Firms affiliated
with John Hancock, which include Tucker Anthony, Sutro & Company and John
Hancock Distributors, may receive an additional fee of up to 0.05% a year of
their total eligible net assets.
STATE REGISTRATION OF FUNDS You may only invest in or exchange into funds that
are registered in the state in which you live.
INVESTMENT GOALS Except for Discovery Fund, Special Opportunities Fund and
Emerging Growth Fund, each fund's investment goal is fundamental, meaning that
it may only be changed with shareholder approval.
26 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
CLASS A INVESTMENTS
==========================================================================================================================
MAXIMUM
SALES CHARGE REALLOWANCE MAXIMUM
PAID BY INVESTORS OR COMMISSION SERVICE FEE TOTAL COMPENSATION (1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Up to $49,999 5.00% 4.01% 0.25% 4.25%
- --------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
- --------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
- --------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
- --------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
- --------------------------------------------------------------------------------------------------------------------------
Regular investments of
$1 million or more
- --------------------------------------------------------------------------------------------------------------------------
First $1M - $4,999,999 -- 1.00% 0.25% 1.24%
- --------------------------------------------------------------------------------------------------------------------------
Next $1 - $5M above that -- 0.50% 0.25% 0.74%
- --------------------------------------------------------------------------------------------------------------------------
Next $1M and more above that -- 0.25% 0.25% 0.49%
- --------------------------------------------------------------------------------------------------------------------------
Waiver investments(2) -- 0.00% 0.25% 0.25%
==========================================================================================================================
CLASS B INVESTMENTS
==========================================================================================================================
MAXIMUM
REALLOWANCE MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION (1)
(% of offering price) (% of net investment) (% of offering price)
- --------------------------------------------------------------------------------------------------------------------------
All amounts 3.75% 0.25% 4.00%
- --------------------------------------------------------------------------------------------------------------------------
(1) Reallowance/commission percentages and service fee percentages are calculated from different amounts, and therefore
may not equal total compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions and trusts that take advantage of the sales
charge waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to fund commission payments when there is no initial sales charge.
</TABLE>
FUND DETAILS 27
<PAGE>
- -------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of each fund's
risk profile in the fund-by-fund information.
The funds are permitted to utilize -- within limits established by the Trustees
- -- certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent a fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following page are brief descriptions of these
securities and practices, along with the risks associated with them. The funds
follow certain policies which may reduce these risks.
As with any mutual fund, there is no guarantee that the performance of a John
Hancock growth fund will be positive over any period of time -- days, months, or
years. However, stock funds as a category have historically performed better
over the long term than bond or money market funds.
Below are definitions of the types of investment risk associated with higher
risk securities and practices:
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated leverage risk.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments, and may widen any losses.
INFORMATION RISK The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK The risk of losses attributable to the behavior of interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as borrowing) that
"leverage" small changes in the value of a given index or security into large
changes.
- - HEDGED When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position which
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.
- - SPECULATIVE To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative affect on fund management or
performance.
MANAGEMENT RISK The risk that strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk operates on all levels of a market; it may
affect a single issuer, industry, sector of the economy or the market as a
whole. Common to all stocks and bonds and the mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in other investments.
POLITICAL RISK The risk of losses directly attributable to government or
political actions of any sort. These actions may range from changes in tax or
trade statutes to expropriation, governmental collapse and war.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
28 FUND DETAILS
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
HIGHER RISK SECURITIES AND PRACTICES
====================================================================================================================================
This table shows each funs's investment limitations as
a percent of portfolio assets italic type if gross
assets, roman type if net assets). "NPL" indicates there
is no policy limit. In each case the principal types of DISICI-
risk are listed (see previous page for definitions). PLINED EMERGING REGIONAL SPECIAL SPECIAL
GROWTH DISCOVERY GROWTH GROWTH BANK EQUITIES OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS The purchase of a security that must
later be sold back to the issuer at the same price plus
interest. Credit risk. NPL NPL NPL NPL NPL NPL NPL
REVERSE REPURCHASE AGREEMENTS The sale of a security that
must later be bought back at the same price minus interest.
Leverage, credit risks. 33.3% 5% 33.3% 33.3% 33.3% 33.3% 33.3%
SECURITIES LENDING The lending of securities to financial
institutions, which provide cash or government securities as
collateral. Credit risk. 5% 33.3% 30% 33.3% 0% 33.3% 33.3%
SHORT SALES The selling of securities which have been
borrowed on the expectation that the market price will drop.
- - Hedged. Hedged leverage, market, correlation, liquidity,
opportunity risks. 0% NPL NPL NPL 0% NPL NPL
- - Speculative. Speculative leverage, market, liquidity risks. 0% 0% 0% 0% 0% 0% 5%
SHORT-TERM TRADING Selling a security soon after purchase.
A portfolio engaging in short-term trading will have higher
turnover and transaction expenses. Market risk. NPL NPL NPL NPL NPL NPL NPL
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Market, opportunity, leverage
risks. NPL NPL NPL NPL NPL NPL NPL
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITIES -- NON-DERIVATIVE
NON-INVESTMENT GRADE CONVERTIBLE SECURITIES Debt securities
that convert into equity securities at a future time.
Convertibles rated below BBB/Baa are considered "junk" bonds.
Credit, market, interest rate risks, liquidity, valuation and
information risks. 0% 0% 10% 5% 0% 0% 0%
FOREIGN EQUITIES
- - Stocks issued by foreign corporations. Market, currency,
information, natural event, political risks. 0% 25% NPL 0% 0% NPL NPL
- - American or European depository receipts, which are
dollar-denominated securities typically issued by American
or European banks and are based on ownership of securities
issued by a foreign corporation. Market, currency, information,
natural event, political risks. 10% 25% NPL 15% 0% NPL NPL
RESTRICTED AND ILLIQUID SECURITIES Securities not traded on the
open market. May include illiquid Rule 144A securities.
Liquidity, market risks. 15% 15% 10% 15% 10% 15% 15%
- -----------------------------------------------------------------------------------------------------------------------------------
SECURITIES -- DERIVATIVE
FINANCIAL FUTURES AND OPTIONS; SECURITIES AND INDEX OPTIONS
Contracts involving the right or obligation to deliver or
receive assets or money depending on the performance of one or
more assets or an economic index.
- - Futures and related options. Market, hedged or speculative
leverage, correlation, liquidity, opportunity risks. NPL NPL NPL NPL NPL NPL NPL
- - Options on securities and indices. Market, hedged or
speculative leverage, correlation, liquidity, opportunity
risks. 5% 5%(1) 10%(1) NPL 5% NPL NPL
CURRENCY CONTRACTS Contracts involving the right or obligation
to buy or sell a given amount of foreign currency at a specified
price and future date.
- - Hedged. Currency, hedged leverage, correlation, liquidity,
opportunity risks. 0% 25% NPL NPL 0% NPL NPL
- - Speculative. Currency, speculative leverage, liquidity risks. 0% 0% 0% 0% 0% 0% 0%
(1) Applies to purchases only.
</TABLE>
FUND DETAILS 29
<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
Growth Funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from the portfolio manager, and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/semi-annual report is included in the SAI.
The Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated by reference into this prospectus (is
legally part of this prospectus).
To request a free copy of the current annual/semi-annual report or the SAI,
please write or call:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, MA 02205-9116
Telephone: 1-800-225-5291
TDD: 1-800-544-6713
Email: http://jhancockfunds.com
[LOGO] JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[LOGO]
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JOHN HANCOCK SPECIAL EQUITIES FUND
CLASS A, CLASS B and CLASS C SHARES
Statement of Additional Information
July 1, 1996
This Statement of Additional Information provides information about John
Hancock Special Equities Fund (the "Fund") in addition to the information that
is contained in the combined Growth Funds' Prospectus for Class A and Class B
Shares dated July 1, 1996 and the Fund's Class C Shares Prospectus dated March
1, 1996 (together, the "Prospectuses").
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectuses, copies of which can be obtained free
of charge by writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund 2
Investment Objective and Policies 2
Investment Restrictions 15
Those Responsible for Management 18
Investment Advisory and Other Services 23
Distribution Contract 25
Net Asset Value 27
Initial Sales Charge on Class A Shares 28
Deferred Sales Charge on Class B Shares 29
Special Redemptions 30
Additional Services and Programs 31
Description of the Fund's Shares 32
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Tax Status 33
Calculation of Performance 36
Brokerage Allocation 38
Transfer Agent Services 39
Custody of Portfolio 39
Independent Auditors 39
Financial Statements 39
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ORGANIZATION OF THE FUND
John Hancock Special Equities Fund (the "Fund") is a diversified open-end
management investment company organized as a Massachusetts business trust under
the laws of The Commonwealth of Massachusetts. The Fund was organized in 1984 by
John Hancock Advisers, Inc. (the "Adviser"). The Adviser is an indirect
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (the "Life
Company"), a Massachusetts life insurance company chartered in 1862, with
national headquarters at John Hancock Place, Boston, Massachusetts. On March 1,
1991, the Fund changed its name from "John Hancock Special Equities Trust."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek long-term growth of capital by
investing in a diversified portfolio of equity securities consisting primarily
of emerging growth companies and of companies in "special situations,"
collectively referred to as "Special Equities." For a discussion of the Fund's
investment objective and policies, investors should refer to the description in
the Prospectuses. There is no assurance that the Fund will achieve its
investment objective. Although the Fund may receive current income from
dividends, interest and other sources, income is an incidental consideration to
seeking capital growth.
The Fund will invest at least 65% of its total assets in Special Equities.
The balance of the Fund's portfolio may be invested in:
- equity securities of established companies believed by the Adviser to
offer growth potential.
- cash or short-term investment grade securities. If in the opinion of the
Adviser, prevailing economic or market conditions require a temporary defensive
posture, the Fund may invest more than 35% of its total assets in cash and these
securities.
Special Equities, particularly equity securities of emerging growth
companies, may have limited marketability due to thin markets in which the
volume of trading for such securities is low or due to the fact that there are
only a few market makers for such securities. Such limited marketability may
make it difficult for the Fund to dispose of a large block of such securities.
To satisfy redemption requests or other needs for cash, the Fund may have to
sell these securities prematurely or at a discount from market prices or to make
many small and more costly sales over a lengthy period of time. Investments by
the Fund may be in existing as well as new issues of securities and may be
subject to wide fluctuations in market value. The Fund will not concentrate its
investments in any particular industry.
The Fund anticipates that its investments generally will be in securities
of companies which it considers to reflect the following characteristics:
- Share prices which do not appear to take into account adequately the
underlying value of the company's assets or which appear to reflect substantial
undervaluation due to factors such as prospective reversal of an unfavorable
industry trend, lack of investor recognition or disappointing earnings believed
to be temporary in comparison with previous earnings trends;
- Growth potential due to technological advances or discoveries, new
methods in marketing or production, the offering of new or unique products or
services, changes in demand for products or services or other significant new
developments; or
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- Existing, contemplated or possible changes in management or management
policies, corporate structure or control, capitalization or the existence or
possibility of some other circumstances which could be expected to have a
favorable impact on earnings or market price of such company's shares.
The Fund is intended to provide an opportunity for investors who are not
ordinarily in a position to perform the specialized type of research or analysis
involved in investing in Special Equities and who may not be able to invest
sufficient assets in such companies to provide wide diversification.
The emerging growth companies whose securities are selected for the Fund's
portfolio will generally have annual gross sales of greater than $100 million,
although companies with smaller sales which, in the opinion of the Adviser, have
significant growth potential may also be selected. Thus, there is no requirement
that a company have annual sales of a pre-selected minimum amount before the
Fund will invest in its securities. In many cases, a company may not yet be
profitable when the Fund invests in its securities.
The Fund seeks emerging growth companies that either occupy a dominant
position in an emerging industry or have a significant and growing market share
in a large, fragmented industry. The Fund seeks to invest in those companies
with potential for high growth, stable earnings, ability to self-finance, a
position of industry leadership, and strong, visionary management. The Adviser
believes that, while these companies present above-average risks, properly
selected emerging growth companies have the potential to increase their earnings
at rates substantially in excess of the growth of earnings of other companies.
This increase in earnings is likely to enhance the value of an emerging growth
company's equity securities.
The Fund may invest in equity securities of companies in special situations
that the Adviser believes present opportunities for capital growth. A company is
in a "special situation" when an unusual and possibly non-repetitive development
is anticipated or is taking place. Since every special situation involves, to
some extent, a break with past experience, the uncertainties in the appraisal of
the future value of the company's equity securities and risk of possible decline
in value of the Fund's investment are significant.
The Fund may effect portfolio transactions without regard to holding
periods, if the Adviser judges these transactions to be advisable in light of a
change in circumstances of a particular company or within a particular industry
or in general market, economic or financial conditions. The Fund does not
generally consider the length of time it has held a particular security in
making its investment decisions. Portfolio turnover rates of the Fund for recent
years are shown in the Prospectuses under "The Fund's Financial Highlights."
The Fund is not intended as a complete investment program. The Fund's
shares are suitable for investment by persons who can invest without concern for
current income, who are in a financial position to assume above-average
investment risk, and who are prepared to experience above-average fluctuations
in net asset value over the intermediate and long term. Emerging growth
companies and companies in special situations will usually not pay dividends.
Generally, emerging growth companies will have high price/earnings ratios
in relation to the market. A high price/earnings ratio generally indicates that
the market value of a security is especially sensitive to developments that
could affect the company's potential for future earnings. These companies may
have limited product lines, market or financial resources, or they may be
dependent upon a limited management group. Emerging growth companies may have
operating histories of fewer than three years.
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Full development of the potential of emerging growth companies frequently
takes time. For this reason, the Fund should be considered a long-term
investment and not a vehicle for seeking short-term profits and income.
The securities in which the Fund invests will often be traded in the
over-the-counter market or on a regional securities exchange and may not be
traded every day or in the volume typical of trading on a national securities
exchange. They may be subject to wide fluctuations in market value. The trading
market for any given security may be sufficiently thin as to make it difficult
for the Fund to dispose of a substantial block of such securities. The
disposition by the Fund of portfolio securities to meet redemptions or otherwise
may require the Fund to sell these securities at a discount from market prices
or during periods when, in the Adviser's judgment, such disposition is not
desirable or to make many small sales over a lengthy period of time.
There may be additional risks inherent in the Fund's investment objective
and policies. For example, if the Fund were to assume substantial positions in
particular securities with limited trading markets, such positions could have an
adverse effect upon the liquidity and marketability of such securities and the
Fund may not be able to dispose of its holdings in these securities at then
current market prices. Circumstances could also exist (to satisfy redemption
requests, for example) when portfolio securities could have to be sold by the
Fund at times which otherwise would be considered disadvantageous so that the
Fund would receive lower proceeds from such sales than it might otherwise have
expected to realize. Investments in securities which are "restricted" in the
hands of the Fund (see the discussion below under the caption "Investment
Restrictions") could involve added expense to the Fund should the Fund be
required to bear registration costs and could involve delays in disposing of
such securities. Such delays could have an adverse effect upon the price and
timing of sales of such securities and the liquidity of the Fund with respect to
redemptions.
The following is a description of the non-equity securities in which the
Fund may invest for defensive purposes or to provide for anticipated redemptions
of Fund shares:
Corporate debt securities are those corporate debt securities issued by
United States corporations payable in United States dollars. The Fund will only
invest in corporate debt securities which have, at the time of purchase, a
rating within the four highest grades as determined by Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard & Poor's Rating Group
("S&P") (AAA, AA, A or BBB).
Money market instruments are either commercial paper (which refers to
promissory notes issued by corporations to finance their short-term credit
needs) or certificates of deposit (which are certificates issued against funds
deposited in a bank). The Fund will invest in commercial paper rated Prime-1 by
Moody's or A-1 by S&P. These commercial paper ratings are the highest assigned
by the two rating agencies. It will also invest in certificates of deposit which
are issued by U.S. banks having assets of $1 billion or more and which mature in
one year or less from the date of acquisition.
Government securities include Treasury Notes, Bonds and Bills which are
direct obligations of the U.S. Government backed by the full faith and credit of
the United States, and securities issued by agencies and instrumentalities of
the U.S. Government, which may be guaranteed by the United States Treasury or
supported by the issuer's right to borrow from the Treasury and may be backed by
the credit of the federal agency or instrumentality itself.
Debt Securities and Money Market Instruments. The Fund may purchase or sell debt
securities (including U.S. corporate bonds and notes, and obligations issued or
guaranteed by the U.S. or foreign governments or their agencies or
instrumentalities) and money market instruments
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(including short-term debt obligations payable in U.S. dollars issued by certain
banks, savings and loan associations and corporations) without regard to the
length of time the security has been held to take advantage of short-term
differentials in yields. The Fund will only purchase securities meeting the
requirements, including rating qualifications, stated in the Prospectuses. See
the discussion under "Ratings" below. General changes in prevailing interest
rates will affect the value of the debt securities and money market instruments
held by the Fund, the value of which will vary inversely to the changes in such
rates. For example, if interest rates rise after a security is purchased, the
value of the security would decline.
Ratings. As described in the Prospectuses, the Fund's investments in corporate
debt must be rated Baa or better by Moody's or BBB or better by S&P.
Moody's describes its ratings for corporate bonds as follows:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment at some time in the future.
Bonds which are rated Baa are considered medium grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
S&P describes its ratings for corporate bonds as follows:
AAA. Debt rated "AAA" has the highest rating by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A. Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated "BBB" is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
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Commercial Paper. As described in the Fund's Prospectuses, the Fund may invest
in commercial paper which is rated A-1 by S&P or P-1 by Moody's.
Moody's ratings for commercial paper are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's highest commercial paper rating category is as
follows:
P-1. "Prime-1" indicates the highest quality repayment capacity of the
rated issues.
S&P commercial paper ratings are current assessments of the likelihood of timely
payment of debts having an original maturity of no more than 365 days. S&P's
highest commercial paper rating category is as follows:
A-1. This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
Investment in Foreign Securities. The Fund may invest in the securities of
foreign issuers, including securities in the form of sponsored or unsponsored
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or
other securities convertible into securities of foreign issuers. ADRs are
receipts typically issued by an American bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar ownership arrangement.
Issuers of unsponsored ADRs are not contractually obligated to disclose material
information, including financial information, in the United States. Generally,
ADRs are designed for use in the United States securities markets and EDRs are
designed for use in European securities markets.
Investments in foreign securities may involve a greater degree of risk than
those in domestic securities. There is generally less publicly available
information about foreign companies and other issuers comparable to reports and
ratings that are published about issuers in the United States. Foreign issuers
are also generally not subject to uniform accounting and auditing and financial
reporting standards, practices and requirements comparable to those applicable
to United States issuers. Also, foreign regulation may differ considerably from
domestic regulation of stock exchanges, brokers and securities.
Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly. Therefore, the Fund's investments
on foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
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With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position.
The dividends and interest payable on certain of the Fund's foreign portfolio
securities, as well as, in some cases, capital gains, may be subject to foreign
withholding or other foreign taxes, thus reducing the net amount of income or
gains available for distribution to the Fund's shareholders.
Repurchase Agreements. A repurchase agreement is a contract under which the Fund
acquires a security for a relatively short period (usually not more than 7 days)
subject to the obligation of the seller to repurchase and the Fund to resell
such security at a fixed time and price (representing the Fund's cost plus
interest). The Fund will enter into repurchase agreements only with member banks
of the Federal Reserve System and with "primary dealers" in U.S. Government
securities. The Adviser will continuously monitor the creditworthiness of the
parties with whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income and lack of
access to income during this period and the expense of enforcing its rights.
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank 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.
Use of reverse repurchase agreements is an investment technique that is intended
to increase income. Thus, 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 will also continue to be
subject to the risk of a decline in the market value of the securities sold
under the agreements because it will reacquire those securities upon effecting
their repurchase. To minimize various risks associated with reverse repurchase
agreements, the Fund will 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. In addition, the Fund will not enter
into reverse repurchase agreements and other borrowings exceeding in the
aggregate 33 1/3% of the market value of its total assets. The Fund will enter
into reverse repurchase agreements only with selected registered broker/dealers
or with federally insured banks or savings and loan associations which are
approved in advance as being creditworthy by the
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Board of Trustees. Under procedures established by the Board of Trustees, the
Adviser will monitor the creditworthiness of the firms involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including securities offered and sold to "qualified institutional buyers" under
Rule 144A under the 1933 Act. However, the Fund will not invest more than 15% of
its assets in illiquid investments, which include repurchase agreements maturing
in more than seven days, securities that are not readily marketable and
restricted securities. However, if the Board of Trustees determines, based upon
a continuing review of the trading markets for specific Rule 144A securities,
that they are liquid, then such securities may be purchased without regard to
the 15% limit. The Trustees may adopt guidelines and delegate to the Adviser the
daily function of determining the monitoring and liquidity of restricted
securities. The Trustees, however, will retain sufficient oversight and be
ultimately responsible for the determinations. The Trustees will carefully
monitor the Fund's investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in the Fund if qualified institutional buyers become for a time
uninterested in purchasing these restricted securities.
The Fund may acquire other restricted securities including securities for which
market quotations are not readily available. These securities may be sold only
in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the Securities Act of 1933.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair market value as determined in good faith by the Fund's
Trustees. If through the appreciation of restricted securities or the
depreciation of unrestricted securities, the Fund should be in a position where
more than 15% of the value of its assets is invested in illiquid securities
(including repurchase agreements which mature in more than seven days and
options which are traded over-the-counter and their underlying securities), the
Fund will bring its holdings of illiquid securities below the 15% limitation.
Foreign Currency Transactions. Due to its investments in foreign securities, the
Fund may hold a portion of its assets in foreign currencies. The foreign
currency transactions of the Fund may be conducted on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in the foreign
exchange market. The Fund may also deal in forward foreign currency contracts
involving currencies of the different countries in which it will invest as a
hedge against possible variations in the foreign exchange rate between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date and price set at the time
of the contract. The Fund's dealings in forward foreign currency contracts will
be limited to hedging either specific transactions or portfolio positions. The
Fund will not attempt to hedge all of its foreign portfolio positions. The Fund
will not engage in speculative forward currency transactions.
If the Fund enters into a forward contract to purchase foreign currency, its
custodian bank will segregate cash or liquid high-grade liquid debt securities
(i.e. securities rated in one of the top three rating categories by Moody's or S
& P in a separate account of the Fund in an amount equal to the value of the
Fund's total assets committed to the consummation of such forward contract.
Those assets will be valued at market daily and if the value of the assets in
the separate account declines, additional cash or liquid assets will be placed
in the account so that the value of the account will equal the amount of the
Fund's commitment with respect to such contracts.
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Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as that currency involved, the length of the contract period and
the market conditions then prevailing. Since transactions in foreign currency
are usually conducted on a principal basis, no fees or commissions are involved.
Financial Futures Contracts. The Fund may hedge its portfolio by selling or
purchasing financial futures contracts as an offset against the effect of
expected changes in interest rates or in security or foreign currency values.
Although other techniques could be used to reduce the Fund's exposure to
interest rate, securities market and currency fluctuations, the Fund may be able
to hedge its exposure more effectively and at a lower cost by using financial
futures contracts. The Fund will enter into financial futures contracts for
hedging purposes and for speculative purposes to the extent permitted by
regulations of the Commodity Futures Trading Commission ("CFTC").
Financial futures contracts have been designed by boards of trade which have
been designated "contract markets" by the CFTC. Futures contracts are traded on
these markets in a manner that is similar to the way a stock is traded on a
stock exchange. The boards of trade, through their clearing corporations,
guarantee that the contracts will be performed. It is expected that if new types
of financial futures contracts are developed and traded the Fund may engage in
transactions in such contracts.
Although financial futures contracts by their terms call for actual delivery or
acceptance of financial instruments, in most cases the contracts are closed out
prior to delivery by offsetting purchases or sales of matching financial futures
contracts (same exchange, underlying security or currency and delivery month).
If the offsetting purchase price is less than the Fund's original sale price,
the Fund realizes a gain, or if it is more, the Fund realizes a loss.
Conversely, if the offsetting sale price is more than the Fund's original
purchase price, the Fund realizes a gain, or if it is less, the Fund realizes a
loss. The Fund's transaction costs must also be included in these calculations.
The Fund will pay a commission in connection with each purchase or sale of
financial futures contracts, including a closing transaction. For a discussion
of the Federal income tax considerations of trading in futures contracts, see
the information under the caption "Tax Status" below.
At the time the Fund enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or U.S. Government
securities, known as "initial margin." The margin required for a financial
futures contract is set by the board of trade or exchange on which the contract
is traded and may be modified during the term of the contract. The initial
margin is in the nature of a performance bond or good faith deposit on the
financial futures contract which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been satisfied. The Fund
expects to earn interest income on its initial margin deposits. Each day, the
futures contract is valued at the official settlement price of the board of
trade or exchange on which it is traded. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. This process is known
as "mark to market." Variation margin does not represent a borrowing or lending
by the Fund but is instead a settlement between the Fund and the broker of the
amount one would owe the other if the financial futures contract expired. In
computing net asset value, the Fund will mark to the market its open financial
futures positions.
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Successful hedging depends on the extent of correlation between the market for
the underlying securities and the futures contract market for those securities
or currency. There are several factors that will probably prevent this
correlation from being perfect, and even a correct forecast of general interest
rate, securities market or currency trades may not result in a successful
hedging transaction. There are significant differences between the securities or
currency markets and the futures markets which could create an imperfect
correlation between the markets and which could affect the success of a given
hedge. The degree of imperfection of correlation depends on circumstances such
as: variations in speculative market demand for financial futures and debt and
equity securities, including technical influences in futures trading and
differences between the financial instruments being hedged and the instruments
underlying the standard financial futures contracts available for trading in
such respects as interest rate levels, maturities and creditworthiness of
issuers. The degree of imperfection may be increased where the underlying debt
securities are lower-rated, and, thus, subject to greater fluctuation in price
than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate, securities market or
currency trends. The Fund will bear the risk that the price of the securities
being hedged will not move in complete correlation with the price of the futures
contracts used as a hedging instrument. Although the Adviser believes that the
use of financial futures contracts will benefit the Fund, an incorrect
prediction could result in a loss on both the hedged securities or currency in
the Fund's portfolio and the futures position so that the Fund's return might
have been better had hedging not been attempted. However, in the absence of the
ability to hedge, the Adviser might have taken portfolio actions in anticipation
of the same market movements with similar investment results but, presumably, at
greater transaction costs. The low margin deposits required for futures
transactions permit an extremely high degree of leverage. A relatively small
movement in the price of instruments underlying a futures contract may result in
losses or gains in excess of the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or down
from the previous day's settlement price, at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.
Finally, although the Fund engages in financial futures transactions only on
boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a particular
futures contract at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking delivery. In the
event participants decide to make or take delivery, liquidity in the market
could be reduced. In addition, the Fund could be prevented from executing a buy
or sell order at a specified price or closing out a position due to limits on
open positions or daily price fluctuation limits imposed by the exchanges or
boards of trade. If the Fund cannot close out a position, it will be required to
continue to meet margin requirements until the position is closed.
The Fund may purchase and write call and put options on financial futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the period of the option. Upon
exercise, the writer of the option delivers the futures contract to the holder
at the
11
<PAGE>
exercise price. The Fund would be required to deposit with its custodian initial
and variation margin with respect to put and call options on futures contracts
written by it.
Options on futures contracts involve risks similar to the risks relating to
transactions in financial futures contracts. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.
Other Considerations. The Fund will engage in futures and related options
transactions only for bona fide hedging or speculative purposes to the extent
permitted by CFTC regulations. The Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes --
i.e., futures contracts will be sold to protect against a decline in the price
of securities or the currency in which they are denominated that the Fund owns,
or futures contracts will be purchased to protect the Fund against an increase
in the price of securities or the currency in which they are denominated it
intends to purchase. As evidence of this hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities or assets denominated in the related currency in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the aggregate initial margin and premiums required to establish
speculative positions in futures contracts and options on futures will not
exceed 5 percent of the net asset value of the Fund's portfolio, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. The
Fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its
qualification as a regulated investment company for Federal income tax purposes.
When the Fund purchases a futures contract, writes a put option thereon or
purchases a call option thereon, an amount of cash or liquid, high grade debt
securities (i.e., securities rated in one of the top three ratings categories by
Moody's or S&P) will be deposited in a segregated account with the Fund's
custodian which is equal to the underlying value of the futures contract reduced
by the amount of initial and variation margin held in the account of its broker.
Options Transactions. The Fund may write (sell) listed and over-the-counter
covered call options and covered put options on securities in which it may
invest, and on indices composed of securities in which it may invest. In
addition, the Fund may purchase listed and over-the-counter call and put options
on these securities and indices. The extent to which covered options will be
used by the Fund will depend upon market conditions and the availability of
alternative strategies. The Fund may write listed covered and over-the-counter
call and put options on up to 100% of its net assets.
The Fund will write listed and over-the-counter call options only if they are
"covered", which means that the Fund owns or has the immediate right to acquire
the securities underlying the options without additional cash consideration upon
conversion or exchange of other securities held in its portfolio. A call option
written by the Fund will also be "covered" if the Fund holds on a
share-for-share basis a covering call on the same securities where (i) the
exercise price of the covering call held is equal to or less than the exercise
price of the call written or the difference is
12
<PAGE>
maintained by the Fund in cash or liquid, high grade debt obligations in a
segregated account with the Fund's custodian, and (ii) the covering call expires
at the same time as the call written. If a covered call option is not exercised,
the Fund would keep both the option premium and the underlying security. If the
covered call option written by the Fund is exercised and the exercise price,
less the transaction costs, exceeds the cost of the underlying security, the
Fund would realize a gain in addition to the amount of the option premium it
received. If the exercise price, less transaction costs, is less than the cost
of the underlying security, the Fund's loss would be reduced by the amount of
the option premium.
The Fund will write a covered put option only with respect to securities it
intends to acquire for the Fund's portfolio and will maintain in a segregated
account with the Fund's custodian cash or liquid, high grade debt securities
with a value equal to the price at which the underlying security may be sold to
the Fund in the event the put option is exercised by the purchaser. The Fund can
also write a "covered" put option by purchasing on a share-for-share basis a put
on the same security as the put written by the Fund if the exercise price of the
covering put held is equal to or greater than the exercise price of the put
written and the covering put expires at the same time as or later than the put
written.
In writing listed and over-the-counter covered put options on securities, the
Fund would earn income from the premiums received. If a covered put option is
not exercised, the Fund would keep the option premium and the assets maintained
to cover the option. If the option is exercised and the exercise price,
including transaction costs, exceeds the market price of the underlying
security, the Fund would realize a loss, but the amount of the loss would be
reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its obligation
prior to exercise, it may effect a "closing purchase transaction". This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the Fund's position will be offset
by the Options Clearing Corporation. The Fund may not effect a closing purchase
transaction after it has been notified of the exercise of an option. There is no
guarantee that a closing purchase transaction can be effected. Although the Fund
will generally write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange or board of trade will exist for any particular option or at any
particular time, and for some options no secondary market on an exchange may
exist.
In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. In the case of a
written put option, it will permit the Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will effect a
closing transaction prior to or concurrent with the sale of the security.
The Fund will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option.
The Fund will realize a loss from a closing transaction if the cost of the
closing transaction is more than the premium received for writing the option.
However, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation of the underlying security owned by the Fund.
The Fund may engage in options transactions on exchanges and in the
over-the-counter markets. In general, exchange-traded options are third-party
contracts (i.e., performance of the parties'
13
<PAGE>
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. Over-the-counter ("OTC")
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. The Fund will acquire only those OTC options for which the
Adviser believes the Fund can receive on each business day at least two separate
bids or offers (one of which will be from an entity other than a party to the
option) or those OTC options valued by an independent pricing service. The Fund
will write and purchase OTC options only with member banks of the Federal
Reserve System and primary dealers in U.S. Government securities or their
affiliates. The Securities and Exchange Commission (the "SEC") takes the
position that OTC options are illiquid securities subject to the Fund's 15%
limitation on illiquid securities. The SEC allows the Fund to exclude from the
15% limitation on illiquid securities a portion of the value of the OTC options
written by the Fund, provided that certain conditions are met. First, the other
party to the OTC options has to be a primary U.S. Government securities dealer
designated as such by the Federal Reserve Bank. Second, the Fund has to have an
absolute contractual right to repurchase the OTC options at a formula price. If
the above conditions are met, the Fund must treat as illiquid only that portion
of the OTC option's value (and the value of its underlying securities) which is
equal to the formula price for repurchasing the OTC option, less the OTC
option's intrinsic value.
While transactions in options (including options on financial futures contracts)
may reduce certain risks, they may entail other risks. Certain risks arise due
to the imperfect correlations between movements in the price of the contracts,
and movements in the prices of the securities or currency that underly the
contract. In addition, the Fund could be prevented from opening, or realizing
the benefits of closing out, an options position because of position limits on
daily price fluctuations imposed by an exchange. There can be no assurance that
a liquid secondary market will exist for any option. The Fund's ability to hedge
successfully will depend on the Adviser's ability to predict accurately the
future direction of securities and currency markets and interest rates. The
potential loss from writing options is potentially unlimited and may exceed the
amount of the premium received.
Short Sales. The Fund may engage in short sales to attempt to limit its exposure
to a possible market decline in the value of its portfolio securities through
short sales of securities which the Adviser believes possess volatility
characteristics similar to those being hedged. To effect such a transaction, the
Fund must borrow the security sold short to make delivery to the buyer. The Fund
then is obligated to replace the security borrowed by purchasing it at the
market price at the time of replacement. Until the security is replaced, the
Fund is required to pay to the lender any accrued interest and may be required
to pay a premium.
The Fund will realize a gain if the security declines in price between the date
of the short sale and the date on which the Fund replaces the borrowed security.
On the other hand, the Fund will incur a loss as a result of the short sale if
the price of security increases between those dates. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of any premium
or interest the Fund may be required to pay in connection with a short sale. The
successful use of short selling as a hedging device may be adversely affected by
imperfect correlation between movements in the price of the security sold short
and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if the Fund engages in
short sales of the type referred to in non-fundamental Investment Restriction
(b) below, it must put in a segregated account (not with the broker) an amount
of cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) any cash or U.S. Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the borrowed
security, it must daily maintain the segregated
14
<PAGE>
account at such a level that the amount deposited in it plus the amount
deposited with the broker as collateral will equal the current market value of
the securities sold short.
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to the Fund and may result in gains from the sale
of securities deemed to have been held for less than three months, which gains
must be less than 30% of the Fund's gross income in order for the Fund to
qualify as a regulated investment company under the Code.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value to the Fund's
commitment. These assets will be valued daily at market, and additional cash or
securities will be segregated in a separate account to the extent that the total
value of the assets in the account declines below the amount of the when-issued
commitments. Alternatively, the Fund may enter into offsetting contracts for the
forward sale of other securities that it owns.
Short Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income. Short
term trading may have the effect of increasing portfolio turnover rate. A high
rate of portfolio turnover (100% or greater) involves corresponding higher
transaction expenses and may make it more difficult for a fund to qualify as a
regulated investment company for federal income tax purposes.
The Fund's rate of portfolio turnover cannot be predicted with assurance and may
vary from year to year. Future turnover rates will be governed by the
availability of investment opportunities, the desirability of continuing to hold
a portfolio security and cash requirements for redemptions of Fund shares. The
Fund's portfolio turnover rates for the years ended October 31, 1995 and 1994
were 82% and 66%, respectively.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to return
the securities involved in the transaction. As a result, the Fund may incur a
loss or, in the event of the borrower's bankruptcy, the Fund may be delayed in
or prevented from liquidating the
15
<PAGE>
collateral. It is a fundamental policy of the Fund not to lend portfolio
securities having a total value exceeding 33 1/3% of its total assets.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without approval of a majority of the Fund's outstanding voting
securities which, as used in the Prospectuses and this Statement of Additional
Information, means approval by the lesser of (1) 67% or more of the Fund's
shares represented at a meeting if at least 50% of Fund's outstanding shares are
present in person or by proxy at the meeting or (2) more than 50% of the Fund's
outstanding shares.
The Fund observes the following fundamental restrictions:
The Fund may not:
(1) Issue senior securities, except as permitted by paragraphs (2), (6) and
(7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, and forward
foreign exchange contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policy, and the
pledge, mortgage or hypothecation of the Fund's assets within the meaning
of paragraph (3) below, are not deemed to be senior securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 1/3% of the
Fund's total assets (including the amount borrowed) taken at market value.
The Fund will not use leverage to attempt to increase income. The Fund will
not purchase securities while outstanding borrowings exceed 5% of the
Fund's total assets.
(3) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such
pledging, mortgaging or hypothecating does not exceed 33 1/3% of the Fund's
total assets taken at market value.
(4) Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
(5) Purchase or sell real estate or any interest therein, except that the
Fund may invest in securities of corporate or governmental entities secured
by real estate or marketable interests therein or securities issued by
companies that invest in real estate or interests therein.
(6) Make loans, except that the Fund may lend portfolio securities in
accordance with the Fund's investment policies. The Fund does not, for this
purpose, consider repurchase agreements, the purchase of all or a portion
of an issue of publicly distributed bonds, bank loan participation
agreements, bank certificates of deposit, bankers' acceptances, debentures
or other securities, whether or not the purchase is made upon the original
issuance of the securities, to be the making of a loan.
(7) Invest in commodities or in commodity contracts or in puts, calls, or
combinations of both, except options on securities and securities indices,
futures contracts on securities and securities indices and options on such
futures, forward foreign exchange contracts, forward
16
<PAGE>
commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.
(8) Purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after such purchase, the
value of its investments in such industry would exceed 25% of its total
assets taken at market value at the time of each investment. This
limitation does not apply to investments in obligations of the U.S.
Government or any of its agencies or instrumentalities.
(9) Purchase securities of an issuer (other than the U.S. Government, its
agencies or instrumentalities), if
(i) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities of
such issuer, or
(ii) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund.
In connection with the lending of portfolio securities under item (6)
above, such loans must at all times be fully collateralized and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Securities used as collateral must be marked to market daily.
Non-Fundamental Investment Restrictions. The following restrictions are
designated as nonfundamental and may be changed by the Board of Trustees without
shareholder approval.
The Fund may not:
(a) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of
the Adviser to save commissions or to average prices among them is not
deemed to result in a joint securities trading account.
(b) Purchase securities on margin or make short sales, except in connection
with arbitrage transactions, or unless by virtue of its ownership of other
securities, the Fund has the right to obtain securities equivalent in kind
and amount to the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities and in connection with transactions involving forward
foreign currency exchange contracts.
(c) Knowingly purchase or retain securities of an issuer if one or more of
the Trustees or officers of the Fund or directors or officers of the
Adviser or any investment management subsidiary of the Adviser individually
owns beneficially more than 0.5%, and together own beneficially more than
5%, of the securities of such issuer.
(d) Purchase a security if, as a result, (i) more than 10% of the Fund's
assets would be invested in securities of other investment companies, (ii)
such purchase would result in more than 3% of the total outstanding voting
securities of any one such investment company being held by the Fund, or
(iii) more than 5% of the Fund's assets would be invested in any one such
investment company.
(e) Purchase securities of any issuer which, together with any predecessor,
has a record of less than three years' continuous operations prior to the
purchase if such purchase would
17
<PAGE>
cause investments of the Fund in all such issuers to exceed 5% of the value
of the total assets of the Fund.
(f) Invest for the purpose of exercising control over or management of any
company.
(g) Purchase warrants of any issuer, if, as a result of such purchases,
more than 2% of the value of the Fund's total assets would be invested in
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange or more than 5% of the value of the total assets of
the Fund would be invested in warrants generally, whether or not so listed.
For these purposes, warrants are to be valued at the lesser of cost or
market, but warrants acquired by the Fund in units with or attached to debt
securities shall be deemed to be without value.
(h) Purchase interests in oil, gas or other mineral leases or exploration
programs; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil,
gas, or other minerals.
(i) Invest more than (1) 10% of its total assets in securities which are
restricted under the Securities Act of 1933 (the "1933 Act") (excluding
securities eligible for resale pursuant to Rule 144A under the 1933 Act) or
(2) 15% of its total assets in such restricted securities (including
securities eligible for resale pursuant to Rule 144A).
(j) Purchase interests in real estate limited partnerships.
(k) Purchase any security, including any repurchase agreement maturing in
more than seven days, which is not readily marketable, if more than 15% of
the net assets of the Fund, taken at market value, would be invested in
such securities. (The staff of the Securities and Exchange Commission
considers over-the-counter options to be illiquid securities subject to the
15% limit.)
(l) The Fund may not purchase securities of any open-end investment company
except when such purchase is part of a plan of merger, consolidation,
reorganization or purchase of substantially all of the assets of any other
investment company.
(m) 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.
In order to permit the sale of shares of the Fund in certain states, the
Trustees may, in their sole discretion, adopt restrictions or investment
policies more restrictive than those described above. Should the Trustees
determine that any such more restrictive policy is no longer in the best
interests of the Fund and its shareholders, the Fund may cease offering shares
in the state involved and the Trustees may revoke such restrictive policy.
Moreover, if the states involved no longer require any such restrictive policy,
the Trustees may, at their sole discretion, revoke such policy. The Fund has
agreed with a state securities administrator that it will not purchase
securities of any open-end investment company except when such purchase is part
of a plan of merger, consolidation, reorganization or purchase of substantially
all of the assets of any other investment company.
18
<PAGE>
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values or the total costs of the Fund's
assets will not be considered a violation of the restriction.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees, who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Fund are
also officers and directors of the Adviser or officers and Directors of the
Fund's principal distributor, John Hancock Funds, Inc. ("John Hancock Funds").
The following table sets forth the principal occupation or employment of the
Trustees and principal officers of the Fund during the past five years:
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Date of Birth With Registrants During Past 5 Years
- ----------------- ---------------- -------------------
<S> <C> <C>
*Edward J. Boudreau, Jr. Chairman (3,4) Chairman and Chief Executive
101 Huntington Avenue Officer, the Adviser and The
Boston, Massachusetts Berkeley Financial Group ("The
October 1944 Berkeley Group"); Chairman, NM
Capital Management, Inc. ("NM
Capital"); John Hancock Advisers
International Limited; ("Advisers
International"); John Hancock
Funds, Inc., ("John Hancock
Funds"); John Hancock Investor
Services Corporation ("Investor
Services"), Transamerica Fund
Management Company ("TFMC") and
Sovereign Asset Management
Corporation ("SAMCorp");
(hereinafter the Adviser, the
Berkeley Group, NM Capital,
Advisers International, John
Hancock Funds, Investor Services
and SAMCorp are collectively
referred to as the "Affiliated
Companies"); Chairman, First
Signature Bank & Trust; Director,
John Hancock Freedom Securities
Corp., John Hancock Capital Corp.,
New England/Canada Business
Council; Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; President, the Adviser
19
<PAGE>
(until July 1992); Chairman, John
Hancock Distributors, Inc.
("Distributors") until April 1994.
Dennis S. Aronowitz Trustee (1,2) Professor of Law, Boston University
Boston University School of Law; Trustee, Brookline
Boston, Massachusetts Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1,2) President, Brookline Savings Bank.
160 Washington Street Director, Federal Home Loan Bank of
Brookline, Massachusetts Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University
(education); Director, Depositors
Insurance Fund, Inc. (insurance).
William J. Cosgrove Trustee (1,2) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, New Jersey N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation Inc.
(consulting, October 1991 - October
1993); Trustee, the Hudson City
Savings Bank (until October 1995).
Douglas M. Costle Trustee (1,2,3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, Vermont 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991). Dean Vermont Law
School (until 1991). Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
MITRE Corporation (governmental
consulting services).
Leland O. Erdahl Trustee (1,2) Director of Santa Fe Ingredients
9449 Navy Blue Court Company of California, Inc. and
Las Vegas, NV 89117 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing
companies); Director of Uranium
Resources, Inc.; President of
Stolar, Inc. (from 1987-1991) and
President of Albuquerque Uranium
Corporation (from 1985-1992);
Director of Freeport-McMoRan Copper
& Cold Company Inc., Hecla Mining
Company,
20
<PAGE>
Canyon Resources Corporation and
Original Sixteen to One Mine, Inc.
(from 1984-1987 and from 1991 to
1995)(management consultant).
Richard A. Farrell Trustee (1,2) President of Farrell, Healer & Co.,
Farrell, Healer & Company, Inc. (venture capital management firm
160 Federal Street -- 23rd Floor (since 1980); Prior to 1980, headed
Boston, MA 02110 the venture capital group at Bank
November 1932 of Boston Corporation.
Gail D. Fosler Trustee (1,2) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD economic and business research).
December 1947
William F. Glavin Trustee (1,2) President, Babson College; Vice
Babson College Chairman, Xerox Corporation until
Horn Library June 1989; Director, Caldor Inc.,
Babson Park, MA 02157 Reebok, Ltd. (since 1994), and Inco
March 1931 Ltd.
Bayard Henry Trustee (1,2) Corporate Advisor; Director,
31 Milk Street Fiduciary Trust Company (a trust
Boston, Massachusetts company); Director, Groundwater
July 1931 Technology, Inc. (remediation);
Samuel Cabot, Inc.; Advisor,
Kestrel Venture Management.
Dr. John A. Moore Trustee (1,2) President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1101 Vermont Avenue N.W. Health Risks, (nonprofit
Suite 608 institution) ( since September
Washington, DC 20005 1989).
February 1939
Patti McGill Peterson Trustee (1,2) President, St. Lawrence University;
St. Lawrence University Director, Niagara Mohawk Power
110 Vilas Hall Corporation and Security Mutual
Canton, NY 13617 Life.
May 1943
John W. Pratt Trustee (1,2) Professor of Business
2 Gray Gardens East Administration at Harvard
Cambridge, MA 02138 University Graduate School of
September 1931 Business Administration (since
1961).
21
<PAGE>
*Michael P. DiCarlo Trustee DFS Advisers LLC; Executive Vice
John Hancock Place President, the Adviser (until
P.O. Box 111 1996); Senior Vice President of
Boston, Massachusetts certain John Hancock funds (until
1996).
Edward J. Spellman, CPA Trustee (1,2,4) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL
November 1932
</TABLE>
The executive officers of the Trust and their principal occupations during the
past five years are set forth below. Unless otherwise indicated, the business
address of each is 101 Huntington Avenue, Boston, Massachusetts 02199.
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Date of Birth With Registrants During Past 5 Years
- ----------------- ---------------- -------------------
<S> <C> <C>
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
July 1938 Officer (4) Officer, the Adviser; President
(until December 1994).
Anne C. Hodsdon Trustee and President (4) President and Chief Operating
August 1953 Officer, the Adviser; Executive
Vice President, the Adviser (until
December 1994); Senior Vice
President; the Adviser (until
December 1993); Vice President, the
Adviser, 1991.
James B. Little Senior Vice President, Chief Senior Vice President, the Adviser.
February 1935 Financial Officer
Thomas H. Drohan Senior Vice President and Secretary Senior Vice President and Secretary,
December 1936 the Adviser.
John A. Morin Vice President Vice President, the Adviser.
July 1950
Susan S. Newton Vice President, Assistant Secretary Vice President and Assistant
March 1950 and Compliance Officer Secretary, the Adviser.
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
November 1946
</TABLE>
22
<PAGE>
- -----------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
(1) Member of the Audit Committee of the Trust.
(2) Member of the Committee on Administration of the Trust.
(3) Member of the Executive Committee of the Trust. The Executive Committee may
generally exercise most powers of the Trustees between regularly scheduled
meetings of the Board of Trustees.
(4) Member of the Investment Committee of the Adviser.
All of the officers listed are officers or employees of the Adviser or the
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or directors and/or trustees of one or more other funds for which the
Adviser serves as investment adviser.
The following table provides information regarding the compensation paid by
the Fund and the other investment companies in the John Hancock Fund Complex to
the Independent Trustees for their services. The two non-Independent Trustees,
Messrs. Boudreau and Scipione, and each of the officers of the Funds are
interested persons of the Adviser, are compensated by the Adviser and receive no
compensation from the Fund for their services.
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Benefits Accrued as Estimated Annual From the Fund and
Aggregate Compensation Part of the Fund's Benefits Upon John Hancock Fund
Independend Trustees from the Fund Expenses* Retirement Complex to Trustees+
- -------------------- ------------- --------- ---------- --------------------
<S> <C> <C> <C> <C>
Dennis S. Aronowitz $ 8,203 $ - $ - $ 61,050
Richard P. Chapman, Jr. 2,416 5,787 - 62,800
William J. Cosgrove 2,666 5,537 - 61,050
Douglas M. Costle 0 - - 0
Leland O. Erdahl 0 - - 0
Richard A. Farrell 0 - - 0
Gail D. Fosler 7,953 - - 60,800
William F. Glavin 0 - - 0
Bayard Henry 7,892 - - 58,850
John A. Moore 0 - - 0
Patti McGill Peterson 0 - - 0
John W. Pratt 0 - - 0
Edward J. Spellman 8,203 - - 61,050
Michael P. DiCarlo 0 0
------- ------- ------- --------
$37,333 $11,324 $ - $365,600
</TABLE>
* Compensation made for the fiscal year ended October 31, 1995.
23
<PAGE>
+ The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995.
As of March 31, 1996, the officers and Trustees of the Fund as a group owned
less than 1% of the outstanding shares of the Fund. As of March 31, 1996, the
following shareholders beneficially owned 5% or more of the outstanding shares
of the Fund listed below:
<TABLE>
<CAPTION>
Number of Shares Percentage of Total
Name and Address of Beneficial Outstanding Shares of
of Shareholder Class of Shares Interest Owned the Class of the Fund
<S> <C> <C> <C>
Merrill Lynch Pierce FennerSmith Inc. Class B 4,099,924 14.25%
Attn: Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
John Hancock As Agent for Ttee Class C 513,173 39.53%
Argo Systems Inc. 401K Plan
Attn: Kim Jackman, Tax Account
310 North Mary Avenue
Mailstop 3-1T
Sunnyvale, CA 94066-411
John Hancock Funds, Inc. Class C 365,694 28.25%
FBO Gilbane Building Company
Attn: Institutional Ret Services
c/o Beth Group-5th Floor
101 Huntington Avenue
Boston, MA 02199-7603
UST Inc. Class C 213,745 16.47%
c/o Wachovia Bank of NC
Attn: Teresa Almond
301 Main Street
Winston-Salem, NC 27150-0001
Gas & Co. Class C 156,843 14.39%
c/o Investors Bank & Trust
P.O. Box 1537
Boston, MA 02205
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Fund's Prospectuses, the Fund receives its investment
advice from the Adviser. Investors should refer to the Prospectuses and below
for a description of certain information concerning the investment management
contract.
24
<PAGE>
Each of the Trustees and principal officers of the Fund who is also an
affiliated person of the Adviser is named above, together with the capacity in
which such person is affiliated with the Fund and the Adviser.
The Fund has entered into an investment management contract with the
Adviser. Under the investment management contract, the Adviser provides the Fund
with (i) a continuous investment program, consistent with the Fund's stated
investment objective and policies, (ii) supervision of all aspects of the Fund's
operations except those delegated to a custodian, transfer agent or other agent
and (iii) such executive, administrative and clerical personnel, officers and
equipment as are necessary for the conduct of its business. The Adviser is
responsible for the management of the Fund's portfolio assets.
The Adviser has entered into a subadvisory agreement with DFS Advisers LLC
(the "Subadviser"). Under the subadvisory agreement, the Subadviser provides the
Fund with advice and recommendations regarding the Fund's investments. The
Subadviser also provides the Fund on a continuous basis with economic and
financial information, as well as other research and assistance. Under the
subadvisory agreement the Subadviser pays all expenses that it incurs in
connection with the performance of its duties under the agreement. The Adviser,
and not the Fund, pays all subadvisory fees. Under the subadvisory agreement,
the Adviser pays the Subadviser a fee at the annual rate of 0.25% of the average
daily net assets of the Fund.
In addition, the Adviser the Subadviser have entered into a separate letter
agreement (the "Letter Agreement"). The Letter Agreement provides for the
Adviser to receive a 10% equity interest in the Subadviser and for the payment
of compensation to the Subadviser if the subadvisory agreement is terminated
without cause within a five year period. The Letter Agreement also requires Mr.
DiCarlo to provide certain marketing services and contains a noncompetition
clause.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser for the Fund or for other funds or clients to which
the Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the Adviser
or its affiliates may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
No person other than the Adviser, the Subadviser and their directors and
employees regularly furnishes advice to the Fund with respect to the
desirability of the Fund's investing in, purchasing or selling securities. The
Adviser may from time to time receive statistical or other similar factual
information and information regarding general economic factors and trends from
the Life Company and its affiliates.
Under the terms of the investment management contract with the Fund, the
Adviser provides the Fund with office space, supplies and other facilities
required for the business of the Fund. The Adviser pays the compensation of all
other officers and employees of the Fund and pays for clerical services relating
to the administration of the Fund.
All expenses which are not specifically paid by the Adviser and which are
incurred in the operation of the Fund (including fees of Trustees of the Fund
who are not "interested persons," as such term is defined in the Investment
Company Act, but excluding certain distribution related
25
<PAGE>
activities required to be paid by the Adviser or John Hancock Funds), and the
continuous public offering of the shares of the Fund are borne by the Fund.
As provided by the investment management contract, the Fund pays the
Adviser monthly an investment management fee, which is based on a stated
percentage of the Fund's average of the daily net assets as follows:
Net Asset Value Annual Rate
First $250,000,000 0.85%
Amount Over $250,000,000 0.80%
From time to time, the Adviser may reduce its fee or make other
arrangements to limit the Fund's expenses to a specified percentage of average
daily net assets. The Adviser retains the right to re-impose a fee and recover
any other payments to the extent that, at the end of any fiscal year, the Fund's
annual expenses fall below this limit.
On October 31, 1995, the net assets of the Fund were $1,024,290,165. For
the years ended October 31, 1993, 1994 and 1995 the Adviser received a fee of
$1,345,474, $3,458,972 and $5,538,912, respectively. The advisory fee figures
for 1993 and 1994 reflect the different advisory fee schedule that was in effect
before January 1, 1994.
If the total of all ordinary business expenses of the Fund for any fiscal
year exceeds limitations prescribed in any state in which shares of the Fund are
qualified for sale, the fee payable to the Adviser will be reduced to the extent
required by these limitations. At this time, the most restrictive limit on
expenses imposed by a state requires that expenses charged to the Fund in any
fiscal year not exceed 2 1/2% of the first $30,000,000 of the Fund's average net
assets, 2% of the next $70,000,000 of such net assets, and 1 1/2% of the
remaining average net assets. When calculating the above limit, the Fund may
exclude interest, brokerage commissions and extraordinary expenses.
Pursuant to its investment management contract and the subadvisory
agreement, neither the Adviser nor the Subadviser is 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 such contract
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser or Subadviser in the performance of its
duties or from reckless disregard by the Adviser or Subadviser of its
obligations and duties under such contract.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and presently has more than $16 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment companies in the John
Hancock group of funds which have a combined total of over 1,080,000
shareholders. The Adviser is an affiliate of the Life Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $80 billion, the Life Company is one of the ten
largest life insurance companies in the United States, and carries high ratings
from S&P and A.M. Best. Founded in 1862, the Life Company has been serving
clients for over 130 years.
Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
contract or any extension, renewal or amendment thereof remains in effect. If
the contract is no longer in effect, the Fund (to the extent permitted by law)
will cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name
26
<PAGE>
to any other corporation or entity, including but not limited to any investment
company of which the Life Company or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.
The investment management contract, subadvisory agreement and the
distribution contract discussed below, continue in effect from year to year if
approved annually by vote of a majority of the Fund's Trustees who are not
interested persons of one of the parties to the contract, cast in person at a
meeting called for the purpose of voting on such approval, and by either the
Fund's Trustees or the holders of a majority of the Fund's outstanding voting
securities. Each of these contracts automatically terminates upon assignment.
Each contract may be terminated without penalty on 60 days' notice at the option
of either party to the respective contract or by vote of a majority of the
outstanding voting securities of the Fund.
DISTRIBUTION CONTRACT
The Fund has entered into a distribution contract pertaining to each class
of shares with John Hancock Funds. Under the contract, John Hancock Funds is
obligated to use its best efforts to sell shares of each class on behalf of the
Fund. Shares of the Fund are also sold by selected broker-dealers (the "Selling
Brokers") which have entered into selling agency agreements with John Hancock
Funds. John Hancock Funds accepts orders for the purchase of the shares of the
Fund which are continually offered at net asset value next determined, plus any
applicable sales charge. In connection with the sale of Class A or Class B
shares, John Hancock Funds and Selling Brokers receive compensation in the form
of a sales charge imposed, in the case of Class A shares, at the time of sale
or, in the case of Class B shares, on a deferred basis. The sales charges are
discussed further in the Class A and Class B Prospectus.
The Fund's Trustees adopted Distribution Plans with respect to Class A and
Class B shares (the "Plans"), pursuant to Rule 12b-1 under the Investment
Company Act. Under the Plans, the Fund will pay distribution and service fees at
an aggregate annual rate of up to 0.30% and 1.00% respectively, of the Fund's
daily net assets attributable to shares of that class. However, the service fee
will not exceed 0.25% of the Fund's daily net assets attributable to each class
of shares. The distribution fees will be used to reimburse the Distributor for
its distribution expenses, including but not limited to: (i) initial and ongoing
sales compensation to Selling Brokers and others (including affiliates of the
Distributor) engaged in the sale of Fund shares; (ii) marketing, promotional and
overhead expenses incurred in connection with the distribution of Fund shares;
and (iii) with respect to Class B shares only, interest expenses on unreimbursed
distribution expenses. The service fees will be used to compensate Selling
Brokers for providing personal and account maintenance services to shareholders.
In the event that John Hancock Funds is not fully reimbursed for expenses
incurred by it under the Class B Plan in any fiscal year, John Hancock Funds may
carry these expenses forward, provided, however, that the Trustees may terminate
the Class B Plan and thus the Fund's obligation to make further payments at any
time. Accordingly, the Fund does not treat unreimbursed expenses relating to the
Class B shares as a liability of the Fund. The Plans were approved by a majority
of the voting securities of the applicable class of the Fund. The Plans and all
amendments were approved by a majority of the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on these Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the
Fund with a written report of the amounts expended under the Plans and the
purpose for which such expenditures were made. The Trustees review such reports
on a quarterly basis.
During the fiscal year ended October 31, 1995 the Funds paid John Hancock
Funds the following amounts of expenses with respect to the Class A and Class B
shares of the Fund:
27
<PAGE>
<TABLE>
<CAPTION>
Expense Items
Printing and
Mailing of Interest
Prospectus to Compensation Expenses of Carrying or
New to Selling John Hancock Other Finance
Special Equities Advertising Shareholders Brokers Funds Charges
- ---------------- ----------- ------------ ------- ----- -------
<S> <C> <C> <C> <C> <C>
Class A shares $206,381 $14,418 $300,871 $ 642,239 $ 0
Class B shares $377,219 $26,575 $809,487 $1,122,932 $456,388
</TABLE>
Each of the Plans provides that it will continue in effect only as long as
its continuance is approved at least annually by a majority of both the Trustees
and the Independent Trustees. Each of the Plans provides that it may be
terminated without penalty (a) by vote of a majority of the Independent
Trustees, (b) by a vote of a majority of the Fund's outstanding shares of the
applicable class in each upon 60 days' written notice to John Hancock Funds and
(c) automatically in the event of assignment. Each of the Plans further provides
that it may not be amended to increase the maximum amount of the fees for the
services described therein without the approval of a majority of the outstanding
shares of the class of the Fund which has voting rights with respect to the
Plan. And finally, each of the Plans provides that no material amendment to the
Plan will, in any event, be effective unless it is approved by a majority vote
of both the Trustees and the Independent Trustees of the Fund. The holders of
Class A and Class B shares have exclusive voting rights with respect to the Plan
applicable to their respective class of shares. In adopting the Plans, the
Trustees concluded that, in their judgment, there is a reasonable likelihood
that each of the Plans will benefit the holders of the applicable class of
shares of the Fund.
Class C shares of the Fund are not subject to any distribution plan.
Expenses associated with the obligation of John Hancock Funds to use its best
efforts to sell Class C shares will be paid by the Adviser or by John Hancock
Funds and will not be paid from the fees paid under Class A or Class B Plans.
When the Fund seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plans, committed to the discretion
of the Committee on Administration of the Trustees. The members of the Committee
on Administration are all Independent Trustees and are identified in this
Statement of Additional Information under the caption "Those Responsible for
Management."
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished
by a principal market maker or a pricing service, both of which generally
utilize electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
28
<PAGE>
Short-term debt investments which have a remaining maturity of 60 days or
less are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
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.
INITIAL SALES CHARGE ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Class A and Class B Prospectus. Methods of obtaining reduced
sales charges referred to generally in the Class A and Class B Prospectus are
described in detail below. In calculating the sales charge applicable to current
purchases of Class A shares of the Fund, the investor is entitled to cumulate
current purchases with the greater of the current value (at offering price) of
the Class A shares of the Fund owned by the investor or, if Investor Services is
notified by the investor's dealer or the investor at the time of the purchase,
the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his or her spouse and their children under the age of 21
purchasing securities for his or their own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
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 a 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 charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention (the
"LOI"), which should be read carefully prior to its execution by an investor.
The Fund offers two options regarding the specified period for
29
<PAGE>
making investments under the LOI. All investors have the option of making their
investments over a specified period of thirteen (13) months. Investors who are
using the Fund as a funding medium for a qualified retirement plan, however, may
opt to make the necessary investments called for by the LOI over a forty-eight
(48) month period. These qualified retirement plans include group IRA, SEP,
SARSEP, TSA, 401(k), TSA and Section 457 plans. Such an investment (including
accumulations and combinations) must aggregate $50,000 or more invested during
the specified period from the date of the LOI or from a date within ninety (90)
days prior thereto, upon written request to Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due from the
investor. However, for the purchases actually made within the specified period
(either 13 or 48 months) the sales charge applicable will not be higher than
that which would have applied (including accumulations and combinations) had the
LOI been for the amount actually invested.
The LOI authorizes Investor Services to hold in escrow a number of Class A
shares (approximately 5% of the aggregate) sufficient to make up any difference
in sales charges on the amount intended to be invested and the amount actually
invested, until such investment is completed within the specified period, at
which time the escrowed Class A shares will be released. If the total investment
specified in the LOI is not completed, the Class A shares held in escrow may be
redeemed and the proceeds used as required to pay such sales charge as may be
due. By signing the LOI, the investor authorizes Investor Services to act as his
or her attorney-in-fact to redeem any escrowed Class A shares and adjust the
sales charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.
Because Class C shares are sold at net asset value without the imposition
of any sales charge, none of the privileges described under these captions is
available to Class C investors, with the following exception:
Combination Privilege. As is explained in the Prospectus for Class C shares, a
Class C investor may qualify for the minimum $1,000,000 investment (or such
other amount as may be determined by the Fund's officers) if the aggregate
amount of his or her current and prior investments in Class C shares of the Fund
and Class C shares of any other John Hancock fund exceeds $1,000,000.
Class A shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share
without the imposition of an initial sales charge so that the Fund will receive
the full amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the 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 increase
in account value shares derived from reinvestment of dividends or capital gains
distributions.
30
<PAGE>
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this number of
years, all payments during a month will be aggregated and deemed to have been
made on the last day of the month.
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole
or in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the Class
A and Class B Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to CDSC,
unless indicated otherwise, in the circumstances defined below:
- - Redemptions of Class B shares made under a Systematic Withdrawal Plan, as
long as your annual redemptions do not exceed 10% of your account value at
the time you established your Systematic Withdrawal Plan and 10% of the
value of 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.
- - Redemptions made to effect distributions from an Individual Retirement
Account either before or after age 59 1/2, as long as the distributions are
based on your life expectancy or the joint-and-last survivor life
expectancy of you and your beneficiary. These distributions must be free
from penalty under the Code.
- - 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 Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" of this Prospectus.
- - Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
- - Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
- - Redemptions from certain IRA and retirement plans that purchase shares
prior to October 1, 1992.
31
<PAGE>
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.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, he or she would incur a brokerage charge.
Any such securities would be valued for the purposes of making such payment at
the same value as used in determining net asset value. The Fund has, however,
elected to be governed by Rule 18f-1 under the Investment Company Act. Under
that rule, the Fund must redeem its shares for cash except to the extent that
the redemption payments to any shareholder during any 90-day period would exceed
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. As described more fully in the Prospectuses, 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 Fund's 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 because of the initial sales charge
payable on purchases of Class A shares and the CDSC imposed on redemptions of
Class B shares and because redemptions are taxable events. Therefore, a
shareholder should not purchase Class A or Class B shares at the same time as a
Systematic Withdrawal Plan is in effect. The Fund reserves the right to modify
or discontinue the Systematic Withdrawal Plan of any shareholder on 30 days'
prior written notice to such shareholder or to discontinue the availability of
such plan in the future. The shareholder may terminate the plan at any time by
giving proper notice to Investor Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained more
fully in the Class A and Class B Prospectus. The program, as it relates to
automatic investment checks, is subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic Accumulation
Program may be revoked by Investor Services without prior notice if any
investment is not honored by the shareholders' bank. The bank shall be under no
obligation to notify the shareholder as to the nonpayment of any checks.
The program may be discontinued by the shareholder either by calling Investor
Services or upon written notice to Investor Services which is received at least
five (5) business days prior to the processing date of any investment.
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Reinvestment Privilege. A shareholder who has redeemed shares of the Fund may,
within 120 days after the date of redemption, reinvest without payment of a
sales charge any part of the redemption proceeds in shares of the same class of
the Fund or in any of the other John Hancock funds, subject to the minimum
investment limit in that fund. The proceeds from the redemption of Class A
shares may be reinvested at net asset value without paying a sales charge in
Class A shares of the Fund or in Class A shares of any of the other John Hancock
funds. If a CDSC was paid upon a redemption, a shareholder may reinvest the
proceeds from such redemption at net asset value in additional shares of the
class from which the redemption was made. The shareholder's account will be
credited with the amount of any CDSC charge upon the prior redemption and the
new shares will continue to be subject to the CDSC. The holding period of the
shares acquired through reinvestment will, for purposes of computing the CDSC
payable upon a subsequent redemption, include the holding period of the redeemed
shares. The Fund may modify or terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "Tax Status."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Fund are responsible for the management and supervision
of the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have not authorized any additional series other than
the Fund, although they may do so in the future. The Declaration of Trust also
authorizes the Trustees to classify and reclassify the shares of the Fund, or
any new series of the Fund, into one or more classes. As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of three classes of shares of the Fund, designated as Class A, Class B, and
Class C. The shares of each class of the Fund represent an equal proportionate
interest in the aggregate net assets attributable to that class of the Fund.
Class C shares of the Fund are offered only to certain institutional
investors as described in the Fund's Prospectuses. Some individual investors who
are currently eligible to purchase Class A and Class B shares may also be
participants in "participant-directed plans" (as defined in the Prospectuses)
that are eligible to purchase Class C shares. 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 will be in the same
amount, except that (i) the distribution and service fees relating to Class A
and Class B shares will be borne exclusively by that class, (ii) Class B shares
will pay higher distribution and service fees than Class A shares and (iii) each
of Class A shares, Class B shares and Class C shares will bear any other 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. Accordingly,
it is expected that the net asset value per share of the Fund's Class C shares
will be higher than the net asset value per share of the Fund's Class A and
Class B shares, each of which has a Rule 12b-1 distribution plan and sales load.
Similarly, the net asset value per share may vary depending on whether Class A
or Class B shares are purchased.
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In the event of liquidation, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to such shareholders.
Shares entitle their holders to one vote per share, are freely transferable and
have no preemptive, subscription or conversion rights. When issued, shares are
fully paid and non-assessable, by the Fund, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration
of Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Fund's outstanding shares and the Trustees shall promptly call
a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Fund. Shareholders
may, under certain circumstances, communicate with other shareholders in
connection with a request for a special meeting of shareholders. However, at any
time that less than a majority of the Trustees holding office were elected by
the shareholders, the Trustees will call a special meeting of shareholders for
the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the Fund. However, the Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations and affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefore
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
TAX STATUS
The Fund has qualified and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and intends to continue to so qualify for each taxable
year. As such and by complying with the applicable provisions of the Code
regarding the sources of its income, the timing of its distributions, and the
diversification of its assets, the Fund will not be subject to Federal income
tax on taxable income (including net realized capital gains, if any) which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to 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 Prospectuses whether taken in shares or in cash. Distributions,
if any, in excess of E & P will constitute a return of capital, which will first
reduce an investor's tax basis in Fund shares and thereafter (after such basis
is reduced to zero) will generally give rise to capital gains. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for Federal income tax purposes in each share so received equal to
the amount of cash they would have received had they elected to receive the
distribution in cash, divided by the number of shares received.
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The amount of net realized capital gains, if any, in any given year will
vary depending upon the Adviser's current investment strategy and whether the
Adviser believes it to be in the best interest of the Fund to dispose of
portfolio securities that will generate capital gains. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or
undistributed taxable income of the Fund. Consequently subsequent distributions
on those shares from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions in reality represent a portion of the purchase price.
Upon a redemption of shares (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
Class A shares of the Fund or another John Hancock fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. This disregarded charge will result in an increase in the
shareholder's tax basis in the Class A shares subsequently acquired. Also, any
loss realized on a redemption or exchange may be disallowed to the extent the
shares disposed of are replaced with other shares of the Fund within a period of
61 days beginning 30 days before and ending 30 days after the shares are
disposed of, such as pursuant to the automatic dividend reinvestments. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period at the time of redemption of six months or less will be treated
as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
Although its present intention is to distribute all net capital gains, if
any, the Fund reserves the right to retain and reinvest all or any portion of
the excess, as computed for Federal income tax purposes, of net long-term
capital gain over net short-term capital loss in any year. The Fund will not in
any event distribute net long-term capital 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 carryforward a
net realized capital loss in any year to offset net capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net capital gains are offset by such losses, they would not result in Federal
income tax liability to the Fund and, as noted above, would not be distributed
as such to shareholders. Presently, there are no capital loss carryforwards
available to offset future net capital gains.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is
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accorded to accounts maintained as qualified retirement plans. Shareholders
should consult their tax advisers for more information.
For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) and distributed and 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 Fund
shares in order to qualify for the deduction and, if they borrow to acquire Fund
shares, may be denied a portion of the dividends received deduction. The entire
qualifying dividend, including the otherwise-deductible amount, will be included
in determining the excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may increase its
alternative minimum tax liability. Additionally, any corporate shareholder
should consult its tax adviser regarding the possibility that its basis in its
shares may be reduced, for Federal income tax purposes, by reason of
"extraordinary dividends" received with respect to the shares, for the purpose
of computing its gain or loss on redemption or other disposition of the shares.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes"), subject to certain provisions and limitations contained in the
Code. Specifically, if more than 50% of the value of 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 and distributions
actually received) their pro rata shares of qualified foreign taxes paid by the
Fund even though not actually received by them, and (ii) treat such respective
pro rata portions as qualified foreign taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their 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 qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. If the Fund
does not satisfy the 50% requirement described above or otherwise does not make
the election, the Fund will deduct the foreign taxes it pays in determining the
amount it has available for distribution to shareholders, and shareholders will
not include these foreign taxes in their income, nor will they be entitled to
any tax deductions or credits with respect to such taxes.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of shares of the Fund may
also be subject to state and local
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taxes. Shareholders should consult their own tax advisers as to the Federal,
state or local tax consequences of ownership of shares of the Fund in particular
circumstances.
The Fund is required to accrue income on any debt securities that have more
than a de minimis amount of original issue discount (or debt securities acquired
at a market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options, futures and forward contracts may
also require the Fund to recognize income or gain without a concurrent receipt
of cash. However, the Fund must distribute to shareholders for each taxable year
substantially all of its net income and net capital gains, including such income
or gain, to qualify as a regulated investment company and avoid liability for
any federal income or excise tax. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy these distribution
requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although it may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the
"IRS") all taxable distributions to shareholders, as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number or if the IRS or a broker notifies the Fund that the
number furnished by the shareholder is incorrect or that the shareholder is
subject to backup withholding as a result of failure to report interest or
dividend income. A Fund may refuse to accept an application that does not
contain any required taxpayer identification number or certification that the
number provided is correct. If the backup withholding provisions are applicable,
any such distributions and proceeds, whether taken in cash or reinvested in
shares, will be reduced by the amounts required to be withheld. Any amounts
withheld may be credited against a shareholder's U.S. federal income tax
liability. Investors should consult their tax advisers about the applicability
of the backup withholding provisions.
Non-U.S. investors not engaged in a U.S. trade or business with which their
Fund investment is effectively connected will be subject to U.S. Federal income
tax treatment that is different from that described above. These investors may
be subject to non-resident alien withholding 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 affective IRS Form W-8 or authorized substitute is on
file, 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 Massachusetts income tax.
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CALCULATION OF PERFORMANCE
The average annual total return on Class A shares of the Fund for the 1
year, 5 year and 10 year periods ended October 31, 1995 was 30.60%, 35.29%, and
17.22%, respectively, and reflect payment of the maximum sales charge of 5.00%.
The average annual total return on Class B shares of the Fund for the 1
year ended October 31, 1995 and since inception on March 1, 1993 was 31.57% and
23.04%, respectively and reflects the applicable CDSC. The average annual total
return on Class C shares of the Fund for the 1 year and since inception on
September 1, 1993 was 38.27% and 20.67%, respectively.
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1 year, 5 year and life-of-fund periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:
_________
T = \n/ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the 1 year and life-of-fund periods.
This calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period.
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
applied at the end of the period. This calculation assumes that all dividends
and distributions are reinvested at net asset value on the reinvestment dates
during the period. The "distribution rate" is determined by annualizing the
result of dividing the declared dividends of the Fund during the period stated
by the maximum offering price or net asset value at the end of the period.
Excluding the Fund's sales load from the distribution rate produces a higher
rate.
In addition to average annual total returns, the Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Fund's 5.0% 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 total
return will be ranked or compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper -Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and
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yield on equity mutual funds in the United States. Ibottson and Associates, CDA
Weisenberger and F.C. Towers are also used for comparison purposes, as well as
the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in national
financial publications such as Money Magazine, Forbes, Business Week, The Wall
Street Journal, Micropal, Inc. Morningstar, Barron's, and Stanger's and may 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.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities of the
Fund are made by officers of the Fund pursuant to recommendations made by an
investment committee of the Adviser, which consists of officers and directors of
the Adviser 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 maker reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. and such other policies as the Trustees may determine, the Adviser
may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in
the selection of brokers and dealers and the negotiation of brokerage commission
rates and dealer spreads by the reliability and quality of the services,
including primarily the availability and value of research information and, to a
lesser extent, statistical assistance furnished to the Adviser of the Fund and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitment to allocate portfolio transactions upon any
prescribed basis. While the Adviser will be primarily responsible for the
allocation of the Fund's brokerage business, the policies and practices of the
Adviser in this regard must be consistent with the foregoing and will at all
times be subject to review by the Trustees. For the years ended on October 31,
1995, 1994 and 1993 the Fund paid negotiated brokerage commissions of $468,191,
$305,789 and $273,700, respectively.
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As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Fund may pay a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended October 31,
1995, the Fund paid $45,269 in commissions to compensate brokers for research
services such as industry and company reviews and evaluations of the securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its subsidiaries,
three of which, Tucker Anthony Incorporated, John Hancock Distributors, Inc. and
Sutro & Company, Inc. are broker-dealers ("Affiliated Brokers"). Pursuant to
procedures established by the Trustees and consistent with the above policy of
obtaining best net results, the Fund may execute portfolio transactions with or
through Affiliated Brokers. During the year ended October 31, 1995, the Fund did
not execute any portfolio transactions with Affiliated Brokers.
Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Trustees pursuant to the Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the Trustees believe to be contemporaneously charged by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with an
Affiliated Broker if the Fund would have to pay a commission rate less favorable
than the Affiliated Broker's contemporaneous charges for comparable transactions
for its other most favored, but unaffiliated, customers, except for accounts for
which the Affiliated Broker acts as clearing broker for another brokerage firm,
and any customers of the Affiliated Broker not comparable to the Fund as
determined by a majority of the Trustees who are not interested persons (as
defined in the Investment Company Act) of the Fund, the Adviser or the
Affiliated Broker. Because the Adviser, which is affiliated with the Affiliated
Brokers, has, as an investment adviser to the Fund, the obligation to provide
investment management services, which includes elements of research and related
investment skills, such research and related skills will not be used by the
Affiliated Broker 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 an annual fee of
$16.00 for each Class A shareholder and $18.50 for each Class B and the 0.10% of
the average daily net assets attributable to the Class C shares, plus certain
out-of-pocket expenses. These expenses are aggregated and charged to the Fund
and allocated to each class on the basis of the relative net asset values.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 24 Federal Street, Boston,
Massachusetts 02110. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and Fund accounting services.
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INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. Ernst & Young LLP audits and renders an
opinion on the Fund's annual financial statements and prepares the Fund's annual
Federal income tax return.
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PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements listed below are included in and incorporated
by reference into Part B of the Registration Statement from the 1995 Annual
Report to Shareholders for the year ended October 31, 1995 (filed electronically
on January 3, 1996; file nos. 811-4079 and 2-92548; accession numbers
0000950135-96-00050):
John Hancock Special Equities Fund
Statement of Assets and Liabilities as of October 31, 1995.
Statement of Operations for the year ended October 31, 1995.
Statement of Changes in Net Assets for each of the two years in the
period ended October 31, 1995.
Financial Highlights for each of the 10 years ended October 31, 1995.
Schedule of Investments as of October 31, 1995.
Notes to Financial Statements.
(b) Exhibits:
Exhibits previously filed are incorporated herein by reference to the
filing containing such exhibit identified in the description to the
exhibit.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common control
with Registrant.
Item 26. Number of Holders of Securities
As of March 29, 1996 the number of record holders of shares of Registrant
was as follows:
Title Number of Record Holders
Class A Class B Class C
------- ------- -------
John Hancock Special Equities Fund 76,113 65,607 4
Item 27. Indemnification
(a) Under Registrant's Declaration of Trust. Section 4.3 of Registrant's
Declaration of Trust provides as follows:
"Indemnification of Trustees, Officers, Etc." The Trust shall indemnify each of
its Trustees, officers, employees and agents (including any individual who
serves at its request as director,
C-1
<PAGE>
officer, partner, trustee or the like of another organization in which it has
any interest as a shareholder, creditor or otherwise) against all liabilities
and expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees reasonably
incurred by him or her in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body in which he or she may be or may have been
involved as a party or otherwise or with which he or she may be or may have been
threatened. While acting as Trustee or as an officer, employee or agent of the
Trust or the Trustees, as the case may be, or thereafter, by reason of his or
her being or having been such a Trustee, officer, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated not to
have acted in good faith in the reasonable belief that his or her action was in
the best interests of the Trust, provided that no individual shall be
indemnified hereunder against any liability to the Trust or the Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, and provided further
that as to any matter disposed of by settlement or a compromise payment by such
Trustee, officer, employee or agent, pursuant to a consent decree or otherwise,
no indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such compromise is in the
best interests of the Trust and that such person appears to have acted in good
faith in the reasonable belief that his or her action was in the best interests
of the Trust and did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. All determinations that the applicable standards of conduct have
been met for indemnification hereunder shall be made by (a) a majority vote of a
quorum consisting of disinterested Trustees who are not parties to the
proceeding relating to indemnification, or (b) if such quorum is not obtainable
or, even if obtainable, if a majority vote of such quorum so directs, by
independent legal counsel in a written opinion, or (c) a Majority Shareholder
Vote (excluding Shares owned of record or beneficially by such individual). The
rights accruing to any Trustee, officer, employee or agent under these
provisions shall not exclude any other right to which he may be lawfully
entitled. The Trustees may make advance payments in connection with the expense
of defending any action with respect to which indemnification might be sought
under this Section 4.3, provided that the indemnified Trustee, officer, employee
or agent shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification.
(b) Under the Distribution Agreement. Under Section 12 of the Distribution
Agreement, John Hancock Funds, Inc. ("John Hancock Funds") has agreed to
indemnify the Registrant and its Trustees, officers and controlling persons
against claims arising out of certain acts and statements of John Hancock
Funds.
(c) Under the By-Laws of the John Hancock Mutual Life Insurance Company (the
"Insurance Company"), John Hancock Funds and John Hancock Advisers, Inc.
(the "Adviser").
Section 9a 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 the
direction or request of the Insurance company against litigation expenses
and liabilities incurred while acting as such, except that such
indemnification does not cover any expense or liability incurred or imposed
in connection with any matter as to which such person shall be finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Insurance Company. In addition,
no such person will be indemnified by the Insurance Company in
C-2
<PAGE>
respect of any liability or expense incurred in connection with any matter
settled without final adjudication unless such settlement shall have been
approved as in the best interests of the Insurance Company either by vote
of the Board of Directors at a meeting composed of directors who have no
interest in the outcome of such vote or by vote of the policyholders. The
Insurance Company may pay expenses incurred in defending an action or claim
in advance of its final disposition, but only upon receipt of an
undertaking by the person indemnified to repay such payment if he should be
determined to be entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and the Adviser
provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was at any time since
the inception of the Corporation a director, officer, employee or agent of
the Corporation, or is or was at any time since the inception of the
Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and the
liability was not incurred by reason of gross negligence or reckless
disregard of the duties involved in the conduct of his office, and expenses
in connection therewith may be advanced by the Corporation, all to the full
extent authorized by law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification
provided by Section 9.01 shall not be deemed exclusive of any other right
to which those indemnified may be entitled, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person."
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to Section 10.1 of the Registrant's
By-Laws, Section 13 of the Underwriting Agreement filed as Exhibit 6 to the
original Registration Statement, the By-Laws of the Registrant, the By-laws of
the Distributors, the Adviser, or the Insurance Company or otherwise. Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Investment
Adviser, reference is made to Forms
C-3
<PAGE>
ADV (801-8124) filed under the Investment Advisers Act of 1940, herein
incorporated by reference.
Item 29. Principal Underwriters
(a) John Hancock Funds acts as principal underwriter for the Registrant and
also serves as principal underwriter or distributor of shares for John
Hancock Cash Reserve, Inc., John Hancock Bond Fund, John Hancock Current
Interest, John Hancock Series, Inc., John Hancock Tax-Free Bond Fund, John
Hancock California Tax-Free Income Fund, John Hancock Capital Series, John
Hancock Limited-Term Government Fund, John Hancock Tax-Exempt Income Fund,
John Hancock Sovereign Investors Fund, Inc., John Hancock Special Equities
Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt Series
Fund, John Hancock Strategic Series, John Hancock Technology Series, Inc.,
John Hancock World Fund, John Hancock Investment Trust, John Hancock
Institutional Series Trust, Freedom Investment Trust, Freedom Investment
Trust II and Freedom Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman, President and Chief Chairman
101 Huntington Avenue Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice President None
John Hancock Place and Chief Compliance Officer
P.O. Box 111
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-4
<PAGE>
Robert G. Freedman Director Vice Chairman and Chief Investment
101 Huntington Avenue Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions and Offices with
Business Address Underwriter Registrant
<S> <C> <C>
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
David A. King Director and Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
James W. McLaughlin Senior Vice President and Chief None
101 Huntington Avenue Financial Officer
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
Michael T. Carpenter Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachsuetts
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Albuquerque, New Mexico
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President and Secretary Vice President and Assistant
101 Huntington Avenue Secretary
Boston, Massachusetts
Keith Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-6
<PAGE>
Name and Principal Positions and Offices with Positions and Offices with
Business Address Underwriter Registrant
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
One Beacon Street
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
C-7
<PAGE>
(c) None.
Item 30. Location of Accounts and Records
Registrant maintains the records required to be maintained by it under
Rules 31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment Company Act of
1940 as its principal executive offices at 101 Huntington Avenue, Boston
Massachusetts 02199-7603. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities,
may be maintained pursuant to Rule 31a-3 at the main office of Registrant's
Transfer Agent and Custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered
with a copy of the latest annual report to shareholders with respect
to that series upon request and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
23rd day of April, 1996.
JOHN HANCOCK SPECIAL EQUITIES 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 Officer)
Edward J. Boudreau, Jr.
Senior Vice President and Chief
Financial Officer (Principal April 23, 1996
/s/ James B. Little Financial and Accounting Officer)
James B. Little
*
______________________ Trustee
Dennis S. Aronowitz
*
______________________ Trustee
Richard P. Chapman, Jr.
*
______________________ Trustee
William J. Cosgrove
*
______________________ Trustee
Gail D. Fosler
*
______________________ Trustee
Bayard Henry
______________________ Trustee
Anne C. Hodsdon
*
______________________ Trustee
Richard S. Scipione
*
______________________ Trustee
Edward J. Spellman
C-9
<PAGE>
April 23, 1996
/s/Thomas H. Drohan
*By: Thomas H. Drohan
(Attorney-in-Fact)
</TABLE>
C-10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.B1 Declaration of Trust of Registrant as amended and
restated February 28, 1992.*
99.B2 By-Laws as adopted on December 8, 1993.*
99.B2.1 Amendment to By-Laws dated December 13, 1994.*
99.B2.2 Amendment to By-Laws dated March 6, 1996+
99.B3 None
99.B4 Specimen share certificate for the John Hancock Special
Equities Fund Classes A & B and C.*
99.B5 Investment Management Contract between Registrant and
John Hancock Advisers, Inc. dated January 1, 1994.*
99.B6 Distribution Agreement with Registrant and John Hancock
BrokerDistribution Services, Inc. dated August 1, 1991.*
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock
Broker Distribution Services, Inc. and Selected Dealers.*
99.B6.2 Form of Financial Institution Sales and Service Agreement.*
99.B7 None
99.B8 Master Custodian Agreement between Registrant and Investors
Bank & Trust Company dated December 15, 1992.*
99.B9 Transfer Agency and Service Agreement between Registrant and
John Hancock Fund Services, Inc. dated January 1, 1991.*
99.B9.1 Accounting & Legal Services Agreement between John Hancock
Advisers, Inc. and Registrant as of January 1, 1996.+
99.B10 Opinion and Consent of Ropes and Gray.*
99.B11 Consent of Auditors+
99.B12 Not applicable
99.B13 Subscription Agreement between Registrant and John Hancock
Advisers, Inc. dated December 17, 1984.*
C-13
<PAGE>
Exhibit No. Description
99.B14 None
99.B15 Class A Distribution Plan between John Hancock Special
Equities Fund and John Hancock Broker Services, Inc.*
99.B15.1 Class B Distribution Plan between John Hancock Special
Equities Fund and John Hancock Broker Services, Inc. *
99.B16 Schedule for Computation of total return.**
99.B17 Powers of Attorney dated November 20, 1984, dated July 22,
1985, dated May 17, 1988, dated November 15, 1988, dated May
17, 1991, May 21, 1984, June dated October 15, 1991, dated
January 1, 1994 and June 22, 1994.*
99.27A Financial Data Schedules -Class A
99.27B Financial Data Schedules -Class B
99.27C Financial Data Schedules-Class C
* Previously filed electronically with post-effective amendment number 11
(file nos. 811-4079 and 2-92548) on February 23, 1995 accession number
0000950156-95-000048.
** Previously filed electronically with post-effective amendment number 12
(file nos. 811-4079 and 2-92548) on February 8, 1996 accession number
0000950156-96-000204.
+ Filed herewith.
C-12
John Hancock Capital Series
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Limited Term Government Fund
John Hancock Sovereign Bond Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Tax-Exempt Income Fund
John Hancock World Fund
CONSIDERATION OF PROPOSAL TO AMEND THE BY-LAWS,
EFFECTIVE MARCH 6, 1996
RESOLVED, that the By-Laws of the Trust be and hereby are amended to delete
Article IV, Sub-Section 5.1 of the By-Laws and replace it with the following:
Executive Committees and Other Committees
Section 5.1. How Constituted. The Trustees may, by resolution, designate
one or more committees, including an Executive Committee, an Audit Committee and
an Administration Committee, each consisting of at least two Trustees. The
Trustees may, by resolution, designate one or more alternate members of any
committee to serve in the absence of any member or other alternate member of
such committee. Each member and alternate member of a committee shall be a
Trustee and shall hold office at the pleasure of the Trustees. The Chairman of
the Board shall be a member of the Executive Committee.
As of January 1, 1996
ACCOUNTING & LEGAL SERVICES AGREEMENT
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Dear Sir:
The John Hancock Funds listed on Schedule A (the "Funds") have selected John
Hancock Advisers, Inc. (the "Administrator") to provide certain accounting and
legal services for the Funds, as more fully set forth below, and you are willing
to provide such services under the terms and conditions hereinafter set forth.
Accordingly, the Funds agree with you as follows:
1. Services. Subject to the general supervision of the Board of
Trustees/Directors of the Funds, you will provide certain tax, accounting
and legal services (the "Services") to the Funds. You will, to the extent
such services are not required to be performed by you pursuant to an
investment advisory agreement, provide:
(A) such tax, accounting, recordkeeping and financial management services
and functions as are reasonably necessary for the operation of each
Fund. Such services shall include, but shall not be limited to,
supervision, review and/or preparation and maintenance of the
following books, records and other documents: (1) journals containing
daily itemized records of all purchases and sales, and receipts and
deliveries of securities and all receipts and disbursements of cash
and all other debits and credits, in the form required by Rule
31a-1(b) (1) under the Act; (2) general and auxiliary ledgers
reflecting all asset, liability, reserve, capital, income and expense
accounts, in the form required by Rules 31a-1(b) (2) (i)-(iii) under
the Act; (3) a securities record or ledger reflecting separately for
each portfolio security as of trade date all "long" and "short"
positions carried by each Fund for the account of the Funds, if any,
and showing the location of all securities long and the off-setting
position to all securities short, in the form required by Rule
31a-1(b) (3) under the Act; (4) a record of all portfolio purchases or
sales, in the form required by Rule 31a-1(b) (6) under the Act; (5) a
record of all puts, calls, spreads, straddles and all other options,
if any, in which any Fund has any direct or indirect interest or which
the Funds have granted or guaranteed, in the form required by Rule
31a-1(b) (7) under the Act; (6) a record of the proof of money
balances in all ledger accounts maintained pursuant to this Agreement,
in the form required by Rule 31a-1(b) (8) under the Act; (7) price
make-up sheets and such records as are necessary to reflect the
determination of each Funds' net asset value; and (8) arrange for, or
participate in (a) the preparation for the Fund of all required tax
returns, (b) the preparation and submission of reports to existing
shareholders and (c) the preparation of financial data or reports
required by the Securities and Exchange Commission and other
regulatory authorities;
<PAGE>
(B) certain legal services as are reasonably necessary for the operation
of each Funds. Such services shall include, but shall not be limited
to; (1) maintenance of each Fund's registration statement and federal
and state registrations; (2) preparation of certain notices and proxy
materials furnished to shareholders of the Funds; (3) preparation of
periodic reports of each Fund to regulatory authorities, including
Form N-SAR and Rule 24f-2 legal opinions; (4) preparation of materials
in connection with meetings of the Board of Trustees/Directors of the
Funds; (5) preparation of written contracts, distribution plans,
compliance procedures, corporate and trust documents and other legal
documents; (6) research advice and consultation about certain legal,
regulatory and compliance issues, (7) supervision, coordination and
evaluation of certain services provided by outside counsel.
(C) provide the Funds with staff and personnel to perform such accounting,
bookkeeping and legal services as are reasonably necessary to
effectively service the Fund. Without limiting the generality of the
foregoing, such staff and personnel shall be deemed to include
officers of the Administrator, and persons employed or otherwise
retained by the Administrator to provide or assist in providing of the
services to the Fund.
(D) maintain all books and records relating to the foregoing services; and
(E) provide the Funds with all office facilities to perform tax,
accounting and legal services under this Agreement.
2. Compensation of the Administrator The Funds shall reimburse the
Administrator for: (1) a portion of the compensation, including all
benefits, of officers and employees of the Administrator based upon the
amount of time that such persons actually spend in providing or assisting
in providing the Services to the Funds (including necessary supervision and
review); and (2) such other direct and indirect expenses, including, but
not limited to, those listed in paragraph (1) above, incurred on behalf of
the Fund that are associated with the providing of the Services and (3) 10%
of the reimbursement amount. In no event, however, shall such reimbursement
exceed levels that are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and
quality. Compensation under this Agreement shall be calculated and paid
monthly in a arrears.
3. No Partnership or Joint Venture. The Funds and you are not partners of or
joint ventures with each other and nothing herein shall be construed so as
to make you such partners or joint venturers or impose any liability as
such on any of you.
4. Limitation of Liability of the Administrator. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or from reckless
disregard by you of your obligations and duties under this Agreement. Any
person, even though also employed by you, who may be or become an employee
of and paid by the Funds shall be deemed, when acting within the scope of
his or her employment by the Funds, to be acting in such employment solely
for the Funds and not as your employee or agent.
<PAGE>
5. Duration and Termination of this Agreement. This Agreement shall remain in
force until the second anniversary of the date upon which this Agreement
was executed by the parties hereto, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually
by a majority of the Trustees/Directors. This Agreement may, on 60 days'
written notice, be terminated at any time without the payment of any
penalty by the Funds by vote of a majority of the Trustees/Directors, or by
you. This Agreement shall automatically terminate in the event of its
assignment.
6. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver
or termination is sought.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without
regard to the choice of law provisions thereof.
8. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement may
be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument. A copy of the Declaration of Trust of each Fund
organized as Massachusetts business trusts is on file with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of each such
Fund are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the Fund's property shall be bound.
Yours very truly,
JOHN HANCOCK FUNDS (See Schedule A)
By: /s/ James B. Little
James B. Little
Senior Vice President
The foregoing contract is
hereby agreed to as of the
date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
Anne C. Hodsdon
President
<PAGE>
January 1, 1996
SCHEDULE A
John Hancock Capital Series
- John Hancock Growth Fund
- John Hancock Special Value Fund
John Hancock Limited Term Government Fund
John Hancock Sovereign Bond Fund John
Hancock Sovereign Investors Fund, Inc.
- John Hancock Sovereign Investors Fund
- John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
- John Hancock Independence Diversified Core Equity Fund
- John Hancock Strategic Income Fund
- John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock World Fund
- John Hancock Pacific Basin Equities Fund
- John Hancock Global Rx Fund
- John Hancock Global Marketplace Fund
John Hancock Cash Reserve, Inc.
John Hancock Series, Inc.
- John Hancock Emerging Growth Fund
- John Hancock Global Resources Fund
- John Hancock Government Income Fund
- John Hancock High Yield Bond Fund
- John Hancock High Yield Tax-Free Fund
- John Hancock Money Market Fund
John Hancock Institutional Series Trust
- John Hancock Active Bond Fund
- John Hancock Dividend Performers Fund
- John Hancock Fundamental Value Fund
- John Hancock Global Bond Fund
- John Hancock International Equity Fund
- John Hancock Multi-Sector Growth Fund
- John Hancock Small Capitalization Equity Fund
- John Hancock Independence Diversified Core Equity Fund II
- John Hancock Independence Value Fund
- John Hancock Independence Balanced Fund
- John Hancock Independence Medium Capitalization Fund
- John Hancock Independence Growth Fund
John Hancock Declartion Trust
- John Hancock V.A. 500 Index Fund
- John Hancock V.A. Discovery Fund
- John Hancock V.A. Diversified Core Equity Fund
- John Hancock V.A. Emerging Equities Fund
- John Hancock V.A. Global Income Fund
- John Hancock V.A. International Fund
- John Hancock V.A. Money Market Fund
- John Hancock V.A. Sovereign Bond Fund
- John Hancock V.A. Strategic Income Fund
- John Hancokc V.A. Sovereign Investors Fund
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" for Special Equities Fund in the John Hancock Growth Funds
prospectus and "Independent Auditors" in the John Hancock Special Equities Fund
Class A, Class B and Class C Shares Statement of Additional Information and to
the use of our report dated December 15, 1995, on the financial statements and
financial highlights of the John Hancock Special Equities Fund in this
Post-Effective Amendment Number 13 to Registration Statement (Form N-1A No.
2-92548) dated July 1, 1996.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 698,919,871
<INVESTMENTS-AT-VALUE> 1,006,693,523
<RECEIVABLES> 30,416,746
<ASSETS-OTHER> 701,702
<OTHER-ITEMS-ASSETS> 307,773,652
<TOTAL-ASSETS> 1,037,811,971
<PAYABLE-FOR-SECURITIES> 11,428,592
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,093,214
<TOTAL-LIABILITIES> 13,521,806
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 693,050,656
<SHARES-COMMON-STOCK> 25,080,561
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<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS B
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<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS C
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