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. 14 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 14 [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)
[X] on March 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) 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 27, 1996.
<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 OF JOHN HANCOCK FUNDS]
- --------------------------------------------------------------------------------
PROSPECTUS
MARCH 1, 1997
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their goal(s)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
DISCIPLINED GROWTH FUND
DISCOVERY FUND
EMERGING GROWTH FUND
FINANCIAL INDUSTRIES FUND
GROWTH FUND
REGIONAL BANK FUND
SPECIAL EQUITIES FUND
SPECIAL OPPORTUNITIES FUND
[LOGO OF JOHN HANCOCK FUNDS] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts
02199-7603
<PAGE>
<TABLE>
CONTENTS
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<CAPTION>
<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
FINANCIAL INDUSTRIES FUND 10
GROWTH FUND 12
REGIONAL BANK FUND 14
SPECIAL EQUITIES FUND 16
SPECIAL OPPORTUNITIES FUND 18
Policies and instructions for opening, YOUR ACCOUNT
maintaining and closing an account
in any growth fund. Choosing a share class 20
How sales charges are calculated 20
Sales charge reductions and waivers 21
Opening an account 21
Buying shares 22
Selling shares 23
Transaction policies 25
Dividends and account policies 25
Additional investor services 26
Details that apply to the growth FUND DETAILS
funds as a group.
Business structure 27
Sales compensation 28
More about risk 30
FOR MORE INFORMATION BACK COVER
</TABLE>
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[LOGO OF GOAL AND STRATEGY] GOAL AND STRATEGY The fund's particular investment
goals and the strategies it intends to use in pursuing those goals.
[LOGO OF PORTFOLIO SECURITIES] 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.
[LOGO OF RISK FACTORS] RISK FACTORS The major risk factors associated with the
fund.
[LOGO OF PORTFOLIO MANAGEMENT] PORTFOLIO MANAGEMENT The individual or group
(including subadvisers, if any) designated by the investment adviser to handle
the fund's day-to-day management.
[LOGO OF EXPENSES] EXPENSES The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
[LOGO OF FINANCIAL HIGHLIGHTS] FINANCIAL HIGHLIGHTS A table showing the fund's
financial performance for up to ten years, by share class. A bar chart showing
total return allows you to compare the fund's historical risk level to those of
other funds.
GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in
common stocks. Each fund has its own strategy and 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
These funds may be appropriate for investors who:
- - have longer time horizons
- - are willing to accept higher short-term risk along with higher potential
long-term returns
- - want to diversify their portfolios
- - are seeking funds for the growth portion of an asset allocation portfolio
- - are investing for retirement or other goals that 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
THE MANAGEMENT FIRM
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 $19 billion in
assets.
<PAGE>
DISCIPLINED GROWTH FUND
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II TICKER SYMBOL CLASS A: SVAAX CLASS B: FEQVX
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[LOGO OF GOAL AND STRATEGY] The fund seeks long-term growth of capital. To
pursue this goal, the fund invests in established, growing companies that have
demonstrated superior earnings growth and stability. Under normal circumstances,
the fund invests at least 65% of assets in these companies, without
concentration in any one industry. The fund also looks for the following
characteristics:
- - predictability of earnings
- - a low level of debt
- - seasoned management
- - a strong market position
Many of the fund's investments are in medium or large capitalization companies.
The fund invests for income as a secondary goal.
PORTFOLIO SECURITIES
[LOGO OF PORTFOLIO SECURITIES] The fund 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 place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund also may invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[LOGO OF RISK FACTORS] As with any growth fund, the value of your investment
will fluctuate in response to stock market movements.
To the extent that the fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. Before you invest,
please read "More about risk" starting on page 30.
PORTFOLIO MANAGEMENT
[LOGO OF PORTFOLIO MANAGEMENT] John F. Snyder III and Jere E. Estes are the
leaders of the fund's portfolio management team. Mr. Snyder is an executive vice
president of the adviser and has been a team member since July 1992. He has been
an investment manager since 1971. Mr. Estes has been a part of the fund's
management team since joining John Hancock in July 1992. He has been in the
investment business since 1967.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO OF EXPENSES] 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
<CAPTION>
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (as a % of average net assets)
- -----------------------------------------------------------------------------
<S> <C> <C>
Management fee 0.75% 0.75%
- -----------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
- -----------------------------------------------------------------------------
Other expenses 0.43% 0.43%
- -----------------------------------------------------------------------------
Total fund operating expenses 1.48% 2.18%
- -----------------------------------------------------------------------------
</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 $127 $218
- ------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------
Assuming redemption
at end of period $72 $98 $137 $234
- ------------------------------------------------------------------------
Assuming no redemption $22 $68 $117 $234
- ------------------------------------------------------------------------
</TABLE>
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
4 DISCIPLINED GROWTH FUND
<PAGE>
<TABLE>
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FINANCIAL HIGHLIGHTS
[LOGO OF FINANCIAL HIGHLIGHTS] The figures below have been audited by the fund's independent auditors, Price Waterhouse LLP.
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VOLATILITY, AS INDICATED BY
CLASS B YEAR-BY-YEAR TOTAL INVESTMENT
RETURN (%) (16.44)(4) 26.69 14.27 (16.46) 30.21 7.22 12.34 0.78 11.51 21.89
(scale varies from fund to
fund)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 10/92(1) 10/93 10/94 10/95 10/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.81 $ 10.99 $ 12.39 $ 12.02 $ 12.77
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2) 0.07(2)
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Net realized and unrealized gain
(loss) on investments (0.06) 1.34 0.07 1.29 2.82
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Total from investment operations 0.00 1.42 0.17 1.37 2.89
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Less distributions:
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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) (0.10)
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Distributions from capital paid-in (0.01) -- -- -- --
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Total distributions (1.82) (0.02) (0.54) (0.62) (0.10)
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Net asset value, end of period $10.99 $ 12.39 $ 12.02 $ 12.77 $ 15.56
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE(3)(%) 0.19(4) 12.97 1.35 12.21 22.78
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RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s
omitted)($) 1,771 23,372 23,292 27,692 28,760
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets(%) 1.73(5) 1.60 1.53 1.46 1.47
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Ratio of net investment income
(loss) to average net assets(%) 0.62(5) 0.64 0.83 0.69 0.46
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Portfolio turnover rate(%) 246 71 60 65 78
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Average brokerage commission rate(6)($) N/A N/A N/A N/A 0.0698
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<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/87(1) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 12.69
- ------------------------------------------------------------------------------------------------------------------------------------
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) (0.03)(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 2.79
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations (1.64) 2.18 1.44 (1.82) 2.74 1.06 1.35 0.10 1.29 2.76
- ------------------------------------------------------------------------------------------------------------------------------------
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) (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
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) (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.34 $ 10.29 $11.52 $ 9.22 $11.71 $10.97 $12.31 $11.95 $12.69 $ 15.35
- ------------------------------------------------------------------------------------------------------------------------------------
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 21.89
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RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted)($) 14,016 14,927 23,813 17,714 21,826 23,525 93,853 94,431 86,178 92,555
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets(%) 2.56(5,7) 2.61(7) 2.30 2.13 2.24 2.27 2.09 2.10 2.11 2.17
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets(%) 0.93(5,7) 1.46(7) 1.75 1.64 0.66 0.10 0.17 0.25 0.06 (0.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 40(5) 54 94 165 217 246 71 60 65 78
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Average brokerage
commission rate(6)($) N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0698
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(1) Class A and Class B shares commenced operations on January 3, 1992 and April 22, 1987, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(7) Net of advisory expense reimbursements per share of $0.01 for the fiscal year ended October 31, 1988 and less than $0.01 for
the fiscal year ended October 31, 1987.
</TABLE>
DISCIPLINED GROWTH FUND 5
<PAGE>
DISCOVERY FUND
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST IV TICKER SYMBOL CLASS A: FRDAX CLASS B: FRDIX
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[LOGO OF GOAL AND STRATEGY] 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 invests at least 65% of
assets in these companies. The fund looks for companies, including small- and
medium-sized companies, that have broad market opportunities and consistent or
accelerating earnings growth. These companies may:
- - occupy a profitable market niche
- - have products or technologies that are new, unique or proprietary
- - be in an industry that has a favorable long-term growth outlook
- - have a capable management team with a significant equity stake
These companies may be in a relatively early stage of development, but will
usually have established a record of profitability and a strong financial
position. The fund does not invest for income.
PORTFOLIO SECURITIES
[LOGO OF PORTFOLIO SECURITIES] 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 net assets in
cash or in investment-grade short-term 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 assets in foreign securities, which carry
additional risks. The fund also may invest in certain higher-risk securities,
and may engage in other investment practices.
RISK FACTORS
[LOGO OF RISK FACTORS] As with any growth fund, the value of your investment
will fluctuate in response to stock market movements. To the extent that the
fund invests in small- and medium-sized company stocks, foreign securities and
other higher-risk securities, it takes on additional risks that could adversely
affect its performance. The fund may experience higher volatility than many
other types of growth funds. Before you invest, please read "More about risk"
starting on page 30.
PORTFOLIO MANAGEMENT
[LOGO OF PORTFOLIO MANAGEMENT] Bernice S. Behar, CFA, leader of the fund's
portfolio management team since March 1994, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO OF INVESTOR EXPENSES] 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
<CAPTION>
---------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (as a % of average net assets)
---------------------------------------------------------------------------
<S> <C> <C>
Management fee 0.75% 0.75%
---------------------------------------------------------------------------
12b-1 fee(3) 0.30% 1.00%
---------------------------------------------------------------------------
Other expenses 0.61% 0.61%
---------------------------------------------------------------------------
Total fund operating expenses 1.66% 2.36%
---------------------------------------------------------------------------
</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 $66 $100 $136 $237
----------------------------------------------------------------------
Class B shares
----------------------------------------------------------------------
Assuming redemption
at end of period $74 $104 $146 $252
----------------------------------------------------------------------
Assuming no redemption $24 $74 $126 $252
----------------------------------------------------------------------
</TABLE>
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
6 DISCOVERY FUND
<PAGE>
<TABLE>
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FINANCIAL HIGHLIGHTS
[LOGO OF FINANCIAL HIGHLIGHTS] The figures below for each of the five periods
ended July 1993 to October 1996 have been audited by the fund's independent
auditors, Ernst & Young LLP. Figures for the period ended July 1992 were audited
by other independent auditors.
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN(%) 10.88(6) 21.63 (7.18) 54.97 16.85 6.69(6)
(scale varies from fund to fund) three
months
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 7/92(1,2) 7/93 7/94 7/95 7/96 10/96(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 15.09
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.05) (0.16) (0.16)(4) (0.17)(4) (0.19)(4) (0.05)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.40) 2.15 (0.43) 4.83 2.46 1.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.45) 1.99 (0.59) 4.66 2.27 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 2.95 $ 15.09 $ 16.13
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5)(%) (4.79)(6) 22.33 (6.45) 55.80 17.72 6.89(6)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 3,866 4,692 3,226 5,075 32,009 52,479
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(%) 1.78(7) 2.17 2.01 2.10 1.72 1.65(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets(%) (1.20)(7) (1.61) (1.64) (1.73) (1.26) (1.20)(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 138 148 108 118 116 45
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(8)($) N/A N/A N/A N/A N/A 0.0628
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 7/92(1,2) 7/93 7/94 7/95 7/96 10/96(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.00 $ 8.87 $ 10.65 $ 8.34 $ 12.54 $ 14.50
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.11) (0.23) (0.22)(4) (0.22)(4) (0.27)(4) (0.08)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.98 2.14 (0.43) 4.69 2.36 1.05
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.87 1.91 (0.65) 4.47 2.09 0.97
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 14.50 $ 15.47
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5)(%) 10.88(6) 21.63 (7.18) 54.97 16.85 6.69(6)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)($) 34,636 38,672 26,537 31,645 68,591 96,042
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(%) 2.56(7) 2.86 2.62 2.70 2.42 2.37(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets(%) (1.56)(7) (2.26) (2.24) (2.34) (1.96) (1.93)(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 138 148 108 118 116 45
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(8) ($) N/A N/A N/A N/A N/A 0.0628
(1) Class A and Class B shares commenced operations on January 3, 1992 and August 30, 1991, respectively.
(2) Covered by report of other independent auditors (not included herein).
(3) Effective October 31, 1996, the fiscal year end changed from July 31 to October 31.
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(6) Not annualized.
(7) Annualized.
(8) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
</TABLE>
DISCOVERY FUND 7
<PAGE>
EMERGING GROWTH FUND
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK SERIES TRUST TICKER SYMBOL CLASS A: TAEMX CLASS B: TSEGX
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[LOGO OF GOAL AND STRATEGY] The fund seeks long-term capital appreciation. To
pursue this goal, the fund invests in emerging companies (market capitalization
of less than $1 billion). Under normal circumstances, the fund invests at least
80% of 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
[LOGO OF PORTFOLIO SECURITIES] 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% of assets in cash or
in investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[LOGO OF RISK FACTORS] As with any growth fund, the value of your investment
will fluctuate in respo nse to stock market movements. 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. Before you invest, please read "More
about risk" starting on page 30.
PORTFOLIO MANAGEMENT
[LOGO OF PORTFOLIO MANAGEMENT] Bernice S. Behar, CFA, leader of the fund's
portfolio management team since April 1996, is a senior vice president of the
adviser. She joined the adviser in 1991 and has been in the investment business
since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO OF INVESTOR EXPENSES] 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
<CAPTION>
----------------------------------------------------------------------
Annual fund operating expenses (as a % of average net assets)
----------------------------------------------------------------------
<S> <C> <C>
Management fee 0.75% 0.75%
----------------------------------------------------------------------
12b-1 fee(3) 0.25% 1.00%
----------------------------------------------------------------------
Other expenses 0.32% 0.32%
----------------------------------------------------------------------
Total fund operating expenses 1.32% 2.07%
----------------------------------------------------------------------
</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 $90 $119 $201
----------------------------------------------------------------------
Class B shares
----------------------------------------------------------------------
Assuming redemption
at end of period $71 $95 $131 $221
----------------------------------------------------------------------
Assuming no redemption $21 $65 $111 $221
----------------------------------------------------------------------
</TABLE>
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
8 EMERGING GROWTH FUND
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO OF FINANCIAL HIGHLIGHTS] The figures below have been audited by the fund's independent auditors, Price Waterhouse LLP.
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VOLATILITY, AS INDICATED BY
CLASS B YEAR-BY-YEAR TOTAL INVESTMENT
RETURN (%) 0.00 33.59 27.40 (11.82) 73.78 6.19 24.53 2.80 33.60 12.48
(scale varies from fund to
fund)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 10/91(1) 10/92 10/93 10/94 10/95(2) 10/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 36.09
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(3) (0.03) (0.20) (0.16) (0.18) (0.25) (0.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.17 1.60 5.45 1.11 9.52 5.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.14 1.40 5.29 0.93 9.27 4.79
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain on investments sold -- (0.60) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09 $ 40.88
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE(4)(%) 6.29 7.32 25.68 3.59 34.56 13.27
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s
omitted)($) 38,859 46,137 81,263 131,053 179,481 218,497
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets(%) 0.33 1.67 1.40 1.44 1.38 1.32
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets(%) (0.15) (1.03) (0.70) (0.71) (0.83) (0.86)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 66 48 29 25 23 44
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission rate(5)($) N/A N/A N/A N/A N/A 0.0698
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/87(1) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95(2) 10/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 12.56 $ 11.06 $19.22 $20.34 $25.33 $26.04 $ 34.79
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss)(3) (0.0021) 0.09 (0.08) (0.22) (0.30) (0.38) (0.36) (0.36) (0.45) (0.60)
- ------------------------------------------------------------------------------------------------------------------------------------
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 4.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.0000 2.65 2.75 (1.48) 8.16 1.18 4.99 0.71 8.75 4.34
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income -- -- (0.04) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain on
investments sold -- -- (0.49) (0.22) -- (0.60) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.53) (0.22) -- (0.60) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.89 $10.54 $ 12.76 $ 11.06 $ 19.22 $ 20.34 $ 25.33 $ 26.04 $ 34.79 $ 39.13
- ------------------------------------------------------------------------------------------------------------------------------------
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 12.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjusted investment
return at net asset
value(4,6) (%) (0.41) 31.00 27.37 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted)($) 79 3,232 7,877 11,688 52,743 86,923 219,484 283,435 393,478 451,268
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets(%) 0.03 3.05 3.48 3.11 2.85 2.64 2.28 2.19 2.11 2.05
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted expenses
to average net assets(7)(%) 0.44 5.64 3.51 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets(%) (0.03) 0.81 (0.67) (1.64) (1.83) (1.99) (1.58) (1.46) (1.55) (1.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of adjusted net
investment income (loss)
to average net assets(7)(%) (0.44) (1.78) (0.70) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 0 252 90 82 66 48 29 25 23 44
- ------------------------------------------------------------------------------------------------------------------------------------
Fee reduction per share ($) 0.03 0.29 0.004 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission
rate(5)($) N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0669
(1) Class A and Class B shares commenced operations on August 22,1991 and October 26,1987, respectively. (Not annualized.)
(2) On December 22,1994, John Hancock Advisors, Inc. became the investment advisor 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) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(6) An estimated total return calculation that does not take into consideration fee reductions by the advisor during the periods
shown.
(7) Unreimbursed, without fee reduction.
</TABLE>
EMERGING GROWTH FUND 9
<PAGE>
FINANCIAL INDUSTRIES FUND
<TABLE>
<S> <C> <C> <C>
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II TICKER SYMBOL CLASS A: FIDAX CLASS B: FIDBX
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[LOGO OF GOAL AND STRATEGY] The fund seeks capital appreciation. To pursue this
goal, the fund invests in U.S. and foreign financial services companies. These
include banks, thrifts, finance companies, brokerage and advisory firms, real
estate-related firms and insurance companies.
Under normal circumstances, the fund invests at least 65% of assets in these
companies.
PORTFOLIO SECURITIES
[LOGO OF PORTFOLIO SECURITIES] The fund invests primarily in the common stocks
of U.S. and foreign companies. It may also invest in warrants, preferred stocks
and debt securities.
The fund may invest up to 5% of net assets in junk bonds. For liquidity and
flexibility, the fund may place up to 15% of net assets in cash or in
investment-grade short-term securities. In abnormal market conditions, it may
invest up to 80% in these securities as a defensive tactic. The fund may also
invest in certain higher-risk securities and may engage in other investment
practices.
RISK FACTORS
[LOGO OF RISK FACTORS] As with any growth fund, the value of your investment
will fluctuate in response to stock market movements. Because the fund
concentrates in a single sector, its performance is largely dependent on the
sector's performance, which may differ from that of the overall stock market.
Falling interest rates or deteriorating economic conditions can adversely affect
the performance of financial services companies' stocks, while rising interest
rates will cause a decline in the value of any debt securities the fund holds.
Before you invest, please read "More about risk" starting on page 30.
PORTFOLIO MANAGEMENT
[LOGO OF PORTFOLIO MANAGEMENT] James K. Schmidt, CFA, and Thomas Finucane lead
the fund's portfolio management team. Mr. Schmidt has been in the investment
business since 1974. He joined the adviser in 1985 and is an executive vice
president. Mr. Finucane has been in the investment business since joining the
adviser in 1990. He is a second vice president.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
{LOGO OF EXPENSES] Fund investors pay various expenses, either directly or
indirectly. The figures below are based on Class A expenses for the past year,
adjusted to reflect any changes. No Class B shares were issued or outstanding
during the past year. 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
<CAPTION>
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
<S> <C> <C>
Management fee (after expense limitation)(3) 0.00% 0.00%
- --------------------------------------------------------------------------------
12b-1 fee(4) 0.30% 1.00%
- --------------------------------------------------------------------------------
Other expenses
(after limitation)(3) 0.90% 0.90%
- --------------------------------------------------------------------------------
Total fund operating expenses
(after limitation)(3) 1.20% 1.90%
- --------------------------------------------------------------------------------
</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
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Class A shares $62 $86 $113 $188
- --------------------------------------------------------------------------------
Class B shares
- --------------------------------------------------------------------------------
Assuming redemption
at end of period $69 $90 $123 $204
- --------------------------------------------------------------------------------
Assuming no redemption $19 $60 $103 $204
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Reflects the adviser's agreement to limit expenses (except for 12b-1 and
other class-specific expenses). Without this limitation, management fees
would be 0.80% for each class, other expenses would be 5.97% for each class
and total fund operating expenses would be 7.07% for Class A and 7.77% for
Class B.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
10 Financial Industries Fund
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO OF FINANCIAL HIGHLIGHTS] The figures below have been audited by the fund's
independent auditors, Price Waterhouse LLP.
<S> <C>
VOLATILITY, AS INDICATED BY
CLASS A YEAR-BY-YEAR TOTAL INVESTMENT
RETURN (%) 29.76(4)
--------------------------------------------------------------------
(scale varies from fund to
fund)
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
CLASS A - PERIOD ENDED: 10/96(1)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.50
- --------------------------------------------------------------------------------
Net investment income (loss) 0.02(2)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.51
- --------------------------------------------------------------------------------
Total from investment operations 2.53
- --------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------
Dividends from net investment income --
- --------------------------------------------------------------------------------
Distributions from net realized gain on investments sold --
- --------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------
Net asset value, end of period $ 11.03
- --------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 29.76(4)
- --------------------------------------------------------------------------------
Total adjusted investment return at net asset value(3,5) (%) 26.04(4)
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) 895
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 1.20(6)
- --------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(5) (%) 7.07(6)
- --------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) 0.37(6)
- --------------------------------------------------------------------------------
Ratio of adjusted net investment income (loss) to average net
assets(5) (%) (5.50)(6)
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 31
- --------------------------------------------------------------------------------
Average brokerage commission rate(7) ($) 0.0649
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
CLASS B - PERIOD ENDED: 10/96
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------
Net asset value, beginning of period --
- --------------------------------------------------------------------------------
Net investment income (loss) --
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments --
- --------------------------------------------------------------------------------
Total from investment operations --
- --------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------
Dividends from net investment income --
- --------------------------------------------------------------------------------
Distributions from net realized gain on investments sold --
- --------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------
Net asset value, end of period --
- --------------------------------------------------------------------------------
Total investment return at net asset value(3) (%) --
- --------------------------------------------------------------------------------
Total adjusted investment return at net asset value(3,5) (%) --
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted) ($) --
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets (5)(%) --
- --------------------------------------------------------------------------------
Ratio of adjusted expenses to average net assets(5) (%) --
- --------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) --
- --------------------------------------------------------------------------------
Ratio ofadjusted net investment income (loss) to average net
assets(5) (%) --
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) --
- --------------------------------------------------------------------------------
Average brokerage commission rate(7) ($) --
- --------------------------------------------------------------------------------
(1) Class A shares commenced operations on March 14, 1996.
(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) Unreimbursed, without fee reduction.
(6) Annualized.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
FINANCIAL INDUSTRIES FUND 11
<PAGE>
GROWTH FUND
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST III
TICKER SYMBOL CLASS A: JHNGX CLASS B: JHGBX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO]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 over
the past five years, although not all stocks in the fund's portfolio will meet
this criterion.
PORTFOLIO SECURITIES
[LOGO]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 net assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. The fund may
also invest in certain higher-risk securities, and may engage in other
investment practices.
RISK FACTORS
[LOGO]As with any growth fund, the value of your investment will fluctuate in
respo nse to stock market movements. To the extent that the fund invests in
higher-risk securities, it takes on additional risks that could adversely affe
ct its performance. Before you invest, please read "More about risk" starting on
page 30.
PORTFOLIO MANAGEMENT
[LOGO]Anurag Pandit, CFA, is leader of the fund's portfolio management team. A
second vice president of the adviser, Mr. Pandit has been a member of the
management team since joining John Hancock Funds in April 1996. He assumed
leadership of the team on January 1, 1997. Mr. Pandit has been in the investment
business since 1984.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO]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 0.79% 0.79%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.39% 0.39%
Total fund operating expenses 1.48% 2.18%
- -------------------------------------------------------------------------------
</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 $127 $218
Class B shares
Assuming redemption
at end of period $72 $98 $137 $234
Assuming no redemption $22 $68 $117 $234
- -------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation
of the fund's actual expenses and returns, either past or future.
- ----------
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
12 GROWTH FUND
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
[LOGO]The figures below have been audited by the fund's independent auditors,
Ernst & Young LLP.
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VOLATILITY, AS INDICATED BY CLASS A [GRAPH]
YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%) 13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17 19.32(4)
(scale varies from fund to fund) ten months
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A - PERIOD ENDED: 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 10/96(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 7.32 $ 17.40 $ 15.89 $ 19.51
Net investment
income (loss) 0.11 0.22 0.23 0.28 0.16 0.04 (0.06) (0.11) (0.10) (0.09)(2) (0.13)(2)
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 3.90
Total from investment
operations 1.90 0.86 1.39 4.09 (1.31) 5.40 1.04 2.22 (1.31) 4.31 3.77
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 $ 23.28
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE(3)(%) 13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17 19.32(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)($) 87,468 86,426 101,497 105,014 102,416 145,287 153,057 162,937 146,466 241,700 279,425
Ratio of expenses to
average net assets(%) 1.03 1.00 1.06 0.96 1.46 1.44 1.60 1.56 1.65 1.48 1.48(5)
Ratio of net investment
income (loss) to average
net assets(%) 0.77 1.41 1.76 1.73 1.12 0.27 (0.36) (0.67) (0.64) (0.46) (0.73)(5)
Portfolio turnover rate (%) 62 68 47 61 102 82 71 68 52 68(6) 59
Average brokerage commission
rate(7)($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0695
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 12/94(8) 12/95 10/96(1)
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period $ 17.16 $ 15.83 $ 19.25
Net investment income (loss) (0.20)(2) (0.26)(2) (0.26)(2)
Net realized and unrealized
gain (loss) on investments (0.93) 4.37 3.84
Total from investment
operations (1.13) 4.11 3.58
Less distributions:
Distributions from net
realized gain on
investments sold (0.20) (0.69) --
Net asset value, end of period $ 15.83 $1 9.25 $ 22.83
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) (6.56)(4) 26.01 18.60(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,807 15,913 25,474
Ratio of expenses to average net assets (%) 2.38 (8) 2.31 2.18 (8)
Ratio of net investment income (loss) to
average net assets (%) (1.25)(8) (1.39) (1.42)(8)
Portfolio turnover rate (%) 52 68(6) 59
Average brokerage commission rate(7) ($) N/A N/A 0.0695
- ----------
(1) Effective October 31, 1996, the fiscal year end changed from December 31 to
October 31.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Excludes merger activity.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(8) Class B shares commenced operations on January 3, 1994.
</TABLE>
GROWTH FUND 13
<PAGE>
REGIONAL BANK FUND
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST II
TICKER SYMBOL CLASS A: FRBAX CLASS B:FRBFX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO]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.
Under normal circumstances, the fund invests at least 65% of assets in these
companies; it may invest up to 35% of assets in other financial services
companies, including lending companies and money center banks. The fund may
invest up to 5% of net assets in stocks of non-financial services companies and
up to 5% in junk bonds issued by banks. Because regional banks typically pay
regular dividends, moderate income is an investment goal.
PORTFOLIO SECURITIES
[LOGO]The fund invests primarily in the common stocks of U.S. companies. It may
als o invest in warrants, preferred stocks and investment-grade convertible debt
securities, as well as foreign stocks.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may also invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[LOGO]As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. 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. Before you invest, please
read "More about risk" starting on page 30.
PORTFOLIO MANAGEMENT
James K. Schmidt, CFA, joined John Hancock in 1985 and has served as the fund's
portfolio manager since its inception that year. An executive vice president of
the adviser, he has been in the investment business since 1974.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO]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 0.76% 0.76%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.32% 0.32%
Total fund operating expenses 1.38% 2.08%
- -------------------------------------------------------------------------------
</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 $207
Class B shares
Assuming redemption
at end of period $71 $95 $132 $223
Assuming no redemption $21 $65 $112 $223
- ----------
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
14 REGIONAL BANK FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO]The figures below have been audited
by the fund's independent auditors, Price Waterhouse LLP.
<TABLE>
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL [GRAPH]
INVESTMENT RETURN(%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35 37.20 36.71 5.69 30.11 27.89
(scale varies from fund to fund)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 10/92(1) 10/93 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning
of period $ 13.47 $ 17.47 $ 21.62 $ 21.52 $ 27.14
Net investment
income (loss) 0.21 0.26(2) 0.39(2) 0.52(2) 0.63(2)
Net realized and
unrealized gain
(loss) on
investments 3.98 5.84 0.91 5.92 7.04
Total from
investment
operations 4.19 6.10 1.30 6.44 7.67
Less distributions:
Dividends from
net investment
income (0.19) (0.26) (0.34) (0.48) (0.60)
Distributions
from net
realized gain on
investments sold -- (1.69) (1.06) (0.34) (0.22)
Total distributions (0.19) (1.95) (1.40) (0.82) (0.82)
Net asset value,
end of period $ 17.47 $ 21.62 $ 21.52 $ 27.14 $ 33.99
TOTAL INVESTMENT
RETURN AT NET
ASSET VALUE(3) (%) 31.26(4) 37.45 6.44 31.00 28.78
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period
(000s omitted) ($) 31,306 94,158 216,978 486,631 860,843
Ratio of expenses
to average net
assets (%) 1.41(5) 1.35 1.34 1.39 1.36
Ratio of net
investment income
to average net
assets (%) 1.64(5) 1.29 1.78 2.23 2.13
Portfolio turnover
rate (%) 53 35 13 14 8
Average brokerage
commission
rate(6) ($) N/A N/A N/A N/A 0.0694
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED:
3/87(7) 10/87(8) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------------------
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 $ 27.02
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) 0.42(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 7.01
Total from investment
operations 1.94 (2.12) 3.28 2.22 (3.89) 5.97 4.74 5.98 1.14 6.25 7.43
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) (0.40)
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) (0.22)
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) (0.62)
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 $ 33.83
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 27.89
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period (000s
omitted) ($) 54,626 38,721 50,965 81,167 38,992 52,098 56,016 171,808 522, 207 1,236,447 2,408,514
Ratio of expenses
to average net
assets (%) 1.48 2.47(5) 2.17 1.99 1.99 2.04 1.96 1.88 2.06 2.09 2.07
Ratio of net
investment income
(loss) to average
net assets (%) 1.62 0.73(5) 1.50 1.67 2.51 2.65 1.21 0.76 1.07 1.53 1.42
Portfolio turnover
rate (%) 89 58(5) 87 85 56 75 53 35 13 14 8
Average brokerage
commission
rate(6)($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0694
- ----------
(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) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(7) Year ended March 31, 1987.
(8) For the period April 1, 1987 to October 31, 1987.
</TABLE>
REGIONAL BANK FUND 15
<PAGE>
SPECIAL EQUITIES FUND
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND
TICKER SYMBOL CLASS A: JHNSX CLASS B: SPQBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO]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. Under normal circumstances, the
fund invests at least 65% of 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
annual earnings and revenue growth of at least 25%, self-financing capabilities
and strong management. The fund does not invest for income.
PORTFOLIO SECURITIES
[LOGO]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 assets in cash or in investment-grade short-term securities. In
abnormal market conditions, it may invest more than 35% in these securities as a
defensive tactic. The fund also may invest in certain higher-risk securities,
and may engage in other investment practices.
RISK FACTORS
[LOGO]As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. 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 that are sensitive to adverse news
In addition, stocks of these companies are often traded in low volumes, which
can increase market and liquidity risks. Before you invest, please read "More
about risk" starting on page 30.
MANAGEMENT/SUBADVISER
[LOGO]Michael P. DiCarlo is responsible for the fund's day-to-day investment
management. He has served as the fund's portfolio manager since January 1988,
and has been in the investment business since 1984. He is currently one of three
principals in DFS Advisors, LLC, which was founde d in 1996 and serves as
subadviser to the fund.
This fund will be closed to new investors at the end of the day its total assets
reach $2.5 billion. Further investments will be limited to existing accounts.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO]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) 0.81% 0.81%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.31% 0.35%
Total fund operating expenses 1.42% 2.16%
</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 $93 $124 $212
Class B shares
Assuming redemption
at end of period $72 $98 $136 $231
Assuming no redemption $22 $68 $116 $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) Includes a subadviser fee equal to 0.25% of the fund's net assets.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
16 SPECIAL EQUITIES FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
[LOGO]The figures below have been audited
by the fund's independent auditors, Ernst & Young LLP.
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL
INVESTMENT
RETURN (%) [GRAPH]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49 12.96
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(scale varies from fund to fund)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 10/87 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $6.08 $4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15
Net investment
income (loss) (0.03) 0.04 0.01 (0.12) (0.10) (0.19)(1) (0.20)(1) (0.21)(1) (0.18)(1) (0.22)
Net realized and
unrealized gain (loss)
on investments (1.26) 0.55 1.53 (1.27) 4.84 2.14 5.43 0.19 6.22 3.06
Total from investment
operations (1.29) 0.59 1.54 (1.39) 4.74 1.95 5.23 (0.02) 6.04 2.84
Less distributions:
Dividends from net
investment income -- -- (0.05) (0.02) -- -- -- -- -- --
Distributions from
net realized gain
on investments
sold (0.45) -- -- -- -- (0.67) (0.09) -- -- (0.46)
Distributions from
capital paid-in (0.04) -- -- -- -- -- -- -- -- --
Total distributions (0.49) -- (0.05) (0.02) -- (0.67) (0.09) -- -- (0.46)
Net asset value, end
of period $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $ 10.99 $ 16.13 $ 16.11 $ 22.15 $ 24.53
TOTAL INVESTMENT RETURN
AT NET ASSET
VALUE(2)(%) (28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49 12.96
Total adjusted
investment return at
net asset value(2,3) (29.41) 12.28 30.75 (22.21) 95.33 -- -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
period (000s
omitted) ($) 10,637 11,714 12,285 8,166 19,713 44,665 296,793 310,625 555,655 972,312
Ratio of expenses to
average net assets (%) 1.50 1.50 1.50 2.63 2.75 2.24 1.84 1.62 1.48 1.42
Ratio of adjusted
expenses to average
net assets(4) (%) 2.23 2.94 2.57 2.95 2.79 -- -- -- -- --
Ratio of net investment
income (loss) to
average net assets (%) (0.57) 0.82 0.47 (1.58) (2.12) (1.91) (1.49) (1.40) (0.97) (0.89)
Ratio of adjusted net
investment income
(loss) to average
net assets(4) (%) (1.30) (0.62) (0.60) (1.90) (2.16) -- -- -- -- --
Portfolio turnover
rate (%) 93 91 115 113 163 114 33 66 82 59
Fee reduction per
share ($) 0.04 0.07 0.03 0.02 0.002 -- -- -- -- --
Average brokerage
commission rate(5) ($) N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0677
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/93(6) 10/94 10/95 10/96
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.30 $ 16.08 $ 15.97 $ 21.81
Net investment income (loss) (0.18)(1) (0.30)(1) (0.31)(1) (0.40)(1)
Net realized and
unrealized gain (loss)
on investments 3.96 0.19 6.15 3.01
Total from investment operations 3.78 (0.11) 5.84 2.61
Less distributions:
Distributions from net
realized gain on
investments sold -- -- -- (0.46)
Net asset value, end of period $ 16.08 $ 15.97 $ 21.81 $ 23.96
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE(2) (%) 30.73(7) (0.68) 36.57 12.09
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted) ($) 158,281 191,979 454,934 956,374
Ratio of expenses to
average net assets (%) 2.34(8) 2.25 2.20 2.16
Ratio of net investment
income (loss) to average
net assets (%) (2.03)(8) (2.02) (1.69) (1.65)
Portfolio turnover rate (%) 33 66 82 59
Average brokerage commission rate(5) ($) N/A N/A N/A 0.0677
- ----------
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) Class B shares commenced operations on March 1, 1993.
(7) Not annualized.
(8) Annualized.
</TABLE>
SPECIAL EQUITIES FUND 17
<PAGE>
SPECIAL OPPORTUNITIES FUND
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST III
TICKER SYMBOL CLASS A: SPOAX CLASS B: SPOBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[LOGO]The fund seeks long-term capital appreciation. To pursue this goal, the
fund invests in those economic sectors that appear to have a higher than average
earning potential. Under normal circumstances, at least 90% of the fund's equity
securities is invested within five or fewer sectors (e.g., financial services,
energy, technology). At times, the fund may focus on a single sector. The fund
first determines the inclusion and weighting of sectors, using macroeconomic as
well as other factors, then selects portfolio securities by seeking the most
attractive companies. The fund may add or drop sectors. Because the fund may
invest more than 5% of assets in a single issuer, it is classified as a
non-diversified fund.
PORTFOLIO SECURITIES
[LOGO]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, and may invest in certain higher-risk securities. The
fund also may make short sales of securities and may engage in other investment
practices. For liquidity and flexibility, the fund may place up to 10% of net
assets in cash or investment-grade short-term securities. In abnormal market
conditions, it may invest more than 10% in these securities as a defensive
tactic.
RISK FACTORS
[LOGO]As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. By focusing on a relatively small number of
sectors or issuers, the fund runs the risk that any factor influencing those
sectors 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. These factors make the
fund likely to experience higher volatility than most other types of growth
funds. Before you invest, please read "More about risk" starting on page 30.
PORTFOLIO MANAGEMENT
[LOGO]Kevin R. Baker is leader of the portfolio management team for the fund. A
vic e president of the adviser, he has been a member of the management team
since joining the adviser in January 1994. He has been in the investment
business since 1986.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[LOGO]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 0.50% 0.50%
Total fund operating expenses 1.60% 2.30%
</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 $133 $231
Class B shares
Assuming redemption
at end of period $73 $102 $143 $246
Assuming no redemption $23 $ 72 $123 $246
- ----------
This example is for comparison purposes only and is not a representation of
the fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
18 SPECIAL OPPORTUNITIES FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
[LOGO]The figures below have been audited
by the fund's independent auditors, Price Waterhouse LLP.
<CAPTION>
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
<S> <C> <C> <C>
(scale varies from fund to fund) (6.71) 17.53 36.15
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A - PERIOD ENDED: 10/94(1) 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.93 $ 9.32
Net investment income (loss)(2) (0.03) (0.07) (0.11)
Net realized and unrealized gain (loss) on investments (0.54) 1.46 3.34
Total from investment operations (0.57) 1.39 3.23
Less distributions:
Distributions from net realized gain on investments sold -- -- (1.63)
Net asset value, end of period $ 7.93 $ 9.32 $ 10.92
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (6.71) 17.53 36.15
Total adjusted investment return at net asset value(3,4) (%) (6.83) -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 92,325 101,562 156,578
Ratio of expenses to average net assets (%) 1.50 1.59 1.59
Ratio of adjusted expenses to average net assets(5) (%) 1.62 -- --
Ratio of net investment income (loss) to average net assets (%) (0.41) (0.87) (1.00)
Ratio of adjusted net investment (loss) to average net assets(5) (%) (0.53) -- --
Portfolio turnover rate (%) 57 155 240
Fee reduction per share ($) 0.01(2) -- --
Average brokerage commission rate(6) ($) N/A N/A 0.0600
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B - PERIOD ENDED: 10/94(1) 10/95 10/96
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.87 $ 9.19
Net investment income (loss)(2) (0.09) (0.13) (0.18)
Net realized and unrealized gain (loss) on investments (0.54) 1.45 3.29
Total from investment operations (0.63) 1.32 3.11
Less distributions:
Distributions from net realized gain on investments sold -- -- (1.63)
Net asset value, end of period $ 7.87 $ 9.19 $ 10.67
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (7.41)(4) 16.77 35.34
Total adjusted investment return at net asset value(3,4) (%) (7.53) -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 131,983 137,363 238,901
Ratio of expenses to average net assets (%) 2.22 2.30 2.29
Ratio of adjusted expenses to average net assets(5) (%) 2.34 -- --
Ratio of net investment income (loss) to average net assets (%) (1.13) (1.55) (1.70)
Ratio of adjusted net investment (loss) to average net assets(5) (%) (1.25) -- --
Portfolio turnover rate (%) 57 155 240
Fee reduction per share ($) 0.01(2) -- --
Average brokerage commission rate(6) ($) N/A N/A 0.0600
- ----------
(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) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
</TABLE>
SPECIAL OPPORTUNITIES FUND 19
<PAGE>
YOUR ACCOUNT
- -------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
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.
- -------------------------------------------------------------------------------
CLASS A CLASS B
- -------------------------------------------------------------------------------
* Front-end sales charges, as * No front-end sales charge; all your
described below. There are money goes to work for you right
several ways to reduce these away.
charges, also described below.
* Higher annual expenses than Class A
* Lower annual expenses than 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 expense
structure and are available to financial institutions only. Call Signature
Services for more information (see the back cover of this prospectus).
- -------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
CLASS A Sales charges are as follows:
<TABLE>
- -------------------------------------------------------------------------------
Class A sales charges
- -------------------------------------------------------------------------------
<CAPTION>
AS A % OF AS A % OF YOUR
YOUR INVESTMENT 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>
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. However, there is a contingent deferred sales charge (CDSC) on any
shares sold within one year of purchase, as follows:
<TABLE>
- -------------------------------------------------------------------------------
CDSC ON $1 MILLION+ INVESTMENTS
- -------------------------------------------------------------------------------
YOUR INVESTMENT CDSC ON SHARES BEING SOLD
<S> <C>
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
</TABLE>
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.
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>
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
</TABLE>
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.
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.
20 YOUR ACCOUNT
<PAGE>
- -------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
* Accumulation Privilege - lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
* Letter of Intention - lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
* Combination Privilege - lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services to add these options to an
existing account.
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each investor has an individual account, but for sales charge
purposes, the group's investments are lumped together making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify.
CDSC WAIVERS As long as Signature Services is notified at the time you sell, the
CDSC for either share class will generally be waived in the following cases:
* to make payments through certain systematic withdrawal plans
* to make certain distributions from a retirement plan
* because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
* government entities that are prohibited from paying mutual fund sales
charges
* financial institutions or common trust funds investing $1 million or more
for non-discretionary accounts
* selling brokers and their employees and sales representatives
* financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
* fund trustees and other individuals who are affiliated with these or other
John Hancock funds
* individuals transferring assets to a John Hancock fund from an employee
benefit plan that has John Hancock funds
* members of an approved affinity group financial services program
* certain insurance company contract holders (one-year CDSC usually applies)
* participants in certain retirement plans with at least 100 members
(one-year CDSC applies)
To utilize: if you think you may be eligible for a sales charge waiver,
contact your financial representative or Signature Services, or consult the
SAI.
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
* non-retirement account: $1,000
* retirement account: $250
* group investments: $250
* Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
application. By applying for privileges now, you can avoid the delay and
inconvenience of having to file an additional application if you want to
add privileges later.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 21
<PAGE>
- -------------------------------------------------------------------------------
BUYING SHARES
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------
BY CHECK
- -------------------------------------------------------------------------------
[LOGO] * Make out a check for the * Make out a check for the
investment amount, payable investment amount payable to
to "John Hancock Signature "John Hancock Signature
Services, Inc." Services, Inc."
* Deliver the check and your * Fill out the detachable
completed application to investment slip from an
your financial representative, account statement. If no
or mail them to Signature slip is available, include a
Services (address on next page). note specifying 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 them
to Signature Services
(address on next page).
- -------------------------------------------------------------------------------
BY EXCHANGE
- -------------------------------------------------------------------------------
[LOGO] * Call your financial * Call Signature Services to
representative or Signature request an exchange.
Services to request an
exchange.
- -------------------------------------------------------------------------------
BY WIRE
- -------------------------------------------------------------------------------
[LOGO] * Deliver your completed * Instruct your bank to wire
application to your financial the amount of your investmen
representative, or mail it to to:
Signature Services. First Signature Bank & Trust
Account # 900000260
* Obtain your account number by Routing # 211475000
calling your financial Specify the fund name, your
representative or Signature share class, your account
Services. number and the name(s) in
which the account is
* Instruct your bank to wire registered. Your bank may
the amount of your charge a fee to wire funds.
investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your
choice of share class, the new
account number and the name(s) in
which the account is registered.
Your bank may charge a fee to
wire funds.
- -------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------
[LOGO] 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
application.
* Call Signature Services to
verify that these features
are in place on your account.
* Tell the Signature Services
representative the fund name
your share class, your
account number, the name(s)
in which the account is
registered and the amount of
your investment.
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
22 YOUR ACCOUNT
<PAGE>
- -------------------------------------------------------------------------------
SELLING SHARES
- -------------------------------------------------------------------------------
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
- -------------------------------------------------------------------------------
BY LETTER
- -------------------------------------------------------------------------------
[LOGO] * Accounts of any type. * Write a letter of instruction or complete
a stock power indicating the fund name,
* Sales of any amount. your share class, your account number,
the name(s) in which the account is
registered and the dollar value or
number of shares you wish to sell.
* Include all signatures and any additional
documents that may be required (see next
page).
* Mail the materials to Signature Services.
* A check will be mailed to the name(s) and
address in which the account is
registered, or otherwise according to
your letter of instruction.
- -------------------------------------------------------------------------------
BY PHONE
- -------------------------------------------------------------------------------
[LOGO] * Most accounts. * For automated service 24 hours a day
using your touch-tone phone, call the
* 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 Signature
Services between 8 a.m and 4 p.m. Eastern
Time on most business days.
- -------------------------------------------------------------------------------
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
- -------------------------------------------------------------------------------
[LOGO] * Requests by letter to sell * Fill out the "Telephone Redemption"
any amount (accounts of section of your new account application.
any type).
* To verify that the telephone redemption
* Requests by phone to sell privilege is in place on an account, or
up to $100,000 (accounts to request the forms to add it to an
with telephone redemption existing account, call Signature
privileges). 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
- -------------------------------------------------------------------------------
[LOGO] * Accounts of any type. * Obtain a current prospectus for the fund
into which you are exchanging by
* Sales of any amount. calling your financial representative
or Signature Services.
* Call Signature Services to request an
exchange.
- -------------------------------------
ADDRESS
John Hancock Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
PHONE
1-800-225-5291
Or contact your financial
representative for instructions and
assistance.
- -------------------------------------
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
YOUR ACCOUNT 23
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders.
You will need a signature guarantee if:
* your address of record has changed within the past 30 days
* you are selling more than $100,000 worth of shares
* you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
* a broker or securities dealer
* a federal savings, cooperative or other type of bank
* a savings and loan or other thrift institution
* a credit union
* a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
- --------------------------------------------------------------------------------
SELLER REQUIREMENTS FOR WRITTEN REQUESTS
- --------------------------------------------------------------------------------
Owners of individual, joint, sole * Letter of instruction.
proprietorship, UGMA/UTMA (custodial * On the letter, the signatures
accounts for minors) or general and titles of all persons
partner accounts. authorized to sign for the account,
exactly as the account is registered.
* Signature guarantee if applicable
(see above).
Owners of corporate or association * Letter of instruction.
accounts. * Corporate resolution, certified
within the past 90 days.
* On the letter and the resolution,
the signature of the person(s)
authorized to sign for the account.
* Signature guarantee if applicable
(see above).
Owners or trustees of trust accounts. * Letter of instruction.
* On the letter, the signature(s) of
the trustee(s).
* If the names of all trustees are not
registered on the account, please
also provide a copy of the trust
document certified within the past
60 days.
* Signature guarantee if applicable
(see above).
Joint tenancy shareholders whose * Letter of instruction signed by
co-tenants are deceased. surviving tenant.
* Copy of death certificate.
* Signature guarantee if applicable
(see above).
Executors of shareholder estates. * Letter of instruction signed by
executor.
* Copy of order appointing executor.
* Signature guarantee if applicable
(see above).
Administrators, conservators, * Call 1-800-225-5291 for
guardians and other sellers or instructions.
account types not listed above.
24 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 p.m. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after your request is accepted by
Signature Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Signature Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or other taxpayer ID number and other relevant
information. If appropriate measures are taken, Signature Services is not
responsible for any losses that may occur to any account due to an unauthorized
telephone call. Also for your protection, telephone transactions are not
permitted on accounts whose names or addresses have changed within the past 30
days. Proceeds from telephone transactions can only be mailed to the address of
record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical. Class B shares
will continue to age from the original date and will retain the same CDSC rate
as they had before the exchange, except that the rate will change to the new
fund's rate if that rate is higher. A CDSC rate that has increased will drop
again with a future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Signature Services. Certificated
shares can only be sold by returning the certificates to Signature Services,
along with a letter of instruction or a stock power and a signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
* after every transaction (except a dividend reinvestment) that affects your
account balance
* after any changes of name or address of the registered owner(s)
* in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The funds generally distribute most or all of their net earnings in
the form of dividends.Any capital gains are distributed annually. 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
semi-annually and quarterly, respectively.
YOUR ACCOUNT 25
<PAGE>
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
* Complete the appropriate parts of your account application.
* If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Signature Services,
Inc." Deliver your check and application to your financial representative or
Signature Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
* Make sure you have at least $5,000 worth of shares in your account.
* Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
* Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
* Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
* Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, 401(k) plans, 403(b) plans (including TSAs) and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund (except tax-free income funds) with a low minimum investment
of $250 or, for some group plans, no minimum investment at all. To find out
more, call Signature Services at 1-800-225-5291.
26 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, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The boards of the John Hancock growth 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").
<TABLE>
------------
SHAREHOLDERS
------------
<S> <C>
--------------------------------------------
FINANCIAL SERVICES FIRMS AND
THEIR REPRESENTATIVES
DISTRIBUTION AND
SHAREHOLDER SERVICES Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
--------------------------------------------
------------------------------------------- -------------------------------------------------
POLITICAL DISTRIBUTOR TRANSFER AGENT
John Hancock Funds, Inc. John Hancock Signature Services, Inc.
101 Huntington Avenue 1 John Hancock Way STE 1000
Boston, MA 02199-7603 Boston, MA 02217-1000
Markets the funds and distributes shares Handles shareholder services, including record-
through selling brokers, financial planners keeping and statements, distribution of dividends,
and other financial representatives. and processing of buy and sell requests.
------------------------------------------- -------------------------------------------------
-------------------------------------
- ---------------------------------- ------------------------------- CUSTODIAN
SUBADVISER INVESTMENT ADVISER
Investors Bank & Trust Co.
DFS Advisors LLC John Hancock Advisers, Inc. 89 South Street ASSET
75 State Street 101 Huntington Avenue Boston, MA 02111 MANAGEMENT
Boston, MA 02109 Boston, MA 02199-7603
Holds the funds' assets, settles all
Provides portfolio management Manages the funds' business and portfolio trades and collects most of
services to Special Equities Fund. investment activities. the valuation data required for
- ---------------------------------- ------------------------------- calculating each fund's NAV.
-------------------------------------
--------------------------------
TRUSTEES
Supervise the funds' activities.
--------------------------------
</TABLE>
FUND DETAILS 27
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation is not expected to exceed
0.02% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
INVESTMENT GOALS Except for Discovery Fund, Emerging Growth Fund, Financial
Industries Fund and Special Opportunities Fund, each fund's investment goal is
fundamental and may only be changed with shareholder approval.
DIVERSIFICATION Except for Special Opportunities Fund, all of the growth funds
are diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation authorizing annual fees of this type). The 12b-1 fee rates
vary by fund and by share class, according to Rule 12b-1 plans adopted by the
funds. The sales charges and 12b-1 fees paid by investors are detailed in the
fund-by-fund information. The portions of these expenses that are reallowed to
financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
<TABLE>
- --------------------------------------------------------------------------------
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
- --------------------------------------------------------------------------------
<CAPTION>
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Disciplined Growth $ 3,798,216 4.19%
Discovery $ 886,207 1.01%
Emerging Growth $11,288,492 2.59%
Financial Industries N/A N/A
Growth $ 208,458 0.79%
Regional Bank $59,994,035 3.42%
Special Equities $19,220,716 2.54%
Special Opportunities $ 7,346,826 4.20%
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
</TABLE>
INITIAL COMPENSATION Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives the first
year's service fee at this time.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
28 FUND DETAILS
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM
SALES CHARGE REALLOWANCE FIRST YEAR MAXIMUM
PAID BY INVESTORS OR COMMISSION SERVICE FEE TOTAL COMPENSATION(1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
REGULAR INVESTMENTS OF
$1 MILLION OR MORE
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
MAXIMUM
REALLOWANCE FIRST YEAR MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
All amounts 3.75% 0.25% 4.00%
(1) Reallowance/commission percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members that take advantage of the sales charge
waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
</TABLE>
FUND DETAILS 29
<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 that 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 that 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.
- --------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks.
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 market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
* HEDGED When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be substantially
offset by gains on the hedged investment, and vice versa. While hedging can
reduce or eliminate losses, it can also reduce or eliminate gains.
* SPECULATIVE To the extent that a derivative is not used as a hedge, the fund
is directly exposed to the risks of that derivative. Gains or losses from
speculative positions in a derivative may be substantially greater than the
derivative's original cost.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance.
MANAGEMENT RISK The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds. Market risk The risk
that the market value of a security may move up and down, sometimes rapidly and
unpredictably. 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 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 less advantageous
investments.
POLITICAL RISK The risk of losses attributable to government or political act
ions, from changes in tax or trade statutes to 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.
30 FUND DETAILS
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
HIGHER-RISK SECURITIES AND PRACTICES
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
This table shows each fund's investment
limitations as a percentage of portfolio
assets. In each case the principal types
of risk are listed (see previous page for
definitions). Numbers in this table show
allowable usage only; for actual usage,
consult the fund's annual/semi-annual
reports.
10 Percent of total assets (italic type)
10 Percent of net assets (roman type)
[X] No policy limitation on usage;
fund may be using currently
[ ] Permitted, but has not typically
been used DISCIPLINED EMERGING FINANCIAL REGIONAL SPECIAL SPECIAL
- -- Not permitted GROWTH DISCOVERY GROWTH INDUSTRIES GROWTH BANK EQUITIES OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BORROWING; REVERSE REPURCHASE AGREEMENTS
The borrowing of money from banks or
through reverse repurchase agreements.
Leverage, credit risks. 5 5 33.3 5 33.3 5 33.3 33.3
REPURCHASE AGREEMENTS The purchase of
a security that must later be sold back
to the seller at the same price plus
interest. Credit risk. [X] [X] [X] [X] [X] [X] [X] [X]
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 33.3 -- 33.3 33.3
SHORT SALES The selling of securities
which have been borrowed on the
expectation that the market price will
drop.
* Hedged. Hedged leverage, market,
correlation, liquidity, opportunity
risks. -- [ ] [ ] [ ] [ ] -- [ ] [X]
* Speculative. Speculative leverage,
market, liquidity risks. -- [ ] -- [ ] [ ] -- [ ] 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. [X] [X] [X] [X] [X] [X] [X] [X]
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. [X] [X] [X] [X] [X] [X] [X] [X]
- ------------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
NON-INVESTMENT-GRADE SECURITIES
Securities rated below BBB/Baa are
considered junk bonds. Credit, market,
interest rate, liquidity, valuation,
information risks. -- -- 10 5 5 5 -- --
FOREIGN EQUITIES
* Stocks issued by foreign companies.
Market, currency, information, natural
event, political risks. -- 25 [X] [X] 15 [ ] [X] [X]
* American or European depository
receipts, which are dollar-denominated
securities typically issued by American
or European banks and are based on
ownership of securities issued by
foreign companies. Market, currency,
information, natural event, political
risks. 10 25 [X] [X] 15 [ ] [X] [X]
RESTRICTED AND ILLIQUID SECURITIES
Securities not traded on the open market.
May include illiquid Rule 144A securities.
Liquidity, valuation, market risks. 15 15 10 15 15 15 15 15
- ------------------------------------------------------------------------------------------------------------------------------------
LEVERAGED DERIVATIVE SECURITIES
FINANCIAL FUTURES AND OPTIONS;
SECURITIES AND INDEX OPTIONS Contracts
involving the right or obligation to
deliver or receive assets or money
depending on the performance of one or
more assets or an economic index.
* Futures and related options. Interest
rate, currency, market, hedged or
speculative leverage, correlation,
liquidity, opportunity risks. [ ] [X] [X] [ ] [ ] -- [ ] [X]
* Options on securities and indices.
Interest rate, currency, market,
hedged or speculative leverage,
correlation, liquidity, credit,
opportunity risks. [ ] [ ] [X] [ ] [ ] [ ] [ ] [X]
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,
relation, liquidity, opportunity risks. -- 25 [X] [ ] [X] -- [ ] [X]
* Speculative. Currency, speculative
leverage, liquidity risks. -- -- -- [ ] -- -- [ ] --
</TABLE>
FUND DETAILS 31
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that To request a free copy of the current
offer further information annual/semi-annual report or SAI,
on John Hancock growth funds: please write or call:
ANNUAL/SEMI-ANNUAL REPORT TO John Hancock Signature Services, Inc.
SHAREHOLDERS 1 John Hancock Way STE 1000
Includes financial statements, Boston, MA 02217-1000
detailed performance information, Telephone: 1-800-225-5291
portfolio holdings, a statement EASI-Line: 1-800-338-8080
from portfolio management and TDD: 1-800-544-6713
the auditor's report. Internet: www.jhancock.com/funds
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed
information on all aspects of the
funds. The current annual/
semi-annual report is included
in the SAI.
A current SAI has been filed with
the Securities and Exchange
Commission and is incorporated
by reference (is legally a part
of this prospectus).
[LOGO] JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(C)1996 John Hancock Funds, Inc.
GROPN 3/97
JOHN HANCOCK (R)
FINANCIAL SERVICES
<PAGE>
JOHN HANCOCK
SPECIAL
EQUITIES
FUND
CLASS C SHARES
PROSPECTUS
MARCH 1, 1997
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Expense Information .................................................... 2
The Fund's Financial Highlights ........................................ 3
Investment Objective and Policies ...................................... 5
Organization and Management of the Fund ................................ 8
The Fund's Expenses .................................................... 8
Dividends and Taxes .................................................... 9
Performance ............................................................ 10
Who Can Buy Class C Shares ............................................. 10
How to Buy Class C Shares .............................................. 11
Class C Share Price .................................................... 12
How to Redeem Class C Shares ........................................... 13
Additional Services and Programs ....................................... 15
This Prospectus sets forth the information about John Hancock Special
Equities Fund (the "Fund") a diversified fund, that you should know before
investing. Please read and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Fund's Statement
of Additional Information, dated March 1, 1997 and incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Signature Services, Inc. P.O. Box 9296, Boston, Massachusetts 02205-9296,
1-800-755-4371.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Class C Fund shares. The operating expenses included in the table and
hypothetical example below are based on actual fees and expenses for the Class C
shares of the Fund for the fiscal year ended October 31, 1996, adjusted to
reflect current fees and expenses. Actual fees and expenses of Class C shares
may be greater or less than those indicated.
<TABLE>
<CAPTION>
CLASS C
SHARES*
-------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price) ......................................... None
Maximum sales charge imposed on reinvested dividends .................................................................. None
Maximum deferred sales charge ......................................................................................... None
Redemption fee+ ....................................................................................................... None
Exchange fee .......................................................................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management fee** ...................................................................................................... 0.81%
Other expenses ........................................................................................................ 0.19%
-----
Total Fund operating expenses ......................................................................................... 1.00%
=====
- ----------
* The information set forth in the foregoing table relates only to Class C shares. Class C shares commenced operations on
September 1, 1993.
+ Redemption by wire fee (currently $4.00) not included.
** The calculation of the management fee is based on average net assets for the fiscal year ended October 31, 1996. See "The
Fund's Expenses."
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: CLASS C SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment, assuming a 5% annual return: ............. $10 $32 $55 $122
(This example should not be considered a representation of past or future expenses. Actual expenses may be greater or less than
those shown.)
</TABLE>
The management fee referred to above is more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the caption "Investment Advisory and Other
Services."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been audited by Ernst &
Young LLP, the Fund's independent auditors whose unqualified report is included
in the Fund's 1996 Annual Report and is included in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to shareholders, which may be obtained free of
charge by writing or telephoning John Hancock Signature Services, Inc.
("Signature Services") at the address or telephone number listed on the front
page of this Prospectus.
Selected data for each class of shares outstanding throughout each period
indicated are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value,
Beginning of Period $22.15 $16.11 $16.13 $10.99 $ 9.71 $ 4.97 $ 6.38 $ 4.89 $ 4.30 $ 6.08
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Investment
Income (Loss)(a) (0.22)(b) (0.18)(b) (0.21)(b) (0.20)(b) (0.19)(b) (0.10) (0.12) 0.01 0.04 (0.03)
Net Realized and
Unrealized Gain
(Loss) on
Investments .... 3.06 6.22 0.19 5.43 2.14 4.84 (1.27) 1.53 0.55 (1.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
Investment
Operations ... 2.84 6.04 (0.02) 5.23 1.95 4.74 (1.39) 1.54 0.59 (1.29)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net
Investment
Income ......... -- -- -- -- -- (0.02) (0.05) -- --
Distributions from
Net Realized
Gain on
Investments Sold (0.46) -- -- (0.09) (0.67) -- -- -- -- (0.45)
Distributions from
Capital Paid-In -- -- -- -- -- -- -- -- -- (0.04)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
Distributions (0.46) -- -- (0.09) (0.67) -- (0.02) (0.05) -- (0.49)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period .. $24.53 $22.15 $16.11 $16.13 $10.99 $ 9.71 $ 4.97 $ 6.38 $ 4.89 $ 4.30
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total
Investment
Return at
Net Asset
Value (a)(f) 12.96% 37.49% (0.12%) 47.83% 20.25% 95.37% (21.89%) 31.82% 13.72% (28.68%)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of
Period
(000's omitted) $972,312 $555,655 $310,625 $296,793 $44,665 $19,713 $8,166 $12,285 $11,714 $10,637
Ratio of Expenses
to Average Net
Assets (a) ..... 1.42% 1.48% 1.62% 1.84% 2.24% 2.75% 2.63% 1.50% 1.50% 1.50%
Ratio of Net
Investment
Income (Loss) to
Average Net
Assets (a) ..... (0.89%) (0.97%) (1.40%) (1.49%) (1.91%) (2.12%) (1.58%) 0.47% 0.82% (0.57%)
Portfolio Turnover
Rate ........... 59% 82% 66% 33% 114% 163% 113% 115% 91% 93%
Average Broker
Commission Rate
(per share of
security)(g) ... $0.0677 N/A N/A N/A N/A N/A N/A N/A N/A N/A
CLASS B (c)
PER SHARE OPERATING PERFORMANCE
Net Asset Value,
Beginning of
Period ......... $21.81 $15.97 $16.08 $12.30
------ ------ ------ ------
Net Investment
Loss ........... (0.40)(b) (0.31)(b) (0.30)(b) (0.18)(b)
Net Realized and
Unrealized Gain
on Investments . 3.01 6.15 0.19 3.96
------ ------ ------ ------
Total from
Investment
Operations ... 2.61 5.84 (0.11) 3.78
------ ------ ------ ------
Less Distributions:
Distributions from
Net Realized
Gain on
Investments Sold (0.46) -- -- --
------ ------ ------ ------
Total
Distributions (0.46) -- -- --
------ ------ ------ ------
Net Asset Value,
End of Period .. $23.96 $21.81 $15.97 $16.08
====== ====== ====== ======
Total Investment
Return at
Net Asset
Value (f)... 12.09% 36.57% (0.68%) 30.73%(d)
------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of
Period
(000's omitted) $956,374 $454,934 $191,979 $158,281
Ratio of Expenses
to Average Net
Assets ......... 2.16% 2.20% 2.25% 2.34%*
Ratio of Net
Investment Loss
to Average Net
Assets ......... (1.65%) (1.69%) (2.02%) (2.03%)*
Portfolio Turnover
Rate ........... 59% 82% 66% 33%
Average Broker
Commission Rate
(per share of
security)(g) ... $0.0677 N/A N/A N/A
(Continued on next page)
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS -- CONTINUED
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------
1996 1995 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
CLASS C (e)
PER SHARE OPERATING PERFORMANCE
Net Asset Value,
Beginning of
Period ......... $22.40 $16.20 $16.14 $14.90
------ ------ ------ ------
Net Investment
Loss ........... (0.14)(b) (0.09)(b) (0.13)(b) (0.03)(b)
Net Realized and
Unrealized Gain
on Investments . 3.11 6.29 0.19 1.27
----- ----- ----- -----
Total from
Investment
Operations ... 2.97 6.20 0.06 1.24
----- ----- ----- -----
Less Distributions:
Distributions from
Net Realized
Gain on
Investments Sold (0.46) -- -- --
------ ------ ------ ------
Total
Distributions (0.46) -- -- --
------ ------ ------ ------
Net Asset Value,
End of Period .. $24.91 $22.40 $16.20 $16.14
====== ====== ====== ======
Total Investment
Return at
Net Asset
Value (f) .. 13.40% 38.27% 0.37% 8.32%(d)
------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of
Period
(000's omitted) $67,498 $13,701 $ 7,123 $ 2,838
Ratio of Expenses
to Average Net
Assets ......... 1.03% 1.01% 1.11% 1.45%*
Ratio of Net
Investment Loss
to Average Net
Assets ......... (0.54%) (0.50%) (0.89%) (1.35%)
Portfolio Turnover
Rate ........... 59% 82% 66% 33%
Average Broker
Commission Rate
(per share of
security)(g) ... $0.0677 N/A N/A N/A
* On an annualized basis.
(a) 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, 1991, 1990, 1989, 1988, 1987 and 1986 reflect reductions of $.002, $.02, $.03, $.07, $.04 and
$.09, respectively. Absent of such limitation, for the years ended October 31, 1991, 1990, 1989, 1988, 1987 and 1986, the
ratio of net expenses would have been 2.79%, 2.95%, 2.57%, 2.94%, 2.23% and 3.47%, respectively, and the ratio of net
investment income (loss) to average net assets would have been (2.16%), (1.90%), (0.60%), (0.62%), (1.30%) and (2.55%),
respectively. Without the limitation, total investment return would be lower.
(b) On average month end shares outstanding.
(c) Class B shares commenced operations on March 1, 1993.
(d) Not annualized.
(e) Class C shares commenced operations on September 1, 1993.
(f) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(g) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
THE FUND SEEKS GROWTH OF CAPITAL BY INVESTING PRIMARILY IN THE EQUITY SECURITIES
OF EMERGING GROWTH AND SPECIAL SITUATION COMPANIES.
The investment objective of the Fund is to seek 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." In seeking to achieve this objective, the Fund will
invest at least 65% of its total assets in Special Equities. The potential for
growth of capital will be the basis for selection of portfolio securities.
Current income will not be a factor in this selection. The Fund's investments
will be subject to the market fluctuation and risks inherent in all securities.
There is no assurance that the Fund will achieve its investment objective.
THE FUND'S INVESTMENTS IN SPECIAL EQUITIES WILL BE PRIMARILY IN COMMON STOCK BUT
MAY ALSO INCLUDE PREFERRED STOCK, SECURITIES CONVERTIBLE INTO COMMON STOCK,
RIGHTS, WARRANTS, FOREIGN SECURITIES WITH THE SAME CHARACTERISTICS AS SPECIAL
EQUITIES AND AMERICAN DEPOSITARY RECEIPTS (ADRS).
The Fund may also invest in:
-- equity securities of established companies that John Hancock Advisers,
Inc. (the "Adviser") believes to offer growth potential.
-- cash or investment grade corporate debt securities (debt securities which
have, at the time of purchase, a rating within the four highest grades as
determined by Moody's Investors Services, Inc. -- Aaa, Aa, A or Baa or
Standard & Poor's Rating Group -- AAA, AA, A or BBB), money market
instruments or securities of the United States Government or its agencies or
instrumentalities ("government securities"), for temporary defensive
purposes or to provide for anticipated redemptions of the Fund's shares.
Debt securities rated Baa or BBB are considered medium grade obligations
with speculative characteristics, and adverse economic conditions or
changing circumstances may weaken capacity to pay interest and repay
principal. If the rating of a debt security is reduced below Baa or BBB, the
Adviser will consider whatever action is appropriate consistent with the
Fund's investment objectives and policies.
THE FUND SEEKS TO IDENTIFY EMERGING GROWTH COMPANIES WHICH CAN SHOW SUSTAINED
INCREASES IN EARNINGS.
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 section "The Fund's Financial Highlights."
THE FUND IS DESIGNED FOR INVESTORS WHO ARE WILLING TO ASSUME GREATER THAN USUAL
RISKS IN THE HOPE OF REALIZING GREATER THAN USUAL RETURNS.
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.
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 only 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
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.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVES.
FOREIGN SECURITIES. The Fund may invest in securities of foreign issuers,
including securities in the form of American Depository Receipts (ADRs) and
European Depository Receipts (EDRs). ADRs and EDRs (sponsored and unsponsored)
are receipts typically issued by American or European bank or trust companies
which evidence ownership of underlying securities issued by a foreign
corporation, and are designed for trading in United States or European
securities markets. Issuers of unsponsored ADRs and EDRs are not contractually
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between that information and the market value of
an unsponsored ADR and EDR. Investment in foreign securities may involve risks
not present in domestic investments. Foreign companies may not be subject to
accounting standards or government supervision comparable to U.S. companies, and
there is often less publicly available information about their operations. They
can also be affected by political or financial instability abroad.
RESTRICTED SECURITIES. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933, as amended (the
"1933 Act") including commercial paper issued in reliance on Section 4(2) of the
1933 Act. Restricted securities may include those eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the 1933 Act. The
Trustees will monitor the Fund's investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
Purchases of other restricted securities are subject to an investment
restriction limiting all illiquid securities held by the Fund to not more than
15% of the Fund's net assets.
LENDING OF SECURITIES. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to return
the loaned securities. As a result, the Fund may incur a loss or in the event of
the borrower's bankruptcy may be delayed in or prevented from liquidating the
collateral. It is a fundamental policy of the Fund not to lend portfolio
securities having a total value in excess of 33 1/3% of its total assets.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys a security
subject to the right and obligation to sell it back to the issuer at a higher
price. These transactions must be fully collateralized at all times, but they
involve some credit risk to the Fund if the other party defaults on its
obligations and the Fund is delayed or prevented from liquidating the
collateral.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which are detailed in the Statement of Additional Information, where they are
designated as fundamental or non-fundamental. The investment objective and those
fundamental restrictions may not be changed without shareholder approval. All
other investment policies and restrictions are non-fundamental and can be
changed by a vote of the Trustees without shareholder approval.
BROKERS ARE CHOSEN BASED ON BEST PRICE AND EXECUTION.
When choosing brokerage firms to carry out the Fund's transactions, the Adviser
gives primary consideration to execution at the most favorable prices, taking
into account the broker's professional ability and quality of service.
Consideration may also be given to the broker's sales of Fund shares. Pursuant
to procedures established by the Trustees, the Adviser may place securities
transactions with brokers affiliated with the Adviser. John Hancock
Distributors, Inc. is affiliated with the Adviser because it is indirectly owned
by John Hancock Mutual Life Insurance Company (the "Life Company"), which in
turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS RESPONSIBLE
FOR THE DAY-TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
The Fund is a diversified open-end investment management company organized as a
Massachusetts business trust in 1984. The Fund has an unlimited number of
authorized shares of beneficial interest. The Fund's Declaration of Trust
permits the Trustees, to create and classify shares of beneficial interest in
separate series of the Fund. The Fund's Declaration of Trust also permits the
Trustees to classify and reclassify any series or portfolio of shares into one
or more classes.
Accordingly, the Trustees have authorized the issuance of three classes of the
Fund, designated as Class A, Class B and Class C shares. The shares of each
class represent an interest in the same portfolio of investments of the Fund and
have equal rights as to voting, redemption, dividends and liquidation. However,
each class of shares bears different distribution fees and Class A and Class B
shareholders have exclusive voting rights with respect to their distribution
plans.
Shareholders have certain rights to remove Trustees. The Fund is not required to
hold annual shareholder meetings, although special meetings may be held for such
purposes as electing or removing Trustees, changing fundamental investment
restrictions and policies or approving a management contract. The Fund, under
certain circumstances, will assist in shareholder communications with other
shareholders.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $19 BILLION.
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Fund,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds, Inc.
("John Hancock Funds") distributes shares for all of the John Hancock funds
through selected broker-dealers ("Selling Brokers"). Certain Fund officers are
also officers of the Adviser and John Hancock Funds. Pursuant to an order
granted by the Securities and Exchange Commission, the Fund has adopted a
deferred compensation plan for its independent Trustees which allows Trustees'
fees to be invested by the Fund in other John Hancock funds.
Michael P. DiCarlo is responsible for the fund's day-to-day investment
management. He has served as the fund's portfolio manager since January 1988,
and has been in the investment business 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.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser, the
Sub-Adviser and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. In the case
of the Adviser, 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. The Sub-Adviser has adopted similar restrictions, which may differ
where appropriate, as long as they have the same intent. These restrictions are
a continuation of the basic principle that the interests of the Fund and its
shareholders come first.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser which for the 1996 fiscal year was 0.81% of the Fund's average daily net
asset value. The investment management fee is higher than the fees paid to most
mutual funds but is believed to be comparable to fees paid by those funds with
investment objectives similar to that of the Fund. The Adviser, not the Fund
pays all Sub-Advisory fees.
The Fund compensates the Adviser for performing necessary tax and financial
management services. The compensation for 1996 was calculated at an annual rate
of 0.01875% of the average net assets of the Fund.
Information on the Fund's total expenses is in the Fund's Financial Highlights
section of this Prospectus.
DIVIDENDS AND TAXES
Dividends from the Fund's net investment income and capital gains are generally
declared at least annually. Dividends are reinvested in additional Class C
shares unless you elect the option to receive cash. If you elect the cash option
and the U.S. Postal Service cannot deliver your checks, your election will be
converted to the reinvestment option.
TAXATION. Dividends from the Fund's net investment income and net short-term
capital gains are taxable to you as ordinary income. Dividends from the Fund's
net long-term capital gains are taxable as long-term capital gains. These
dividends are taxable whether received in cash or reinvested in additional Class
C shares. Certain dividends may be paid in January of a given year, but they may
be taxable as if you received them the previous December. Corporate shareholders
may be entitled to take a corporate dividends received deduction for dividends
received by the Fund from U.S. domestic corporations, subject to certain
restrictions in the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund will send you a statement by January 31 showing the tax status of the
dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, the Fund will not be
subject to Federal income tax on any net investment income and net realized
capital gains that are distributed to its shareholders within the time period
prescribed by the Code. When you redeem (sell) or exchange Class C shares, you
may realize a taxable gain or loss.
The Fund anticipates that it will be subject to foreign withholding taxes or
other foreign taxes on certain foreign investments which will reduce the yield
or return from these investments. However, if more than 50% of the Fund's total
assets at the close of its taxable year consists of stock or securities of
foreign corporations and if the Fund so elects, shareholders will include in
their gross incomes their pro-rata shares of qualified foreign taxes paid by the
Fund and may be entitled subject to certain conditions and limitations under the
Code, to claim a Federal income tax credit or deduction for their share of these
taxes.
On the account application, you must certify that your social security or other
taxpayer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information, or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your dividends and the proceeds of redemptions and
exchanges.
In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from the Fund. In
many states, a portion of the Fund's dividends that represents interest received
by the Fund on direct U.S. Government Obligations may be exempt from tax.
Non-U.S. shareholders are also subject to a different tax treatment not
described above. Under the Code, a tax-exempt investor in the Fund will not
generally recognize unrelated business taxable income from its investment in the
Fund unless the tax-exempt investor incurred indebtedness to acquire or continue
to hold Fund shares and such indebtedness remains unpaid. You should consult
your tax adviser for specific advice.
PERFORMANCE
THE FUND MAY ADVERTISE ITS TOTAL RETURN ON CLASS C SHARES.
Total return shows the overall dollar or percentage change in value of a
hypothetical investment in Class C shares of the Fund, assuming the reinvestment
of all dividends and distributions in Class C shares. Cumulative total return
shows the performance on Class C shares over a period of time. Average annual
total return shows the cumulative return of the Class C shares divided over the
number of years included in the period. Because average annual total return
tends to smooth out variations in the performance, you should recognize that it
is not the same as actual year-to-year results.
Total return calculations for Class C shares do not reflect the imposition of a
sales charge. The value of Class C shares, when redeemed, may be more or less
than their original cost. Total return is an historical calculation and is not
an indication of future performance.
WHO CAN BUY CLASS C SHARES
CLASS C SHARES ARE AVAILABLE TO CERTAIN INSTITUTIONAL INVESTORS.
In order to qualify to buy Class C shares, you must qualify as one of the
following types of institutional investors: (i) Benefit plans not affiliated
with the Adviser which have at least $25,000,000 in plan assets, and either have
a separate trustee vested with investment discretion and certain limitations on
the ability of the plan beneficiaries to access their plan investments without
incurring adverse tax consequences or allow their participants to select among
one or more investment options, including the Fund ("participant-directed
plans"); (ii) Banks and insurance companies which are not affiliated with the
Adviser purchasing shares for their own account; (iii) Investment companies not
affiliated with the Adviser; (iv) Tax exempt retirement plans of the Adviser and
its affiliates, including affiliated brokers; (v) Unit investment trusts
sponsored by John Hancock Funds and certain other sponsors; and (vi) existing
full-service clients of the Life Company who were group annuity contract holders
as of September 1, 1994. John Hancock Funds, out of its own resources, may pay
to a selling broker an annual service fee up to 0.20% of the amount invested in
Class C shares by these clients. Plans that qualify to purchase Class C shares
will also be permitted to purchase shares of any other class of the Fund.
Participant-directed plans include but are not limited to 401(k), TSA and
Section 457 Plans.
<PAGE>
HOW TO BUY CLASS C SHARES
OPENING AN ACCOUNT.
- ------------------------------------------------------------------------------
The minimum initial investment is $1,000,000, except that this requirement may
be waived at the discretion of the Fund's officers. You may qualify for the
minimum investment if you invest more than $1,000,000 in Class C shares in the
John Hancock family. This is discussed in greater detail in the Statement of
Additional Information.
Complete the application attached to this Prospectus.
- ------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Signature
Services, Inc.
2. Deliver the completed application and check to your
registered representative or Selling Broker, or mail it
directly to Signature Services.
- ------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative or Selling Broker or by calling
1-800-755-4371.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Special Equities Fund
(Class C Shares)
Your Account Number
Name(s) under which account is registered.
3. Deliver the completed application to your registered
representative or Selling Broker, or mail it directly to
Signature Services.
BUYING ADDITIONAL CLASS C SHARES.
- ------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information"
sections on the Account Privileges Application
designating a bank account from which your funds may be
drawn. Note that in order to invest by phone, your
account must be in a bank or credit union that is a
member of the Automated Clearing House system (ACH).
2. After your authorization form has been processed, you may
purchase additional Class C shares by calling Signature
Services toll free at 1-800-755-4371.
3. Give the Signature Services representative the name(s) in
which your account is registered, the Fund name and your
account number, and the amount you wish to invest in
Class C shares.
4. Your investment normally will be credited to your account
the business day following your phone request.
- ------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your
account statement or include a note with your investment
listing the name of the Fund and class of shares you own,
your account number and the name(s) in which the account
is registered.
2. Make your check payable to John Hancock Signature
Services, Inc.
3. Mail the account information and check to:
John Hancock Signature Services, Inc.
P.O. Box 9296
Boston, MA 02205-9296
or deliver it to your registered representative or
Selling Broker.
- ------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Special Equities Fund
(Class C Shares)
Your Account Number
Name(s) under which account is registered
- ------------------------------------------------------------------------------
Other Requirements: All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the offering
price based on the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the Fund's custodian bank. Wire
purchases normally take two or more hours to complete and, to be accepted the
same day, must be received by 4:00 p.m., New York time. Your bank may charge a
fee to wire funds. Telephone transactions are recorded to verify information.
Class C share certificates are not issued unless a request is made in writing to
Signature Services.
- ------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT YOU SHOULD KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends will be sent to you quarterly). A tax information statement will be
mailed to you by January 31 of each year.
CLASS C SHARE PRICE
THE OFFERING PRICE OF YOUR CLASS C SHARES IS THEIR NET ASSET VALUE.
The net asset value per share ("NAV") of a Class C share is the value of one
Class C share. The NAV is calculated by dividing the net assets of each class by
the number of outstanding shares of that class. The NAV of each class can
differ. Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, at fair
value as determined in good faith according to procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued at
amortized cost which the Trustees have determined to approximate market value.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. If quotations are not readily available
or, the value has been materially affected by events occurring after the closing
of a foreign market, assets are valued by a method that the Trustees believe
accurately reflects fair value. The NAV of Class C shares is calculated once
daily as of the close of regular trading on the New York Stock Exchange (the
"Exchange") (generally at 4:00 p.m., New York time) on each day that the
Exchange is open.
Class C shares of the Fund are sold at the offering price based on the NAV
computed after your investment request is received in good order by John Hancock
Funds. If you buy shares of the Fund through a Selling Broker, the Selling
Broker must receive your investment before the close of regular trading on the
New York Stock Exchange and transmit it to John Hancock Funds prior to its close
of business to receive that day's offering price. There is no sales charge
imposed on the purchase of Class C shares.
A one-time payment of up to 0.15% of the amount invested in Class C shares may
be made by John Hancock Funds to a Selling Broker for sales of Class C shares
made by that Selling Broker. A person entitled to receive compensation for
selling shares of the Fund may receive different compensation with respect to
sales of Class A shares, Class B shares and Class C shares of the Fund. John
Hancock Funds, out of its own resources, may pay to a selling broker an annual
service fee up to 0.20% of the amount invested in Class C shares by these
clients.
HOW TO REDEEM CLASS C SHARES
You may redeem all or a portion of your Class C shares on any business day. Your
Class C shares will be redeemed at the next NAV for Class C shares calculated
after your redemption request is received in good order by Signature Services.
The Fund may hold payment until reasonably satisfied that investments that were
recently made by check or Invest-by-Phone have been collected (which may take up
to 10 calendar days).
Once your Class C shares are redeemed, the Fund generally sends you payment on
the next business day. When you redeem your Class C shares, if you are subject
to tax, you may realize a taxable gain or loss, depending usually on the
difference between what you paid for them and what you receive for them, subject
to certain tax rules. Under unusual circumstances, the Fund may suspend
redemptions or postpone payment for up to three business days or longer, as
permitted by Federal securities laws.
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE
PROCEDURES.
- ------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are eligible automatically for the
telephone redemption privilege. Call 1-800-755-4371, from
8:00 A.M. to 4:00 P.M. (New York time), Monday through
Friday, excluding days on which the New York Stock Exchange
is closed. Signature Services employs the following
procedures to confirm that instructions received by telephone
are genuine. Your name, the account number, taxpayer
identification number applicable to the account and other
relevant information may be requested. In addition, telephone
instructions are recorded.
You may redeem up to $100,000 by telephone and redemption
proceeds may be sent by wire or by check. Checks will be
mailed to the exact name(s) and address on the account.
You may redeem between $100,000 and $5 million by telephone
but only if the redemption proceeds will be wired to your
designated corporate bank account.
If reasonable procedures such as those described above are
not followed, the Fund may be liable for any loss due to
unauthorized or fraudulent telephone instructions. In all
other cases, neither the Fund nor Signature Services will be
liable for any loss or expense for acting upon telephone
instructions made according to the telephone transaction
procedures mentioned above.
Telephone redemption is not available for tax-qualified
retirement plans or Class C shares of the Fund that are in
certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement due
to a large volume of calls. During such times you should
consider placing redemption requests in writing.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
included with this Prospectus.
- ------------------------------------------------------------------------------
IN WRITING Send a stock power or letter of instruction specifying the
name of the Fund, the dollar amount or the number of Class C
shares to be redeemed, your name, class of shares, your
account number and the additional requirements listed below
that apply to your particular account.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
Corporation, Association A letter of instruction and a corporate
resolution signed by person (s) authorized
to act on the account. The signature(s)
must be guaranteed if redemption proceeds
will be sent by check and exceed $100,000.
Retirement Plan or Pension Trusts A letter of instruction signed by the
Trustee(s). The signature(s) must be
guaranteed if redemption proceeds will be
sent by check and exceed $100,000. (If the
Trustee's name is not registered on your
account, also provide a copy of the trust
document, certified within the last 60
days.)
Redemptions of $5 million or more must always be made in writing.
If you do not fall into any of these registration categories please call
1-800-755-4371 for further instructions.
WHO MAY GUARANTEE YOUR SIGNATURE.
- ------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. The following institutions may provide you with a signature guarantee,
provided that the institution meets credit standards established by Signature
Services: (i) a bank; (ii) a securities broker or dealer, including a government
or municipal securities broker or dealer, that is a member of a clearing
corporation or meets certain net capital requirements; (iii) a credit union
having authority to issue signature guarantees; (iv) a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association; or (v) a national securities exchange, a registered
securities exchange or a clearing agency.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- ------------------------------------------------------------------------------
THROUGH YOUR BROKER Your broker may be able to initiate the redemption.
Contact your broker for instructions. If you have
certificates for your shares, you must submit them
with your stock power or a letter of instruction.
You may not redeem certificated shares by telephone.
DUE TO THE PROPORTIONATELY HIGH COST OF MAINTAINING SMALLER ACCOUNTS, THE FUND
RESERVES THE RIGHT TO REDEEM AT NET ASSET VALUE ALL CLASS C SHARES IN AN ACCOUNT
WHICH HOLDS FEWER THAN 50 SHARES (EXCEPT ACCOUNTS UNDER RETIREMENT PLANS) AND TO
MAIL THE PROCEEDS TO THE SHAREHOLDER, OR THE TRANSFER AGENT MAY IMPOSE AN ANNUAL
FEE OF $10.00. NO ACCOUNT WILL BE INVOLUNTARILY REDEEMED OR ADDITIONAL FEE
IMPOSED, IF THE VALUE OF THE ACCOUNT IS IN EXCESS OF THE FUND'S MINIMUM INITIAL
INVESTMENT. SHAREHOLDERS WILL BE NOTIFIED BEFORE THESE REDEMPTIONS ARE TO BE
MADE OR THIS CHARGE IS IMPOSED AND WILL HAVE 30 DAYS TO PURCHASE ADDITIONAL
CLASS C SHARES TO BRING THEIR ACCOUNT UP TO THE REQUIRED MINIMUM. UNLESS THE
NUMBER OF CLASS C SHARES ACQUIRED BY ADDITIONAL PURCHASES AND ANY DIVIDEND
REINVESTMENTS EXCEEDS THE NUMBER OF CLASS C SHARES REDEEMED, REPEATED
REDEMPTIONS FROM A SMALLER ACCOUNT MAY EVENTUALLY TRIGGER THIS POLICY.
- ------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
YOU MAY EXCHANGE CLASS C SHARES OF THE FUND ONLY FOR CLASS C SHARES OF ANOTHER
JOHN HANCOCK FUND.
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Not all John Hancock funds offer Class C shares. Contact your registered
representative or Selling Broker and request a prospectus for the John Hancock
funds that interest you. Read the prospectus carefully before exchanging your
Class C shares. Exchanges may be made only into Class C shares of other John
Hancock funds.
Exchanges between funds are based on their respective net asset values. No sales
charge or transaction charge is imposed.
The Fund reserves the right to require you to keep previously exchanged Class C
shares (and reinvested dividends) in the Fund for 90 days before you are
permitted a new exchange. The Fund may also terminate or alter the terms of the
exchange privilege upon 60 days' notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.
When you make an exchange, your account registration in both the old and new
account must be identical. The exchange privilege is available only in states
where the exchange can be made legally.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time.
BY TELEPHONE
1. When you complete the application for your initial purchase of Class C shares
you automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to have the authorized telephone exchange
privilege.
2. Call 1-800-755-4371. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.
IN WRITING
1. In a letter request an exchange and list the following:
-- the name of the Fund whose Class C shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of Class C shares, all Class C shares or the dollar amount you
wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Signature Services, Inc.
Attn: Institutional Services
P.O. Box 9296
Boston, Massachusetts 02205-9296
<PAGE>
<TABLE>
<S> <C>
JOHN HANCOCK SPECIAL EQUITIES FUND JOHN HANCOCK
SPECIAL
INVESTMENT ADVISER EQUITIES
John Hancock Advisers, Inc. FUND
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CLASS C SHARES
PROSPECTUS
PRINCIPAL DISTRIBUTOR MARCH 1, 1997
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603 A MUTUAL FUND SEEKING TO ACHIEVE GROWTH OF
CAPITAL BY INVESTING IN A DIVERSIFIED PORTFOLIO
CUSTODIAN OF EQUITY SECURITIES PRIMARILY OF EMERGING
Investors Bank & Trust Company GROWTH COMPANIES AND OF COMPANIES IN
89 South Street SPECIAL SITUATIONS.
Boston, Massachusetts 02111
This fund will be closed to new investors at the
TRANSFER AGENT end of the day its total assets reach $2.5 billion.
John Hancock Signature Services, Inc. Further investments will be limited to existing accounts.
P.O. Box 9296
Boston, Massachusetts 02205-9296
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
INDEPENDENT AUDITORS TELEPHONE 1-800-755-4371
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION [recycle symbol] Printed on recycled paper using soybean ink
ABOUT THE FUND
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180PC 3/97
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JOHN HANCOCK SPECIAL EQUITIES FUND
CLASS A, CLASS B and CLASS C SHARES
Statement of Additional Information
March 1, 1997
This Statement of Additional Information provides information about John Hancock
Special Equities Fund (the "Fund"), a diversified open-end investment company,
in addition to the information that is contained in the combined Growth Funds'
Prospectus for Class A and Class B Shares dated March 1, 1997 and the Fund's
Class C Shares Prospectus dated March 1, 1997 (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 Signature Services, Inc.
1 John Hancock Way STE 1000
Boston, MA 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund 2
Investment Objective and Policies 2
Investment Restrictions 15
Those Responsible for Management 19
Investment Advisory and Other Services 29
Distribution Contracts 31
Net Asset Value 33
Initial Sales Charge on Class A Shares 34
Deferred Sales Charge on Class B Shares 37
Special Redemptions 39
Additional Services and Programs 40
Description of the Fund's Shares 41
Tax Status 43
Calculation of Performance 48
Brokerage Allocation 50
Transfer Agent Services 51
Custody of Portfolio 52
Independent Auditors 52
Appendix A- Description and Bond Ratings
and Commercial Paper Ratings 53
Financial Statements 56
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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.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus.
The Fund's investment objective is to seek 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." The Fund will invest at least 65% of its total assets
in Special Equities. The potential for growth of capital will be the basis for
selection of portfolio securities. Current income will not be a factor in this
selection. There is no assurance that the Fund will achieve its investment
objective.
The Fund may also invest in:
- equity securities of established companies that the Adviser believes
offers growth potential.
- cash or investment grade corporate debt securities (debt securities
which have, at the time of purchase, a rating within the four highest grades as
determined by Moody's Investors Services, Inc. -- Aaa, Aa, A or Baa or Standard
& Poor's Rating Group -- AAA, AA, A or BBB), money market instruments or
securities of the United States Government or its agencies or instrumentalities
("government securities"), for temporary defensive purposes or to provide for
anticipated redemptions of the Fund's shares. Debt securities rated Baa or BBB
are considered medium grade obligations with speculative characteristics, and
adverse economic conditions or changing curcumstances may weaken capacity to pay
interest and repay principal. If the rating of a debt security is reduced below
Baa or BBB, the Adviser will consider whatever action is appropriate consistent
with the Fund's investment objectives and policies. 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
under valuation 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;
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- 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
- 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 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.
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
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upon a limited management group. Emerging growth companies may have operating
histories of fewer than three years.
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. Investment 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.
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 (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. 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 Investment Criteria. In general, the ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") represent
the opinions of these agencies as to the quality of the securities which they
rate. It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of portfolio securities. Among
the factors which will be considered are the long-term ability of the issuer to
pay principal and interest and general economic trends. Appendix A contains
further information concerning the ratings of Moody's and S&P and their
significance.
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Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund, but the Adviser will consider the event in its determination of whether
the Fund should continue to hold the securities.
Investments in Foreign Securities. The Fund may invest in the securities of
foreign issuers, including securities in the form of sponsored or unsponsored
American Depository Receipts (ADRs), European Depository Receipts (i) 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.
If securities traded in markets moving in different directions are combined into
a single portfolio, such as that of the Fund, total portfolio volatility may be
reduced. Since the Fund may invest in securities denominated in currencies other
than U.S. dollars, changes in foreign currency exchange rates may affect the
value of its portfolio securities. Exchange rates may not move in the same
direction as the securities markets in a particular country. As a result, market
gains may be offset by unfavorable exchange rate fluctuations.
These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements.
Foreign Currency Transactions. The Fund's foreign currency exchange transactions
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
enter into forward foreign currency exchange contracts to enhance return, to
hedge against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position, or as a substitute for the purchase or sale
of a currency or assets denominated in that currency. Forward contracts are
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. Transaction hedging is the purchase
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or sale of forward foreign currency contracts with respect to specific
receivables or payables of the Fund accruing in connection with the purchase and
sale of its portfolio securities quoted or denominated in the same or related
foreign currencies. Portfolio hedging is the use of forward foreign currency
contracts to offset portfolio security positions denominated or quoted in the
same or related foreign currencies. The Fund may elect to hedge less than all of
its foreign portfolio positions deemed appropriate by the Adviser and
Sub-Advisers.
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, its custodian will segregate cash or liquid securities, of
any type or maturity, 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. The assets in the segregated account will be valued at market
daily and if the value of the securities in the separate account declines,
additional cash or securities will be placed in the account so that the value of
the account will be equal to the amount of the Fund's commitment with respect to
such contracts.
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 rises. 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 the 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.
Risks of Foreign Securities. 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 in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.
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 so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. 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
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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.
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 terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends, in some cases capital gains and interest payable on certain of
the Fund's foreign portfolio securities, 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 the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities 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 with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
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 liquid securities, of any type
or maturity, in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
addition, the Fund will not enter into reverse repurchase agreements and other
borrowings 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
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attempt to increase income. The Fund will not purchase securities while
outstanding borrowings exceed 5% of the Fund's total assets. The Fund will enter
into reverse repurchase agreements only with federally insured banks which are
approved in advance as being creditworthy by the Trustees. Under procedures
established by the Trustees, the Adviser will monitor the creditworthiness of
the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on section 4(2) of the 1933 act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 10% of its total
assets in restricted securities (excluding securities eligible for resale
pursuant to Rule 144A under the 1933 Act) or more than 15% of its total assets
in restricted securities including those eligible for resale pursuant to Rule
144A. The Fund will not invest more than 15% of its net assets in illiquid
investments. If the Trustees determines, based upon a continuing review of the
trading markets for specific Section 4(2) paper or Rule 144A securities, that
they are liquid, they will not be subject to the 15% limit on illiquid
investments. The Trustees 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.
Options on Securities, Securities Indices and Currency. The Fund may purchase
and write (sell) call and put options on any securities in which it may invest,
on any securities index based on securities in which it may invest or on any
currency in which Fund investments may be denominated. These options may be
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. The Fund may write covered put and
call options and purchase put and call options to enhance total return, as a
substitute for the purchase or sale of securities or currency, or to protect
against declines in the value of portfolio securities and against increases in
the cost of securities to be acquired.
Writing Covered Options. A call option on securities or currency written by the
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the Fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the Fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.
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All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account maintained by the Fund's custodian with a value at least equal to the
Fund's obligation under the option, (ii) entering into an offsetting forward
commitment and/or (iii) purchasing an offsetting option or any other option
which, by virtue of its exercise price or otherwise, reduces the Fund's net
exposure on its written option position. A written call option on securities is
typically covered by maintaining the securities that are subject to the option
in a segregated account. The Fund may cover call options on a securities index
by owning securities whose price changes are expected to be similar to those of
the underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts"), in the market value of securities or currencies of the type
in which it may invest. The Fund may also sell call and put options to close out
its purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. The Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by
the Fund for the purpose of affirmatively benefiting from a decline in the price
of securities or currencies which it does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities or currency decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
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the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates, securities prices or currency
exchange rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the Fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
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Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When interest rates are rising or securities prices are falling,
the Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, the Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. The Fund may
seek to offset anticipated changes in the value of a currency in which its
portfolio securities, or securities that it intends to purchase, are quoted or
denominated by purchasing and selling futures contracts on such currencies.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices or foreign currency rates that
would adversely affect the dollar value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund or securities with characteristics similar to those of the
Fund's portfolio securities. Similarly, the Fund may sell futures contracts on
any currencies in which its portfolio securities are quoted or denominated or in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency if there is an established historical
pattern of correlation between the two currencies.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
11
<PAGE>
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. The Fund
may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or 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 quoted or denominated) it intends to purchase.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities (or assets denominated in the related currency) in the cash
12
<PAGE>
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. 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.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish with the custodian a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. There are no futures contracts based upon
individual securities, except certain U.S. Government securities. The only
futures contracts available to hedge the Fund's portfolio are various futures on
U.S. Government securities, securities indices and foreign currencies. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. In addition, it is not
possible to hedge fully or protect against currency fluctuations affecting the
value of securities denominated in foreign currencies because the value of such
securities is likely to fluctuate as a result of independent factors not related
to currency fluctuations.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
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
13
<PAGE>
Fund may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price subject to the Fund's Investment
Restriction. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrant and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also 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 or dividends and may be required to pay a premium.
The Fund may only make short sales "against the box," meaning that the Fund, by
virtue of its ownership of other securities, 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.
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 the 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 or dividends 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, 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 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.
14
<PAGE>
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 for a taxable year in order for
the Fund to qualify as a regulated investment company under the Code for that
year.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid, securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
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 greater
brokerage 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
portfolio turnover rate is set forth in the table under the caption "Financial
Highlights" in the prospectus.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without 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) the holders of 67% or more of
the Fund's shares represented at a meeting if more than 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.
15
<PAGE>
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
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.
16
<PAGE>
(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 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 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.
17
<PAGE>
(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 the Trustees of the Trust, who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers and Directors of the Adviser or officers
and Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
19
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), First
Signature Bank and Trust Company
and Sovereign Asset Management
Corporation ("SAMCorp."); Director,
John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Capital Corporation and New
England/Canada Business Council;
Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; Vice Chairman and
President, the Adviser (until July
1992); Chairman, John Hancock
Distributors, Inc. (until April
1994); Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
20
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee (3) Professor of Law, Emeritus, Boston
Boston University University School of Law; Trustee,
Boston, Massachusetts Brookline Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1, 3) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 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 (3) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
21
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Douglas M. Costle Trustee (1, 3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 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
Mitretek Systems (governmental
consulting services).
Leland O. Erdahl Trustee (3) Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing companies),
Uranium Resources, Inc.; President,
Stolar, Inc. (1987-1991); President,
Albuquerque Uranium Corporation
(1985-1992); Director,
Freeport-McMoRan Copper & Gold
Company, Inc., Hecla Mining Company,
Canyon Resources Corporation and
Original Sixteen to One Mines, Inc.
(1984-1987 and 1991-1995)
(management consultant).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
22
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Farrell Trustee(3) President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank of
Boston, MA 02110 Boston Corporation.
November 1932
Gail D. Fosler Trustee (3) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD 20815 economic and business research);
December 1947 Director, Unisys Corp.; and H.B.
Fuller Company.
William F. Glavin Trustee (3) 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.
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Director,
Boston, MA 02199 The Berkeley Group, John Hancock
April 1953 Funds; Director, Advisers
International; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993); Director, Signature
Services (until January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
23
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dr. John A. Moore Trustee (3) President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939
Patti McGill Peterson Trustee (3) Cornell Institute of Public Affairs,
Cornell University Cornell University (since August
Institute of Public Affairs 1996); President Emeritus of Wells
364 Upson Hall College and St. Lawrence University;
Ithica, NY 14853 Director, Niagara Mohawk Power
May 1943 Corporation (electric utility) and
Security Mutual Life (insurance).
John W. Pratt Trustee (3) Professor of Business Administration
2 Gray Gardens East at Harvard University Graduate
Cambridge, MA 02138 School of Business Administration
September 1931 (since 1961).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
24
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp. and NM Capital; Trustee,
The Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, John Hancock Property and
Casualty Insurance and its
affiliates (until November 1993);
Director, Signature Services (until
January 1997).
Edward J. Spellman, CPA Trustee (3) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
25
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, SAMCorp.,
Insurance Agency, Inc. and NM
Capital; Counsel, John Hancock
Mutual Life Insurance Company (until
January 1997).
Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until 1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
</TABLE>
26
<PAGE>
All of the officers listed are officers or employees of the Adviser or the
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or directors and/or trustees of one or more 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. Messrs. Boudreau and Scipione and Ms.
Hodsdon, and each of the officers of the Fund are interested persons of the
Adviser, are compensated by the Adviser and receive no compensation from the
Fund for their services. The compensation to the Trustees from the Fund shown
below is for the fiscal year ended October 31, 1996.
Aggregate Total Compensation From
Compensation All Funds in John Hancock
Independent Trustees From the Fund Fund Complex to Trustees(*)
- -------------------- ------------- ---------------------------
Dennis S. Aronowitz $ 17,641 $ 72,450
Richard P. Chapman, Jr.+ 18,223 75,200
William J. Cosgrove+ 17,641 72,450
Douglas M. Costle++ 891 75,350
Leland O. Erdahl++ 750 72,350
Richard A. Farrell++ 891 75,350
Gail D. Fosler 16,648 68,450
William F. Glavin++ 750 72,250
Bayard Henry** 6,606 23,700
John A. Moore++ 750 68,350
Patti McGill Peterson++ 750 72,100
John W. Pratt++ 750 72,350
Edward J. Spellman 17,782 73,950
-------- --------
$100,073 $894,300
(*) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1996. As of
this date, there were sixty seven funds in the John Hancock Complex of which
each of these independent trustees served on thirty-five funds.
**Mr. Henry retired from his position as Trustee effective April 26, 1996.
+As of December 31, 1996, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock fund complex for Mr.
Chapman was $63,164, for Mr. Cosgrove was $131,317 and for Mr. Glavin was
$109,059.
++Became Trustees of the Trust on June 26, 1996.
As of January 31, 1997, the officers and Trustees of the Fund as a group owned
less than 1% of the outstanding shares of the Fund. As of January 31, 1997, the
following shareholders beneficially owned 5% or more of the outstanding shares
of the Fund listed below:
27
<PAGE>
<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>
Donaldson Lufkin Jenrette Class A 2,138,315 5.31%
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ
Merrill Lynch Pierce FenneSmith Inc. Class A 2,167,926 5.38%
Attn: Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Merrill Lynch Pierce FenneSmith Inc. Class B 7,990,650 19.30%
Attn: Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Saturn & Co. Class C 829,630 30.30%
Pension Plan
P.O. Box 1537
Boston, MA
John Hancock As Agent for Ttee Argo Class C 544,217 19.88%
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 376.-92 13.74%
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 290,731 10.62%
c/o Wachovia Bank of NC
Attn: Teresa Almond
301 Main Street
Winston-Salem, NC 27150-0001
28
<PAGE>
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
-------------- --------------- -------------- ---------------------
Hampshire County Retirement System Class C 283,057 10.34%
99 Main Street
Northhampton, MA.
BAS & Co. Class C 205,983 7.49%
c/o Investors Bank & Trust
P.O. Box 1537
Boston, MA 02205
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and presently has more than $19 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.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser. Pursuant to the Advisory Agreement, the Adviser
agreed to act as investment adviser and manager to the Fund. As manager and
investment adviser, the Adviser will: (a) furnish continuously an investment
program for the Fund and determine, subject to the overall supervision and
review of the Trustees, which investments should be purchased, held, sold or
exchanged, and (b) provide supervision over all aspects of the Fund's operations
except those which are delegated to a custodian, transfer agent or other agent.
The Adviser has entered into a subadvisory agreement with DiCarlo, Forbes and
St. Pierre Advisors, 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.
29
<PAGE>
In addition, the Adviser and 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.
The Fund bears all costs of its organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plan of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expense of the Fund (including an allocable portion of the cost of the Adviser's
employees rendering such services to the Fund; the compensation and expenses of
Trustees who are not otherwise affiliated with the Trust, the Adviser or any of
their affiliates; expenses of Trustees' and shareholders' meetings; trade
association membership; insurance premiums; and any extraordinary expenses.
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.
For the years ended October 31, 1994, 1995 and 1996 the Adviser received a fee
of $3,458,972, $5,538,912, and $12,884,307, respectively. The advisory fee
figures for 1994 reflect the different advisory fee schedule that was in effect
before January 1, 1994.
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
30
<PAGE>
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.
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.
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 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
agreement 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 on 60 days' written notice by either party or by
vote of a majority of the outstanding voting securities of the Fund.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended October 31, 1996, the Fund paid
the Adviser $264,274 for services under this agreement.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser, the
Sub-Advisers and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. In the case
of the Adviser, 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. The Sub-Adviser has adopted similar restrictions, which may differ
where appropriate, as long as they have the same interest. These restrictions
are a continuation of the basic principle that the interests of the Fund and its
shareholders come first.
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. John Hancock Funds accepts orders for the
31
<PAGE>
purchase of the shares of the Fund which are continually offered at net asset
value next determined, plus an applicable sales charge, if any. 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 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
of 1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% and 1.00%, respectively, of the Fund's
daily net assets attributable to shares of that class. However, the service fee
will not exceed 0.25% of the Fund's average daily net assets attributable to
each class of shares. The distribution fees will be used to reimburse John
Hancock Funds for their distribution expenses, including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others 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 and others
for providing personal and account maintenance services to shareholders. In the
event the John Hancock Funds is not fully reimbursed for payments or expenses
they incur under the Class A Plan, these expenses will not be carried beyond
twelve months from the date they were incurred. Unreimbursed expenses under the
Class B Plan will be carried forward together with interest on the balance of
these unreimbursed expenses. The Fund does not treat unreimbursed expenses under
the Class B Plan as a liability of the Fund because the Trustees may terminate
Class B Plan at any time. For the fiscal year ended October 31, 1996, an
aggregate of $19,220,716 of distribution expenses or 2.54% of the average net
assets of the Class B shares of the Fund, was not reimbursed or recovered by
John Hancock Funds through the receipt of deferred sales charges or Rule 12b-1
fees in prior periods.
The Plans were approved by a majority of the voting securities of the Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provide the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
Independent Trustees. The Plans provide that they 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 upon 60
days' written notice to John Hancock Funds, and (c) automatically in the event
of assignment. The Plans further provide that they may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to that Plan. Each plan provides, that
no material amendment to the Plans will be effective unless it is approved by a
vote of a majority of the Trustees and the Independent Trustees of the Fund. The
32
<PAGE>
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 the Plans will benefit the holders of the applicable class of
shares of the Fund.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Funds.
During the fiscal year ended October 31, 1996 the Funds paid John Hancock Funds
the following amounts of expenses with respect to the Class A and Class B shares
of the Fund:
<TABLE>
<CAPTION>
Expense Items
Printing and
Mailing of Interest
Prospectus to Compensation Expenses of Carrying or
New to Selling John Hancock Other Finance
Advertising Shareholders Brokers Funds Charges
----------- ------------ ------- ----- -------
<S> <C> <C> <C> <C> <C>
Class A shares $294,689 $18,696 $ 589,551 $1,487,581 $ 0
Class B shares $778,581 $42,389 $1,372,020 $4,018,491 $1,366,079
</TABLE>
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.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
33
<PAGE>
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe acurately reflects fair value.
The NAV for each fund and class is determine each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net asset by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then they
will only be issued for full shares. The Trustees reserve the right to change or
waive the Fund's minimum investment requirements and to reject any order to
purchase shares (including purchase by exchange) when in the judgment of the
Adviser such rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A 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 Signature Services
is notified by the investor's dealer or the investor at the time of the
purchase, the cost of the Class A shares owned.
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
34
<PAGE>
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 Signature
Services or a Selling Broker's representative.
Without Sales Charge. Class A shares may be offered without a front-end sales
charge or CDSC to various individuals and institutions as follows:
* Any state, county or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment
laws from paying a sales charge or commission when it purchases shares
of any registered investment management company.*
* A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.*
* A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandchildren, mother, father, sister, brother,
mother-in-law, father-in-law) of any of the foregoing; or any fund,
pension, profit sharings or other benefit plan for the individuals
described above.
* A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into an agreement with John Hancock
Funds providing specifically for the use of Fund shares in fee-based
investment products or services made available to their clients.
* A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to the Fund.
* A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
* A member of an approved affinity group financial services plan.*
* Existing full service clients of the Life Company who were group
annuity contract holders as of September 1, 1994, and participant
directed defined contribution plans with at least 100 eligible
employees at the inception of the Fund account, may purchase Class A
shares with no initial sales charge. However, if the shares are
redeemed within 12 months after the end of the calendar year in which
the purchase was made, a CDSC will be imposed at the following rate:
Amount Invested CDSC Rate
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
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.
* For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
35
<PAGE>
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 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 pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using the Fund as a funding medium for a
qualified retirement plan, however, may opt to make the necessary investments
called for by the LOI over a forty-eight (48) month period. These qualified
retirement plans include group IRA, SEP, SARSEP, TSA, 401(k), 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 Signature Services. The sales charge applicable to all amounts
invested under the LOI is computed as if the aggregate amount intended to be
invested had been invested immediately. If such aggregate amount is not actually
invested, the difference in the sales charge actually paid and the sales charge
payable had the LOI not been in effect is due from the investor. However, for
the purchases actually made within the specified period (either 13 or 48 months)
the sales charge applicable will not be higher than that which would have
applied (including accumulations and combinations) had the LOI been for the
amount actually invested.
The LOI authorizes Signature Services to hold in escrow 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 Signature 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.
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<PAGE>
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
increases in account value attributable to shares derived from reinvestment of
dividends or capital gains distributions. No CDSC will be imposed on shares
derived from reinvestment of dividends or capital gains distributions.
Class B shares are not available to full-service defined contribution plans
administered by Signature Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this number of
years, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. Upon redemption, appreciation is effective only on a per share basis for
those shares being redeemed. Appreciation of shares cannot be redeemed CDSC free
at the account level.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
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<PAGE>
(dividend reinvestment) -120
* Minus appreciation on remaining shares (40 shares X $2) - 80
----
* Amount subject to CDSC $400
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:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in
"Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account
value, including reinvested dividends, at the time you established your
periodic withdrawal plan and 12% of the value of subsequent investments
(less redemptions) in that account at the time you notify Signature
Services. (Please note that this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a
CDSC).
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b),
401(k), Money Purchase Pension Plan, Profit-Sharing Plan and other
plans qualified under the Internal Revenue Code of 1986, as amended
(the "Code") unless otherwise noted.
* Redemptions made to effect mandatory distributions under the Internal
Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under Section
401(a) of the Code (such as 401(K), Money Market Purchase Pension Plan,
Profit -Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.
Please see matrix for reference.
38
<PAGE>
<TABLE>
<CAPTION>
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-
Distribution (401(k), MPP, PSP) Rollover Retirement
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Over 70 1/2 Waived Waived Waived Waived for 12% of
mandatory account value
distributions annually in
or 12% of periodic
account value payments
annually in
periodic
payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of
and 70 1/2 Expectancy or account value
12% of account annually in
value annually periodic
in periodic payments
payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Under 59 1/2 Waived Waived for Waived for Waived for 12% of
annuity annuity annuity account value
payments (72t) payments (72t) payments (72t) annually in
or 12% of or 12% of or 12% of periodic
account value account value account value payments
annually in annually in annually in
periodic periodic periodic
payments. payments. payments.
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Loans Waived Waived N/A N/A N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Hardships Waived Waived Waived N/A N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
Return of Excess Waived Waived Waived Waived N/A
- --------------------- -------------------- ----------------- ---------------- ----------------- ---------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, 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
39
<PAGE>
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of the
Fund for shares of the same class in any other John Hancock fund offering that
class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transactions charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock Short-Term Strategic Income
Fund, John Hancock Intermediate Maturity Government Fund and John Hancock
Limited-Term Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994
(except John Hancock Short-Term Strategic Income Fund) for Class B shares of any
other John Hancock fund, the acquired shares will continue to be subject to the
CDSC schedule that was in effect when the exchanged shares were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The fund may refuse any exchange order. The Fund may changed or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. The maintenance of a Systematic Withdrawal Plan
concurrently with purchases of additional Class B shares of the Fund could be
disadvantageous to a shareholder because of the CDSC imposed on redemptions of
Class B shares. Therefore, a shareholder should not purchase Class B shares of
the Fund 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 Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained in
the Prospectus and the Account Privileges Application. The program, as it
relates to automatic investment checks, is subject to the following conditions:
40
<PAGE>
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 Signature Services without prior notice if any
investment is not honored by the shareholder's bank. The bank shall be under no
obligation to notify the shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the due date of any investment.
Reinstatement and Reinvestment Privilege. Upon notification of Signature
Services, a shareholder who has redeemed Class B shares of the Fund and paid a
CDSC thereon, may, within 120 days after the date of redemption, reinvest any
part of the redemption proceeds in shares of the same class of the Fund or
another John Hancock fund, subject to the minimum investment limit in that fund
and, upon such reinvestment, the shareholder's account will be credited with the
amount of any CDSC charged upon the redemption and the new shares will continue
to be subject to the CDSC. The holding period of the shares acquired through
reinvestment will, for purposes of computing the CDSC payable upon a subsequent
redemption, include the holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS".
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. Holders of
Class A shares, Class B and Class C shares have certain exclusive voting rights
on matters relating to their respective distribution plans. The different
41
<PAGE>
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.
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 for differences resulting from the facts 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.
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. Furthermore, no Fund
included in this Fund's prospectus shall be liable for the liabilities of any
other John Hancock Fund. Liability is therefore limited to circumstances in
which the Fund itself would be unable to meet its obligations, and the
possibility of this occurrence is remote.
A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
42
<PAGE>
TAX STATUS
The Fund has qualified and has elected to be treated as a "regulated investment
company" under Subchapter M of 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 in accordance with the
timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions from investment company taxable income
and/or net capital gain may be paid in January but may be taxable to
shareholders as if they had been received on December 31 of the previous year.
The tax treatment described above will apply without regard to whether
distributions are received in cash or reinvested in additional shares of the
Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
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 or engage in certain other transactions or derivatives 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 of the Fund (including by exercise of the exchange
privilege) a shareholder may realize a taxable gain or loss depending upon the
amount of the proceeds and the investor's basis in his shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's tax holding period for the shares and subject to the special rules
43
<PAGE>
described below. 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 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 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, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net 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. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his 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. The Fund has $26,806,579 of capital loss carryforward available
to the extent provided by regulations to offset future net realized capital
gains. The carryforward expires October 31, 2004.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
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 properly designated by the Fund may be
treated as qualifying dividends. Corporate shareholders must meet the minimum
44
<PAGE>
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 have any debt
that is deemed under the Code directly attributable to Fund shares, may be
denied a portion of the dividends received deduction. The entire qualifying
dividend, including the otherwise-deductible amount, will be included in
determining the excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may increase its
alternative minimum tax liability. Additionally, any corporate shareholder
should consult its tax adviser regarding the possibility that its basis in its
shares may be reduced, for Federal income tax purposes, by reason of
"extraordinary dividends" received with respect to the shares, for the purpose
of computing its gain or loss on redemption or other disposition of the shares.
If the Fund acquires stock of certain foreign corporations that receive at least
75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences, but any such election would require the Fund to recognize taxable
income or gain without the concurrent receipt of cash. The Fund may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not
directly-related to the Fund's investment in stock or securities, possibly
including any such transaction not used for hedging purposes, may increase the
amount of gain it is deemed to recognize from the sale of certain investments or
derivatives held for less than three months, which gain is limited under the
Code to less than 30% of its gross income for each taxable year, and may under
future Treasury regulations produce income not among the types of "qualifying
income" from which the Fund must derive at least 90% of its gross income for
each taxable year. If the net foreign exchange loss for a year treated as
ordinary loss under Section 988 were to exceed the Fund's investment company
taxable income computed without regard to such loss the resulting overall
ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into options and futures contracts,
foreign currency positions and foreign currency forward contracts. Certain of
these transactions may cause the Fund to recognize gains or losses from marking
to market even though its positions have not been sold or terminated and may
affect the character as long-term or short-term (or, in the case of certain
foreign currency options, futures and forward contracts, as ordinary income or
loss) of some capital gains and losses realized by the Fund. Additionally,
certain of the Fund's losses on transactions involving options, futures, forward
contracts, and any offsetting or successor positions in its portfolio may be
deferred rather than being taken into account currently in calculating the
45
<PAGE>
Fund's taxable income or gain. Certain of such transactions may also cause the
Fund to dispose of investments sooner than would otherwise have occurred. These
transactions may therefore affect the amount, timing and character of the Fund's
distributions to shareholders. The Fund will take into account the special tax
rules applicable to options, futures or forward contracts, including
consideration of available elections, in order to seek to minimize any potential
adverse tax consequences.
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 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.
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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 and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The 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 tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund and, unless an affective IRS Form W-8 or authorized substitute for
Form W-8 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.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of shares of the Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the Federal, state or local tax consequences of ownership of
shares of the Fund in their particular circumstances.
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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, 1996 was 7.29%, 21.24%, and 16.76%,
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, 1996 and since inception on March 1, 1993 was 7.09% and
19.48%, 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 13.40% and 18.39%, respectively.
The Fund's total return is computed by finding the average annual compounded
rate of return over the 1 year, 5 year and 10 year periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at
the beginning of the year, 5 year and 10 year periods.
This calculation assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period.
Because each share has its own sales charge and fee structures, the classes have
different performance results. 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 sales charge on Class A shares
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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.
The Fund may advertise yield, where appropriate. The Fund's yield is computed by
dividing net investment income per share determined for a 30-day period by the
maximum offering price per share (which includes the full sales charge) on the
last day of the period, according to the following standard formula:
Yield = 2([(a - b) + 1] 6 - 1)
---
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during
the period that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period (NAV where applicable).
From time to time, in reports and promotional literature, the Fund's total
return will be ranked or compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper -Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on equity mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as the Russell and
Wilshire Indices.
Performance rankings and ratings reported periodically in national financial
publications such as Money Magazine, Forbes, Business Week, The Wall Street
Journal, Micropal, Inc. Morningstar, Barron's, and Stanger's may also be
utilized. The Fund's promotional and sales literature may make reference to the
Fund's "beta". Beta is a reflection of the market related risks of the Fund by
showing how responsive the Fund is to the market.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
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BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities of the Fund
and the allocation of brokerage commission 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.
In the U.S. and in some other countries, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
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,
1996, 1995, and 1994 the Fund paid negotiated brokerage commissions of
$1,298,680, $468,191, and $305,789, respectively.
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
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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, 1996, the Fund paid
$58,100 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 Distributors, Inc. broker-dealers ("Distributor s"
or "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, 1996, the Fund did not execute any portfolio transactions
with Affiliated Brokers.
Distributors 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.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate securities to be
sold or purchased for the Fund with those to be sold or purchased for other
clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way STE 1000, Boston, MA
02217-1000, 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
$19.00 for each Class A shareholder account and $21.50 for each Class B
shareholder account and 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.
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CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02111. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. Ernst & Young LLP audits and renders an
opinion on the Fund's annual financial statements and prepares the Fund's annual
Federal income tax return.
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APPENDIX A
RATINGS
Bonds.
Standard & Poor's Bond Ratings
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
To provide more detailed indications of credit quality, the ratings AA to BBB
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
A provisional rating, indicated by "p" following a rating, is sometimes used by
Standard & Poor's. It assumes the successful completion of the project being
financed by the issuance of the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion.
Moody's Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Generally speaking, the safety of
obligations of this class is so absolute that with the occasional exception of
oversupply in a few specific instances, characteristically, their market value
is affected solely by money market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
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may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. The market
value of Aa bonds is virtually immune to all but money market influences, with
the occasional exception of oversupply in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical modifier
1 indicates that the security ranks at the high end, 2 in the mid-range, and 3
nearer the low end, of the generic category. These modifiers of rating symbols
Aa, A and Baa are to give investors a more precise indication of relative debt
quality in each of the historically defined categories.
Conditional ratings, indicated by "Con", are sometimes given when the security
for the bond depends upon the completion of some act or the fulfillment of some
condition. Such bonds, are given a conditional rating that denotes their
probably credit statute upon completion of that act or fulfillment of that
condition.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical modifier
1 indicates that the security ranks at the high end, 2 in the mid-range, and 3
nearer the low end, of the generic category. These modifiers are to give
investors a more precise indication of relative debt quality in each of the
historically defined categories.
Commercial Paper.
Standard & Poor's Commercial Paper Ratings
A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The two highest categories are as follows:
AIssues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.
A-1This designation indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus(+) sign designation.
The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
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Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
Moody's Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designations, judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
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FINANCIAL STATEMENTS
F-1
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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 1996 Annual
Report to Shareholders for the year ended October 31, 1996 (filed electronically
on December 27, 1996; file nos. 811-4079 and 2-92548; accession number
0000928816-96-000377):
John Hancock Special Equities Fund
Statement of Assets and Liabilities as of October 31, 1996.
Statement of Operations for the year ended October 31, 1996.
Statement of Changes in Net Assets for each of the two years in the
period ended October 31, 1996.
Financial Highlights for each of the 10 years ended October 31, 1996.
Schedule of Investments as of October 31, 1996.
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 January 31, 1997 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 100,158 103,415 15
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,
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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
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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 Trust, 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 World Fund, John Hancock Investment Trust, John
Hancock Institutional Series Trust, John Hancock Investment Trust II,
John Hancock Investment Trust III and John Hancock Investment Trust
IV.
(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
Anne C. Hodsdon Director President
101 Huntington Avenue
Boston, Massachusetts
C-4
<PAGE>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
---------------- ----------- ---------------
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
Thomas H. Drohan Senior Vice President Senior Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
David A. King Director 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
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
101 Huntington Avenue Secretary
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices with Positions and Offices
Business Address Underwriter with Registrant
---------------- ----------- ---------------
Keith Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman Second Vice President and None
101 Huntington Avenue Treasurer
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
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-6
<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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
24th day of February, 1997.
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
Edward J. Boudreau, Jr.* (Principal Executive Officer)
/s/James B. Little
- ------------------------ Senior Vice President and Chief
James B. Little Financial Officer (Principal February 24, 1997
Financial and Accounting Officer)
- ------------------------ Trustee
Dennis S. Aronowitz*
- ------------------------ Trustee
Richard P. Chapman, Jr.*
- ------------------------ Trustee
William J. Cosgrove*
- ------------------------ Trustee
Douglas M. Costle*
- ------------------------ Trustee
Leland O. Erdahl*
- ------------------------ Trustee
Richard A. Farrell*
- ------------------------ Trustee
Gail D. Fosler*
- ------------------------ Trustee
William F. Glavin*
- ------------------------ Trustee
Anne C. Hodsdon*
C-8
<PAGE>
- ------------------------ Trustee
John A. Moore
- ------------------------ Trustee
Patti McGill Peterson*
- ------------------------ Trustee
John W. Pratt*
- ------------------------ Trustee
Richard S. Scipione*
- ------------------------ Trustee
Edward J. Spellman*
*By: /s/Susan S. Newton February 24, 1997
------------------
Susan S. Newton
Attorney-in-Fact under
Powers of Attorney dated
May 21, 1996 and August 27,
1996, filed herewith
</TABLE>
C-9
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 21st day of May, 1996.
/s/Dennis S. Aronowitz /s/William F. Glavin
- ----------------------------- ------------------------------
Dennis S. Aronowitz William F. Glavin
/s/Edward J. Boudreau, Jr. /s/ Anne C. Hodsdon
- ----------------------------- ------------------------------
Edward J. Boudreau, Jr. Anne C. Hodsdon
/s/Richard P. Champman, Jr. /s/Patti McGill Peterson
- ----------------------------- ------------------------------
Richard P. Chapman, Jr. Patti McGill Peterson
/s/William J. Cosgrove
- ----------------------------- ------------------------------
William J. Cosgrove John A. Moore
/s/Douglas M. Costle /s/John W. Pratt
- ----------------------------- ------------------------------
Douglas M. Costle John W. Pratt
/s/Leland O. Erdahl /s/Richard S. Scipione
- ----------------------------- ------------------------------
Leland O. Erdahl Richard S. Scipione
/s/Richard A. Farrell /s/Edward J. Spellman
- ----------------------------- ------------------------------
Richard A. Farrell Edward J. Spellman
/s/Gail D. Fosler
- -----------------------------
Gail D. Fosler
C-10
<PAGE>
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust Freedom Investment Trust
John Hancock Limited Term Government Fund Freedom Investment Trust II
John Hancock Sovereign Bond Fund Freedom Investment Trust III
John Hancock Special Equities Fund
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 27th day of August, 1996.
/s/ John A. Moore
John A. Moore
C-11
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.B1 Declaration of Trust of Registrant as amended and
restated February 28, 1992.*
99.B1.1 Instrument Amending Number of Trustees and Appointing
Individual to Fill a Vacancy dated March 5, 1996.+
99.B1.2 Instrument Increasing Number of Trustees and Appointing
Individuals to fill vacancy dated May 21, 1996.+
99.B1.3 Instrument Amending Manner of Acting by Written Consent dated
December 3, 1996.+
99.B2 Amended and Restated By-Laws dated December 3, 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.B5.1 Sub-Advisory Agreement between Registrant and DFS Advisors,
LLC dated July 1, 1996.+
99.B6 Distribution Agreement with Registrant and John Hancock
Broker Distribution Services, Inc. dated August 1, 1991.*
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock
Broker Distribution Services, Inc. and Selected Dealers.*
99.B6.2 Form of Financial Institution Sales and Service Agreement.*
99.B7 None
99.B8 Master Custodian Agreement between 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.*
C-12
<PAGE>
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.*
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 Schedule - Class A
99.27B Financial Data Schedule - Class B
99.27C Financial Data Schedule - 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.
*** Previously filed electronically with post-effective amendment number 13
(file nos. 811-4079 and 2-92548) on April 23, 1996 accession number
0001010521-96-000041.
+ Filed herewith.
C-13
JOHN HANCOCK SPECIAL EQUITIES FUND
Instrument Amending Number of Trustees
and Appointing Individual to Fill a Vacancy
The undersigned, constituting a majority of the Trustees of John Hancock
Special Equities Fund, a Massachusetts business trust (the "Trust"), acting
pursuant to the Amended and Restated Declaration of Trust dated February 28,
1992 of the Trust, as amended from time to time, do hereby:
a) amend Section 2.12, effective March 5, 1996, to read as follows:
Section 2.12. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed
by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than two (2).
b) appoint Anne C. Hodsdon to fill a vacancy, such appointment to become
effective upon such individual accepting in writing such appointment and
agreeing to be bound by the terms of the Declaration of Trust and such
individual to hold office until his successor is elected and qualified or
until the earlier occurrence of any of the events specified in the first
sentence of Section 2.15 of the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned being at least a majority of the
Trustees of the Trust, have executed this amendment as of the 5th day of March,
1996.
/s/Dennis S. Aronowitz /s/ Gail D. Fosler
- -------------------------- -------------------------
Dennis S. Aronowitz Gail D. Fosler
Edward J. Boudreau, Jr.
- -------------------------- -------------------------
Edward J. Boudreau, Jr. Bayard Henry
/s/Richard P. Chapman, Jr. /s/Richard S. Scipione
- -------------------------- -------------------------
Richard P. Chapman, Jr. Richard S. Scipione
/s/William J. Cosgrove /s/Edward J. Spellman
- -------------------------- -------------------------
William J. Cosgrove Edward J. Spellman
The Declaration, a copy of which, together with all amendments thereto,
is on file in the office of the Secretary of State of The Commonwealth of
Massachusetts, provides that no Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his/her
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Trust Property of one or more specific Series of
the Trust if the claim arises from the conduct of such Trustee, officer,
employee or agent with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr., Dennis S.
Aronowitz, Richard P. Chapman, Jr., William J. Cosgrove, Richard S. Scipione,
and Edward J. Spellman, who each acknowledged the foregoing instrument to be his
or her fee act and deed, before me, this 5th day of March 1996.
/s/ Ann Marie Kalapinski
-------------------------------
Notary Public
My Commission Expires: 10/20/00
JOHN HANCOCK SPECIAL EQUITIES FUND
Instrument Increasing Number of Trustees and
Appointing Individuals to Fill Vacancy
The undersigned, constituting a majority of the Trustees of the above
listed Trust, of which is a Massachusetts voluntary association established
pursuant to a Declaration of Trust duly filed with the Secretary of the
Commonwealth of Massachusetts, do hereby with respect to the Trust to be
effective July 1, 1996:
a) pursuant to Section 2.3 of the Declaration of Trust, increase the number
of Trustees from eight to sixteen; and
b) pursuant to Section 2.15 of the Declaration of Trust, appoint Douglas M.
Costle, Leland O. Erdahl, Michael P. DiCarlo, Richard A. Farrell, William
F. Glavin, Anne C. Hodsdon, Patti McGill Peterson, John A. Moore and John
W. Pratt to fill vacancies, such appointments to become effective upon such
individuals accepting in writing such appointment and agreeing to be bound
by the terms of the Declaration of Trust and such individuals to hold
office until the earlier occurrence of any of the events specified in the
first sentence of Section 2.15 of the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned being at least a majority of the
Trustees of the Trust, have executed this amendment as of the 21st day of May,
1996.
/s/Dennis S. Aronowitz /s/ Gail D. Fosler
--------------------------- -------------------------
Dennis S. Aronowitz Gail D. Fosler
/s/Edward J. Boudreau, Jr.
--------------------------- -------------------------
Edward J. Boudreau, Jr. Richard S. Scipione
/s/Richard P. Chapman, Jr. /s/Edward J. Spellman
--------------------------- -------------------------
Richard P. Chapman, Jr. Edward J. Spellman
/s/William J. Cosgrove
---------------------------
William J. Cosgrove
The Declaration, a copy of which, together with all amendments thereto, is
on file in the office of the Secretary of State of The Commonwealth of
Massachusetts, provides that no Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his/her
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Trust Property of one or more specific Series of
the Trust if the claim arises from the conduct of such Trustee, officer,
employee or agent with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Edward J. Boudreau, Jr., Dennis S.
Aronowitz, Richard P. Chapman, Jr., Gail D. Fosler, and Edward J. Spellman, who
each acknowledged the foregoing instrument to be his or her fee act and deed,
before me, this 21st day of May 1996.
Anne Marie Kalapinski
-------------------------------
Notary Public
My Commission Expires: 10/20/00
JOHN HANCOCK SPECIAL EQUITIES FUND
Instrument Amending Manner of Acting by Written Consent
The undersigned, constituting a majority of the Trustees of John Hancock
Special Equities Fund, a Massachusetts business trust (the "Trust"), acting
pursuant to the Amended and Restated Declaration of Trust dated February 28,
1992 of the Trust, as amended from time to time, do hereby amend Article II,
Section 2.8 to allow a majority of the Trustees to act by written consent,
effective December 3, 1996, as follows:
Amend the first paragraph of Section 2.8 by replacing the words "the entire
number" with the words "a majority".
IN WITNESS WHEREOF, the undersigned being at least a majority of the
Trustees of the Trust, have executed this amendment as of the 3rd day of
December, 1996.
/s/Dennis S. Aronowitz /s/William F. Glavin
- -------------------------- -------------------------
Dennis S. Aronowitz William F. Glavin
/s/Edward J. Boudreau, Jr. /s/Anne C. Hodsdon
- -------------------------- -------------------------
Edward J. Boudreau, Jr. Anne C. Hodsdon
/s/Richard P. Chapman, Jr. /s/John A. Moore
- -------------------------- -------------------------
Richard P. Chapman, Jr. John A. Moore
/s/William J. Cosgrove /s/Patti McGill Peterson
- -------------------------- -------------------------
William J. Cosgrove Patti McGill Peterson
/s/Douglas M. Costle /s/John W. Pratt
- -------------------------- -------------------------
Douglas M. Costle John W. Pratt
/s/Leland O. Erdahl /s/Richard S. Scipione
- -------------------------- -------------------------
Leland O. Erdahl Richard S. Scipione
/s/ Richard A. Farrell /s/Edward J. Spellman
- -------------------------- -------------------------
Richard A. Farrell Edward J. Spellman
Richard A. Farrell
/s/ Gail D. Fosler
- --------------------------
Gail D. Fosler
<PAGE>
The Declaration of Trust, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his/her duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Dennis S. Aronowitz, Edward J.
Boudreau, Jr., Richard P. Chapman, Jr., William J. Cosgrove, Douglas M. Costle,
Leland O. Erdahl, Richard A. Farrell, Gail D. Fosler, William F. Glavin, Anne C.
Hodsdon, John A. Moore, Patti McGill Peterson, John W. Pratt, Richard S.
Scipione, and Edward J. Spellman, who acknowledged the foregoing instrument to
be his or her free act and deed, before me, this 3rd day of December, 1996.
/s/ Anne Marie White
-------------------------------
Notary Public
My Commission Expires: 10/20/00
AMENDED AND RESTATED
BY-LAWS
OF
JOHN HANCOCK SPECIAL EQUITIES FUND
DECEMBER 3, 1996
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C> <C>
ARTICLE I -- Definitions .........................................................................1
ARTICLE II -- Offices .........................................................................1
Section 2.1 Principal Office.........................................................1
Section 2.2 Other Offices............................................................1
ARTICLE III -- Shareholders .........................................................................1
Section 3.1 Meetings.................................................................1
Section 3.2 Notice of Meetings.......................................................1
Section 3.3 Record Date for Meetings and Other Purposes..............................1
Section 3.4 Proxies..................................................................2
Section 3.5 Abstentions and Broker Non-Votes.........................................2
Section 3.6 Inspection of Records....................................................2
Section 3.7 Action without Meeting...................................................3
ARTICLE IV -- Trustees .........................................................................3
Section 4.1 Meetings of the Trustees.................................................3
Section 4.2 Quorum and Manner of Acting..............................................3
ARTICLE V -- Committees .........................................................................4
Section 5.1 Executive and Other Committees...........................................4
Section 5.2 Meetings, Quorum and Manner of Acting....................................4
ARTICLE VI -- Officers .........................................................................4
Section 6.1 General Provisions.......................................................4
Section 6.2 Election, Term of Office and Qualifications..............................5
Section 6.3 Removal..................................................................5
Section 6.4 Powers and Duties of the Chairman........................................5
Section 6.5 Powers and Duties of the Vice Chairman...................................5
Section 6.6 Powers and Duties of the President.......................................5
Section 6.7 Powers and Duties of Vice Presidents.....................................5
Section 6.8 Powers and Duties of the Treasurer.......................................6
Section 6.9 Powers and Duties of the Secretary.......................................6
i
<PAGE>
Section 6.10 Powers and Duties of Assistant Officers..................................6
Section 6.11 Powers and Duties of Assistant Secretaries...............................6
Section 6.12 Compensation of Officers and Trustees and
Members of the Advisory Board........................................6
ARTICLE VII -- Fiscal Year .........................................................................7
ARTICLE VIII -- Seal .........................................................................7
ARTICLE IX -- Sufficiency and Waivers of Notice.............................................................7
ARTICLE X -- Amendments .........................................................................7
</TABLE>
ii
<PAGE>
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the Amended and
Restated Declaration of Trust of John Hancock Special Equities Fund dated
February 28, 1992, as amended or restated from time to time.
ARTICLE II
OFFICES
Section 2.1. Principal Office. Until changed by the Trustees, the principal
office of the Trust shall be in Boston, Massachusetts.
Section 2.2. Other Offices. The Trust may have offices in such other places
without as well as within The Commonwealth of Massachusetts as the Trustees may
from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 3.1. Meetings. Meetings of the Shareholders of the Trust or a Series or
Class thereof shall be held as provided in the Declaration of Trust at such
place within or without The Commonwealth of Massachusetts as the Trustees shall
designate. The holders of a majority the Outstanding Shares of the Trust or a
Series or Class thereof present in person or by proxy and entitled to vote shall
constitute a quorum at any meeting of the Shareholders of the Trust or a Series
or Class thereof.
Section 3.2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail or telegraphic means to each Shareholder at his address as
recorded on the register of the Trust mailed at least seven (7) days before the
meeting, provided, however, that notice of a meeting need not be given to a
Shareholder to whom such notice need not be given under the proxy rules of the
Commission under the 1940 Act and the Securities Exchange Act of 1934, as
amended. Any adjourned meeting may be held as adjourned without further notice.
No notice need be given to any Shareholder who shall have failed to inform the
Trust of his current address or if a written waiver of notice, executed before
or after the meeting by the Shareholder or his attorney thereunto authorized, is
filed with the records of the meeting.
Section 3.3. Record Date for Meetings and Other Purposes. For the purpose of
determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding sixty (60) days, as the Trustees may determine; or without
1
<PAGE>
closing the transfer books the Trustees may fix a date not more than ninety (90)
days prior to the date of any meeting of Shareholders or distribution or other
action as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments which
shall be governed by the Declaration of Trust.
Section 3.4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken. A
proxy shall be deemed signed if the shareholder's name is placed on the proxy
(whether by manual signature, typewriting or telegraphic transmission) by the
shareholder or the shareholder's attorney-in-fact. Proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each whole share shall be
entitled to one vote as to any matter on which it is entitled by the Declaration
of Trust to vote and fractional shares shall be entitled to a proportionate
fractional vote. When any Share is held jointly by several persons, any one of
them may vote at any meeting in person or by proxy in respect of such Share, but
if more than one of them shall be present at such meeting in person or by proxy,
and such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy,
including a photographic or similar reproduction thereof and a telegram,
cablegram, wireless or similar transmission thereof, purporting to be executed
by or on behalf of a Shareholder shall be deemed valid unless challenged at or
prior to its exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a person of unsound
mind, and subject to guardianship or the legal control of any other person as
regards the charge or management of such Share, he may vote by his guardian or
such other person appointed or having such control, and such vote may be given
in person or by proxy. The placing of a Shareholder's name on a proxy pursuant
to telephonic or electronically transmitted instructions obtained pursuant to
procedures reasonably designed to verify that such instructions have been
authorized by such Shareholder shall constitute execution of such proxy by or on
behalf of such Shareholder.
Section 3.5. Abstentions and Broker Non-Votes. Outstanding Shares represented in
person or by proxy (including Shares which abstain or do not vote with respect
to one or more of any proposals presented for Shareholder approval) will be
counted for purposes of determining whether a quorum is present at a meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the number of Shares that are present and entitled to
vote with respect to any particular proposal, but will not be counted as a vote
in favor of such proposal. If a broker or nominee holding Shares in "street
name" indicates on the proxy that it does not have discretionary authority to
vote as to a particular proposal, those Shares will not be considered as present
and entitled to vote with respect to such proposal.
Section 3.6. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
2
<PAGE>
Section 3.7. Action without Meeting. For as long as there are under one hundred
fifty (150) shareholders, any action which may be taken by Shareholders may be
taken without a meeting if a majority of Outstanding Shares entitled to vote on
the matter (or such larger proportion thereof as shall be required by law, the
Declaration of Trust, or the By-laws) consent to the action in writing and the
written consents are filed with the records of the meetings of Shareholders.
Such consents shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE IV
TRUSTEES
Section 4.1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, the Chairman
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be given by telephone, cable, wireless, facsimilie or
electronic means to each Trustee at his business address, or personally
delivered to him at least one day before the meeting. Such notice may, however,
be waived by any Trustee. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
The Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
a majority of the Trustees consent to the action in writing and the written
consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
Section 4.2. Quorum and Manner of Acting. A majority of the Trustees shall be
present in person at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration of Trust or these By-laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
3
<PAGE>
ARTICLE V
COMMITTEES
Section 5.1. Executive and Other Committees. The Trustees by vote of a majority
of all the Trustees may elect from their own number an Executive Committee to
consist of not less than two (2) members to hold office at the pleasure of the
Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series thereof, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers which by law, the Declaration of Trust or these By-laws
they are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time; the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation the Committee
may elect its own Chairman.
Section 5.2. Meetings, Quorum and Manner of Acting. The Trustees may (1) provide
for stated meetings of any Committee, (2) specify the manner of calling and
notice required for special meetings of any Committee, (3) specify the number of
members of a Committee required to constitute a quorum and the number of members
of a Committee required to exercise specified powers delegated to such
Committee, (4) authorize the making of decisions to exercise specified powers by
written assent of the requisite number of members of a Committee without a
meeting, and (5) authorize the members of a Committee to meet by means of a
telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and records
of decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
ARTICLE VI
OFFICERS
Section 6.1. General Provisions. The officers of the Trust shall be a Chairman,
a President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers or agents.
4
<PAGE>
Section 6.2. Election, Term of Office and Qualifications. The officers of the
Trust and any Series thereof (except those appointed pursuant to Section 6.10)
shall be elected by the Trustees. Except as provided in Sections 6.3 and 6.4 of
this Article VI, each officer elected by the Trustees shall hold office at the
pleasure of the Trustees. Any two or more offices may be held by the same
person. The Chairman of the Board shall be selected from among the Trustees and
may hold such office only so long as he/she continue to be a Trustee. Any
Trustee or officer may be but need not be a Shareholder of the Trust.
Section 6.3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 6.4. Powers and Duties of the Chairman. The Chairman shall preside at
the meetings of the Shareholders and of the Trustees. He may call meetings of
the Trustees and of any committee thereof whenever he deems it necessary. He
shall be the Chief Executive Officer of the Trust and shall have, with the
President, general supervision over the business and policies of the Trust.
Section 6.5. Powers and Duties of the Vice Chairman. The Trustees may, but need
not, appoint one or more Vice Chairman of the Trust. A Vice Chairman shall be an
executive officer of the Trust and shall have the powers and duties of a Vice
President of the Trust as provided in Section 7 of this Article VI. The Vice
Chairman shall perform such duties as may be assigned to him or her from time to
time by the Trustees or the Chairman.
Section 6.6. Powers and Duties of the President. The President shall preside at
all meetings of the Shareholders in the absence of the Chairman. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres as provided by the Trustees, he shall at all
times exercise general supervision over the business and policies of the Trust.
He shall have the power to employ attorneys and counsel for the Trust or any
Series or Class thereof and to employ such subordinate officers, agents, clerks
and employees as he may find necessary to transact the business of the Trust or
any Series or Class thereof. He shall also have the power to grant, issue,
execute or sign such powers of attorney, proxies or other documents as may be
deemed advisable or necessary in furtherance of the interests of the Trust or
any Series thereof. The President shall have such other powers and duties, as
from time to time may be conferred upon or assigned to him by the Trustees.
Section 6.7. Powers and Duties of Vice Presidents. In the absence or disability
of the President, the Vice President or, if there be more than one Vice
President, any Vice President designated by the Trustees, shall perform all the
duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
5
<PAGE>
Section 6.8. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust or any Series or Class thereof which may come into his hands
to such Custodian as the Trustees may employ. He shall render a statement of
condition of the finances of the Trust or any Series or Class thereof to the
Trustees as often as they shall require the same and he shall in general perform
all the duties incident to the office of a Treasurer and such other duties as
from time to time may be assigned to him by the Trustees. The Treasurer shall
give a bond for the faithful discharge of his duties, if required so to do by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 6.9. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of a transfer agent. He shall attend to the giving and serving
of all notices by the Trust in accordance with the provisions of these By-laws
and as required by law; and subject to these By-laws, he shall in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Trustees.
Section 6.10. Powers and Duties of Assistant Officers. In the absence or
disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 6.11. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 6.12. Compensation of Officers and Trustees and Members of the Advisory
Board. Subject to any applicable provisions of the Declaration of Trust, the
compensation of the officers and Trustees and members of an advisory board shall
be fixed from time to time by the Trustees or, in the case of officers, by any
Committee or officer upon whom such power may be conferred by the Trustees. No
officer shall be prevented from receiving such compensation as such officer by
reason of the fact that he is also a Trustee.
6
<PAGE>
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust and any Series thereof shall be established
by resolution of the Trustees.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have such
inscription thereon as the Trustees may from time to time prescribe but the
absence of a seal shall not impair the validity or execution of any document.
ARTICLE IX
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the Declaration of
Trust or these By-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been sent by mail, telegraph, cable, wireless, facsimilie or electronic means
for the purposes of these By-laws when it has been delivered to a representative
of any entity holding itself out as capable of sending notice by such means with
instructions that it be so sent.
ARTICLE X
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be adopted by a vote of a majority of the Trustees, provided,
however, that no By-law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to federal or state law,
the Declaration of Trust or these By-laws, a vote of the Shareholders.
END OF BY-LAWS
7
JOHN HANCOCK ADVISERS, INC.
Boston, Massachusetts
July 1, 1996
DFS Advisors, LLC
75 State Street, 25th Floor
Boston, MA 02109
Sub-Advisory Agreement
Dear Madam/Sirs:
John Hancock Special Equities Fund (the "Fund"), has been organized
under the laws of the Commonwealth of Massachusetts to engage in the business of
an investment company. The Fund's shares of beneficial interest may be
classified into series and classes, each series representing the entire
undivided interest in a separate portfolio of assets. As of the date hereof, the
Fund has three classes of shares.
The Board of Trustees of the Fund (the "Trustees") and the Fund's
shareholders have approved the selection of John Hancock Advisers, Inc. (the
"Adviser") to provide overall investment advice and management for the Fund, and
to provide certain other services, under the terms and conditions provided in
the Investment Management Contract, dated January 1, 1994, between the Fund and
the Adviser (as may be further amended from time to time, the "Investment
Management Contract").
The Adviser and the Fund have selected DFS Advisors, LLC (the
"Sub-Adviser") to provide the Adviser and the Fund with the advice and services
set forth below, and the Sub-Adviser is willing to provide such advice and
services, subject to the review of the Fund and the overall supervision of the
Adviser, under the terms and conditions hereinafter set forth. The Sub-Adviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended. Accordingly, the Adviser
agrees with the Sub-Adviser as follows:
1. Delivery of Documents. The Adviser has furnished the Sub-Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) The Amended and Restated Declaration of Trust of the Fund
dated February 28, 1992 (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Board of Trustees approving the form of
this Agreement and resolutions adopted by the shareholders of
the Fund approving the form of this Agreement.
<PAGE>
(d) Resolutions of the Board of Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of the
Investment Management Contract and resolutions adopted by the
shareholders of the Fund approving the form of the Investment
Management Contract.
(e) The Investment Management Contract.
(f) Commitments, limitations and undertakings made by the Fund to
state "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states.
(g) The Fund's portfolio compliance checklists.
(h) The Fund's Prospectus and Statement of Additional Information.
(i) The Fund's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services and Duties. The Sub-Adviser will use its best efforts to
provide to the Fund continuing and suitable investment advice with respect to
investments, consistent with its investment policies, objectives and
restrictions as set forth in the Fund's Prospectus and Statement of Additional
Information. In the performance of the Sub-Adviser's duties hereunder, subject
always to the provisions contained in the documents delivered to the Sub-Adviser
pursuant to Section 1 above, as each of the same may from time to time be
amended or supplemented, the Sub-Adviser will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth above,
with respect to the purchase, holding and disposition of
portfolio securities including the purchase and sale of
options;
(b) furnish the Adviser and the Fund with advice as to the manner
in which voting rights, subscriptions rights, rights to
consent to corporate action and any other rights pertaining to
the Fund's assets shall be exercised, the Fund having the
responsibility to exercise such voting and other rights on
behalf of the Fund;
(c) furnish the Adviser and the Fund with research, economic and
statistical data in connection with the Fund's investments and
investment policies;
(d) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
2
<PAGE>
(e) consistent with the provisions of Section 7 of this Agreement,
place orders with the Adviser's trading room for the purchase,
sale or exchange of portfolio securities for the Fund's
account with brokers or dealers selected by the Adviser or the
Sub-Adviser;
(f) from time to time or at any time requested by the Adviser or
the Fund, make reports to the Adviser or the Fund, as
requested, of the Sub-Adviser's performance of the foregoing
services;
(g) subject to the supervision of the Adviser, maintain and
preserve the records required by the Investment Company Act of
1940, as amended, to be maintained by the Sub-Adviser (the
Sub-Adviser agrees that such records are the property of the
Fund and copies will be surrendered to the Fund promptly upon
request therefor) subject to the Sub-Adviser's right to have
reasonable access thereto;
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities to
and from such custodian and payments of cash for the account
of the Fund, and advise the Adviser on the same day such
instructions are given; and
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the
Securities and Exchange Commission, including registration
statements on Form N-1A, semi-annual reports on Form N-SAR,
periodic statements, shareholder communications and proxy
materials furnished to holders of shares of the Fund, filings
with state "blue sky" authorities and with United States and
foreign agencies responsible for tax matters, and other
reports and filings of like nature.
3. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Agreement, the expenses of office rent, telephone, telecommunications
and other facilities required by it to perform the services specified in Section
2, and any other expenses, including legal, audit and professional fees and
expenses, incurred by it in connection with the performance of its duties
hereunder.
4. Expenses of the Funds Not Paid by the Sub-Adviser. The Sub-Adviser will not
be required to pay any expenses which this Agreement does not expressly state
shall by payable by the Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of Section 3, the
Sub-Adviser will not be required to pay any Fund expenses or to reimburse the
Adviser for any such expenses that the Adviser is required to pay.
5. Compensation of the Sub-Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser a fee at the annual rate of 0.25%
of the average daily net assets of the Fund. The Adviser shall pay the foregoing
fee to the Sub-Adviser within ten business days of receipt by the Adviser of the
advisory fee payable to it by the Fund from time to time pursuant to the
Investment Management Contract.
3
<PAGE>
The Sub-Adviser will receive a pro rata portion of such fee for any periods in
which the Sub-Adviser advises the Fund for less than a full payment period. The
Sub-Adviser understands and agrees that the Fund shall not have any liability
for the Sub-Adviser's compensation hereunder. Calculations of the Sub-Adviser's
fee will be based on average net asset values as provided by the Adviser.
6. Other Activities of the Sub-Adviser and Its Affiliates. The Adviser and
Sub-Adviser may enter into a separate agreement which limits the ability of the
Sub-Adviser to act as Sub-Adviser for certain other investment companies and
advisory clients. However, nothing in this Agreement shall prevent the
Sub-Adviser or any of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment manager for any
other person or entity, whether or not having investment policies or portfolios
similar to the Fund. Subject to the provisions of such separate agreement, it is
specifically understood that officers, directors and employees of the
Sub-Adviser and those of its affiliates may engage in providing portfolio
management services and advice to other investment advisory clients of the
Sub-Adviser or of its affiliates.
7. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Sub-Adviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission. The Sub-Adviser shall, at the time the Sub-Adviser
places any order to purchase or sell portfolio securities on behalf of the Fund,
inform the Adviser of any financial interest the Sub-Adviser has in the issuer
of the portfolio securities being bought or sold. The Adviser shall be entitled
to reject any purchase or sale order placed by the Sub-Adviser, including orders
that are deemed to be inappropriate due to the financial interest of the
Sub-Adviser. Access persons (as defined in Rule 17j-1 under the Investment
Company Act of 1940, as amended) of the Sub-Adviser will provide personal
trading reports to a designated representative of the Adviser in accordance with
the Fund's Code of Ethics.
8. No Partnership or Joint Venture. Nothing in this Agreement shall be construed
so as to make the Adviser and the Sub-Adviser partners or joint venturers or
impose any liability as such on any of them. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and unless
otherwise expressly provided or authorized shall have no authority to act for or
represent the Fund in any way or otherwise be deemed to be an agent of the Fund
or of the Adviser.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund or the Adviser in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence on the Sub-Adviser's part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination of this Agreement. Unless terminated as provided
below, this Agreement shall remain in force until June 30, 1998, and from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually by (a) a majority of the Trustees of the Fund who are
not interested persons of the Adviser, of the Sub-Adviser or of the Fund (other
4
<PAGE>
than as Board members), cast in person at a meeting called for the purpose of
voting on such approval, and (b) either (i) a majority of the Trustees of the
Fund or (ii) a majority of the outstanding voting securities of the Fund. This
Agreement may, on 60 days' written notice, be terminated at any time, without
the payment of any penalty by the Fund by vote of a majority of the outstanding
voting securities of the Fund, by the Adviser or by the Sub-Adviser. Termination
of this Agreement shall not be deemed to terminate or otherwise invalidate any
other agreement between the Adviser and the Sub-Adviser, except as otherwise
provided therein. This Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Adviser's Investment Management
Contract. In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the Investment Company Act of 1940, as amended
(particularly the definitions of "assignment", "interested person," and "voting
security"), shall be applied.
11. Amendment of This Agreement. No provision of this Agreement may be changed
or waived orally, but only by an instrument in writing signed by the party
against which enforcement of the change or waiver is sought, and no amendment,
transfer, assignment, sale, hypothecation or pledge of this Agreement shall be
effective until approved by (a) the Board of Trustees of the Fund, including a
majority of the Trustees who are not interested persons of the Adviser, the
Sub-Adviser or the Fund, cast in person at a meeting called for the purpose of
voting on such approval, and (b) a majority of the outstanding voting securities
of the Fund, as defined in the Investment Company Act of 1940, as amended.
12. Miscellaneous.
(a) 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.
(b) Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts if done in full compliance with
the Sub-Adviser's Code of Ethics. The Fund acknowledges that
the Adviser or sub-advisers engaged by it and their respective
officers, affiliates and employees, and their other clients
may at any time, have, acquire, increase, decrease or dispose
of positions in investments which are at the same time being
acquired or disposed of by the Fund.
(c) Any of the shareholders, Trustees, officers and employees of
the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Adviser, any
interested person of the Sub-Adviser, any organization in
which the Sub-Adviser may have an interest or any organization
which may have an interest in the Sub-Adviser, and the
Sub-Adviser, any such interested person or any such
organization may have an interest in the Fund. Subject to the
provisions of any separate agreement between the Adviser and
the Sub-Adviser, the Sub-Adviser, the Adviser and the Fund may
have advisory, management, service or other contracts with
5
<PAGE>
other individuals or entities, and may have other interests
and businesses. When a security proposed to be purchased or
sold for the Fund is also to be purchased or sold for other
accounts managed by the Sub-Adviser at the same time, the
Sub-Adviser shall make such purchases or sales on a pro-rata,
rotating or other equitable basis so as to avoid any one
account's being preferred over any other account.
(d) The Sub-Adviser agrees that it will adopt a Code of Ethics in
a form reasonably satisfactory to the Adviser by no later than
June 1, 1996.
13. Governing Law. This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable provisions of the
Investment Company Act of 1940.
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------------
President
DFS ADVISORS, LLC
By: /s/ Andrew St. Pierre
------------------------
Title: Manager
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for Special Equities Fund in the John Hancock Growth Funds
Prospectus, "The Fund's Financial Highlights" in the John Hancock Special
Equities Fund Class C Shares Prospectus and "Independent Auditors" in the John
Hancock Special Equities Fund Class A, Class B and Class C Shares Statement of
Additional Information in Post-Effective Amendment No. 14 to the Registration
Statement (Form N-1A, No. 2-92548) dated March 1, 1997.
We also consent to the incorporation by reference therein of our report dated
December 10, 1996, with respect to the financial statements and financial
highlights of the John Hancock Special Equities Fund in the Form N-1A.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,427,362,108
<INVESTMENTS-AT-VALUE> 1,998,769,081
<RECEIVABLES> 6,808,290
<ASSETS-OTHER> 27,561
<OTHER-ITEMS-ASSETS> 950,085
<TOTAL-ASSETS> 2,006,555,017
<PAYABLE-FOR-SECURITIES> 6,590,784
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<TABLE> <S> <C>
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<NUMBER> 002
<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS B
<S> <C>
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<PERIOD-START> NOV-01-1995
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 003
<NAME> JOHN HANCOCK SPECIAL EQUITIES FUND - CLASS C
<S> <C>
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</TABLE>
